Treasury were concerned about removing regional fuel tax

Posted on December 6, 2011 by

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Prior to the 2008 election, the Labour Government introduced legislation that would have allowed individual regions (i.e., regional council’s and unitary authorities) to introduce a regional fuel tax to pay for their own transport projects. When National came to power, Minister of Transport Steven Joyce reversed that policy. Now it turns out he did so against the advice of Treasury, who were concerned that there would be no alternative funding mechanism in its place.

“Although the Treasury appreciated regional fuel taxes had some practical limitations, it believed retaining legislative provision for them “would send an important signal to the regions about being accountable for funding their transport decisions”. 

The regional fuel tax would have allowed the Canterbury Regional Council (ECan), for example, to impose a regional fuel tax of up to 4.5 cents per litre to raise money for its own transport projects. In my view, this would have given us the prospect of a more balanced transport funding approach, and allowed Canterbury/Christchurch to fund projects that were deemed a priority at a local level, rather than having transport projects dictated to them from Wellington (especially cycling, local roads, and public transport – all of which have suffered immense funding cuts).

Would people have simply driven across the border to get cheaper petrol? Not likely in most cases as most regions in New Zealand are quite large. In Canterbury, being the largest in area, if you lived in Christchurch you would have to drive about 200km in any direction (supposing those other regions didn’t introduce their own regional fuel tax). Even if greater Christchurch ended up as some sort of unitary authority it would still be a long way to go to somewhere like Amberley just to save a few cents.

Another point often made is that the price of petrol has increased astronomically in recent times, so a regional fuel tax would have been unpopular and/or uneconomic. However, I don’t believe 4.5 cents extra a litre would have been a wallet breaker, and it ultimately would have been meaningless in the face of continued fuel price increases anyway. Plus, the Government introduced a 3c nationwide fuel tax in 2009 (to be spent as they want, of course).

It looks like the idea of local government being able to spend tax dollars taken from within its own boundaries on its own transport projects was a little too much for some. Having someone far removed imposing their own agenda upon local government is obviously a far more sensible, efficient, and democratic outcome (please note sarcasm).

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Posted in: Funding