Families Package and Auckland Regional Fuel tax kick in

Written By: - Date published: 10:24 am, July 2nd, 2018 - 48 comments
Categories: auckland supercity, benefits, child welfare, class war, Economy, jacinda ardern, labour, making shit up, Media, national, poverty, same old national, Simon Bridges, spin, tax, the praiseworthy and the pitiful, wages, you couldn't make this shit up - Tags:

Yesterday the Government’s tax changes and the Auckland fuel tax kicked in.

First some comments about the fuel tax.  Anyone who has ventured onto an Auckland road in the past few years knows that Auckland has a congestion problem.  A big one.

Some things have been done to address this.  Completion of the Western Ring Route, a project that was started under the last Labour Government, gave substantial relief at least for a while although the effects are now lessening.

And the rejuvination of the rail system continues to show outstanding results.  Annual trips on the Auckland Rail System now exceed 20 million.  Back in 2002 the figure was one million.

For the past decade the focus moved from public transport to more roads even though the international experience was that roads generate congestion rather than reduce it.  The city rail link has been started.  But National had to be dragged screaming and kicking to acceptance that the proposal was absolutely vital.

The basic problem that Auckland is facing is that under the last Government’s Auckland Transport Alignment Project there was an initially estimated $4 billion shortfall that ballooned by a further $1.9 billion in 2017.  About a fifth of the projects were not funded.  This is as sure fire a way of creating a transport crisis as you can imagine.

So the Government introduced the ability for Auckland Council to raise a fuel tax.  At the level that has been agreed to about $1.5 billion will be raised over ten years.  With the help of NZTA subsidies and other funding mechanisms this will fill in the funding gap.  No worsening congestion.

What other options did the Government have?  It could have used the NLTF or a Crown grant to cover the extra money.  Aucklanders would still have paid a third of this amount and the rest of the country would have complained.  This way is much quicker and less risky.

And congestion costs.  Whether through lost time travelling or increased charges for anything that is transported.

Is the fuel tax regressive?  The views appear to be yes and no.  Simon Wilson, who is one of the most astute reporters writing about Auckland issues initially thought no but then changed his mind.  He said this:

What will wealthier people pay? On average per household, they drive more, and as the pump prices suggest, they probably pay more for their petrol too. The wealthiest third of households will face an average fuel price rise at least double that of the poorest.

That might come as a surprise to anyone used to hearing that “fuel taxes hurt the poorest more”, but it shouldn’t. Wealthy people spend more on almost everything.

Despite that, however, it is true that these fuel taxes will hurt low-income households more. Low-income households spend a bigger proportion of their money on essentials, including transport costs. So every price rise eats into their disposable income, assuming they even have any.

Wealthier people might not notice having to spend $5 or more a week of something. But many others have to count every penny.

Another factor: people in poorer households are more likely to use public transport, thus not paying for petrol at all. Those who do drive may be travelling further than many wealthier people, and in less fuel-efficient cars too.

I wrote earlier this week that the fuel price rises are not regressive. That was wrong. Wealthier people will pay more overall but this will impact them less. The fuel taxes are flat taxes: we all pay the same per litre. And all flat taxes are regressive, for the reasons just outlined.

The effect is unfortunate.  But there was another event that occurred yesterday that provides some balance.  Labour’s family package kicked in.

A summary is in the Herald:

The Families Package, which was funded by cancelling the previous National government’s planned tax cuts, will cost $5.53 billion over five years.

The Government estimates that by 2020/21, when the package is fully rolled out, some 384,000 families with children will be better off by about $75 a week. It is projected to lift the number of children living out of poverty by 64,000, or about 41 per cent, by 2020.

“We know that low and middle income families have been really struggling with things like the cost of housing and the cost of living. For those families, when you are encountering financial difficulties it can really put a lot of stress on the family, particularly when you have children to raise,” [Carmel] Sepuloni told the Herald on Sunday.

“This will really make a difference to their lives.”

The elements of the Families Package are a boost for working families increasing the amounts families currently receive and extending it to 30,000 more families, a best start payment for families with new born children, the winter energy payment, reinstating the independent earners’ tax credit, implementing the accommodation supplement increases previously advised and the introduction of 26 weeks paid parental leave.

Jacinda Ardern announced the introduction of the package with this video.

One other package that has been criticised by the right is Labour’s policy of making the first year’s tertiary education free. The right have criticised the policy as a package of wealth transfer to the wealthy. I have to disagree. There has been a gross transfer of wealth from the young to the poor for decades. This is one attempt to use taxes to reverse this trend.

National’s response to the Regional Fuel Tax is to repeal it.  Bridges complains that it is a lack of fiscal discipline that is the problem.  But clearly the same fiscal indiscipline must have existed in 2016 and 2017 under National because the funding gap was identified then.

And National continues its stupidity based attacks on the policies with this effort.

No sign of any acknowledgement what the families package means for people, particularly poorer families.  Maybe in National land these people do not exist.

To all the critics of the regional fuel tax I accept your concerns but the work is absolutely vital for Auckland’s future. And the other announcements will provide significant benefit for poorer families.

48 comments on “Families Package and Auckland Regional Fuel tax kick in”

  1. indiana 1

    Is the implication that the changes to the Family’s Package and the new Fuel tax is a tax neutral change? Seems odd when the Family’s Package will take until 2020/21 to be fully rolled out, but those families need to take the fuel tax increase hit first up.

    • mickysavage 1.1

      Family package benefits are way higher than the likely cost of the regional fuel tax.

      • indiana 1.1.1

        …only if you meet the criteria of eligibility for the Family’s Package right?

        • AsleepWhileWalking 1.1.1.1

          That’s right.

          Regardless the cost will be passed on through public transport.

        • Gabby 1.1.1.2

          Only if you actually use fuel right?

        • Andrew 1.1.1.3

          The political party who deliberately used Social Engineering and tried to copy singapores bus system and messed it up needs to be sued for lying about not adding any additional taxes! We no longer use the bus system in Auckland and now pay 30c p/litre to local government to go to and from work, are they running a business or what? Lets start a class action law suit against the responsible political parties, let me knows whose in. any lawyers please comment if you want in. Time to take our freedom back by suing the irresponsible political party (we own the government. we now need to force them to work for us and not them just working for each of their minority party members).

          • lprent 1.1.1.3.1

            *sigh* Always interesting seeing someone who hasn’t bothered to actually research anything jerking off in public.

            I have been in Singapore for for about half of 2018 so far. I wound up having a pretty good look at their public and private transport systems.

            1. The majority of Singapore’s public transport traffic is on a largely elevated train system (the MRT and LRT). The bus system is relatively tiny by comparison. Trying to ‘copy’ it for Auckland would be an exercise in futility simply because we don’t have anything like the required train infrastructure. It doesn’t cover very much of the Auckland urban area and won’t for several more decades.

            2. Singapore also has a density that is way higher than Auckland. Having 5.8 million people (ie nearly 4x as much as Auckland’s 1.6 million) in an area about a quarter of that of Auckland tends to do that.

            Basically no-one would or has tried to equate or even to develop the two systems in a similar fashiom. They are completely different geographies. Except apparently you have just invented this as some kind of deluded conspiracy theory.

            Personally I’d be more inclined to start a class action to try to lock up deluded conspiracy theorists together on the Auckland Islands so that they can develop them together (and leave us without their advice).

    • Matthew Whitehead 1.2

      Even the minimum wage rises should cancel out the fuel tax raise for most workers, so really the only people being hit here are those far enough up the salary/income foodchain not to get bouyed by minimum wage rises or WFF. That said, it is a little disappointing given how slow the govt is moving on minimum wage rn that they’re offsetting it with fuel tax increases, but you gotta fund those buses and trams I guess.

  2. Monkeyhill 2

    In general I think we should have had a regional tax years ago, I do think it’s not that fair on shift workers as public transport at night is pretty pathetic. Last train to Swanson or Onehunga or to the south is at about 9.40 pm, it’s not like new lines have to be built to run later trains, this should have been done at the same time the tax went in. Also I think the boundaries are way too far out, transport options in places like Wellsford or Warkworth are pretty much nil. There’s no reason why some of the surplus carriages couldn’t be used to hook the western line up to Hellensville too. The families package doesn’t offset much if you don’t qualify. I use a combination of bike, and train to get around mostly, it’s just pathetic how early the trains finish, there’s normally plenty of people on them.

  3. Matthew Whitehead 3

    A fuel tax is absolutely regressive. It’s also the only option for now because MoT has been skipping out on doing the work on preparing an alternative, which should be the messaging on this- it undercuts National’s attempts to turn poorer people against Labour, and rightly places the blame on them for not future-proofing the funding source for transport. (A fuel tax is unsustainable as in the future the majority of vehicles won’t be using fossil fuels)

    To explain why a fuel tax is regressive, we need to do some background. The reason we have a fuel tax is because of the user-pays principle, the idea of which is that people who use roads more should contribute more to their maintenance, expansion, and efforts to reduce traffic on them, eg. public transport. This is a fine principle.

    However, in practice, many of the options we use to follow this principle that seem neutral are regressive in either one simple way, or in at least two, like the fuel tax. This is fine if the things that funding is spent on disproportionately benefit the poor, (eg. free public transport rides for those on community service cards) but isn’t okay if they go to things that largely benefit the rich. (eg. new highways) Traditionally, road funding has done the latter.

    The way most simple user-pays measures are regressive is that there is a flat fee for everyone that doesn’t account for difference in disposable income, making the fee “larger” for poorer people when it is properly considered as a percentage of disposable income rather than in absolute dollar amounts.

    A fuel tax is even more regressive than that, because it charges per litre rather than per kilometre, which might seem fine at first blush, but actually introduces another variable into the pricing of using roads: fuel efficiency. Because poorer people generally drive cheaper cars when they drive at all, (and are more likely to live in areas poorly serviced by public transport, or that require a car to commute at all, so they have less options to avoid the fuel tax than wealthier people, even though wealthier people choose to drive more/are less transport-efficient) they are far more likely to have worse fuel efficiency on average, meaning not only is the same dollar amount hitting them harder, they are being hit with a larger dollar amount on average per kilometre. When you add in transport funding previously mostly going to roading expansion, that was a triple-whammy of unfairness. The government’s new transport plans abandon that for a double-whammy by redirecting funding to public transport and road safety, but they still had to use fuel taxes.

    Now, the case for one in Auckland has another factor, too. National-level transport funding isn’t always spent where it’s collected, which is fine if there are emergency works costs in a particular region that need immediate attention, of course, but that’s not the only source of the inequity. A few regions, most significantly Wellington and Auckland, get a much larger share of the funding than they pay in. Wellington has seen continuous investment from its local council and is using rates funds to keep up with its local share of public transport infrastructure for now, but Auckland has been trying to freeze rates and has been under-funded for infrastructure compared to demand for services, so needs a way to get more local funding for projects.

    The regional fuel tax is the fairest currently available way to do this. It’s not perfect, its critics in the National Party are right on that. But it is the best available option. This fuel tax won’t have Auckland paying its fair share for its own infrastructure. It’s not actually catching things up that far. It will just provide the local funding share for the existing planned transport projects. Auckland will still be sucking funds out of most of regional New Zealand’s fuel taxes in order to pay for the central government share of its infrastructure, which for poorer people in the regions, is another unfair element of the transport funding equation: they are net contributors to public transport needs in large cities that they don’t get to use, and they have no option but to pay the fuel tax because they live in areas where they need to drive.

    • Matthew Whitehead 3.1

      As for alternatives, I can think of a couple:

      A simple system would basically be to seperate out RUCs for all drivers and charge a per-km fee. This removes vehicle efficiency from the equation, but would require more administration to effectively police it.

      On multi-lane highways, another option is to have a toll lane, effectively opt-in congestion charging. Richer drivers are more likely to use these, so it actually tends to be progressive, yet the element of partial charging tends to reduce congestion and make people with the money to pay the fee feel better about it because they have a way to a lower-traffic lane.

      A final option is basically a high-tech congestion charging system. There are a number of ways to target this- in San Fransisco, for instance, they have dynamic parking fees based on demand for on-road parking, rather than charging people for driving directly, or you can require drivers to install some sort of GPS tracking unit that deduces charges, but the latter is pretty high-demand on your software and hardware system.

      None of these suffer from additional complications of double-factored regressiveness, and if their funding is spent in a progressive way, they should all come out as net-progressive systems.

      • Brendon Harre 3.1.1

        Mathew I agree with pretty much all of that. Good explanation.

        For me down here in Canterbury. I would like a regional fuel if it meant greater transport choices. In particular rapid transit like Auckland and Wellington have. Lower income people could save $1000’s if the buses were faster and more convenient -this benefit is way more than the cost of a petrol tax. The way to do that is create a rapid transit network -Auckland and Wellington prove that.

        I have made a plan for how and why Greater Christchurch could build a rapid transit network, with some detail on how this fits in with housing supply.
        View at Medium.com

        • I agree with most of your conclusions in your paper, Brendon. The trouble has been a lack of foresight post earthquake – mainly driven by the ex-woodwork teacher who said ‘a business case can’t be made for a commuter line from Rangiora to the ChCh CBD.’

          The bus exchange should never have been constructed where it it, even though it works quite well. The old Moorhouse Ave. railway station should have become a combined bus exchange/commuter rail hub, with frequent trains linking Rangiora to Rolleston to Lyttleton and on to buses.

          I don’t know for sure, but I suspect all the railway land on Moorhouse Ave. has been flogged off to mates of Brownlee – we missed a great opportunity to develop a central hub that could have helped rejuvenate the centre of Christchurch.

          And, dare I say it, John Minto was right with his mayoral slogan for public transport – ‘free and frequent.’ We need to think outside the square if we are to make this city work.

          • Brendon Harre 3.1.1.1.1

            It is easy to get irate when thinking about the missed opportunities in Christchurch after the earthquakes. But we need to focus on the future now. Auckland shows that what is possible to from a low auto-centric base. Christchurch should try to copy that.

            Re: the land in Moorhouse Ave that could be used for a combined train and bus rapid transit hub -it is always possible to use the Public Works Act…..

          • the other pat 3.1.1.1.2

            not to mention a passenger rail service fromt Rolleston.

      • ropata 3.1.2

        The problem with proper RUCs applied to truckers is that they have a tendency to hold the country to ransom, I suspect Labour is wary of this as it was a PR disaster for Clark’s government in 2008.

        Troglodyte Truckers Threaten Nation with Gridlock

        The only way out of our national truck dependency is to work on improving the rail network.

        I would also like to see heavy trucks banned from urban/suburban streets completely, and light delivery trucks banned from operating in rush hour, per New York and Paris

        • Draco T Bastard 3.1.2.1

          The problem with proper RUCs applied to truckers is that they have a tendency to hold the country to ransom.

          Yes. They’ve done that before.

          The government should grow a spine and if they try it again have their trucks taken from them.

        • Gabby 3.1.2.2

          It wouldn’t have crossed Shagger Banxie’s ‘mind’ to clamp the trucks I guess, and charge the drivers.

    • dukeofurl 3.2

      “A few regions, most significantly Wellington and Auckland, get a much larger share of the funding than they pay in .”

      Thats not true.

      See the details here
      https://www.greaterauckland.org.nz/2016/11/30/transport-spending-in-nz-in-2016/

      Auckland region spend was a bit over $1400 mill , but that included councils share which was say $350 mill.

      They reckon the regions share 35%, is roughly the same as population 34%, just under the region share of GDP 37%

      Some time back before changes in the early 2000s Auckland share was closer to 20%

      • Gabby 3.2.1

        Why reckon it by population duky? Why not by total road length and value of goods transported?

        • dukeofurl 3.2.1.1

          Auckland has about 80% of the countrys population growth
          Its increased by the size of Wellington in last 20 years, that makes a big difference.

          generally the more cars and trucks the more fuel tax/ diesel mileage paid

          Greater Auckland did some numbers on km travelled , its on the link.

    • Draco T Bastard 3.3

      National-level transport funding isn’t always spent where it’s collected, which is fine if there are emergency works costs in a particular region that need immediate attention, of course, but that’s not the only source of the inequity. A few regions, most significantly Wellington and Auckland, get a much larger share of the funding than they pay in.

      Actually, Auckland gets less. I shouldn’t have to be telling you this.

      Auckland will still be sucking funds out of most of regional New Zealand’s fuel taxes in order to pay for the central government share of its infrastructure,

      Auckland has never sucked funds from other regions – they’ve always subsidised them.

  4. Draco T Bastard 4

    What other options did the Government have?

    The big one and one that would have worked much better would be to have businesses paying their employees to and from work travel costs.

    Do that and watch as the businesses demand better public transport. The cost benefits of public transport would become obvious very, very quickly.

    This is another cost that should have always been with the business but the business people managed to get shifted onto the employees and in doing so has helped push uneconomic solutions in the form of cars and more roads.

    • ropata 4.1

      Great point, there should also be penalties for parents dropping off their kids by car and causing daily chaos around schools. Or better incentives for walking.

    • mikes 4.2

      Totally agree. Or at least let wage earners claim back fuel expenses in their tax return. It sux how contractors and the self employed can claim 100% of their petrol costs back as a cost of doing business whilst wage / salary earners can’t. It’s a cost of doing business (working and paying taxes) for a wage earner too.

  5. Gosman 5

    Are you seriously expecting an Opposition to focus on positives in a Government policy?

    • Stuart Munro 5.1

      It’s pretty basic not to lie about them.

      National’s attack ad goes like this:

      Fuel tax $15
      Rent increase $20
      Food cost rise $20
      Lost tax cut $40
      Lower wages $10

      Fuel tax is probably on the high side. Rent increase is nothing whatsoever to do with this government, nor is the rising food cost – good nudge for regulation though.
      Tax cut is exaggerated. Lower wages is a blatant lie.

      • Gosman 5.1.1

        The rental increase has everything to do with the Government if it makes it more costly for landlords to rent their places out. The argument made by the right is that it has. You may disagree with this but it isn’t a lie.

        Also why is it a good nudge for regulation? Do you think you can regulate the price of food do you?

        • Stuart Munro 5.1.1.1

          It’s a lie. Rents go up as far as the market will bear, unless they are regulated.

          There are two drivers for the high price of food in NZ – one is the substantive monopoly of the large supermarket chains, the other is road transport operators.

          The supermarket chains should face punitive taxes for price gouging – ie any time their prices exceed Australian prices by more than 25%. Current Oz prices for kumara are less than a quarter of NZ supermarket prices for example.

          • Gosman 5.1.1.1.1

            If you increase costs on Landlords they usually pass much of the costs on to their tenants. Alternatively you reduce the number of rentals in the market which again drives up rental costs.

            There is a Commerce commission that is meant to ensure we have competition in the Supermarket industry. You are claiming that it is not doing it’s job. If it is failing to do it’s job now why do you think it would be any better with more powers?

            • Stuart Munro 5.1.1.1.1.1

              Landlords pass on costs both real and imagined.

              The commerce commission just needs a little encouragement – such as a revenue grab every time the supermarket cartels rort their customers.

              • Gosman

                What you are essentially stating is Kris Faifoi is not doing his job given he has not directed the Commerce Commission to investigate what you regard as an obvious non competitive market.

                • Stuart Munro

                  Meh – it’s been going on for at least the last 18 months. Sure the minister should bring the hammer down – but the Gnats never would. Paid not to.

    • Draco T Bastard 5.2

      I expect an Opposition to listen to reality.

      Of course, National and other RWNJs are never going to do that because reality never supports their ideology.

  6. DH 6

    I’m uncomfortable with this type of support. People want to be able to stand on their own two feet and packages like these are making many working people near-permanent beneficiaries. That’s not right IMO. None of us should have any need to put our hand out when we’re working full time.

    I’d much rather see a support package targeted directly at the reason why so many are in the financial crapper. Housing. People can talk about wages and cost of living but it’s housing that keeps bleeding lower-income people dry and neither increased wages nor WFF will fix that IMO.

    I know it would be a logistical nightmare to manage a housing benefit but that at least would enable the Govt to remove/reduce the tax rebates when (if) housing is finally sorted through Kiwibuild. WFF is nigh impossible to retract, people come to rely on it and the cost of housing just continues rising to soak up any extra cash people get from WFF.

    Here’s an idea. Why not bring in a capital gains tax on investment properties and send all the revenue from it to low income people as housing support.

    Having said that at least this Govt has the heart in the right place…. it may not be ideal but it still helps.

    • dukeofurl 6.1

      We never heard any bleats along the lines of ‘think of the poor’ during nationals 22c rise in petrol taxes over the last 9 years.
      You would think the way some economists have gone into it that they were in the running for a Nobel !

      I reckon its the invisible hand of the Business Roaund table, like they did in the 1980s. pay commentators money to write favourable articles and even those who were paid got a top up of the newspapers money

      All the details were revealed from a leak of emails from the BRT some time back

    • Gabby 6.2

      Here’s an idea. Why not build a bunch of rentals that compete directly with unsubsidised rentiers.

      • DH 6.2.1

        That too Gabby. It would be poetic justice if they used a CGT to fund more state houses.

      • CHCOff 6.2.2

        I like the idea that housing is ownership for the people living in the property.

        Also that strick criteria of citizenship is followed, for people living in NZ.

        I also like the idea that instead of New Zealanders sitting their assets into housing & property speculation, they sit it into public utilities. I also like the idea that the more New Zealanders do this, the more foreign investment that takes profits off shore is taxed. I also like the idea that govt. surpluses go to dividends for the NZ citizenship that funds public utilities.

        NZ1st!

  7. Bill 7

    The effect [of the fuel tax] is unfortunate. But there was another event that occurred yesterday that provides some balance. Labour’s family package kicked in.

    Or, by the same measure, any lessening of hardship in Auckland that was intended to result from the “Family Package”, has been eroded somewhat by the flat fuel tax.

    • mikes 7.1

      And as usual, the single people of the working class who are on low incomes are forgotten about again as they always are.

      • Gabby 7.1.1

        Unless they have kids of course.

      • ropata 7.1.2

        And the housing crisis makes it impossible for the median waged worker to ever get ahead. The system is rigged. It’s a gross injustice against a whole generation of Kiwis. The banks and property flippers are laughing though

  8. cleangreen 8

    Auckland needs more freight moved by rail as over 90% is moved by road, and studies have shown we subsidise road freight but not rail freight.

    This new development in HB can be used by government to shift more road freight back to rail to save Auckland road congestion and deaths.

    https://www.nzherald.co.nz/hawkes-bay-today/news/article.cfm?c_id=1503462&objectid=12079763

    HAWKE’S BAY TODAY

    KiwiRail: Rail Network a ‘win’ for everybody
    30 Jun, 2018 9:00am

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