27 March 2017
2nd Reading Speech
The Hon. ADAM SEARLE ( 11:19 ): I lead for the Opposition on the Fire and Emergency Services Levy Bill 2017. Every bill that comes before the House reflects the priorities of the party or those introducing it. In recent times, members on this side of the House have introduced a variety of bills that reflect our approach to fairness, social justice and a fair go for all. That is why the Labor Opposition recently introduced legislation in the other place on medicinal cannabis to alleviate the suffering of those with terminal and other serious illnesses. It also introduced legislation dealing with transparency in motorway tolls so that those who pay do so on a fair basis and with proper independent oversight, and the steel industry legislation to boost jobs and economic growth throughout the supply chains across New South Wales.
I note that a range of principles are embodied in this bill. We support the concepts in the bill in principle, but as is always the case with this Government close attention must be given to the level of detail. The Opposition has some amendments that will address our concerns. If all or a substantial proportion of those amendments are successful, we will support the passage of the legislation through this House. On the other hand, if the Government does not join us in making those improvements to the legislation, we will be unable to support the legislation on its third reading. I reflect on the most recent Legislation Review Committee Digest No. 33/56, which pointed out some issues relating to the Fire and Emergency Services Levy Bill as it stands. It found that the bill trespasses on personal rights and liberties, particularly the right to receive a refund. The digest states:
The Committee notes that whilst policyholders are to receive refunds for over-collected amounts where practicable, in circumstances where it is impracticable to do so the over payments are to be paid into the Consolidated Fund. As the term “practicable” is not defined in the legislation, the Committee refers the potential non-payment of over-collected funds to policyholders to Parliament for its further consideration.
We share that concern and Labor will have a cluster of amendments that address that concern. The committee also found that the bill inappropriately delegates legislative powers. In particular, there are various clauses that seek to make regulations that may amend an Act of Parliament. The digest further states:
The Bill contains several clauses which authorise regulations to amend the Act. The Committee generally prefers an Act of Parliament to be amended by a further Act of Parliament, not a regulation. Regulations are subject to some parliamentary scrutiny through the disallowance process in section 41 of the Interpretation Act 1987. However, there is a much greater level of parliamentary scrutiny associated with the passage of a Bill through the Parliament.
The provisions which the Bill proposes may be amended via regulation are associated with key definitions relating to classifying land for the purposes of the fire and emergency services levy. They may also consolidate savings and transitional provisions. The Committee notes that savings and transitional provisions can sometimes impact on rights and liberties issues depending on the content of those provisions. The Committee refers clauses 43, 46 and schedule 3, clause 1 of the Bill to Parliament for further consideration as to whether authorising the regulations to amend various Schedules of the Act is appropriate in the circumstances.
When this bill was debated in the other place, the Opposition identified the issues and our proposed amendments will go some way to addressing those issues. Although such provisions have been held to be legally effective, they are colloquially known as Henry VIII clauses. It is one thing to have an enactment and regulation‑making powers to fill in the details, but it is taking matters to another level when we enable Acts of Parliament to be changed by regulation. Although that is legally effective, it is significantly undemocratic because it reduces the level of scrutiny on what then becomes the final principal legislation. It is important to note that this Government engaged in that practice to a significant degree in its 2012 workers compensation reforms when the former Premier claimed—until he was blue in the face—that there was no retrospective effect to the legislation.
However, as a result of changes that were made to the Act by regulation, it went all the way to the High Court of Australia and the High Court upheld those changes, which had the effect of clawing back tens of millions of dollars worth of benefits from injured workers. This mechanism is legally effective, but it is profoundly undemocratic and we have grave concerns about it. The reaction of the big insurers to the legislation also gives us some pause for thought. We note there has been no outcry from the Property Council. We refer also to modelling by the Fire Brigade Employees Union, using the formula in the bill, which indicates that the introduction of this new State Government tax will be at the expense of working families and those doing it tough in New South Wales. In particular, there is a significant shift in the funding of the emergency services to individual households. Even though businesses are the prime consumers, we all consume the benefit of those services. I will come to that when we deal with the bill in more detail.
As the Parliamentary Secretary noted, the bill before the House proposes a new way to fund the essential work that Fire and Rescue NSW, the Rural Fire Service [RFS] and the State Emergency Service provide to the community as a whole. I recognise the great work of the fire and emergency service workers who support our communities, especially in times of vulnerability, and also the work they do in education and prevention. As a resident of the Blue Mountains, and we have another resident in the Chamber—the Hon. Shayne Mallard—our community is indebted to the work undertaken by generations of emergency services and RFS workers. We are thankful for the work of volunteers and staff in helping to save lives. They put themselves in the path of danger as members of the community are enjoined to move away from it.
At present the significant budgets of those frontline services are largely collected from insurance companies through a variety of insurance policies such as home contents, building, and comprehensive motor vehicle insurance premiums. The insurance levies currently make up almost 74 per cent of the contribution to the emergency services budget. The State provides approximately 15 per cent and councils make up the rest, contributing shy of 12 per cent. This scheme has worked and has underpinned a massive injection of funding for our emergency services. I note that much of that was achieved throughout the 16 years of the Labor Government. Today we have a modern and well-equipped fire and emergency service of which we can all be proud and which we can take comfort in for the security that it provides the community. Whether it is fire, floods, storms or accidents, New South Wales has an emergency service capacity that is the envy of other jurisdictions not only in Australia but also abroad.
Tinkering with the funding that underpins this important response mechanism should not be taken lightly and that is why the Opposition has closely examined the legislation before the House. As I indicated, we support the bill in principle. The principles that it embodies are sound and they reflect a range of reviews that have been undertaken such as the Henry Tax Review, an Independent Pricing and Regulatory Tribunal review and the 2013 parliamentary inquiry into the present levy. We note the findings of those reviews, but it should be noted that the levy, seen through the lens of taxation efficiency, is not necessarily all that it could be. While it is the aim of all governments to ensure as efficient a tax system as possible, progressive and sensible government must also consider issues relating to fairness and sustainability. All governments should seek to balance those considerations and apply a number of tests to any tax or proposed tax reform.
As I indicated, the Opposition supports the principle of moving from an insurance levy to a land levy. In theory, it should be fairer because everyone benefits from those essential services, and funding for those services should not be merely borne by those who purchase insurance. Public benefit land, residential land, farmland, industrial land and commercial land will all be subject to the levy. To calculate the levy, different base rates and ad valorem rates are applied, depending upon classification of the land. Government land or land owned by a State‑owned corporation is exempt from the levy unless, with a few exceptions, the land is leased.
Councils will be responsible for recovering the levy, along with rates and charges that they levy under the Local Government Act 1993, and then pay the levy to the Chief Commissioner of State Revenue. The levy can be paid by landholders as a single instalment or by quarterly instalments, and the new scheme is set to begin on 1 July 2017.
As the Parliamentary Secretary noted, a separate but related piece of legislation is the Emergency Services Levy Insurance Monitor Act 2016. That Act created the Emergency Services Insurance Monitor role, which is to provide advice and guidance to consumers and the insurance industry to make certain that insurers genuinely phase out the insurance-based levy during transition to the property levy. Former Australian Competition and Consumer Commission chair Allan Fels was appointed to the role, which is due to expire within two years of the bill’s enactment. In looking at this bill we have focused on the end result: the funding of our essential fire and emergency services. One would think that, given their focus on the user-pays principle, those opposite would put forward a bill that reflects those who use the fire and emergency services and the differing degrees to which they do so. But this is not the case.
According to the Government’s own reports of fire and emergency service usage, families use these essential services to the extent of 35 per cent; businesses, 55 per cent; and the rural sector, 7 per cent. However, the bill before the House will not, in its impact on those different parts of the community, reflect the risk faced by each sector or the cost of the emergency services used. In fact, the legislation will increase the residential land component—mums, dads and families—to 58 per cent of the funding. So families use 35 per cent of the services but will fund 58 per cent of the services. In any language that is a significant disconnect. Those opposite—the Liberal-Nationals Government of this State—are seeking to increase the cost of living for families who pay this new State Government tax to fund these essential services.
Some within our emergency services have also expressed concern that their fundraising will be affected by the new scheme. Concerns have been expressed that community fundraising will be negatively impacted by the perception by many ratepayers that they have already done their bit by paying the new tax collected through their rates. This is always the danger in moving to such a scheme, and the Opposition will maintain a close eye on how the new scheme impacts the important fundraising efforts of many of our emergency service volunteers across the community. The Opposition supports any effort to reduce the cost of living. Our party was founded on the principles of defending the living conditions of working people. Reducing cost-of-living pressures on the most vulnerable and those who can least afford to pay is one of our guiding principles. We can only hope that the Government’s sale pitch on this legislation is true. But we have our doubts about how the new funding proposed in the bill will impact on different parts of the community—shifting more of the burden onto the shoulders of households and families.
It is said that the new property tax will offset expected insurance savings. We know that those who are not currently paying insurance will automatically pay more. We should be concerned about the Government’s assumption that paying $100 or so will see those people instantly take up insurance. I will return to that point later. When the Government talks about average savings it can hide great unfairness in terms of financial impacts, depending on the value of the property. We must be very careful that when this legislation is implemented it does not impact aggressively and disproportionately those who can least afford it. While the Opposition has not seen any of the Government’s modelling, the Fire Brigade Employees Union has put together some modelling based on the formulas in the bill. I note that on page 11 of today’s Sydney Morning Herald there is an extensive report about the union’s work.
I will provide two real-life examples of how the proposed new State Government tax will impact on people in the community. The first example is of a three-bedroom fibro house at Arncliffe with a market value of around $950,000 and a July 2016 unimproved land value assessment of $635,000. It is estimated that the 2017‑18 fire and emergency services levy on the property will be $264. This home owner paid $235 in their 2016‑17 home and contents insurance, which leaves them about $30 worse off. The Government relies on an average figure of $186 as being the impact of this legislation but the family in the example I have just given will be $78 more worse off than the Government has claimed. In the second example, a three-bedroom fibro house in Oyster Bay with a market value of around $900,000 and a July 2016 unimproved land value of $635,000, the 2017-18 fire and emergency services levy on the property will be $248, less the $50 pensioner discount. That makes a total of $198. This pensioner home owner paid a levy of $137 in their 2016-17 home and contents insurance policy, which leaves them $61 worse off. Once again, there is a disconnect between this real-world example and $186 average figure that Government members keep repeating.
Lastly, let us consider a couple of local government areas. In the Kiama local government area, where the average unimproved land value is approximately $464,000, the fire and emergency services levy under this legislation will be approximately $220—$34 more than the Government’s stated average of $186. In the Penrith local government area, where the average unimproved land value is approximately $360,000, the fire and emergency services levy will be approximately $200—$14 more than the Government’s average. I will give one final example—chosen completely at random of course. Under the average unimproved land values for Gosford, the fire and emergency services levy will come to approximately $200. That is $14 more than the average of $186 that the Government claims. We can see from those examples that using a claimed average can mask the real‑world and adverse consequences of such a significant shift as is embodied in this legislation.
Those opposite may claim that it is only a small amount—and to them it may well be. But to families and vulnerable people that money can mean one fewer school excursion, one fewer tank of fuel, no new school shoes for growing feet or no medications purchased for one month. These are the real-world cost pressures faced by everyday families. Those people are at risk under the legislation in its current form if stronger safeguards are not put in place. I will return to that issue later. The bill mandates the proportion that householders and our families will pay. It even mandates the proportion that local councils are required to pay. What the bill does not do is mandate the proportion that the State Government has to pay. It is of some concern that there may be further “mission creep”—if I can use that term—pushing the burden more onto individual households and off the State coffers. That is cost shifting, which local councils are only too experienced with.
As I indicated earlier, the Opposition has several amendments that will improve the bill. The Opposition still has significant concerns about the nature of the levy and the checks and balances that the Government is putting in place during the transitional phase. Our mission is to look after citizens and try to get the balance right in terms of the economy, society and the broader environment. However, we envisage some issues. Transitional issues will present difficulties in the reform process. For example, people purchasing or renewing insurance up to 30 June this year will be paying the emergency services levy for the 2016-17 financial year. Having just paid the old levy, they will then, in the new financial year, receive a rates notice that will require payment of the new fire and emergency services levy for the 2017-18 financial year. That is two annual payments that will be separated not by 12 months, but by a much shorter period. There is a risk of double payment unless the insurance companies take great care. The Opposition has already received a significant number of representations from people who have paid their insurance premiums and are concerned that they will take a double hit when the rates come in.
The advice our side received from Treasury is that the insurance industry is aware of the issue and is seeking to address it by progressively absorbing much of this year’s levy payment for policies taken out in the latter months of this financial year. This aims to avoid dramatic price changes between policies renewed on 30 June and on 1 July 2017.
If it is not addressed, this aspect of the scheme will impact many of those who have taken out insurance in the lead-up to the introduction of the new scheme. I ask the Government to explain in detail how it intends to address this transitional issue to ensure that the people whom it claims to be helping will not be worse off in the crossover period. It is this bitter aftertaste that we are concerned to avoid. It would be a bitter aftertaste for many residents in this State, many of who are struggling already with cost of living pressures and who may be forced to pay a property tax with no real, long-term guarantee that insurance premiums will come down. We know that those in the insurance industry are always the winners in these situations.
The job of responsible government whenever dealing with a new tax to fund a service is to put in place a scheme that introduces the tax not only as efficiently as possible but also as fairly as possible. We are concerned that we may see a big win for some of the State’s larger institutions, such as electricity transmission company TransGrid, motorway project WestConnex and the Sydney Airport Corporation—none of whom will pay the new levy under this legislation. Even the Government appears to have cashed in, reducing its contribution to our frontline services. We are concerned that not only will those who can least afford it be hit by this State Government’s “great big new tax”—to quote a former Prime Minister—but the long-term oversight of the insurance industry and the even longer term challenges presented by climate change, for example, will mean there is a bigger impact on our community and even more pressure on our emergency services to respond to disasters and accidents.
The Opposition doubts whether the Government has thought through this new scheme sufficiently. The amendments proposed by the Opposition are designed to bring greater accountability, fairness and transparency to the new fire and emergency services levy. As I indicated at the outset, if the Government refuses to accept considered and positive amendments offered in the spirit of cross-partisanship, the Opposition will oppose the legislation if it is not changed. I look forward to the response of those opposite as well as finding out whether the Government genuinely wants to improve the bill and, more importantly, what it has to say about some of the issues to be raised by Labor.
In conclusion, I indicate that Labor has 20 amendments to the legislation. The first one deals with the description of the levy. Amendments Nos 2, 3 and 4, which I intend to move together, deal with the major government entities that will not be making a contribution to public wellbeing under the legislation—WestConnex, TransGrid and Sydney Airport Corporation. Amendments Nos 5 to 12 and 14 to 20 deal with extending the insurance monitor’s period of responsibility and the issue of potential overpayment and how that should be dealt with, giving greater security to the community regarding possible concerns about the insurance industry. They are important amendments that I will also seek to move together. Amendment No. 13 deals with a proposed statutory review of the legislation before the House. I look forward to considering the bill in some detail later this morning.