Fuel tax deferral won’t help

Kiwis are feeling the pain at the pump, and the Government’s grand “solution” is to defer a 1.5c increase in the petrol tax until next year.

Let’s put this in perspective. 1.5 cents a litre will save the average driver less than $1 when they fill up their tank. It’s about 0.6% of the total price of a litre of fuel at the moment, and it’s less than 4% of the total increase in petrol prices we’ve seen in the last 6 months.

What’s more, this is just a deferral – after the election they will have to put it up even more to recoup the $70+m they will lose in revenue this year. Guess they think if fuel prices drop they can sneak in a bigger tax rise.

The problem is that deferring the tax does nothing to prepare our economy for higher fuel prices.

The Economist blogged a while ago about how high fuel taxes are key to making economies more resilient to inevitable fluctuating (mostly high) oil prices, and stated that the revenue raised should be reinvested in alternatives like better public transport.

John Key says there’s nothing the Government can do about the international price of oil. We agree – that why we have been saying for years that we should prepare for high oil prices by investing in smarter transport projects.

As fuel prices go up, we see demand for buses, trains, walking and cycling increase. But at the moment buses are crowded, trains in Wellington are unreliable and in many places cycling isn’t safe. This won’t change unless the Government changes their transport priorities.

The Government can’t do anything about the international price of oil, and that’s why they should change their transport funding now.

I tried to get this message across on Breakfast TV this morning. Do you think I was clear enough?

24 Comments Posted

  1. Kevyn, I would suggest that while the increased borrowing for home loans to workers did not help the situation, the railways did contribute a lot to their own woes – millions of Pounds were poured into schemes that had limited value, or were scrapped in the end (the Nelson Section springs to mind). Furthermore, NZR failed to do the one thing that would have helped rail transport as early as the 1920s would have been the purchase of diesel railcars for shorter distance passenger services – almost all of the Australian systems purchased a decent number of diesel railcars during that period and these served as late as the 1960s, and that helped replace much slower Mixed and With Car Goods trains. Instead, New Zealand never got diesel railcars for shorter distance passenger services – all the diesel railcars we got were geared toward medium distance passenger services.

  2. bj, the underfunding of pt in this country really began with the introduction of generous state advances loans to workers to build houses in the suburbs in 1926. Although the suburbs at that time were tramway suburbs the amount the government borrowed to fund the scheme, and increased borrowing to build power stations, meant that less was available to be borrowed by tramways boards and by the government for railways capital works because of government limits on foreign borrowing. The improvements to Wellington’s commuter rail were funded largely from a diversion of national fuel tax but that diversion stopped in 1954 and Aucklands underground loop plans were replaced with a motorway scheme funded from fuel taxes.

    Because the government was the biggest subdivision developer in the 1950s and 1960s and provided only basic services, such as unsealed roads and no footpaths, the full costs of the sprawl approach were hidden for years which severely disadvantaged those advocating for higher density housing or government subsisidies for pt.

  3. The problem is that public transport has been sadly treated for the past (I don’t actually know HOW long it has been, I’ve only been here 8 years, and the deterioration looks like 30 years worth or more) -many- years.

    It makes it almost impossible to use anything BUT buses for public transport as nothing has been built but roads.

    We do not have the light rail we ONCE had, the rail we OUGHT TO have or the cultural background to support the use of public transport.

    OTOH, it is not really sensible to expect public transport to service individual farms out in the back blocks of the country. Roads are also required if the country is to be workable. What we have is not what we need.

    I am reminded of the difference.

    Moscow: Public transport anywhere in the city for about 50 cents in 15-30 minutes. Never wait more than 5 minutes for a train.

    What Trevor describes – “Incredible Journey’s”: the hidden tax of time. The schedules and transfers that turn each trip into an odyssey.

    If I miss a connection by a minute I can lose an hour and a half with the train and bus even here in Wellington region. The car admits to having lost the minute, and time is a precious thing. That time the public transport system eats so profligately is NOT free. It is not simply a matter of finally getting me to my destination, it includes the massive disadvantage that wasted time imposes vs someone who takes a car. Never just the money.

    Which is why Auckland needs loops, as frequency of service is massively important to people WILLING to use the public system. The time we cannot afford to waste compared with people who use cars because like it or not we are in competition with them and our jobs are on the line if we do not show up on time and our kids suffer if we are not home on time.

    I can imagine that our culture has to change too, as the impatience of everyone to do everything yesterday is not supportable in a system that uses really expensive energy. That however, is beyond my ability to change. It may. One hopes that it will. The alternative is collapse. Take it easy or have a heart attack.


  4. I’m with LH on the public transport question.

    I put my home and work addresses into the bus web site route-finder and it suggested a route that took over an hour and a half. It took me under 15 minutes by car to get to work, and I would not end up nearly as wet and cold if the weather was inclement. I cannot afford to waste 2 1/2 hours a day to take public transport and have it rule my life. With a car I leave work when I am ready to leave, not when a bus needs me to.

    If public transport is going to be part of the answer, it needs to be more user-friendly, such as the door-to-door mini-bus to get to the local bus stop (which could be a shopping centre).


  5. Rimu:

    “If it was not for registration and insurance”

    heh, what? why would you not include those things in your calculations of the cost of running a car?

    Was not really the point I was trying to make. I guess what I was trying to say is public transport is not that attractive to ppl outside of auck or wlgtn, so putting them in provincial locations is not forward thinking and is more restrictive on the consumer.

  6. Ok Scott.
    I’ll let him count scheduled airline service as being public transport, although most Green acolytes appear to regard air travel as an invention of the devil.
    Counting taxi’s is really pushing hard. The only thing being “Public” about it that the tax-paying public have to pay for the MPs use of them. They are normally larger cars than average and have a dedicated driver. At least if I drive myself to the airport all the people in the vehicle are travelling.
    Incidentally is Gareth going to reply? Surely he at least took the bus to and from the airport?

  7. Toad:

    Alternatively, National still fully intend to implement the tax increase, but for electorally expedient reasons are deferring its implementation out of fear that doing it now will see them punished in this year’s election.

    The chances of National being electorally disadvantaged by a scheduled fuel tax rise is almost unthinkable. They would have to try a lot, lot harder than that to lose the election. They could bump GST another several percent and it still wouldn’t guarantee them a loss, I don’t reckon.

    Which is frightening.

    We appear to live in a one party state. Like many of the middle east countries, only with democracy and without the no fly zones.

  8. “If it was not for registration and insurance”

    heh, what? why would you not include those things in your calculations of the cost of running a car?

  9. That interview seemed a lot like every other green interview about oil I’ve seen recently. Its seems that the greens think that public transport as a bit of a silver bullet. Having caught buses for around 7 years in Christchurch , late last year I purchased a small car, and I am still spending less money on petrol than I did on the bus fare [which had seemed to rise every year]. My commuting time has also been reduced by around 40-60%. If it was not for registration and insurance I would in fact be better off, but that’s a small price for independence. Public Transport is not that reliable either, especially after natural disasters. Auckland and Wellington are probably the only places where public transport is beneficial, but even then it needs a lot better planning.

    There needs to be more research on businesses moving away from a cbd. Also I would hope that the govt will in the future be encouraging electric cars with low emissions.

    Supporting the rise of something that will effect everyone in society is never a good idea.

  10. Alwyn, Why did you not include scheduled passenger flights in your description of public transport. Unless you take a private plane it definitely counts as public transport. Some people also include taxi’s as public transport.

  11. Get real Alwyn. Maybe if public transport had seen a decent level of funding any time in the last 50+ years that could be an option.

  12. Can we have some common sense on the question of the acceptance of public transport.
    You appear to have been in Dunedin at the time of the interview. Can you advise me on the following items.
    1) Did you get to Dunedin by ferry and then bus from Picton? Or did you fly?
    2) Did you get to the point of departure in Wellington by public transport, ie bus? Or did you go by taxi or private car?
    3) Did you get into Dunedin by public transport, ie bus? Or did you go by taxi or private car?
    Naturally as a true Green you will have used the bus to the ferry terminal, a rail ferry then a bus from Picton to Dunedin and a bus to the hotel.

  13. This is more ‘tinkering round the edges’..
    what about taking GST off basic food & introducing a CGT as most other countries have ? or is it just to difficult.
    Sounds like more pandering to the ‘top end of town’ to me !

    I guess Mr Key won’t have to worry, as he rides in his ministerial BMW.

  14. You really are pretty careless in your words you know.
    What did you say?
    “I’m not going to announce a tax rise today”
    That simply leads you wide open to the question of when you are going to announce something you appear to have decided on.
    If you then don’t tell us what the tax increase is going to be you come across a shifty and deceitful.
    Careless, careless, careless.
    Also – it’s a minor point but do you think you could perhaps buy a comb?

  15. Thought you did well on Breakfast, Gareth. Corin Dann was just being dense. I know his aunt is a staunch Green and should have a good talk to him 🙂

  16. Cheers for the links Gareth. I have no problem with the government deferring the tax increase – they would have been hammered mercilessly if they hadn’t.

    The bigger and more important point question is “where are they going to save the $75 million”? Hopefully from the unnecessarily large state highways budget – but you never know.

  17. Going to treat that as a semi-serious question.

    We are in a pinch. We have to ask why that is and how to fix it and that’s a separate question.

    The real question is how, with inadequate resources, do we manage to keep our citizens and our goods mobile, and all parts of the country accessible.

    Which IS a question that Joyce is incompetent to answer correctly. This is in evidence in his simple minded dictation regarding the route of the road through Paraparaumu. That’s my only direct knowledge place where I have seen the difference between his decisions and intelligent decisions… others here have other stories about it.

    However, the GENERAL question has to be considered and the perception that Greens oppose all roads improvements has to be revisited. We don’t reject all roading improvements. We simply strike a balance that favors rail over road in general.

    It is a matter of the long term perspective that most Greens have, vs the short term profit orientation that most Nats have. Greens look at the next generation’s resources. Which are going to be more electricity and less diesel and petrol. We may have battery powered cars, we may have something else (NH3, CH4 fuel cells?) but what is certain is that we will have electricity and we already know how to electrify a rail line. Heck, most of the rail line is already electrified. So we have a potential means of keeping people moving that is efficient in energy, but not as fast as our CURRENT energy intensive systems are.

    We also have the ability to build our own trains. Something we cannot manage with commercial vehicles in general. The re-use and heavier engineering that goes into rail means that these projects ARE feasible for us. One has to ask why Hyundai and Bombardier and whoever else are building trainsets for us rather than our own NZ workforce.

    Exactly what part of keeping NZ working was that? Not that Labour is any brighter about this. Wellington’s new cars may be nice but they’re also imported. Again. I’d rather we spent the money in New Zealand. Spending it anywhere else on something we CAN do ourselves is a BIG mistake.

    However, the point here is about future proofing our society. Which is another way of saying “doing things sustainably”.

    We can, of our own resources, make a transport system of our own rather than relying on batteries from Mitsubishi and diesel’s from Toyota and v-8’s from Holden… and none of it made here.

    We can, instead of creating a system that relies on a solution we cannot identify for the motive power of vehicles we do not ourselves make in any case, build something that uses electricity, moves us pretty efficiently and can be built with current technologies.

    We can, instead of encouraging fossil fuels to be burned until they are exhausted, encourage thrift in their use and retention of their capabilities for our children’s children.

    We can rather than encouraging fossil fuels to be burned until the ocean rises, encourage the development of renewable energy that will remain accessible even when the ocean does rise.

    Yet every road is a route, and I have gone through a lot of argument with Greens here and elsewhere to point out the folly of opposition to Transmission Gully when SH1 is within 2 meters of Mean High Water and SH2 is an optimistic name for a goat track.

    Build the road and there will be infrastructure built along it, and we are going to NEED that infrastructure when the water rises.

    Not all roads are bad. Most National Transport policy however, seems to be worse than that.


  18. Corin sure owned that interview with his straight up questions, as he put it National “are damned if they do damned if they dont”

    Do you think neglecting new and improved roading projects and throwing it at cycleways, trains and buses will fix the problem ? or will it just mean we will have crappy roads running alongside shiney new railways ?. People still need to get the train station via a road dont they ?

    Im not saying trains, buses and bikes are bad, but we are really in a pinch when it comes to money at the moment and can we afford to neglect our roading system which is the only real and semi reliable transport option we have at the moment ?

    To many problems to fix and not enough $$$…tax the rich a bit more ?

  19. @dbuckley 4:06 PM

    I like the honesty and tranparency of the Greens. Of course a policy of a tax increase is never going to be “popular”. But the reality is that National proposed this tax increase, and are now deferring it purely for political gain, but fully intend to implement it if/when oil prices drop, if not before.

    The most likely thing to make oil prices drop is another global recession. Who thinks that’s a good time to increase fuel taxes?

    Alternatively, National still fully intend to implement the tax increase, but for electorally expedient reasons are deferring its implementation out of fear that doing it now will see them punished in this year’s election.

    Either way, the Green solution is the sensible one. Instead of playing politics over fuel taxes, divert a good chunk of the revenue they raise to transport spending that is more fuel-efficient – i.e. public transport, rather than roads.

  20. The Green Party say that National are just playing politics in an election year and they should go ahead with the increase.

    There, a message that every voter can understand. The Green Party want you to pay more for fuel. We hate you people. Get paying more for your fuel. Green Party sticks it to the everyday Kiwi.

    Next you’ll be wanting to limit the flow rate of showers.

    When does the drive to make the Green Party unelectable end…?

  21. While oil prices will remain high, and also given that development of high quality public transport is essential, this article shows that oil prices are not what they seem.
    As seems to be typical, it appears we’re being manipulated by the money men once again. Add water to this in coming years, and we’ve got a world wide disaster on our hands, that will make the financial meltdown look pretty tame. Even more reason why we must retain state control of essential assets and resources, so we relatively immune from this.

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