The Puhoi-to-Wellsford "holiday highway" will be one of the first casualties if Labour is elected in November to lead the next government.
As the party hunts for projects it can axe to fund its policies, it has also decided that farmers will have to pay the price for tax breaks for research and development and boost the minimum hourly wage from $13 to $15.
Labour leader Phil Goff unveiled the policies yesterday at the party's congress, and pledged that he will not make promises for which he cannot find funding.
He said there were fairer ways to confront the $16.7 billion deficit than National's cutting KiwiSaver and Working for Families and selling state assets.
Labour's $800 million R&D tax credit plan would be funded by bringing agriculture into the emissions trading scheme from 2013 instead of 2015.
Other measures include taxing the wealthy more and shelving expensive projects such as the holiday highway and a missile system for Navy frigates.
Mr Goff said the $1.65 billion roading plan was one example of projects Labour would axe to free up cash for more important areas. It would be shelved indefinitely.
He said introducing 12.5 per cent tax credits was expected to increase spending on R&D by about $1.5 billion a year and grow a lucrative high-tech industry, creating jobs and exports.
In addition to the $800 million from bringing agriculture into the ETS early, $70 million a year would come from scrapping National's current R&D grant schemes.
Mr Goff said it was fair that the agriculture sector should pay its way as taxpayers had to by paying more for electricity and transport. Farmers would start off by paying for just 10 per cent of their emissions. "We don't believe this is asking too much."
Mr Goff's pledges were strongly applauded by congress delegates and welcomed by Council of Trade Unions president Helen Kelly.
However, Prime Minister John Key said he was astonished, given Labour's apparent concern with the cost of living. Farming would be put at a competitive disadvantage because other farming nations did not have an ETS. "Ultimately New Zealanders will pay more for milk, butter, cheese, meat and all the staples of a New Zealand diet. How that can be good for the New Zealand consumer is beyond me."
Mr Key said the Department of Labour recently estimated that a sudden lift in the minimum wage to $15 would result in 6000 job losses.
Federated Farmers president Don Nicolson said Labour was clearly targeting farmers, who were already paying significantly more in power and transport costs under the ETS. It had yet to be shown what the cost-benefit ratio was.
Business NZ chief executive Phil O'Reilly said businesses would welcome the R&D credits but it was doubtful whether the trade-off - forcing farmers into the ETS - was worth it.
"The impact on the economy will be significant and will also impact on other sectors, including consumers. You have to ask if the pain is worth the gain of the tax credits."
Labour's detailed tax plans have yet to be announced but Mr Goff has already confirmed the party will increase the top tax rate to help fund its policy of making the first $5000 of income tax-free.
Yesterday, he indicated the introduction of that policy would be staggered over two terms rather than one.
Promise: A 12.5 per cent research and development tax credit for companies.
Cost: $800 million over five years.
Pay by: Making the agriculture sector pay for emissions under the Emissions Trading Scheme from 2013 instead of 2015: $800 million in four years, and axing three grant schemes set up by National ($70 million a year).
Promise: New ministry for children:
Cost: Less than $7.7 million.
Pay by: Scrapping the Families Commission: Saves $7.7 million.By Claire Trevett @CTrevettNZH Email Claire