• Mac Mckenna is an economist at the New Zealand Taxpayers Union.
The fire service is being reformed. A bill at the last stages of passing in Parliament amalgamates the urban and rural fire services into one organisation to be more efficient. But using the Government's own figures, the total cost of the new entity, Fire and Emergency New Zealand, will shoot up by $80 million a year. The burden of these costs will fall on only those who insure for property.
The changes on July 1 will see a 40 per cent increase in fire levy rates on insurance policies. For residential insurance-holders the fire levy only applies to the first $100,000 of cover, so the increase will be a maximum of $36.20 per annum. However, because the cap does not apply to non-residential property the average levy paid will be substantially larger.
The reforms will result in additional government revenue of $80m. This figure accounts for the $115m increase from the insurance levy minus the $35m of rural fire rates and charges that are abolished. Efficiency is one of the objectives of the reforms, so why is the Government taxing an additional $80m each year?
The Government's projections estimate that there will not be any efficiency gains until the fifth year, and even then the gains will only be $48m. This only amounts to 12 per cent of the increase in revenue over that same period.