National implied during the election campaign that it could deliver on its big transport promises without lifting taxes on drivers. They played voters like a bassoon.
Everybody knows that things cost money. Yet politicians repeatedly claim they have come up with a clever plan that means voters can have their cake without paying for it.
Labour has been guilty of this. For example, it talked about Three Waters as if ratepayers would be rescued from big bills — when really it was just shifting the cost to water levies.
National’s promise to axe the Auckland Regional Fuel tax and not raise fuel taxes (in its first term) were popular rallying cries on the campaign trail, but it was also just shuffling costs.
One wonders how much emphasis was put on the critical qualifier ‘in the first term’ when talking about this promise in town halls?
It probably wasn’t followed by an explanation that three years’ worth of fuel tax increases would happen at the start of the second term, and that car rego costs would go up instead.
There is only a six month difference between Labour’s gradual path to a 12 cent fuel tax increase and National’s all-in-one go hike in 2027 (with another 10 cents to follow).
Motor vehicle licensing costs will increase 50% over the next two years for most vehicles and the actual transport component of that total will more than double. Surprise!
But these unsignaled fish hooks are not just necessary to fund upgrades to the transport network, they actually don’t go far enough.
The Crown will still be borrowing money to make up the shortfall and seeking advice on how to raise even more revenue from the transport network in the future.
The catch
Raising the vehicle licensing fee to pay for roads is odd. That money is supposed to be for maintaining the motor vehicle register, and the draft Government Policy Statement says so.
“The fees are intended to contribute to the maintenance of the Motor Vehicle Register where the details of motor vehicles are recorded,” it reads on page 42.
One reason why it hasn’t been increased since 1994 could be because the cost of maintaining the register has not increased at anything like the cost of inflation.
Even if that isn’t the case, already a chunk of the revenue reaped from that fee makes its way into the general National Land Transport Fund where it used to pay for other things.
It appears to cost about $54 million to provide the licensing service while the fees raise closer to $200 million, according to a document released by the Ministry of Transport last year
An associated funding and fees review found charges for driver and vehicle licenses had been subsidizing other activities. National’s proposed change increases that subsidization.
This is unfortunate because it means levying all car owners equally, regardless of how much they use the transport network. People who drive less will subsidize those who drive more.
Road user charges and the fuel levy are both a ‘user pays’ type tax. The more you drive, the more you pay into the National Land Transport Fund.
Levying money from licensing fees means a person who walks most places, but owns a car for rainy days, will experience the same tax increase as somebody who drives every day.
Someone who owns two cars will contribute more than someone with one car — despite only being able to drive one at a time. Or, think of a retiree who drives just short distances...
We are only talking about a tiny portion of transport funding here, it’s not the end of the world, but it shows why it might be better to lift user pay taxes by an equivalent amount.
The only good reason to do it this way is because National painted itself into a corner with a purely political promise not to increase certain taxes.
Transport Minister Simeon Brown has kept his party’s election promise but has found a loophole big enough to pull $530 million through.
Interest.co.nz readers and government ministers alike understand there is a lot of infrastructure to be built and that New Zealanders will have to pay for it.
The only debate is about how best to structure that funding; anyone who says otherwise is trying to pull a fast one.
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