Regional Fuel Tax looks to go

The Dom Post reports:

A planned regional tax that threatened to add up to 10c to every litre of fuel will be scrapped. …

Transport Minister Steven Joyce will ditch the tax when he announces changes to transport funding next week. He said yesterday that a package of announcements would be made, including funding alternatives to the controversial 10c-a-litre tax introduced by Labour.

The Government was not convinced the regional tax made sense, Mr Joyce said. The tax and other increases to fuel levies planned for the next three years would mount up for motorists.

“In the Auckland region, by 2011 there’d be a 14c-a-litre extra tax and so we really wanted to have a close look at that.”

The fuel tax plan gave regional councils the power to charge up to 10c a litre on petrol and diesel to fund roading and public transport projects. Many councils around the country have already put a lot of work into the scheme and have all but spent the potential proceeds.

Keep cost increases down is laudable, but like the newspaper I am unsure where the funding will now come from.

I’m possibly one of the few advocates for a greater fuel tax. Why?

Well all proposed new roads get evaluated a cost:benefit formula. Now I have not checked recently but I think we only fund projects that say have a 3:1 or even 4:1 or grater benefit to cost ratio.

We also then have the Government hand pick certain roads as more important than others, because of limited funds.

So what I would do is to specify all roads over a certain benefit to cost ratio be automatically funded. 1:1 might be too low as there is some uncertainity over the calculations, but say fund everything over 1.5:1. And then have the fuel tax automatically adjust to be able to fund those projects. That way there is no cherry picking, we get better roads, but also motorists are paying the full costs of a roading network.

I would not fund public transport from the fuel tax. I support public transport but beleive it should be funded from general taxation as a competing priority like other public good expenditures.

Funding them both from petrol tax turn it into a battle of roads vs trains (for example) and it is not a choice. Unless we stop growing we are always going to need both more roads and more public transport. They complement each other – they are not substitutes.

Anyway I will be interested to see what the Government does.