Fuel tax cut before Cabinet, decision imminent- Michael Wood

A decision on whether to extend the Government’s transport subsidies is in the “Cabinet process” Transport Minister Michael Wood said, with a decision expected imminently.

In March, the Government cut 25 cents a litre from fuel taxes, an equivalent amount from road user charges, and halved the cost of public transport tickets in response to a spike in the cost of fuel following Russia’s invasion of Ukraine.

This subsidy was extended in the May Budget, and extended again after that, and is currently due to expire at the end of January.

Advice obtained under the Official Information Act from September told ministers that if the Government wished to extend the cut, it would need to pass a bill in the House to do so before Christmas. Parliament goes into summer recess next week and will not return until February.

Wood said the extension was in the “Cabinet process” and had been put to Cabinet yesterday, but decisions were “still being made which will be confirmed shortly”.

“That’s currently being considered by Cabinet,” Wood said, saying the proposal was“still going through the Cabinet process”.

The last Cabinet meeting of the year is next Monday.

Wood confirmed that if the Government decided to extend the subsidies, it would need to legislate that change. If, however, it chose to let the subsidies expire it would not need to do anything.

Finance Minister Grant Robertson told Q+A’s Jack Tame on Sunday that a decision was coming “very shortly”.

“We will make our judgment very shortly around whether or not we think it can be extended, but if it does, that won’t be for a long period of time. Because ultimately we need that money for the long term for the things New Zealanders really want and need.”

Fuel taxes and road user charges are paid into Waka Kotahi’s land transport fund, which pays for new roads, public transport subsidies, and road maintenance, among other things.

To cut fuel taxes and road user charges, the Government topped up the fund with funding from the core Crown account. This money comes from general taxation.

The last five-month extension was estimated to cost the Government $589 million to top up Waka Kotahi’s fund for the money it lost from the tax cut.

Robertson warned on Q+A that the Government had to balance the benefits of a fuel tax cut to road users with the immense cost to the Crown.

“In the end, there’s no costless decision here, because that money is the money that pays for our roads. There’s the money that pays for our private transport, so it can go on forever,” Robertson said.