Report: Reformed fire service fails to deliver promised savings

The 2017 amalgamation of urban and rural fire services has delivered huge cost increases for taxpayers, finds a new report from the New Zealand Taxpayers’ Union.

Cash to Ashes: The inefficiency of fire service reforms can be read here.

Key findings:

1. The merger and centralisation of urban and rural fire services was meant to produce $47.7 million in efficiency savings by 2021/22. In practice, there have been no efficiency savings, and Fire and Emergency NZ (FENZ) has cost taxpayers $338 million more in its first three years than was forecast to Cabinet in 2016.
2. $163 million of the $205 million increase in forecast expenditure between 2017/18 and 2018/19 was dedicated to ‘Support Services’ – i.e. back office bureaucracy.
3. FENZ has increased spending by $43 million on ‘communications and computers’ over three years.
4. FENZ is spending $27.4 million on external consultants over three years.
5. FENZ is ‘gold plating’ its infrastructure. New stations in Lake Okareka and Wanaka cost $1.9 million and $4 million respectively, far more than comparable volunteer stations in Australia. FENZ has even opened a double-bay station, complete with training space, laundry, and kitchenette, in Tinui, a town of 20 people.
6. FENZ spent $17 million responding to the Pigeon Valley Forest fire – more than 17 times more than the response to the remarkably similar Hira Forest fire in 1981.
7. FENZ does not have to justify wasteful spending to Cabinet, as it collects revenue through the fire insurance levy, bypassing the Budget bid process.

Cash to Ashes recommends that FENZ be required to go through the scrutiny of the Budget bid process to secure its funding. The report also proposes abolishing the fire insurance levy entirely, and collecting revenue for FENZ from general taxation.

Former National Rural Fire Officer Murray Dudfield, ONZM, consulted on the report. Reflecting on its findings, he says:

“The annual rural fire costs in 2015/16, to local government rate payers, was $29 million. In addition the 2017 PWC report concluded that the 2015/16 expenditure of $389 million was appropriate for the NZ Fire Service functions and output responsibilities. Following the merger of urban and rural fire services on 1^st July 2017, the latest FENZ forecast of expenditure is showing a hefty spend of $617 million in 2020/21. The FENZ Board, in just year four of this merger, are planning an additional $228 million more than the 2015/16 budget. The merger was intended to produce savings and deliver cost effective benefits to all New Zealanders. However these savings and benefits are now disappearing in a puff of smoke unless the Minister gets involved. On behalf of all New Zealanders the Minister of Internal Affairs, Tracey Martin, must take urgent steps to ensure FENZ delivers the savings identified by Government in 2016.”

Mr Dudfield also joined Duncan Garner on The AM Show to discuss the report.

In a foreword to the report, Insurance Council Chief Executive Tim Grafton asks, “Why should those who insure be the ones that fund FENZ? Everyone benefits from FENZ services, not just those who take responsibility to insure themselves.”