Fire service funding plan 'disappointing'

Fire service funding plan 'disappointing' | Insurance Business

Fire service funding plan
The Insurance Council of New Zealand (ICNZ) has expressed its disappointment at the Government’s planned method of funding the Fire Service and this morning has repeated the message it gave to cabinet ministers in a letter to them last month.

The ICNZ statement comes on the back of Internal Affairs Minister Peter Dunne’s announcement today of $303 million of funding over five years to combine the urban and rural fire services into one organisation, called Fire and Emergency New Zealand, from mid-2017.

Minister Dunne said the $303 million package would be funded through:
  • A proposed increase in the fire levy of approximately $161 million over three years from 2017/18;
  • $30 million of Crown funding over three years from 2017/2018 towards the cost of public good non-fire activities, such as responding to medical emergencies, floods or other natural emergencies;
  • A $112 million capital injection which will be repaid over the next decade.
Dunne said the new arrangements would be ‘much fairer’ and would ensure that both large and small property owners and most motorists would pay their fair share towards the cost of fire and emergency services.

He said an operational and performance review of the NZ Fire Service Commission would start this year to better predict the costs involved.

However, insurers said continuing to tax only those people who pay insurance to fund the fire service was ‘blatantly unfair’ and ‘well out of step with best policy practice internationally’.

ICNZ took issue with the $300 million cost that insured people would have to pay above what they do now to fund the changes.

“This is not good for hard working Kiwis who do the right thing by taking out insurance to protect their policy,” said CEO Tim Grafton.

“We’re naturally disappointed the Government only wants to tax people who take out insurance and allow those who don’t insure to be freeloaders.”

Grafton said one option that had been supported by officials was to remove the tax from insured drivers and apply it to the annual licensing fee, or ‘rego’, so all road users paid.

However, the Government had instead expanded the tax on motor insurance to third party insurance on the basis it would reduce avoidance, a belief Grafton said was ‘misguided’.

“The real problem that is not tackled is that it still leaves the 10% of drivers who do not insure themselves not paying to fund the fire service.

“Had they been serious about reducing avoidance completely, then the rego provided the solution.”

On top of that, Grafton said ICNZ had outlined in detail to ministers that major industry disruption was a huge factor that made the Government’s solution near-sighted.

“The motor insurance sector faces significant change due to technological and disruptive influences.

“This will likely lead to insurance product changes that will almost certainly have significant impacts on funding available to fund the fire service,” Grafton said.

“The rego was the right vehicle to collect the tax because it will be around for as long as ACC payments for funding the cost of road accidents continue. There are no plans to disband this system, yet motor insurance disruption will occur much sooner.”

There were some small positives, Grafton said.

“We welcome the greater clarity provided by applying the tax to all insurance policies for damage to property. This will simplify the administration and limit avoidance.

“This should also mean that contributions are made by central and local government authorities who take out insurance cover. That will make the system fairer as will the decision for the Crown to contribute $10 million toward non-fire activities.”

He added: “We also welcome the move to align the tax payments with the GST cycle which should also reduce compliance costs.”

ICNZ spoke out about the initial fire service changes in May last year, describing it as a ‘mockery’.