I think I said at the time that Labour looked desperate in trying to stave off the cost of living crisis which their spendthrift ways have exacerbated by rushing out a reduction in fuel excise taxes and road user charges. We knew it was rushed because the Prime Minister didn’t even know that diesel users don’t pay excise taxes, only road user charges. It turns out that Labour were so panicked by their tanking poll numbers they rushed the policy out in just 20 hours.
Just before 3pm on a Sunday afternoon, about a dozen New Zealand Transport Agency and Ministry of Transport officials received a weekend-ruining email. Subject: “Cabinet paper: Urgent.”
It provides a depressing insight into how policy gets made.
The agency that would have to administer a fuel tax and Road User Charge (RUC) holiday had less than a day’s notice that the change was coming.
Important detail had to be filled in after the policy was announced, which also may have prevented improvements that ran counter to what had already been announced.
The scheme was obviously fraught with complexity and potential for gaming.
I expected that the NZTA may have provided a few warnings about the messes that the Government would encounter, so I put in a request for any advice that NZTA provided in advance of the scheme’s announcement, and correspondence about it.
The very first email in that trail was an urgent email from an NZTA senior manager in Investment and Finance to a collection of NZTA and Ministry of Transport officials at 2.53pm Sunday, March 13. An urgent cabinet paper was due to the minister at 11am the next day.
Officials were told to calculate how much it would cost to reverse the increases in RUCs and Fuel Excise that had occurred since 2018, assuming normal use volumes. They had 20 hours, less any amount of time spent sleeping.
Newsroom
This shows you just how badly Labour were panicked by their tanking poll numbers. They were desperate to do something, anything, on the cost of living front so they ordered officials to come up with something within 20 hours about how they were going to cut road user charges and fuel excise tax.
The scheme wound up being announced at the Prime Minister’s post-cabinet update, at about 4pm on Monday, March 14.
Monday’s announcement had no detail on how rebates on RUCs would be handled. Nobody would have had any chance to think it through.
The officials started in. They quickly noted the importance of maintaining support for the National Land Transport Fund to cover the resulting shortfall. One official noted, “Given the increases in fuel costs we have seen, any roll back of tax increases may just be a drop in the ocean”.
Newsroom
And it turns out those officials were right: the roll back of taxes was quickly soaked up; fuel is now more expensive than when the changes were announced, leaving the Government with a massive headache when it comes to eventually revoking the discounts. I can’t wait for that day to arrive.
Any fool could have foreseen what would happen with such a large discount in RUC. Unsurprisingly the idiots in charge did not, despite warnings about what would happen.
The first reply notes the obvious problem with RUC:
“noting the issue that temp nature of the drop is going to create some odd behaviour, i.e. big operators will purchase up while RUC is lower … meaning a “lag” hit to the NLTF [National Land Transport Fund] after the rate goes back up. Perhaps the Revenue floor to us is the way to go to make it easier to plan and deliver.”
At 10.08am, the National Manager, Policy and System Planning, summarised the main issues. After noting consequences for the NLTF of any reduction in revenue, “which is the primary focus of the MoT draft Cab paper … requested yesterday afternoon for 11am this morning”, they noted that it was unclear what proportion of any excise reduction would pass through to customers, and that removing excise would have no impact on diesel prices.
Officials then discussed the management of surrendered RUC licences – which was presumably, at that point, the preferred option for dealing with RUC.
It was not crazy as a starting point. Holders of existing licences may have been rebated for unused kilometres while purchasing new, discounted RUC. Discount licences could have been printed on a different coloured paper, usable only for the period of the discount. At the end of the discount period, any kilometres left on the permit could be refunded or put toward the cost of a new full-cost permit.
But that option would have required every single diesel vehicle in the country to queue up for an odometer check, or risked causing rorts. Officials hadn’t yet had time to work through how any of this could be made to work. […]
A diesel subsidy equivalent to the petrol excise discount could have been simpler. But the press release from the Beehive had already announced a cut to road user charges, before anyone had had time to think about it.
So we wound up with a high-trust system and many potential stockpiling issues.
NZTA did an admirable job, under circumstances that should not be faced except under real emergency.
There was no emergency that required inventing policy on less than 24 hours’ notice to officials, forcing them to work past 11pm on a Sunday night.
There was only a political emergency caused by Labour’s drop in the polls, resulting in a ruined weekend for officials, extensive and imperfect backfilling of details afterwards, and theft from the Covid fund to cover road costs.
It is a terrible way to run a country.
Newsroom
Of course there would be stockpiling of RUCs. Only a fool would turn down a 36% discount on RUC for the foreseeable future. In this day and age any substantial saving like that would be a godsend.
It has all been for naught though. Fuel prices show no sign of abating anytime soon, and this Government, through their own actions have set a massive trap for themselves that they will have to trip on some time before the next election….and they sure as hell don’t have any sort of ninja skills that will allow them to avoid getting snapped.
Michael Wood will soon be looking for a way to exit the Transport portfolio as repeated failures to deliver are starting to mount, and this trap regarding fuel excise and RUC is sure to catch him out as well.
What poor old Michael hasn’t yet grasped is that his boss will happily chuck him under the first electric bus or train she can find to avoid getting herself caught in the trap.
This whole episode shows us, with great clarity, just how inept the Labour Government is.
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