Urgent Change Required to Unfair Insurance-based Fire Service Levy

The New Zealand Institute of Economic Research (NZIER) is recommending a fairer way of funding the fire service to better reflect the public good it provides for all New Zealanders.

In reports commissioned by the Insurance Council of New Zealand, the NZIER has recommended moving the funding of the fire service from insurance-based levies to property-value based levies for both non-commercial (residential and lifestyle) and real commercial property to general taxation.

The NZIER recommendations join a mounting body of expert opinion that funding the fire service through a levy on insurance premiums is unfair, outdated and out-of-step with the rest of the world.

ICNZ Chief Executive Tim Grafton says: “No-one would expect the police force to be funded through their insurance premiums yet the fire service provides a public good that is collected by insurance companies for the benefit for all New Zealanders, including the uninsured or under-insured.”

ICNZ says funding the service from general taxation would also better reflect the diverse role the fire service plays, which often has little to do with putting out fires, for example rescuing victims of serious road accidents or dealing with chemical spills.

“It’s time to change the way the fire service is funded to better reflect the work it does, the public good it provides and ensure that its costs are fairly met by all who benefit.

“While there is still a lack of political urgency for changes to the funding of the fire service, we will be making strong representations to Government after the election," says Mr Grafton.

The NZIER reports note that across the Tasman, Australian States have successively moved from insurance-based levies to property-based levies to fund their fire and emergency services.

The last mainland state (New South Wales) with an insurance-based levy has completed its public consultation and is observing the outcome of the recent change to a property-based levy in Victoria before implementing similar changes. The two Australian Territories fund their fire and emergency services from government consolidated revenue.

NZIER recommends from their current analysis that the following regimes be applied, based on either the capital value or the value of improvements of properties:

· for non-commercial property, a single rate levy on property value up to a fixed cap (either $200,000 value of improvements or $500,000 capital value)

· for commercial property, a dual-rate abating levy, with an initial rate no higher than the current insurance-based levy rate per unit of value, and the abatement point set so as to balance the benefits across mid-range to higher value properties in an equitable manner.

The report recommends that the property-based levy be collected by local authorities as a rate (deemed rate) on property values, and that this rate be extended to include many of the properties that are exempted from general rates (notably churches, schools, hospitals) but which are currently contributing to payment of the insurance-based fire service levy.

NZIER suggests that the transitional costs should be met by central Government and that the ongoing costs of collection should be recovered from the levy collection, with levy rates adjusted.

ENDS

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