Fire and Emergency New Zealand funding to be reviewed

Internal Affairs Minister Tracey Martin announced today that Government will be reviewing how Fire and Emergency New Zealand (FENZ) is funded.

“We’re having a look at the funding structure of FENZ to see if we can provide a stable, simple funding system that is fair to individuals and businesses.”

FENZ is the amalgamation of former rural and urban fire authorities, and the national body for all fire and emergency services in New Zealand and was formed in 2017.

“The establishment of FENZ has gone well and New Zealanders are beginning to see the benefits of a modern, unified fire and emergency service,” the Minister said. “For example, FENZ has responded admirably to the Nelson/Tasman fire.

“However, FENZ, like the fire service before it, is funded by a levy on property insurance and there are flaws in insurance-based funding:

• Property owners that do not insure are able to ‘freeride’, as they do not pay a levy but still benefit from FENZ’s services;

• Charging people on their insurance increases insurance costs and can reduce the incentive for them to properly insure their properties; and

• Levy collection is complex to administer for insurers, and FENZ’s levy income may become uncertain as the commercial insurance market evolves.

“I have also heard concerns from large property owners who are facing substantial levy increases under the modernised levy regime that was proposed in 2017. While the modernised regime would improve equity across levy payers, it appears that it may unnecessarily impact New Zealand businesses and other large property owners.

“The Government considers that there may be better ways to fund such an important organisation.”

The timing was right for a review, as two years on there was now much clearer information and understanding of the costs involved with running FENZ.

“We have an opportunity to take a clean-slate approach rather than simply stick with the model we’ve had historically.”

The Minister said there were a number of different funding regimes for fire services internationally, but there appeared to be a trend away from insurance-based levies and four Australian states have changed from an insurance-based model.

“The review will look at a wide range of options for funding FENZ. We will be looking to achieve a model that is stable, universal, fair and flexible, Ms Martin says. “No single option will fully satisfy all of these criteria, but I think we can do better than what we currently have.”

The Minister stressed that under any possible model, and during the review period, FENZ will continue to be adequately funded.

“The announcement of the review means that present arrangements will largely continue, and people will not notice any difference to what they are paying in levies in the immediate future.”

A public discussion document on the FENZ funding model will be released later this year.

ENDS

Notes for Editors:

Currently a transitional insurance-based levy regime funds FENZ, with an increased levy rate to fund the transition to a unified organisation. This was introduced in 2017, and was intended to apply until the modernised levy regime came into force.

A Bill currently before Parliament would extend the transitional levy period until 1 July 2021, but the Minister will take a Supplementary Order Paper to Parliament to extend the transitional levy period to 1 July 2024 to allow time for the review to be completed.

Overseas funding regimes include charges on property value, charges based on the expected cost of providing fire protection to property, or a combination of collection models.

More information on FENZ and the FENZ Act 2017 and updates on the review are on the Department of Internal Affairs website: https://www.dia.govt.nz/Fire-Services-Transition

Information on the current levy regime is at: http://www.firelevy.co.nz/ProcessAndImpacts#IncreaseMeansToMe

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