Transport Minister Chris Bishop says the Government will take around $1 billion from its operating allowance to fund the delay to next year’s fuel tax increase, acknowledging the November election was a factor in the decision.
Bishop and Labour leader Chris Hipkins were interviewed on Herald NOW on Tuesday morning, a day after the Government cancelled the 12 cents a litre fuel excise increase due to take effect on January 1, 2027.
Asked by host Ryan Bridge how the resulting funding gap would be covered, Bishop says the money will come from general operating expenditure, with the impact to be detailed in the Pre-election Economic and Fiscal Update (PREFU) later this month.
“So basically we have to take it from general operating expenditure, which is not an ideal situation, but we think on balance is the right thing to do,” he says.
Bishop puts the cost at around $1b over the forecast period, or roughly $250m a year.
He also acknowledges the election played a part in the decision, saying going into the campaign with a 12 cent increase locked in for January was “a pretty unpalatable prospect, because petrol’s about three bucks a litre, give or take”.
Bishop says the National Land Transport Fund is intended to operate on a user-pays basis, with fuel excise revenue used to fund roads, new state highways, public transport and rail, but successive governments have moved away from that approach.
He also repeats the Government’s claim that Labour’s proposed three-year fuel tax freeze would cost $4.6b.
“That comes at the expense of potholes, resilience projects around the country, public transport services, and jobs in the regions, people who are working on roading projects right now,” he says.
Hipkins disputes the $4.6b figure, saying it does not account for Monday’s announcement and includes a period beyond the next election. However, when repeatedly asked what Labour believes the correct figure is, he declines to provide one.
“We’re going to set out our own plans in that regard, including any changes that we would make, when we set out our fiscal plan. We’re waiting for the government to open the books when we’re doing that,” he says.
Hipkins also declines to commit to retaining the Government’s ring-fenced pothole fund, comparing it with the road cone hotline as a policy he says has not worked.
“I am committing to prioritising road maintenance, and that of course includes potholes,” he says.
He says National’s pledge of no new taxes “didn’t even last a week”, pointing to the 20 cents a litre of fuel excise increases now scheduled from 2028.
For motorists, there will be no fuel excise increase before then.
Fuel excise will rise by five cents a litre on January 1, 2028, followed by the same increase at three further six-monthly intervals, taking the total increase to 20 cents a litre by the end of 2029.
Road user charges will rise by equivalent amounts.
