Dialogue: Business dodges starving Fire Service of money

Wage disputes involving firefighters would become far less frequent if the funding of the Fire Service was revamped and made more equitable, writes GRANT GILLON*.

Firefighters have been criticised for rejecting an employment contract offered to them by the Fire Service Commission. Their decision, however, must be put in the context of its wider cause, the long-standing underfunding of the Fire Service.

As with any wage claim, employees and employers have conflicting demands. The workers may require more money to provide for their families, while employers have to ensure that the cost of wages and salaries is sustainable in the long term.

In the case of the Fire Service, a change to the way in which the Fire Service Commission is funded could go a significant way to meeting the requirements of both firefighters and their employing body.

Some commentators have chastised the firefighters for not accepting what seems to be a reasonable offer. While the offer might seem reasonable when compared with a standard wage claim, the long-standing nature of the dispute makes their claim unusual.

The firefighters have not had a pay increase since 1992. Their conditions of work have been constantly under attack for most of that time.

Union representatives have expressed a willingness to settle the dispute. The union has put an alternative proposal to the commission asking for a rise, according to union secretary Derek Best, of less than double figures.

Since 1976, the Fire Service has been funded by the fire levy, based on a levy of the sum insured. Because of the previous Government's neglect, and the unethical actions of some large companies, the Fire Service faces severe financial constraints.

In the insurance-based funding arrangements, many loopholes exist whereby large companies and corporations can avoid or evade paying fire levies.

Only those who hold insurance policies pay a Fire Service levy. It is somewhat ironic that some state-owned enterprises, and even Parliament itself, do not carry insurance and, therefore, do not pay a levy, yet still enjoy Fire Service protection.

Some companies move their insurance arrangements overseas, evading the fire levy on New Zealand-based insurance, even though they are still legally required to pay.

Other property-owners split or layer their insurance policies and pay the levy only on the indemnity value of the insurance cover. The nominated indemnity value is often less than the real value. It is illegal to nominate an artificially low indemnity value to reduce the fire levy, but almost impossible to prove.

A further scheme is referred to as the first-loss scheme. For example, a company could have a large number of buildings in different places and a policy is taken out which covers the most valuable building. While a premium is paid for one building only, all buildings are insured under the policy.

This is quite legal as long as the policy ends when a building burns down. But questions have to be asked about the ethics of such a scheme, especially if it is designed to avoid the payment of fire levies. If the policy is automatically reinstated, it is illegal.

Estimates show that each year the Fire Service loses between $60 million and $90 million to some large companies which evade the levy through innovative insurance schemes. Yet these same companies would still expect fire engines to roll up and save their premises if they caught fire.

Some of these schemes are illegal and others, while they may be legal, are certainly unethical and result in the domestic sector subsidising the Fire Service for many large commercial companies.

In a recent survey of 2500 people almost 100 per cent rated the Fire Service as the most trustworthy, value-for-money agency. With the firefighters held in such high regard, the Fire Service needs to be stabilised and put on a sustainable funding base. The Government has made significant moves in this direction.

The way forward is clear. In the short term we need to close these loopholes and in the long term secure a property-based funding scheme that spreads the costs of the Fire Service across all properties.

A property-based levy would be based on the value and the use of the building. For example, a chemical factory would pay more than a clothing factory of the same size because of the greater level of risk.

Such a scheme would fairly fund the Fire Service in a similar way to many other community services. For example, the Fire Service levy could be collected by local territorial authorities and appear as an item on rates bills.

This would not be a new cost. The vast majority would see their Fire Service levy reduced under such a scheme.

In 1998 I initiated a parliamentary select committee inquiry into the Fire Service. The committee's report looked favourably at a property-based funding scheme. That is the policy of the Alliance - and the Insurance Council also supports such a change.

If all large companies paid their correct amount of fire levies to the Fire Service Commission, there would be sufficient funding to enable decent wage increases for the firefighters, as well as the urgently required replacement of fire engines and fire equipment.

Rundown fire stations could be upgraded. It could also provide greater resources for voluntary firefighters, especially for those working in isolated rural areas.

With these improvements, New Zealanders could feel safe knowing that the Fire Service is well equipped to save their lives and their homes in the event of a major fire.

Under a property-based funding scheme, the Fire Service Commission would be adequately funded and the vast majority of New Zealanders would pay less in fire levies - a true and equitable win-win solution.

* Grant Gillon is the Alliance emergency services spokesman.