Labor is now backing government plans for regular fuel tax increases

Lisa Maree Williams/Getty Images

A key revenue measure in Joe Hockey’s 2014 budget may finally be passed in the Senate with Labor set to cut a deal with the government to reintroduce twice-yearly increases to petrol excise.

The struggle to reinstate the excise, scrapped by the Howard government in 2001, led the frustrated treasurer to make his notorious “poor people don’t drive” comment last year.

The AFR reports that while the government has been negotiating with the Greens, who want more money spent on public transport, Labor is prepared to cut a deal provided $1.1 billion goes towards regional roads over the next two years.

Labor’s about-turn comes after 12 months of criticising the government for a broken election promise by reintroducing the tax.

The government originally flagged that some of the revenue would go towards roads, but that changed during talks with the Greens.

When the measure was announced 13 months ago, it was expected to raise $340 million in the first year and $1.5 billion annually by 2018. All up it will add $3 billion to the budget bottom line over the four-year forward estimates.

Thwarted by Labor and the crossbench, the government introduced the excise via the back door, using regulation instead, but it now needs to become legislation by October this year or it will lapse and the revenue collected will have to be refunded to the oil companies.

There’s more on the potential deal here.

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