More secure funding base for land transport

Fuel excise duty and road user charges for light vehicles will be indexed to inflation from 2006 as part of the government’s transport strategy, Finance Minister Michael Cullen said today.

“The indexation will apply to the proportion of the excise [17.725 cents of 36.2 cents per litre] used to fund land transport. All RUC revenue is used for roading.

“The effect of the decision, which was taken as part of the Investing for Growth transport package announced in December, will be to put transport on to a more secure funding base.

“It also means that the proportion of the total excise duty going to land transport will continue to grow and the proportion going to general funding will continue to fall.

“Spending pressures will arise in the future as the costs of building roads increase and new technologies make vehicles more fuel efficient reducing the excise revenue per vehicle, per kilometre,” Dr Cullen said.

Fuel excise is due to increase by 5 cents per litre [excluding GST] from April, 2005 with an equivalent increase for RUCs for light diesel vehicles. The first indexed increase will take place in April, 2006. At expected average rates of inflation, each annual increase will be well under half a cent per litre.

The April 2005 increase will raise around $207 million a year. This will be distributed proportionally around the country according to population. In response to official information requests, the documents relating to the Investing for Growth transport package will be available later today http://www.treasury.govt.nz/release/investinggrowth/

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