Taxes add to $600 million transport surplus

The Transport fund financed by fuel taxes posted a $634 million surplus, adding fire to the debate around the role of tax in high fuel prices. 

Four months before the Government’s 3.5 cent fuel excise increase kicked in, Transport Minister Phil Twyford was given a pleasant surprise — an expected $634 million surplus in the National Land Transport Fund, the pot of money funded by fuel taxes.

Documents obtained by Newsroom under the Official Information Act show the NLTF was expected to post a $634 million surplus for the years 2015-18. The document, a May briefing to Minister Twyford, shows that higher than expected revenue and lower than forecast expenditure would generate the surplus.

The period covered was before the Government increased fuel excise by 3.5 cents in September and does not include the Regional Fuel Tax, which raises revenue for Auckland Council. 

"Unjustified" but already budgeted for

National Party Transport Spokesperson Paul Goldsmith told Newsroom the surplus showed the Government’s fuel taxes were “unjustified”.

“The surplus is enough to cover 57 per cent of the tax the Government is trying to source – more than the first two fuel tax increase are expected to raise over the next three years,” Goldsmith said.

“The NLTF is expected to have $634 million in surplus that has been carried over from 2015-2018 and the Government is planning to raise $1.124 billion in new national fuel excise increases over the next three years,” he said. 

The documents said the surplus would be carried forward into the next round of NLTF spending. A spokesperson for Minister Twyford said the funding will contribute to new projects going forward, in addition to the revenue raised from fuel taxes. 

National Party Leader Simon Bridges, who was Transport Minister during most of the period in which the fund posted surpluses, launched a petition on Friday to have the regional fuel tax and the increase in fuel taxes repealed.

“The average New Zealand household is now paying $200 a year more in petrol taxes than this time last year and in Auckland that figure is $324," Bridges said.

The briefing noted that in spite of posting big surpluses, the future of the fund was far from secure. 

Changing economic conditions and the rise of more fuel efficient or electric vehicles would put pressure on the sustainability of the fund.

Where does the money come from? 

The NLTF is a Government fund administered by New Zealand Transport Authority, which funds roads and other transport related projects throughout the country.

Every three years, the Government draws up a Government Policy Statement for transport, which roughly directs how the money will be divided up and the level of funding that will be given to the NLTF. The most recent GPS, for example, emphasised local roading projects and safety over highways. 

The GPS uses Treasury forecasts of economic growth to estimate the revenue that will flow into the fund, which helps it to estimate the amount of money it has to spent.

The surplus comes from revenue consistently exceeding those forecasts, due to faster-than-expected population growth and increased road use. In 2015/16 the fund raised $3.5 billion, rather than the $3.3 billion forecast. 

These surpluses continued until the 2017/18 year, when the fund was forecast to raise $357 million or 3.4 percent above its forecast. The briefing was drawn up in March, when the financial year still had three months to run so it’s final figures were estimates. 

“Expenditure should be as close to target as possible" 

On the other side of the ledger, NZTA consistently underspent on transport projects over the three years.  

At March 2018, expenditure was 88 percent of the three year budget, although the fund had targeted to spend just 91 percent of the budget. 

This means the fund had revenues roughly three percent higher than forecast and expenditure roughly three percent lower. 

The briefing said NZTA aimed to have expenditure run as close as possible to target.

“Although expenditure for the NLTP can be underspent for a variety of reasons, expenditure should be as close to target as possible,” it said.

“Any NLTF surplus will carry over into the next financial year and GPS 2018.

…but a surplus doesn’t mean an end to taxes 

The Ministry of Transport warned Twyford that the fund’s golden run was likely to run. As worsening economic conditions and changing vehicle user habits depleted revenue. 

The Ministry uses the latest Treasury figures to forecast what revenue is likely to be in the future. 

It said that lower than previously forecasted real GDP, which is correlated with vehicle kilometres travelled impacted upon the forecast.

Lower migration would also impact the fund, as it flowed-on to fewer new cars on the road. 

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