Luxon Defends Gas Plan as Labour Calls it a “Tax” | New Zealand News

Prime Minister Christopher Luxon’s government is defending its plan to fund a new liquefied natural gas (LNG) import facility with a charge levied on electricity companies, dismissing opposition claims that this constitutes a new “gas tax.” The debate centers on the nature of the charge and its ultimate impact on consumer power bills.

Labour leader Chris Hipkins has characterized the funding mechanism as a “gas tax,” arguing it will inevitably be passed on to consumers. Luxon vehemently rejected this assertion, stating, “What a load of rubbish. It’s all designed to lower power bills for New Zealanders. That’s why we’re doing it, and that’s what it’s all about.” He emphasized the goal of increasing energy supply to mitigate the risk of dry-year electricity shortages and, lower prices.

Energy Minister Simon Watts further complicated the messaging, initially referring to the charge as a “levy” during the announcement on Monday, before clarifying that it was neither a tax nor a levy because it would result in “net savings” for households. This shifting terminology has fueled criticism from the opposition.

The core of the dispute lies in the government’s plan to build the LNG facility, intended to bolster New Zealand’s energy security. The facility will be funded by a charge applied to electricity companies, a move Labour argues will translate into higher costs for consumers. National maintains that the increased supply will ultimately offset any initial costs, leading to lower overall power prices, estimating savings of $50 per household annually.

Hipkins countered this claim, questioning Luxon’s understanding of household economics and referencing the Prime Minister’s reported modest grocery spending. “if the government charges every household in the country a new tax every time they receive their power bill, it’s going to cost households more money,” Hipkins stated.

The debate has also resurrected past statements from within National itself. Hipkins pointed to a 2022 comment by Finance Minister Nicola Willis, who, while in opposition, declared, “if it looks like a tax and it quacks like a tax, it’s a tax.” This remark was made in response to a Labour proposal regarding KiwiSaver fees.

Willis defended the current plan, asserting that Labour’s criticism is unfounded and ignores official advice predicting a decrease in electricity prices. “This is not us conjuring up numbers… Labour have not engaged with that analysis at all. Don’t let them get away with it,” she said. She also criticized Labour’s previous energy policies, specifically their plans for the Lake Onslow project, which she characterized as costly and delayed.

National’s coalition partners have offered differing perspectives on the issue. ACT leader David Seymour argued that the charge technically qualifies as a levy under the recently passed Regulatory Standards Act, as its benefits are not directly tied to those who pay it. NZ First leader Winston Peters, however, asserted that the charge is, in fact, a tax, while his deputy, Shane Jones, initially disagreed before aligning with Peters’ view.

Green Party co-leader Chlöe Swarbrick condemned the government’s plan, arguing it will increase New Zealanders’ power bills and perpetuate reliance on fossil fuels. “Whatever you want to call it, Christopher Luxon has decided that New Zealanders are going to pay for his decision to lock us into fossil fuel dependency.”

The disagreement highlights the political sensitivities surrounding energy policy and the challenges of balancing energy security with affordability and environmental concerns. The government’s insistence that the LNG facility will lower power bills hinges on the assumption that increased supply will outweigh the costs of the new charge, a claim that remains contested by the opposition and subject to market conditions.

The debate also underscores the complexities of defining a “tax” versus a “levy,” particularly when the stated intention is to offset costs and ultimately benefit consumers. The differing interpretations from within the coalition government itself suggest a lack of unified messaging and potential for future friction on energy policy.