Treasury weighs ACC options

John Key. Photo / Getty Images

The Government sought urgent advice from the Treasury this week about allowing private companies to get into the accident compensation market - a sign it is taking the dustcloths off its policy to secure Act Party support for changes it wants to make to the scheme.

Prime Minister John Key yesterday released an initial summary from the Treasury on the advantages and disadvantages of introducing competition into the work account, which covers workplace injuries.

The paper follows a week of negotiations with the Act Party over ACC legislation that would push out the date from which ACC is to be fully funded from 2014 to 2019 and cut some entitlements.

Act has pushed for National to commit to allowing competition into the work account in return for its support - a policy National had decided not to proceed with until 2011.

The paper is the first firm sign the Government could bring that forward to secure Act's support.

It was released after questioning from Labour leader Phil Goff, who said the only winners from allowing competition would be Australian insurance companies.

The Treasury paper sets out three options, including the status quo, allowing private insurers to act as claims managers and fully opening the work account to competition by allowing private companies to offer insurance packages to employers.

It says any economic gains could be "relatively modest" in the short term and a change was likely to do little to resolve ACC's cost pressures which were mainly in accounts other than the work account.

While the Treasury believed there would be net gains in allowing competition in claims management only, it was not clear whether such gains would flow from making underwriting also contestable.

Potential economic gains would be limited by increased costs of regulation and monitoring.

Advantages of cheaper levies from competitive pressures could also be weakened because the current economic conditions and risk of a future government reversing the policy would make insurers cautious about entering the market.

Although the Maori Party has agreed to support the bill going to a select committee, National still does not have guaranteed support to ensure it passes into law. Under questioning from Mr Goff yesterday, Mr Key said he did not support privatisation but was "intrigued by the idea of more competition in the work account".

This week, the PM said the Government was considering it but would go further only if it was satisfied it was in the best interests of the taxpayers, business and workers.

It is National Party policy to "investigate" the viability of opening ACC to competition from private insurers in the most profitable work account - into which employers pay levies to cover workplace accidents.

However, it had shelved its plans until at least 2011 while it tried to deal with ACC's funding woes.

Mr Key was also tackled over the Government's changes to ACC at the Council of Trade Unions conference yesterday.

He used his speech to tell the members that every actuary who had looked at ACC's books had agreed it was in trouble.

CTU head Helen Kelly said she did not accept Mr Key's message about the perilous state of ACC.