|The “Costpocalypse” is finally getting serious Government attention. Yesterday’s announcement of cuts to fuel taxes and cheaper public transport was a response to rising electoral pressure on Labour over the “cost of living crisis” – something the Government had until now refused to accept existed. Last week’s shock opinion poll obviously helped focus minds around the Cabinet table.
It’s a smart move. As the Herald’s Thomas Coughlan writes today, the cut to fuel taxes “was the right thing to do, easing short-term pain on struggling households… and it makes sense for the Government to smooth the impact of those price rises by lowering fuel costs. It’s not difficult to do either.”
Something had to give. Pressure from across the political spectrum was proving too much for Jacinda Ardern to keep up the pretence that there was no crisis and therefore no action was required. Crucially, this political pressure reflects a reality that the public, especially those on lower incomes, are really struggling at the moment.
Stuff political editor Luke Malpass sees the Government’s shift as a return to political flexibility: “For Labour, this is a significant move and shows that it might be regaining some of its political agility that has been lost over the past year or so as it has become tied up with Covid and wedded to the righteousness of to its big bang reforms in water, health, climate change, housing and elsewhere.”
Government decision widely welcomed, but more is demanded
There is a consensus today that the Government’s announcement is a step in the right direction but more is needed.
Te Pāti Māori co-leader Debbie Ngarewa-Packer pointed out that there are much bigger problems in terms of food and housing that the Government appears unwilling to address. She complains, “Fuel is the last thing on the list creating real material hardship for our families.”
The Green Party is relatively cold on the fuel tax cuts – not because of climate change, but because they would prefer direct welfare payments. They argue that petrol retailers could also just take the 25 cent per litre cut in taxes for themselves in profits.
Many consider the level of the fuel tax cuts are inadequate and that three months might not be enough, with an extension likely. BusinessDesk’s Ian Llewellyn suggests the 25 cent cut could be bigger, saying “Someone paying $3.20 a litre at the pump on Monday was paying about $1.42 in levies, taxes, GST and carbon prices.”
Blogger Martyn Bradbury urges the Government to go further and make public transport entirely free: “Here’s the reality, Putin is in this for the long haul and the face saving measures Labour have scrambled together will inoculate us for about 2 weeks before more measures are required.”
Bradbury emphasises the need to go beyond transport costs, saying today: “Great. Do Child Poverty, Inequality and Housing next! Isn’t it amazing how fast a Government will move when polls tank? We need this same urgency on a whole raft of issues.”
Leftwing blogger Steven Cowan points out that electricity costs are about to increase for poor people: “at least 40 percent of Kiwi households will see a jump in their power bills as the electricity industry, with the blessing of the government, does away with low-use plans. Those whose power use is very low will be hardest hit. As part of the phasing out, power companies will be able to double the daily fixed rate for low users from 30c a day to 60c a day, which works out to an increase of around $110 over the next year.”
Should public transport fares be permanent cut, or made entirely free?
The cuts to public transport fares have been met with particular enthusiasm. Thomas Coughlan sees this element of the package as the “most politically significant”, and points out it’s occurring despite fares not actually increasing at the moment.
Here’s his explanation for the fare cut: “That detail was a signal to households to consider public transport use to cut energy bills (public transport will now be far, far cheaper in many places than driving), and it was a clear signal that the Government was wedded to its “mode-shift” approach to transport, which seeks to economise road use by shifting people from private vehicles on to bikes and public transport.”
But many feel public transport should be made entirely free, and permanently rather than for three months. Today’s Stuff newspaper editorial says “with our climate change commitments in mind, that should arguably be a permanent change.”
In Auckland it’s set to become a core part of the local government election campaign, with mayoral contenders Leo Molloy and Labour-endorsed Efeso Collins both pushing for this. There is also hope that the Government will deliver something for public transport in the upcoming Budget (which Grant Robertson gave some hints about yesterday).
Currently, the Government is only budgeted to allocate about a tenth of the cost of the petrol tax cut to public transport. While the tax cut will cost about $350m, the fare cut is estimated at around $35m. It wouldn’t cost too much more to make all such transport free, and only cost a tiny fraction of the Government’s climate change budget and roading costs.
How does the drop in fuel taxes work with climate change?
There’s always going to be tension between cost of living problems and climate change. In the case of yesterday’s announcement, there is a major problem, because the Government’s climate change strategy is based on the need for fossil fuels to increase in price significantly. So, was the tax cut a mistake for the environment?
Richard Harman writes today, “The decision to lower the fuel price does raise questions about the Government’s commitment to phasing out our dependence on fossil fuels.” He says this paradox is why the Government also had to cut public transport fares – so that it would be less vulnerable to criticism about their climate change agenda.
Rightwing commentator Matthew Hooton says it’s hypocrisy, as the tax cuts come just as the price of fuel was seeing people talk about not driving as much: “When it comes to it, the polls will always trump the Labour-Green Government’s commitment to Jacinda Ardern’s ‘nuclear-free moment’ and climate change ‘emergency’, and her fake pledge to halve net greenhouse-gas (GHG) emissions by 2030. For anyone who is serious about climate change, the one silver lining of the Russian invasion of Ukraine is the surge in the price of oil”.
So, perhaps the bigger lesson from yesterday’s announcement is that at least in the short term, cost of living politics trumps the climate change agenda.