Parliament's funding problem: The pickle of covering the cost of not increasing fuel taxes

Labour's not yet outlining how much its promise to freeze fuel tax rises for three years will cost, how it will be funded or if it plans to top up any shortfall resulting from the pause in the National Land Transport Fund (NLTF). Meanwhile, National has outlined the extra $1 billion needed to fund its 2027 fuel tax freeze will be borrowed. 

Leader Chris Hipkins announced last week Labour would not increase fuel excise for three years if elected. While National estimated this would cost $4.67 billion, Labour has denied this is how much the policy would cost, but has yet to release its own estimates. 

On Tuesday, Hipkins said: "We'll set out our own estimates ... I think what the Government said out yesterday is just completely ridiculous. But we'll set out our full policies in due course."

The cost would be less than $4.6 billion, Labour transport spokesperson Tangi Utikere said. 

"But we will make that very clear when the government open their books" at the end of September, he said.

"We will make that very clear that it is less than what the Government and Simeon Brown and Chris Bishop and others are spouting."

If he would top up the NLTF, Hipkins said he was not going to announce Labour's fiscal plan that day. 

"What I'm being clear about is that we won't be increasing fuel tax by another 25 cents a litre."

The Government's fuel promise

Prime Minister Christopher Luxon confirmed on Monday Cabinet had signed off on scrapping the upcoming 12 cent fuel tax increase, due to kick in January 1, 2027. 

The Government still wanted to top up the $1.48 billion shortfall the pause would leave in the National Land Transport Fund through the unused $450 million fuel response contingency fund, but would not confirm if the additional $1 billion needed would be through borrowing. 

On Tuesday, asked if the $1 billion would be borrowed, Finance Minister Nicola Willis said it would come off the bottom line and be funded by general taxation - "So it is the case that that is money that would otherwise be able to be used to reduce debt or to spend on other things."

If the money had been taken from elsewhere in the Government's books, Willis said, "this is money that we wouldn't have otherwise spent, that we are now going to spend, putting general revenue into the [National] Land Transport Fund."

When Transport Minister Chris Bishop was asked if it was borrowed money, he said: "Well, yeah, because we're in deficit, so by definition that's true. We've said we'll fund it, but the country's in deficit... the answer is yes."

"My point was we're not going to be making reprioritisation inside the transport budget, but clearly in the round of the overall government of expenditure of billions of dollars we spend each and every year, you'll see all of that in PREFU [the Pre-Election Economic and Fiscal Update]."

'That money's got to come from somewhere'

Deputy Prime Minister Seymour said: "We will not be collecting the money from the fuel tax, but we're still going to maintain the roads, that money's got to come from somewhere."

"Now it's either savings elsewhere, additional taxes, or borrowing more money. Now we're definitely not doing new taxes, so where else can it come from? Potentially there will be savings, but I would say we should make savings anyway. 

"Therefore, it is a net increase in debt."

Seymour said Willis had been clear, "this is money that could have been used for debt reduction."