The coalition Government just made its politically riskiest move, Bernard Hickey writes. It announced a surprise tax hike that will make provincial drivers help pay for new rail tracks in Auckland.
Comment: Watching a popular Government making a politically dangerous and large policy decision is never a comfortable experience. Prime Minister Jacinda Ardern led out a bevy of transport ministers onto the stage of the Beehive Theatrette on Tuesday to make what on the face of it was a bland strategy announcement about building fewer big new motorways and spending more on rumble strips, median barriers, bike paths, buses and trams.
But it was clear from the mounting discomfort of Ardern, Phil Twyford, Shane Jones and Julie Anne Genter that they were tip-toeing through a political minefield. What they painted as a motherhood and apple pie statement about improving road safety amounted to the biggest shakeup in the way transport is designed and funded in more than a decade. It would stop doing something a large part of the voting population wanted the Government to continue and then tax all New Zealanders to spend more money on what most of those voters consider 19th century infrastructure they will never use.
They initially focused on the plans for regional road safety improvements in the wake of eight people dying over the Easter weekend.
“The previous government did not spend enough on road safety, and instead wasted funds on a few low-value motorway projects. This has created an imbalance in what is funded, with a few roads benefitting at the expense of other areas,” Twyford said.
Jones highlighted the planned 98 percent increase in spending on regional road improvements after nine years in which regional road funding was cut by as much as 30 percent in areas such as Taranaki, Southland, West Coast, Otago, Northland, Hawke’s Bay, Gisborne and the Bay of Plenty.
But it became clear as the news conference wore on that they were actually announcing an unexpected increase in fuel levies and road users charges on all New Zealand drivers that will mostly help pay for train tracks in Auckland and improvements in road safety on regional roads. It also cancelled the previous Government’s plans for more motorways that older suburban voters love.
They proposed 9 to 12 cents per litre of fuel excise duty and road user charge increases over three years starting on September 1, which will be on top the 10 cents a litre regional fuel tax that Aucklanders will have to pay from July 1. This money goes into the Land Transport Fund, which will be opened up to be used by KiwiRail for the first time. They then plan to use $4 billion of that over the next decade to build rail infrastructure, mostly in Auckland, and will also use around $800 million to improve safety on regional roads. The big new motorways that National planned are gone.
This decision also pointed to one of the fault lines in New Zealand’s political landscape, and more specifically between Labour’s two support partners: the culture clash between cycle-loving, rail-riding young apartment-dwelling renters, and older car-loving, provincial-and-suburban home-and-section-owning drivers who love motorways. If you want to see a preview of the clashes between Ardern’s ‘our nuclear free moment’ generation and their elders it is the heat generated over the likes of the Island Bay cycleway and the removal of eight carparks in West Lynn to help pedestrians, cyclists and bus passengers.
Angry young renters who started to vote in larger numbers at the last election are up against just-as-angry older car-driving voters who want the billions spent every year from the Land Transport Fund used to build more motorways rather than railways. This is a fundamental clash about the future of New Zealand cities, its youth and what the big chunks of Government spending will go on for the next decade.
It pits the Jacinda Ardern-James Shaw alliance in favour of buses, trains and affordable apartments against the National Opposition’s enthusiasm for extending its ‘Roads of National Significance’ (RONS) from Warkworth to Whangarei, from Cambridge to Tirau, from Otaki to north of Levin and from Christchurch to Ashburton. This contest pits two different generations and ways of looking at the world against each other.
What will Te Atatu man think?
But Ardern knows it’s a politically risky strategy when many of that young generation have yet to start voting and older property-owning drivers vote at much higher rates. There’s also a risk that the 19 to 22 cents a litre of fuel excise increase for Aucklanders also alienates ‘Te Atatu Man’, the median voter in Auckland who still relies on driving an old second-hand import to drive to work and school around Auckland. This tax increase is regressive in that it is effectively more painful for the poorest voters because a bigger proportion of their income is used on fuel.
This Government’s choice in favour of public transport and cycling over more motorways depends on those poorer voters believing that a Government based in Wellington and in partnership with the Auckland Council will deliver more public transport choices that will allow them to stop using their cars. At the moment, that is an act of faith when it is still faster and easier to drive around Auckland than use a bus or a train — despite the blowout in commuting times in recent years.
The political management around the fuel excise increase has not been ideal for the Government. No voter likes surprises and this hike was not previewed before the election.
Ardern was immediately asked if this announcement breached her ‘no new taxes’ policy before the election. She argued it was not a tax increase because fuel excise was used specifically for transport in an ‘hypothecated’ fund, and National had been planning its own increases of 10 to 20 cents a litre increase to fund its new RONS. Newsroom reported on the advice the previous Government received in this report from Shane Cowlishaw on October 7 last year, shortly after the election.
Brownlee’s pre-Christmas tax increase
National also did exactly the same thing with this tax on drivers, but in a much less politically dangerous way. Then Transport Minister Gerry Brownlee announced a nine cent a litre increase just before Christmas in 2012 to pay for the RONS that are now being completed north of Wellington and south of Auckland. It was barely noticed.
National’s own history did not stop the Opposition for launching into a full attack on the new tax. Transport Spokesman Jami-Lee Ross said motorists around New Zealand would be “shocked at the extraordinary new taxes the Government plans to impose on them.”
Ross portrayed the changes as taking money from regional New Zealand to spend on Auckland’s trams.
“The Government is saying their needs are secondary and ensuring tourists can get from the Auckland CBD to the airport is more pressing,” he said.
Judith Collins was even more aggressive, responding to Genter on twitter that the Government’s pro-rail policy was being paid for by petrol and diesel users.
“That’s not fair. That’s theft,” she wrote.
Prepare for a battle royale between an Opposition arguing for more motorways to be paid for by motorists and against a Government using fuel tax revenues to pay for railways.
It is as much a battle of world views and generations as it is a contest about taxes and fuel funding.