Labour, National reject calls to cancel petrol tax increase

Pressure is building on the main election contenders to soften petrol price rises by reversing a tax rise imposed in April to boost transport spending.

The Government and National were quick yesterday to reject a call by the Automobile Association for the 5c a litre tax increase to be returned to motorists to lessen hardship caused by relentless price rises.

But Consumers' Institute chief David Russell said last night that the idea was "certainly worth further investigation", and National leader Don Brash was confronted with deep concern at the skyrocketing prices while addressing a Grey Power meeting in Papatoetoe.

Petrol prices rose 4c a litre this week, to $1.479 for the 91-octane grade and $1.529 at most main centre pumps for 96-octane, making the cost of fuelling a car 34 per cent dearer than at the end of last year.

Prime Minister Helen Clark said the extra tax take was already committed to building roads that the AA wanted so badly and the Government also had an ambitious public transport programme.

Dr Brash, who wants all petrol taxes diverted to the Government's general account to be put into roading, said his party could not afford to wipe the April levy while also cutting income tax.

At his session with Grey Power's Counties Manukau branch, he was asked two questions about petrol prices and the hardship this was inflicting on superannuitants.

Dr Brash said benefits flowing to superannuitants from increases in after-tax income "should cover the increase in the price of petrol".

He said there was a pressing need to invest the petrol tax money into the roading network.

But AA spokesman Greg Hunting said an increasing goods and services tax yield from rising petrol prices gave the Government enough money to forfeit the April levy.

He said that when the levy was first flagged late in 2003, petrol cost little more than $1 a litre, from which the Government received 11.5c in GST on top of other taxes of almost 42c. The GST component of the latest price of 91-octane petrol has risen to 16.4c a litre, out of an overall tax take of 64.1c.

After the 5c April increase, 22.5c of that is specifically earmarked for the National Land Transport Fund, although the Government has promised to return $1.235 billion from its general account in the next three years to transport.

National says it will do all of that and more, until all the $600 million a year now diverted into the general account goes to roads.

Green Party co-leader Jeanette Fitzsimons said "the rapid and probably permanent" rise in petrol prices meant removing the April levy would give motorists no more than a week or two of respite.

"Let's get real and face up to the fact that the world has arrived at the end of cheap oil, and prices are never permanently coming down again."

- additional reporting, Bernard Orsman