Loophole 'costing Fire Service millions'

Companies are costing the Fire Service tens of millions of dollars a year by using a loophole to avoid insurance levies, it was claimed yesterday.

Fire Service Commission executives told the government administration select committee at Parliament that cracks were appearing in the service's funding model.

"The model that served us very well is really becoming fraught with difficulties," chief executive Mike Hall told the MPs' panel.

"There are a number of schemes that are coming to the forefront now where people are becoming cleverer in using the insurance-based system to circumvent the principle of the model and reduce the amount of money ... to the Fire Service."

After the committee hearing, Fire Service strategic adviser Murray McKee said companies with large property portfolios in different areas were avoiding levies, amounting to a loss to the service of tens of millions per year.

"If each of those properties was separately insured, then it would be collectively much greater than if those properties were insured collectively.

"We're pursuing a number of cases behind the scenes, and possibly considering testing some of those more aggressive cases in court ... in the course of this year."

Mr McKee declined to name companies.

The levy is payable on all contracts of fire insurance covering New Zealand property and is used to fund the Fire Service.

However, Internal Affairs Minister Nathan Guy said he did not think legislative change would be possible until at least the next parliamentary term.

"I'm aware of this issue and I'm well aware that the current fire legislation is outdated and, in a number of areas, struggles to reflect current and emerging practice.

"I expect the Fire Service to ensure that everyone liable for the levy meets their proper obligations and to enforce this, if necessary.

"If long-term viability is threatened then I am prepared to look at any legislative changes that might be required, in the next parliamentary term."

Earlier, Fire Service Commission chairwoman Dame Margaret Bazley told the select committee that the nature of the Fire Service was changing, and only 50 per cent of callouts in 2008-09 were for fires.

The number of responses to natural hazards such as flooding, storm damage or earthquake damage steadily increased from fewer than 500 in 1993-94 to more than 2100 in 2008-09.