The NSW government is reforming how it funds fire services, removing the charge on fire insurances and introducing a land-based levy.

NSW Treasurer Dominic Perrottet says:

“Eliminating the old (Emergency Services Levy) is expected to reduce insurance costs on residential property by an average of $233, leaving fully-insured residential property owners better off by $47 per year on average.

Saving nearly $1 a week per dwelling is a useful benefit. The real economic gain is moving this to a land-levy.

Fire services protect structures. They give citizens the confidence to build – and build bigger and better. But that is not where the tax base lives.

Like all civic amenities, the benefit of the fire service is capitalized into land values. A quality fire service raises land prices, whether a building is put up or not.

The natural tax base for this emergency service is land.

The vast majority of fire brigade expenses is the standby cost: placing skilled firefighters ready to roll 24 hours a day within 8-10 minutes of dwellings. Here is why:

When the fire levy was on fire insurance, prudent insured households carried the standby cost and the uninsured got a free ride. Meanwhile, the high cost of fire insurance plus fire levy deterred some holders – on the margin – from protecting themselves against catastrophe.

This public policy win-win, broadening the base and putting it on land, is compromised by the minimum charge of $100 and discounts for pensioners, veterans and vacant land. Pensioners and veterans are better helped with targeted direct payments. And vacant land consumes as much in fire-fighter standby services as a mansion.