Espiner on ACC

Colin Espiner blogs on ACC:

I said I’d post something on ACC, so here goes. Oh dear, what a mess.

It’s hard to know where to start really. Is it all Labour’s fault for increasing entitlements but not premiums? Or the people at ACC, who seem keen to pay themselves large salaries but can’t apparently count? Or the recession? Or the fully funded model? Or all of the above?

When news first broke earlier this year of a hole in the ACC accounts, many of us – and I include myself – were a bit sceptical of National’s motivation, particularly given that excitable boy Nick Smith was in charge, and he is known for, well, exaggerating from time to time.

But the conspiracy theory peddled by Labour and the EPMU (i.e. Labour) that somehow this is all just a VRWC to derail the ACC, lower public confidence in it, and then sell it to the highest (or any) bidder just doesn’t ring true for me.

I can never work out if Labour is the political arm of the EPMU or if the EPMU is the industrial arm of Labour.

For starters, I can’t believe someone with chairman John Judge’s commercial background is going to put his reputation on the line just to help the Government push a particular political ideology. Judge is not going to claim that the very existence of the ACC is under threat if it’s not.

Second,  there have now been three relatively independent reviews of ACC’s financial position, and all of them have come up with the conclusion that it is in the poo.

I actually laugh everytime David Parker insists you can’t trust the Government’s figures, considering the last Government’s failure to mention the ACC blowout broke the Public Finance Act. This is not an area of credibility for them.

Third, there’s little doubt that the additions made to the scheme by Labour a couple of years ago – including things like lump-sum payouts for the families of suicide victims, and physiotherapy, simply aren’t affordable any more.

An employee on the average wage is now paying over $1,000 a year to ACC. That is a huge amount of money.

Having said all that, I do think Nick Smith has over-egged the pudding a little bit. At least some of the need for the big increases is because of the move towards fully funding the ACC.

Fully funding means that like a commercial insurer, ACC is required to hold enough in reserve to meet the claims it expects to have to pay out on over a given time. It has never operated like this before, but is now required to.

Originally this was to happen by 2014. The Government – and in fact Labour too – wants to push this out to 2019. You could question whether ACC should in fact ever be fully funded, but that’s another argument.

I want to cover this argument in detail one day. Michael Littlewood has written at length that a Government backed insurer does not need to depart from the old model of collecting enough every year to cover payments for that year.

The Government is also going to get some heat over the decisions it’s made, and so it should. The massive increases in levies for motorcycles seems grossly unfair to me, and smacks of National hitting a group of voters it doesn’t think are likely to be National supporters.

Sure, motorcycles are involved in more accidents, but how many of those were caused by car drivers? As a former motorcyclist myself, it was being knocked off my bike by some idiot in a car that prompted me to hang up my helmet.

Even under the changes, motorcyclists are being subsidised by other drivers. A motorcyclist is 16 times more likely to be involved in an accident. Not even if half are caused by motorists, that is still eight times more likely.

Ramping up motorcycle levies also flies completely in the face of all the rhetoric from the Government about reducing congestion, cutting carbon emissions, using less petrol, etc etc. Not to mention parking.

The purpose of ACC is not to incentivise people to cut carbon emissions, reduce congestion etc. You have other taxes and policies for that. The purpose of ACC is to cover the costs of accidents.

I hear National doesn’t have the votes to get the changes through Parliament yet, either, although it probably will manage it eventually because it’s cleverly set up a straw man in the form of even higher increases proposed by ACC that don’t require a law change.

Therefore if parties don’t vote for National’s bill, the Government can accuse them of agreeing to even higher imposts on the public. That is quite clever.

I don’t think it is clever. I think one should get 61 votes in favour before you announce the changes.

Also Whale Oil has a post on a payout to children of someone killed in an accident. I think there should be some initial support, but when did it happen that  ACC funds you until you are 18, if your parent dies in an accident. If your parent drops dead from a heart attack you get nothing, but if it is an “accident” you get ACC. The original scheme was about looking after people temporarily until they could work again – not social welfare.