Soaring prices put new fuel tax at risk

Soaring petrol prices may stymie attempts by regional councils to hit motorists with an additional fuel tax to pay for roading and public transport projects.

The Government is poised to introduce legislation on July 1 that will enable regional councils to implement the fuel tax, but already there are signs that the move could be a tough sell.

The Automobile Association suggested yesterday that motorists would balk at a 10 cents a litre fuel tax on top of record petrol prices closing in on $2 a litre.

And the regional fuel tax could be the tip of the iceberg - expected biofuel recovery costs, emission charges and a 2 cent increase in the ACC levy could bump up petrol by at least another 15 cents a litre by early next year.

"At the moment, any regional fuel tax would be extremely unpopular," said Mike Noon, the AA's general manager of motoring affairs. "I think it's going to be very difficult [for councils] to get the public's mandate ... but that doesn't mean they shouldn't try."

The tax would allow councils to fast-track under-funded roading and public transport improvements - and in Wellington, could help pay for huge projects such as Transmission Gully and the Ngauranga to airport corridor.

But it would also push the price of unleaded 91 well above $2 a litre, adding $5 to the average cost of filling a car.

The price of unleaded 91 was $1.89 yesterday, significantly higher than a year ago.

The Road Transport Forum urged the Government yesterday to delay legislation allowing a regional fuel tax, and put off any biofuel or emissions taxes till the international fuel market cools.

"New Zealanders are already struggling to cope with the effects of record fuel prices," said forum chief executive Tony Friedlander. "People need a breathing space to adjust to higher prices."

The Government already takes 42.5 cents a litre in petrol excise, as well as gst.

Finance Minister Michael Cullen - while conceding that petrol prices were putting significant pressure on household budgets - dismissed calls to cut gst on petrol.

A spokesman for Transport Minister Annette King said rising petrol prices would have to be considered by any regional council looking to introduce a fuel tax once the enabling legislation was passed.

Rigorous consultation would be required before the Government would consider a regional council proposal, he said. "The minister wouldn't want a tax to be all in one hit. There may only be a change of 1 cent a litre. The [regional councils] wouldn't be allowed to just bank money."

Greater Wellington regional council estimates the regional fuel tax would inject $35 million a year into the region's roading and public transport projects.

Jane Davis, its divisional manager of transport policy and strategy, stressed the council had no proposal or policy on whether it would implement the fuel tax.

A decision was likely later in the year, she said, following reports and costings on the Gully scheme and a draft plan on the Ngauranga to airport corridor.

"There are a lot of transport needs and we know there's not unlimited funds to get things done," she said, adding that motorists would have to be willing to sacrifice at the pump to fund road and transport upgrades.

- © Fairfax NZ News