Government to consider hiking road charges and tolls to help NZTA before end of term

National promised no fuel tax hikes this term, but a letter from ministers to NZTA shows they are open to new revenue tools if they are required. Photo / NZME

• Finance Minister Nicola Willis and Transport Minister Simeon Brown will consider increasing NZTA’s revenue soon.
• The Government hints that revenue increases may come from tolls for transport infrastructure projects.
• Labour and the Greens accuse the Government of breaking its promises on fuel taxes and road user charges.

Finance Minister Nicola Willis and Transport Minister Simeon Brown have agreed to consider, before the end of the term, ways of increasing NZ Transport Agency Waka Kotahi’s (NZTA) revenue if the agency needs more money.

The concession came in a letter from Willis and Brown to NZTA chairman Simon Bridges in which they said they would consider “within this term of government whether further increases to revenue are required” to deliver on the Government’s transport commitments and to sustain a $3.1 billion loan given to the agency. NZTA demanded the commitments as part of agreeing to take on the loan.

Brown, commenting on behalf of the Government, hinted the revenue increases would come in the form of tolls, which National and the coalition Government had always backed.

“The quarter four action plan is explicit that Cabinet will take decisions on allowing greater use of road tolling to support the delivery of transport infrastructure. Tolling is an example of an additional revenue measure that will support the delivery of major roading projects across New Zealand,” Brown said.

However, Labour and the Greens argued the commitment breaks in spirit a promise made by National on the election campaign not to raise fuel taxes and road user charges (RUCs) this term. Brown has already announced an increase to vehicle registration fees, which the Government did not campaign on, and which Labour’s transport spokesman Tangi Utikere calls a “drivers’ tax”.

Both Opposition parties pointed to an apparent double standard in the Government’s investment programme, with ministers promising to come to the rescue of NZTA with taxes and lending, while other projects, including the new Dunedin Hospital, are stalled or scaled back.

The new Dunedin Hospital is in the process of rescoping following a budget increase of $1.2b. The Government has not released figures for how much its promised roads have increased in cost, but figures leaked to the Herald show the roading blowout could be as much as $24b – $8b more than Otago’s entire GDP.

The Green Party’s transport spokeswoman Julie Anne Genter said: “Voters need to be very clear that there is money available, but it is being used to prioritise a few [transport] projects that haven’t had a proper economic analysis of their value.

“They [National] are sticking with some campaign promises and not others,” she said.

The Government denies a double standard, saying it treats NZTA the same as it does the rest of the coalition’s investment programme – and noting it had already increased funding for the new Dunedin Hospital build by $280 million.

“The Government has the same expectation of NZTA as outlined in our decision to not provide further capital for the roads of regional significance projects, and instead require NZTA to manage these projects within the budget available,” Brown said.

NZTA was loaded up with debt under the last Government. The new Government agreed to give the agency a $3.1b loan to allow it to deliver on the coalition’s $32b investment programme, which includes beginning work on 17 Roads of National Significance. The Herald has previously reported NZTA’s board required a “Letter of Comfort” from ministers which would make several guarantees to the agency in return for it agreeing to accept the loan.

That letter, sent on June 17, was released to the Herald under the Official Information Act. It shows Willis and Brown making several assurances to NZTA’s board to come to its aid in the event of financial strife.

The agency faces potential financial pressures as its National Land Transport Programme (NLTP) is predicated on fuel taxes and road user charges rising by 12c a litre in 2027, 6c a litre in 2028, and 4c a litre each year after that. However, a chart released by NZTA showed New Zealand’s transport expenses are so great that even with those increases, NZTA’s costs will exceed its revenues by $6b a year.

Transport spending looks set to vastly exceed future revenue. Graphic / NZTA

In the letter, the ministers said they “acknowledge that provision of an additional Crown loan will generate future repayment obligations on the board”.

Willis and Brown offered to “commit” to three measures to help the agency meet these obligations.

First, they would, with the help of officials, consider, “whether... agreed revenue increases are sufficient to support NZTA’s medium-term financial sustainability”. If these were not sufficient, the ministers agreed to consider “within this term of government whether further increases to revenue are required”.

They also agreed to look at options to “smooth or restructure” NZTA’s debt, and to take advice from NZTA’s board on whether it is necessary to “rephase or reprioritise any of the major capital programmes covered by the GPS [Government Policy Statement on Land Transport]”. This would mean delaying transport projects that had been promised by the Government.

In a statement to the Herald, Brown pushed back on this, saying the projects in the GPS “will be phased as I have already announced”.

“We expect NZTA to focus on delivering these projects in a cost-effective manner with a no-frills approach to be taken to ensure value for money for New Zealand taxpayers. The Government is committed to the projects outlined in the GPS with the NZTA board responsible for managing the prioritisation and phasing of the projects within... NZTA’s National Land Transport Programme process,” he said.

NZTA is struggling not just because of the increasingly costly infrastructure projects it is required to build, but the fact it is raising less money through fuel taxes than it might have done in the past, largely due to better fuel economy standards.

Both the last Government and the coalition agreed to look at fixing this, with the latter now saying a shift away from fuel taxes towards universal RUCs could come as early as 2027.

This is meant to help address NZTA’s funding issues. However, in the event NZTA still needs help, Willis and Brown committed in the letter to consider “whether further Crown support may be appropriate”.

Utikere said Brown was “panicking to find a way to fill the $6b fiscal hole in his transport plan”.

“It wouldn’t be surprising to see National add a new tax like increases to RUC, FED [fuel excise duty] or rego [registrations] given its unexpected drivers’ tax after the election. The Transport Minister appears to be backtracking on election promises, like starting construction on a second Mt Victoria tunnel as he scrambles around looking for ways to raise more revenue,” he said.

“National’s obsession with roads is looking more and more concerning. If Nicola Willis stumps up more cash for roads, where’s it expected to come from? They’ve already cut work on hospitals, stopped $2b worth of school upgrades, and taken $1.5b out of Kāinga Ora’s public housing budget.”

Genter said National’s transport plan was “always unrealistic”.

“They weren’t being serious with voters,” she said.

Genter said the Government’s transport spending was “irresponsible” at a time when it was preaching “fiscal discipline and cancelling hospital and housing projects”.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.