Fuel tax will go to road users activities

The Cabinet has agreed to full hypothecation or dedication of all fuel excise duty (FED) to land transport activities from 1 July 2008, Transport Minister Annette King announced today.

"This decision ensures that funds collected from road transport users will be used to fund activities which benefit those same users, whether the activities concern roading or public transport."

Ms King made the announcement, foreshadowed in Budget 2007, at a major transport sector conference which began in Christchurch today. Prime Minister Helen Clark is speaking to the conference on sustainability issues tomorrow.

Ms King said: "In 2009/10 alone full hypothecation will provide an estimated extra $35 million above what would have been provided under the current funding commitments. This extra funding is projected to rise to an extra $600 million by the year 2016.

"Road users have been complaining for years about the lack of full hypothecation. In Budget 2006 the Government announced it would be spending $300 million over and above what would have been available from full hypothecation over a five-year period. All the projects and commitments announced then still stand, of course, but notwithstanding that, the Government still thinks it is important to commit to the principle of full hypothecation from now on."

Ms King says the decision follows recommendations from the Next Steps in the Land Transport Sector review. It will align the FED with Road User Charges and Motor Vehicle Registration fees where those who cause and/or benefit from land transport expenditure contribute toward the costs.

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