National proposes dropping tax on fuel

The National Party is thinking about axing fuel taxes completely if it wins office in 2020.

Its transport spokesperson, MP Chris Bishop, will today release a discussion document, which proposes a move away from fuel taxes as the primary way of funding road building.

New Zealanders currently pay 66 cents per litre of tax on a litre of unleaded 91 petrol.

Bishop would like to reduce that over the medium to long term to zero.

Fuel excise duty (fuel tax) is a hypothecated tax for roading, meaning the money collected goes directly into the National Land Transport Fund (NLTF) for building and maintaining roads.

A fuel tax is used as a proxy to charge road users for building and maintaining roads based on how often a driver uses them.

Bishop said that better fuel economy standards and hybrid and electric vehicles (EVs) had undermined the principle of a user-pays roading system.

He said it was time to ‘‘move away from fuel tax as a proxy to road use’’.

National is proposing a transition to funding the NLTF through road user charges (RUC), which are currently paid by diesel and heavy vehicles like trucks.

The RUC is charged per kilometre travelled, and is paid in advance. Bishop argued that new technology would mean RUCs could be rolled out for all road users over time.

He said switching to RUCs would save New Zealand from a looming crisis in the way we fund road construction.

Currently, the NLTF receives roughly $4 billion per year but this will likely decrease as better fuel economy reduces the amount of petrol people use and EVs come to dominate the market.

EVs currently pay no RUC or fuel tax, although their exemption from RUCs expires in 2021.

Bishop said the changes would mean some motorists would pay more and others less after fuel taxes had been phased out.

‘‘People who use the road more will pay more,’’ Bishop said.

While National has promised to repeal the Auckland regional fuel tax and not to increase other fuel taxes in its first term, the transport policy ideas are currently only at the stage of discussion. While they give an indication of areas the party is looking at, they don’t yet represent party policy.

Bishop also proposed increasing the share of Crown funding for roading and the use of PublicPrivate-Partnerships to plug the infrastructure deficit.

National is also looking at whether to allow councils to introduce congestion charging.

Councils have been clamouring for congestion charging, which would allow them to fund their own transport projects but the current Government has so far ruled it out.

A congestion charge works by charging a fee for motorists to enter a particular part of a city, usually the centre.

Bishop is soliciting feedback on whether a future National-led Government should allow councils to use it here.

He said he would be open to allowing it in main centres where there were alternative public transport options available.

He thought the charges could be higher at certain times of day – like rush hour – to encourage people to use public transport.