'Scrooge' squeezes surplus

The Government yesterday announced a treble price rise of 3c a litre at the pump for the next three years. Photo / Dean Purcell

The Government has been accused of being a Christmas Scrooge and increasing petrol prices in order to protect its promise to get back into surplus in 2014-15.

Gerry Brownlee yesterday announced a price rise of 3c a litre at the pump for the next three years on petrol excise duty, and an increase in user charges by the same amount.

The tax is expected to raise a net total of $300 million over the next two financial years and will be dedicated to fund the roads of national significance under the existing timeline.

But Finance Minister Bill English conceded at the half-yearly opening of the books yesterday that without the extra excise, the tiny forecast surplus would have shrunk altogether. However he insists the excise was driven by the need to meet the roading plan timetable, not his surplus.

The May Budget forecast a $197 million surplus by 2014-15, which shrank yesterday to a mere $66 million.

The increase in excise will add about $1.50 to the cost of filling up an average 50 litre car from July next year. But it comes on top of a 2c rise in September.

By the time the final increase kicks in, the same car will cost motorists $5.50 more in excise in 2015 than in August this year.

Mr Brownlee, whom Labour's Annette King said had gone from "a half decent Santa" to an Ebenezer Scrooge, said the announcement would allow businesses and motorists to plan for the increases, and indicated there would be no further increases until 2016.

Ms King said the Government had put too many items on its Christmas wish list.

"Now it has realised the kitty is empty and is having to scramble around to find new ways to pay."

But the planned increases also protect the Government's bid to get back into surplus, which has been a stated aim for two years.

Mr English said the Government wasn't sticking slavishly to the surplus target but it helped to keep the public service focused on fiscal discipline "and they can't just sit it out".

Mr English said that while the forecast surplus was not large "we are heading in the right direction".

And he said the need for expenditure control "does not expire once we get to surplus".

But he repeated the message that if growth slowed down more than expected, it could change the target.

"We're not willing to get to surplus at any cost," he said.

There is still some wiggle room. The $800 million operating allowance is still in place for next year's budget and $1.2 billion for the 2014-15 year.

Mr English confirmed that the Cabinet decision to keep ACC levies as they are rather than cut them as the ACC board had recommended has also helped the Government's books.

A cut in levies would have meant a loss in revenue of $310 million a year.

Mr English pointed out that the Government had agreed to levy cuts last year to the tune of $630 million.

Average growth in the next four years has been revised to 2.5 per cent, rather than 3 per cent in the May Budget.