Paying less for more

Press, 28 January 1984, Page 14

Paying less for more

Rare enough these days are the occasions when the cost of something is reduced. The freeze on prices and incomes has reduced the rate of inflation and with it the expectation of continual price increases; nevertheless, a reduced bill for something, be it for goods or services, remains a novelty. A novelty that will affect a great many people is the reduction in the Fire Service levy that makes up a part of the cost of insuring a house. The reduction, announced yesterday by the Minister of Internal Affairs, Mr Highet, will apply to all householders’ policies taken out or renewed after April 1. The levy, at present 3.5 cents for each $lOO of insured value, is a surcharge on insurance premiums and is a means by which the public contributes to the New Zealand Fire Service. The other sources of income for the service are further contributions from insurance companies — whose risk is reduced by the work of the service — and from taxpayers through the Government’s contribution. Without the levy, the Fire Service would have to rely on a greater contribution from taxpayers to maintain the same service, or would need a ' greater contribution from insurance companies — who would pass on the cost in higher premiums. The present system is a fair middle course between the principle of user-pays and the desirability of protecting life and property with an efficient fire-fighting force that is universal in all but the smallest of urban areas. Few would seriously propose a return to the days

long ago when the appropriate insurance plaque had to be fixed to a building before the brigade maintained by that insurance company would attempt to put out a fire there. Nor would it seem entirely fair if property owners — who stand to gain the most personally from efficient fire-fighting — were provided with the service at no expense to themselves other than that shared by all taxpayers. An argument can be raised that not all property owners take out insurance cover and they are not paying their due share for a service that will nevertheless come to their aid. The answer to this has to be that the system may be a little rough and ready, but broadly those who get the benefit of the service pay according to the value of the property being protected. The levy was increased two years ago when the Fire Service had to meet some unusually high capital expenditure, most of it for new and improved equipment. The peak in required spending has passed, although the community will continue to profit from the modernisation for some years to come. Some saving on the levy might have been possible in the normal course of events; the freeze on prices has meant that it was certain. According to Mr Highet, the reduction in the levy — 43 per cent — would not have been as great except for the freeze. Be that as it may, from April 1 the levy will be only 2c for each $lOO of insured value. The effect is a reduction of $7.50 a year in insurance payments for a home owner with a house insured for $50,000. The saving might not seem great; the novelty is nonetheless welcome.