Budget 2013: Government accused of surplus tricks

Senior Reporter, Health·NZ Herald·

16 May, 2013 05:30 PM3 mins to read

Reserves have grown to more than $20 billion since changing the funding model to cover the life-long cost of injuries. Photo / APN

The Government has promised deep cuts to ACC levies which could save the average worker up to $400 a year, but opponents say they do not go far enough and the high rates are artificially inflating the economy.

ACC Minister Judith Collins said that the corporation's good financial performance meant the Government could reduce levies by $300 million in 2014/15 and by $1 billion in 2015/16. The proposed cuts would amount to a 40 per cent decrease in levies between 2011/12 and 2015/16.

The impact would vary over different levy accounts. A 40 per cent cut in the wage and salary earner account would equate to a saving of around $400 for a worker on the average wage of $48,600. The same decrease would reduce the average car registration to around $200.

Labour ACC spokeswoman Sue Moroney said that workers were still being overcharged on ACC levies.

She noted that the minister went against officials' advice to reduce all three levies in December, when the Government decided to keep the rates level. If that advice had been followed, lower rates would have begun in April and saved workers, drivers and companies $2 billion this year.

Instead, the smaller reductions would begin in April 2014.

Furthermore, Ms Moroney said that the Government was using the levies to create the impression that it was in surplus.

"Most New Zealanders want the surplus to be reached through a growing economy, not trumped-up ACC levies. It is an artificial surplus because the fund cannot be used for anything but ACC."

The corporation's reserves have grown to more than $20 billion since the Government changed its funding model to cover the life-long cost of injuries, instead of a "pay-as-you-go" system.

Finance Minister Bill English said the Government had not wanted to make levy cuts until ACC was performing well.

"We don't want volatility in the levies where you're putting them up and then down all the time. We believe now that the performance is sufficiently embedded that we can look at a track over the next four or five years of steadily reducing ACC.

"That should deliver some quite significant bonuses back to households and businesses and wage-earners."

Green Party ACC spokesman Kevin Hague argued that levy rates could remain volatile because the new funding model was vulnerable to changes in the global economy.

"These ridiculous pendulum swings reflect the fact that this model simply doesn't work," he said.

Mr English confirmed the Government was still aiming to have ACC fully funded by 2019. He was not willing to open the corporation up to competition because the insurance industry was preoccupied by work related to the Christchurch earthquakes.

He emphasised that the Government was not considering managing ACC like a state-owned enterprise.

ACC levies

2008/09

Employers and self-employed: $1.26 per $100 of earnings (average rate)

Wage and salary earners: $1.40 per $100 of earnings

2009/10

Employers and self-employed: $1.31

Wage and salary earners: $1.70

2010/11

Employers and self-employed: $1.47

Wage and salary earners: $2.00

2011/12