Passport fees

The Herald reports:

Last August, seemingly as a matter of pride, the Internal Affairs Minister, Peter Dunne, proclaimed that this country’s passport system was “funded purely on a cost-recovery basis”.

Such a service should, indeed, be provided on that basis, with the fee collected being no more than the sum required to issue the passport. Yet despite Mr Dunne’s worthy sentiment, the Government plans to lift that fee when it extends the passport validity period from five to 10 years, even though there seems no grounds for doing so.

The Prime Minister has been coy on the likely cost. It will be higher than the present $135 but less than $270, the cost of two five-year , he says. His only attempted justification for the increase is that revenue from processing the documents will fall.

Mr Dunne, when announcing an independent review of passport security and a separate Internal Affairs review of passport costs, made the same point.

“Moving to a 10-year passport could lead to higher upfront passport fees as revenue could decline from processing passports on a less frequent basis,” he said.

Obviously, the longer validity dictates that revenue will fall. But having half the number of passports to deal with surely means that half the number of staff and half the time will be required to do the processing. In that regard, the cost to provide each passport will decline. This suggests the fee should drop. Perhaps the only conceivable added cost will be the under-use of technology that caters for the renewal of passports every five years.

The Herald logic here is not quite right. The passport system will include fixed costs (IT etc) and variable costs. Reducing the number of passports to be processed does not reduce the cost per passport – just the overall cost.

The Taxpayers Union suggests that even now New Zealanders are being overcharged, with the $135 fee being more expensive than nearly every other comparable country.

It also believes, contrary to Mr Dunne’s assertion, that the Government has been receiving more in passport fees than is necessary to cover its costs. The account, it says, has been in surplus since 2001 and has an excess of $20.8 million. The Government must answer such claims, and also provide a rational justification for increasing the fee.

To be fair to the government, it did recently reduce the fees to reduce the surplus. A new passport has dropped in price from $160 to $140 and an online renewal from $140 to $125.

I think there will inevitably be an increase in price due to economies of scale and the fact some costs are fixed. The key is that the Passport Memorandum Account should not build up a large surplus again. It went up to $27 million three years ago and is now down to $20 million. It really should end up close to zero.

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