Fire service funding ‘flawed’


THE system for funding fire services is unfair because only people who take out home or contents insurance pay for it, the Bushfires Royal Commission heard yesterday.
It was also told that broadening the system would create a different kind of inequity because poorer people, such as age pensioners, would struggle to contribute.
“I’m concerned that [a property-based levy] might go into rates notices . . . and the largest user of debt collectors is local government, particularly rural and regional and outer-urban councils [chasing rate-payers],” said consumer lawyer Denis Nelthorpe, of the Bushfire Legal Help Unit.
The Metropolitan Fire Brigade and the Country Fire Authority are largely funded through a fire services levy.
This must be paid to the Victorian government by insurance companies. Companies then pass its cost on to customers in insurance premiums. This means those who do not insure — as was the case with 13 per cent of those burnt out on Black Saturday — make no contribution.
It is possible for fire services to bill uninsured residents for a callout, but this did not occur in relation to Black Saturday, said senior counsel assisting the commission Jack Rush, QC.
Joe Monforte, director of tax with the Victorian Treasury, said a property-based fire services tax would probably lower the cost of insurance. He said another option would be to remove the ability of services to waive costs for callouts, but such a policy would need to take into account the ability of people on low incomes to pay, and the “appropriateness in circumstances such as Black Saturday of billing displaced and distressed property owners”.
Mr Rush also raised the question of whether car owners should be made to help pay for fire services when he noted that road accidents comprise 15 per cent of MFB callouts and 10 per cent of CFA callouts.
He also questioned several witnesses over a lack of accountability by insurance companies over how they chose to pass the levy on to consumers. He quoted a 2003 report that found in the four years leading up to 2000-2001, insurance companies had collected $47 million more from consumers than they were required to pay to the government.
Mr Monforte said this might not be a significant amount in terms of the overall premiums collected.
“I don’t think there’s any evidence of individual companies gouging,” he said.
Dr Richard Tooth, of economic consultants LECG, told the commission that 23 per cent of households spent nothing on building or contents insurance.
Mr Rush said the fire services levy would generate revenue of $509 million in 2009-10.