Treasury amends processes over ACC shortfall

Treasury Deputy Secretary Peter Bushnell. Photo / Mark Mitchell

Treasury has amended processes around identifying fiscal risk following a ministerial inquiry into the non-disclosure of a forecast $1.5 billion four-year shortfall in an ACC account.

The report, released in March, found the shortfall in the non-earners account was known to ACC, the Department of Labour, Treasury, former ministers Maryan Street (ACC) and Michael Cullen (finance) in time for it to be disclosed as a fiscal risk in the Pre-election Fiscal Update (Prefu).

But it said Treasury had mistakenly believed it did not need to be disclosed and offered poor advice to ministers.

When National came to power last year it accused the previous Labour government of a cover-up and criticised it for not identifying the shortfall in the 2008 budget round.

Treasury deputy secretary Peter Bushnell said today the changes went beyond the recommendations of the inquiry.

They involved collecting information on all likely risks before making decisions at a senior level about what constituted defined "specific fiscal risks".

"What we did before was use the specific fiscal risks disclosure rules as a filtering mechanism as information was collected.

"Under the new process the rules are not applied until a fiscal risks committee of senior Treasury managers meets," Dr Bushnell said.

The other main change was to do with the interpretation of the likelihood of a risk materialising, and involved adjusting thresholds around that.

The improved rules and processes to identify the fiscal risks will be published as part of today's budget.

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