Land Transport Management (Regional Fuel Tax) Amendment Bill

I remind the committee that this is quite a narrow debate on a Commerce Commission fuel market study.

Thank you, Madam Chair. It’s a pleasure to, in fact, move this new part to the bill—“Part 3 — Commerce Commission Fuel Market Study”—a part that seeks not only to help the Government to provide a better level of oversight into the impacts of the regional fuel tax (RFT), if it goes ahead, but, more importantly, actually, to give New Zealand consumers and, indeed, New Zealand businesses greater confidence and certainty around the impacts of the regional fuel tax, not only in the regions—and there could be up to 14 of those, as news reports have indicated—where the regional fuel tax is in effect but, actually, on some of the behaviours and impacts outside of that immediate region. If we look at what will happen with the application of the fuel taxes, it will create some natural incentives, incentives that do not indicate any sort of wrong or nefarious behaviour but, simply, are people and businesses responding to a natural incentive when additional costs are placed—particularly in the area they live or conduct the centre of their operations.

For instance, for consumers, there is a natural incentive, if one lives or travels close enough to the border of the regional fuel tax area, to go a bit a further to go outside of that area and to therefore take advantage of fuel pricing which does not have the regional fuel tax applied to it, which, to a consumer who can’t claim GST, is 11.5c a litre. It is a significant amount of money for that consumer or consumers to seek to not have applied to them.

If we take Auckland as an example of this, because it is important to understand, I think, the context of normal behaviours today, outside of the regional fuel tax additional application. I met with a fuel company ahead of this going into the committee stage. Their information was that inside of the Auckland boundary, today—prior to this new tax—there are already variances across that region of up to 20c a litre. They know that people travel some distance to take advantage of them. So when those consumers are faced with a higher impost if they shop and buy their fuel within their region, their behaviour already exhibits that they will go to some lengths to get the cheapest possible price.

There is a natural incentive for Aucklanders—and other regional fuel tax area residents—to travel outside of their region to get cheaper fuel, but there’s also the incentives on fuel companies in a competitive market. Because, as I say, there’s already a spread in Auckland, for instance, of up to 20c a litre, no fuel company is going to want to be disadvantaged by having a local competitor discount their fuel—fuel that includes the tax—and then take market share off another local fuel company. So they have an incentive to still keep a competitive market, despite the fact that the cost of product in that market has risen by 10c a litre plus GST. So we will still see market movements inside an RFT area, and also not only within that area—particularly for independent operators and retailers—but outside of the area. Just outside of the border, there is a natural incentive for a small, independent retailer—obviously, because they don’t have to apply the tax—to discount their fuel even more, because they can then take advantage of consumers’ willingness to travel to keep their costs down. The ability to sell fuel that doesn’t include a regional fuel tax and, therefore, take volume off all of those other fuel companies that operate within the regional fuel tax area, and therefore should have that levy attached to their retail price—there are natural incentives.

Although the bill contains provisions that talk about monitoring and keeping a track on volumes and everyone reporting data back, what it doesn’t do is seek an in-depth look, taking into consideration those natural incentives and existing behaviours, all of which are legal and, indeed, part of a functioning, competitive market. The bill as it stands does not have the provision for those deep studies to truly understand if there are behaviours that are so abhorrent to the provisions and intention of the bill that they should be captured.

Firstly, it allows them, through competition studies, to ascertain the facts—the facts not only of the RFT area itself but of the implications of those actions and behaviours on areas, not only just outside the border of the RFT area but, indeed, how that fits into the broader New Zealand market. So such a study can, in much more detail and with a greater context, actually provide legitimate and real information to make an independent and more accurate assessment on what sorts of behaviours are happening within and without the RFT area, and to determine whether or not action can be taken under the existing provisions, or indeed if the Government of the day might then choose further legislative measures to address behaviours that perhaps are either unintended consequences or just unforeseen.

One of the assumptions that have come up, both in the rhetoric ahead of this stage and certainly in contributions across parts in this stage, is a concern that fuel companies will seek to not apply the tax impost in the RFT area because of competitive concerns, because they don’t want to lose market share. There’s actually another possibility, which I don’t think the Government has considered. It is just possible—and I’m certainly not passing any sort of legal judgment—I think it could be argued that if a fuel company sought to not apply the tax in an RFT area, they could be in breach of the offences clause in the bill in either avoiding paying RFT or evading paying RFT. But it’s not actually a deliberate act by a fuel company that is the only means for the effect, in terms of price, of the RFT to not be borne within the RFT area, but instead to be borne by consumers and businesses from outside the area. It is simply those competitive forces.

We’ll use Auckland as an example not only because it’s the first cab off the rank but because it is such a large market. Because it’s already a competitive market, you could look at it and go, “From 1 July, every fuel company and retailer is charging 10c a litre extra plus GST—11.5c a litre extra—because the law demands that.”, but all it takes is an operator, and particularly, I was told by the fuel company I spent some time with, it is more likely to be an independent retailer at the margin, not a large fuel company. All it takes is for either a fuel company or one of those retailers to make a significant discount to the price of the fuel in their outlet—done nothing about the tax; they’re still paying the tax. They are complying with the law: they are paying the 11.5c to the New Zealand Transport Agency under the provisions of the bill, but they simply choose to price it to consumers at a different rate. Should they do that, other companies and retailers in the area are almost certainly going to have to move to meet the market, because it is a competitive market, and to not move it will see those other companies lose share. That is simply not a good thing for their business models.

So we then end up in a situation where the margins are constrained, and possibly even negative, inside of area such as Auckland. They’re meeting their obligations on fuel tax with respect to the Government. The cost of their product has gone up and, as businesses, they have to make returns to their shareholders. So what will they do? They will apply a different price in different parts of New Zealand—parts of New Zealand that don’t have a regional tax applied to them. It is a completely legal and reasonable business model. It won’t meet the provisions of avoidance or evasion, in my view, under the bill, yet what will happen, in effect, is what has been talked about as price spreading.

At this point, you don’t necessarily have to focus on whether it is a deliberate attempt to shift the price or just the factor of a competitive market in action. The effect for consumers and businesses outside of the regional fuel tax area or areas is that they will bear an impost of the effect of the tax for an area that should be bearing it but won’t be bearing all of it. A competition study gives the Commerce Commission the authority and scope and power to be able to look into that, and to determine and to advise the Government so that the Government can know with some certainty whether there are unforeseen circumstances arising from the bill in action and then look to actions the Government might take to address that.

Thank you, Madam Chair. This is an excellent new part that has been in the name of Brett Hudson. Speaking as the former Minister of Energy and Resources and, in fact, the Minister who, with the support of my colleagues, started the fuel price study of petrol and diesel prices last year, and that came back from a Ministry of Business, Innovation and Employment study, along with support from economists and other experts in the area. It came back with a finding that because some of the fuel companies, in fact, from memory, Mobil—actually, not from memory; I know it very well—and also the Gull people did not provide all the information they were supposed to and promised to do so, but BP did and Z Energy did.

What that was very clear about was that there was a great deal of concern that people—ordinary New Zealanders, who go and buy their petrol and their diesel—were right to be concerned. We were right to be concerned, and I acknowledge the Minister, the Hon Stuart Nash, who was the then Opposition spokesperson for the area, who first raised the issue with me and was supportive of the work that we did.

Since then, we’ve got a new Minister in the situation of energy and resources, and that’s the Hon Dr Megan Woods. Megan Woods has humped and talked about it and carried on, but she’s actually done nothing to bring about the changes that we in Government approved through Cabinet in about August last year, just before the three-month period came in for an election.

So this is a very genuine attempt by Brett Hudson to help out that Minister to actually get this issue dealt with—in a way that her amendments to the Commerce Act, clearly, are not moving anywhere—and this is a very sensible way to deal with it. The Minister who is in the chair, Phil Twyford, has previously stated that this is an issue that needs to be dealt with, so he actually had the chance to deal with it and he didn’t. His inability to deal with that has been picked up and assisted by Brett Hudson to try and get him out of this hole that the Government has got itself into.

So it’s now been, what, eight months of this particular Government. They talked a lot about the different energy prices around the country, the fuel prices. We know fully well that there is this thing called the Gull effect in the prices of petrol and diesel. We’ve heard of some very, very strange behaviours from some in the market. I recall that BP had some interesting comments about how they were putting up the prices in Ōtaki so that it was less obvious that places like Levin—where apparently there is a Gull station there—were being discounted because of the competition from Gull.

This is actually a very serious issue, and when we know that this regional fuel tax, which was only going to be for Auckland and which now is going to be able to be done for the whole of the country—that this is actually a way of dealing with a situation where New Zealanders who pay for their own petrol and diesel are right to say that there’s something very strange going on when they can go to one big-named petrol station in one town and in the next town it’s an entirely different price, and that price is very much based on whether or not there seems to be either a Gull station there or a Waitomo Group station or one of the other smaller independents.

So this is this Minister’s opportunity to get off his high horse, to listen to the Opposition, and to get up and speak in favour of this amendment, and this side of the House might actually increase its view of him. All we’ve heard so far from him has been sanctimony and, actually, put-downs of people who have generally tried to help his bill, so that’s his condescension writ large.

Madam Deputy Chair, thank you very much for this opportunity. I wish to speak to both of the new Part 3s. I understand that it is a legitimate way of addressing this. There’s a new Part 3 in the name of my colleague Brett Hudson, which is seeking to insert a new Part 3 that is around the Commerce Commission fuel market study, which he has spoken to and the Hon Judith Collins has spoken to. Then I’d like to turn to the new Part 3 that I’ve proposed—the amendment in my name which also seeks to insert a new Part 3 to do with reviews. I think it’s timely that we do consider this, because this bill is proceeding, unfortunately, and how it is impacting on New Zealanders is what should be carefully considered.

The amendment in the name of Brett Hudson should actually be a very easy amendment for the Government to decide to support. The reason why it should be easy for the Government to decide to support this is because every time I’ve asked in the House questions of Phil Twyford, the Minister, around price spreading—every time I have asked questions around how petrol companies are responding to all of his new taxes of up to 25 cents a litre—his answer has been that they’re going to have new powers for the Commerce Commission to put in place fuel market studies to enable them to better understand the situation. According to the Government, the answer is to monitor this more. They think monitoring will lead to greater scrutiny, greater sunlight, as a form of disinfectant when it comes to price spreading, and they’re of the view, as a Government, that there should be powers there for the Commerce Commission to do so.

The problem is the bill that the Government has put forward regarding Commerce Commission fuel market studies will take quite some time to get through the legislative process. It won’t be in place on 1 July, which is very close—it’s not too far away. It will not be in force at the point at which the regional fuel tax for Auckland proceeds, on 1 July, and there will not actually be powers right at that point of time for the Commerce Commission to undertake studies around that.

I submit to the House that if we were all to unite on this issue of price spreading, and we were all to support the amendment in Brett Hudson’s name, then there would be the power immediately, from 1 July, for the Commerce Commission to start doing this work. And what better time for the Commerce Commission to start doing this important work, according to the Government—it is their solution to the issue. The work that the Government wants to do could commence immediately on 1 July if they were to support Brett Hudson’s amendment. So I have to say that I’m looking forward to what the Minster or Government members may wish to say on this amendment, because they have an opportunity, right now in the Parliament, to say to New Zealanders that they actually take the issue of price spreading seriously.

Why should they take the issue of price spreading seriously? It should be self-evident, but let’s just go through it a little bit. One of the biggest issues with a regional fuel tax—aside from the fact that we’re of the view it’s unnecessary—is that that there’s going to be fuel market behaviour which sees not just Aucklanders paying an Auckland regional fuel tax; it will be spread across the whole country. People in the South Island will be paying for the Auckland regional fuel tax. People in the South Island, people in Wellington, people in the Bay of Plenty, people in Waikato will be paying for the Auckland regional fuel tax. So if the Government’s solution is to have it monitored, here’s a way to do so. Why should we care, though, that it’s happening? We should care because if there’s going to be a regional fuel tax in Auckland, then Aucklanders should be paying the bill. We’re seeing, however, that fuel companies are already deciding to put up the price of fuel in other parts of the country. Many commentators have suggested that they’re doing so in anticipation of the regional fuel tax in Auckland coming into force.

I’m particularly interested in some of the wording that Mr Hudson has put into his amendment. The wording he’s put into his amendment gives the Commerce Commission quite some latitude to prepare a report around competition. I think it’s also interesting that he wants to give the Commerce Commission the ability to look at changes to the policies or practices of central or local government. That’s quite interesting, because it is local government which comes up with the proposals that will be funded in the regional fuel tax scheme. It’s a whole new way of local government doing things, and the benefit of having this information quite early is that we know that the intention of this Government is to allow other councils around the country to have regional fuel taxes in just a few short years. That will be quite a change to local government practices and, therefore, it’s helpful for the Commerce Commission to do this work.

The other point about that wording that I think is interesting is that we know that it’s not just a regional fuel tax that the Government is proposing; the total combined impact of fuel tax increases under this Government is up to 25c a litre when you include GST. So it’s important for the Commerce Commission to understand the changes and the issues that are in there and that are being impacted by Government policy around increases to fuel taxes.

I now wish to turn to the amendment that’s in my name. We’re also asking the committee, by way of this amendment, to support there being a review conducted by the Ministry of Transport and Treasury. This amendment, if successful, would provide a requirement for the Minister of Transport and the Minister of Finance to commission a report three years after the implementation of the regional fuel tax, to understand exactly how it is impacting New Zealanders. The very reason why I think this is important is because we learnt quite a bit through the bill, in terms of the views that individuals submitting had, about the impacts of the regional fuel tax.

We also learnt—and this came out at Estimates through the answers to the questions—that there was very little modelling done on the impact on New Zealanders. There was almost no modelling done on price spreading. In fact, the paragraphs around price spreading—now, I don’t blame the officials that work for the Minister, because they’ve had limited time to do a whole lot of work on this, but there’s limited information out there around price spreading. There’s limited information out there about how it would actually impact on those that are struggling the most in this country, from a cost of living perspective, and understanding about how they will be impacted. There was evidence provided by submitters that those living the furthest away from the CBD and those that have the least fuel-efficient vehicles are, typically, the people in this country who need assistance from the State the most. Typically, people in this country who are living in lower socio-economic circumstances will be impacted the most by this.

So I think it’s reasonable that Treasury and the Ministry of Transport do work on issues to do with cost of living, issues to do with congestion—and let’s just pause for a moment on congestion. We don’t actually believe that many of the projects that the Minister has seen put forward under this will solve the congestion issues for Auckland alone, but if there’s going to be an argument put forward that the regional fuel tax is the grand solution, the great panacea for Auckland—to tax people more and extract more money from their pockets—then let’s actually have some real information around congestion and get that work done.

I’m also interested to learn more about the public transport use and whether this regional fuel tax will actually see more public transport use come about in Auckland as a result of the regional fuel tax. There are also other elements to do with environmental impacts and to do with fuel consumption, and other issues to do with regional fuel taxes.

In this legislation, we should put in place issues to be considered seriously, given that so little work was done on this regional fuel tax. Given that so little work was done to understand the impacts, to understand how much this hurts New Zealanders—particularly in Auckland, where it will start; so little emphasis put on doing any work around price spreading—these two amendments are timely and they should be supported by the Government. There is nothing that the Government has to fear from having, firstly, work done that they’ve already proposed through another piece of legislation come into force immediately. If they’re so proud of their tax hikes, if they’re so proud of the work they’re doing to ram through under urgency legislation to put in place new taxes on Aucklanders, then they shouldn’t be afraid to front up and hear what Treasury and the Ministry of Transport would have to say about the impact of those regional fuel taxes.

Sure, under the amendment I’ve put forward, it would take three years for that report to be done. At least we would have a cycle of a local government election. There’d be an opportunity to consider how it’s being implemented—and, of course, these are infrastructure projects. So it does take some time for infrastructure projects to be implemented, but there’s nothing the Government should be afraid of when it comes to their taxes and how they’re impacting on New Zealanders, because they’re so gung-ho and so proud of everything they’re doing to increase taxes on New Zealanders at a time when, I say, it’s not actually necessary or desirable for New Zealanders.

I raise a point of order, Madam Chairperson. The members of the Opposition have now added a number of additional parts to the bill amending other Acts other than the primary Act being amended by the bill. The structure of the bill is such that amendments to other Acts were contained in Part 2. Therefore, the amendments either should have been proposed during the debate on Part 2 or, basically, should be ruled out, because the House has now debated and considered its desire to amend other Acts as a result of the changes made in Part 1 and has concluded its debate upon that. The ongoing nature of adding additional parts is alien to the structure of the bill, which is very clear. There are two parts to the bill. There is a part that has the principal amendments proposed to the Land Transport Act and a second part, which contains the consequential or other relevant amendments to other Acts, and both of those debates have now concluded.

There’s a couple of points that I think are worthwhile considering when you decide on how to rule on this. The first point to consider is that the Government has taken a decision to put the House into urgency. We know that when urgency is accorded to a piece of legislation, there is wider latitude for the Opposition to put forward amendments, and we’re exercising that prerogative right now.

Secondly, though, if you were to rule, as the Minister is asking, that no amendments can come through as a new part if they amend another piece of legislation other than what is already contained in the bill, or that any other amendments that come through as a proposed new part that amend an additional piece of legislation must be contained in Part 2, then you would, in effect, be ruling that if the Government continues to structure bills as they’ve done so here, where there’s only ever two parts—one amending a principal Act and a second part amending every other possible Act that is consequential to the proposal in the bill—then you would, effectively, be ruling out in entirety the ability, ever, for the House to consider new parts. If the Government changes the way they structure bills, that would be different, but should the Government continue structuring bills like this, Madam Chair, your ruling would be very broad and would have, I believe, quite a dangerous impact in the long term for this House.

My third point in response is that we took some very careful advice from the Clerk in drafting these tabled amendments. The advice we received was that Part 2 was for amendments to other pieces of legislation that were related to how the regional fuel tax scheme would be implemented. These new proposed parts are not in relation to how the regional fuel tax would be implemented but, rather, are in relation to how it is subsequently reviewed or actions that could be taken—in this case, by the Commerce Commission—in response to the regional fuel tax already being in place. So it’s about subsequent decisions and subsequent issues arising after the fuel tax is in place. The amendments in Part 2 are around assisting the regional fuel tax to be implemented. Therefore, Madam Chair, I think you should rule these new parts should continue.

I’d just like to add to the comments made there that the member also had the opportunity in Part 2 to raise an issue like this if he felt that was an issue at that time. He did not do that and has passed that point now, and so we’re now into Part 3, and he’s had that opportunity already.

I thank the members for their contributions. [Interruption] Could I just ask the clerks just to leave the Table for a minute, just while we’re dealing with this—thank you—so that I can see the Chamber. I am troubled by the point, actually, that the Hon David Bennett has made. The amendments were accepted by the Clerk’s Office and tabled yesterday, so the committee has had knowledge of those proposed amendments to the bill for quite some time, and it doesn’t seem right to me that just halfway through the debate, we suddenly get a different piece of advice from the Clerk’s Office. I am disturbed by that, because the committee is already debating Part 3.

I can’t find anything to help me in Speakers’ Rulings, but it indicates that the House has accepted that there is a debate on Part 3. So to curtail that debate and say “Well, it should have been done in Part 2. We’ve finished Part 2 so we move on.” seems, to me, to be out of order. So I’m going to rule that the two tabled amendments that we have for new Part 3 are acceptable—that they are relevant—and therefore, then, the further amendment to amend the new Part 3 is also in order.

This does have significant precedent value. Therefore, I move, That the Speaker be recalled to give a ruling on the matter.

I’m happy to do that, but I just refer the member to Speakers’ rulings 74/1-3, particularly Speaker’s ruling 74/2, that says, “The Speaker may not interfere with the decision of the chairperson on a question of relevancy.”

Motion agreed to.

House resumed.

Speaker Recalled