The decision by the NSW Government to halt the introduction of the Fire and Emergency Services Levy (FESL) on properties has divided major stakeholders.
Central Coast Council first announced in April that it would be required to collect the FESL from property owners alongside their rates on behalf of the state government.
At the time of the announcement, only insured property owners contributed directly to the funding for NSW Fire and Rescue, NSW Rural Fire Service and the State Emergency Service as part of their premiums.
From July 1, Councils across the state were required to include the FESL on rates notices.
Unimproved land values were to be determined by the NSW Valuer General, while Councils determined property classifications.
To introduce the FESL, the NSW Valuer General reviewed all land values in NSW to align all NSW properties with a single valuation base date, to apply the FESL equitably.
Council’s Administrator, Mr Ian Reynolds, confirmed that the levy was to be passed straight to the NSW Government to fund fire and emergency services.
In April, Mr Reynolds confirmed that some rates, despite the rate path freeze for merged Councils, could be impacted by the levy.
The introduction of the levy, heralded by proponents as the most significant reform of a generation, was aimed at reducing the cost of household insurance, and sharing the cost of emergency services more fairly, to bring NSW in line with other states.
Premier Gladys Berejiklian and Treasurer, Mr Dominic Perrottet then announced on May 30 that the new way of collecting the FESL had been halted and was under review, to ensure small to medium businesses did not face an unreasonable cost burden.
Ms Berejiklian said in the majority of cases fully insured people would be better off under the new system, but some fully insured businesses were facing unintended consequences.
“We have heard the concerns from the community, and we will take the time to get this right,” Ms Berejiklian said.
“While the new system produces fairer outcomes in the majority of cases, some people, particularly in the commercial and industrial sectors, are worse off by too much.”
Mr Perrottet said the lived experience had not matched the intention of the reform particularly for small and medium businesses.
“It’s not enough for this reform to work on paper, its real-life implementation has real life consequences for families and businesses, and we need to make sure they are not placed under unfair strain,” he said
“We are committed to reducing NSW’s high rates of under insurance and to making the funding of our fire and emergency services fairer, but we want to get this right.
“The NSW Government will work with local government, fire and emergency services, the insurance industry and other stakeholders to find a better and fairer path forward.
“The FESL will continue to be collected via insurance policies until the NSW Government has completed its review of the policy, and the funding requirements of fire and emergency services agencies will be met in full.
“The FESL is revenue neutral, raising no more than the amount required to fund the state’s fire and emergency services.”
The Berejiklian Government’s decision to pull the pin on the new way of collecting the levy just days before it was supposed to formally begin, has left some stakeholders reeling, with NSW Labor leader, Mr Luke Foley, describing the last minute ditch as an “eleventh hour backflip.”
Mr Foley also questioned why the FESL was put on pause and suggested the government had returned to the drawing board, spurred on by the backlash from disgruntled householders facing large increases in their bills in the adjustment.
“Only now that the inequity of the tax has been exposed, has the Premier and her Treasurer been prompted to act and go back to the drawing board.
“There now hangs a question mark over the future funding of emergency services, now that the tax has been shelved.
“The latest backflip follows Mike Baird’s infamous change of heart on greyhounds last year, and the Premier’s U-turn on some Council amalgamations,” Mr Foley said.
The NSW Rural Fire Service Association (RFSA) said that any review of the FESL must not trigger changes to the amount of their guaranteed funding.
“The RFSA is a supporter of the previous model of collecting the levy through insurance, and was very vocal about the pitfalls of changing to a levy on property holders by local councils,” RFSA President, Mr Ken Middleton said.
“However, with the government’s strong commitment to follow other states into a property-based model, the RFSA worked closely with the government to secure the best interests of its members.
“The Treasurer has provided us with a commitment that changes to the way the levy is collected and administered will not impact on our 74,000 volunteer and salaried rural fire fighters, and that unspent allocations can be rolled into the next financial year.
“We would not want to see undertakings compromised by model changes,” Mr Middleton said.
Insurance Council of Australia’s Spokesperson, Mr Campbell Fuller, echoed other stakeholders’ disappointment.
“The decision is a blow to NSW property owners, households, businesses and the broader state economy.
“The Emergency Services Levy will continue to deter the community from taking out insurance.
“The government now requires insurance companies to continue collecting the old Emergency Services Levy (ESL) beyond June 30, for an unspecified portion of the 2017-18 financial year.
“This has significant legal and commercial implications for the industry.
“It is a logistical and technical challenge that will cause confusion and increase premiums for policyholders,” Mr Fuller said.
“This government had promised insurance customers they would experience a fall in their insurance premiums after June 30; as the ESL Insurance Monitor has said publicly, many consumers have already seen significant reductions in the ESL on their insurance.
“This will now need to be reversed.
“The NSW Government has had more than 18 months to design and implement its new FESL system.
“Every other mainland state has abolished emergency services levies on insurance with little fuss.
“Insurers have spent more than a year and tens of millions of dollars on consultants and technological system changes in preparation for the removal of the ESL from June 30.
“They have worked without the certainty of legislation, which was only passed in March.
“The government’s failure to introduce its FESL on time calls into question the notion that emergency services should be funded separately rather than through consolidated revenue,” Mr Fuller added.
Other stakeholders, like the NSW local government sector, welcomed the decision to halt the FESL.
Local Government Minister, Ms Gabrielle Upton, advised the sector’s peak body, Local Government NSW (LGNSW), that the collection of the fire and emergency services levy would revert to the existing system.
Currently, property owners make a significant funding contribution to fire and emergency services through their insurance premiums, as well as through an 11.7 per cent levy embedded in their rate notices.
“The government had previously announced it would scrap the insurance contribution, replacing it with a new line-item levy on Council rate notices,” LGNSW President, Mr Keith Rhoades said.
“The FESL was based on the unimproved land value of property across NSW.
“However, the most recent land valuations meant significant increases in contributions for many property owners, prompting community and media criticism.
“Premier Berejiklian’s announcement that the Government will not impose the FESL from July 1 provides an opportunity to pursue a true broad-based levy that replaces both the insurance and existing ratepayer contributions.
“The local government sector recognises and supports the need to properly fund fire and emergency services, and has continued to work with the treasury on this.
“Councils have already done a lot of work to comply with the Government’s FESL legislation, and there will now be a need to undo this work, not to mention the associated costs.
“While this is regrettable, the chance to get the levy right should be our focus,” he concluded.
Sources:
Media releases, Apr 26 and May 30
Central Coast Council Media
Luke Foley, NSW Opposition Leader
Keith Rhoades, LGNSW
Campbell Fuller, Insurance Council of Australia
Melissa Humphrey, NSW RFS
Media statement, May 30
Dominic Perrottet, NSW Treasurer
Dilon Luke, Journalist