Hooton on ACC
Matthew Hooton has written on ACC in his opening salvo for NBR. It is only available in the tree version, but some extracts:
In 2001, Australian insurance giant HIH collapsed with debts of around A$5 billion, caused by gross mismanagement, including charging too little for premiums and failing to put enough aside for claims.
The Australian authorities took the matter seriously, including Prime Minister John Howard, who established a royal commission. The company’s principals were jailed for offences including knowingly disseminating false information, filing false financial statements, being intentionally dishonest and failing to discharge their duties in good faith and in the best interests of the company.
I think I know where Matthew is going with this.
This week, New Zealand’s biggest insurer, ACC, reported a NZ$4.8 billion loss on top of a NZ$2.4 billion loss the previous year.
Like HIH, ACC’s crisis was knowingly hidden from the public. The Treasury’s Pre-Election Economic and Fiscal Update, signed by then finance minister Michael Cullen, did not disclose it, a failure subsequently found by an independent inquiry to have breached the Public Finance Act.
Yes my suspicions are correct.
Even worse were the public statements of then-ACC minister Maryan Street.
On June 26, 2008, ACC was apparently strong enough for Ms Street to announce that 400,000 casual and seasonal workers would get improved cover.
On September 11, she had enough confidence in the company’s finances to announce a re-elected Labour government would cut the motor vehicle levy from $254 to $203.
Three weeks later, and just five weeks before the election, Ms Street was at it again, announcing an expansion of ACC entitlements to people over 65.
The most charitable interpretation is that the former university academic might suffer from some advanced form of oniomania that makes her believe that, despite ballooning liabilities and a global financial crisis, it was possible to keep buying new services from ACC, while cutting its revenue, and expect it to remain viable. Alternatively, perhaps she was just telling lies in the heat of a close election campaign.
I had to look up what oniomania is!
Far from turning itself in to the Serious Fraud Office, Labour now has the audacity to launch a new narrative that accuses ACC Minister Nick Smith and ACC chairman John Judge of establishing some kind of conspiracy to privatise the scheme.
Audacity is the nicest word for it. I still think it is a pity the Government did not demand prosecutions for the breach of the Public Finance Act!
October 16th, 2009 at 2:10 pm
“Like HIH, ACC’s crisis was knowingly hidden from the public. The Treasury’s Pre-Election Economic and Fiscal Update, signed by then finance minister Michael Cullen, did not disclose it, a failure subsequently found by an independent inquiry to have breached the Public Finance Act.”
HOOTEN forgot to add that unlike the Aussie Principals, instead of being jailed, CULLEN was rewarded for this and other financial treachery by the incoming National Government with a lucrative sinecure as a director of NZ Post.
October 16th, 2009 at 2:11 pm
David, David. You know that one polie (unless its the Act party – Donna) will not prosecute one of their own. Remember both National and Labour play loose and free with the law of the land when it applys to them.
You and Mathew need to get over it. Asking them to follow the law is as useless as asking for an independent commission on corruption. There self interest is too strong it will never happen .
October 16th, 2009 at 2:34 pm
Sabre to the front, Mr Hooten rides to the rescue of the doomed wagon train. But is it too late? Have the poor innocents already persished, or has Thaddeus Smith and his motley crew held out?
One understands that attack is sometimes the only form of defence possible, but as one looks at the smoking wreckage of Mr Smith’s strategy, this attempt to divert attention is pretty weak. Of course, ACC is not an HIH. The comparison is fundamentally flawed. And it is in no way audacious to suggest that privatisation is on the Government’s mind. They tried it before and they will try it again. It is common sense to expect it.
Still, full marks for trying to rescue Mr Smith, who looks to be a lost cause.
October 16th, 2009 at 2:42 pm
Robert Winter resorts to bluster with no evidence. Of course ACC is another HIH. Why are so many lefties just plain old bullshit artists?
October 16th, 2009 at 2:48 pm
Robert Winter, regardless of whether the link between ACC and HIH is tenuous (I choose to believe it is not), the fact is Cullen and Street lied and lied, and lied again over the state of ACC. They should be prosecuted for their breaches of the Public Finance Act. But, as with so much of the corruption and coercion of the last Liarbore Dictatorship, the police response would be “not in the public interest. Nothing to see here, please move along.”
Second verse, same as the first: Independent Commission Against Corruption. It was clearly an attempted bribe used to try and buy an election they knew they would lose.
October 16th, 2009 at 2:50 pm
Hooten has the right idea, go after the bastards with everything you have.
None of this namby pamby crap from our Matthew, this is exactly what Key and co should be doing, Key should have made it his task to go after Kullen and Klark immediately he was sworn in as PM.
Key could have then embarked on a broad range of reforms, he could have slashed govt spending and taken a hammer to the public service, any criticism he faced could have been silenced by pointing the finger at the corrupt Labour government.
Instead…..he gave Cullen a nice cushy job and actively campaigned on behalf of Comrade Klark.
What a fucking idiot the man is.
October 16th, 2009 at 2:51 pm
How lovely, that nice Robert Winter is here to tell us that there is no blow-out at ACC and we can afford to keep funding more and more welfare without raising levies. Where is the money going to come from Robert? Does Maryan have a few billion stashed under your mattress that she can prop the welfare agancy up with?
One understands that Labour and associated nonses are in full denial about the fact that they overcommitted and underfunded ACC, and that their only form of defense in regard to the criticism levelled against them is to pretend there is nothing wrong.
Lies from Labour, lies from Robert. Same lies, different day.
October 16th, 2009 at 2:55 pm
Key going after his soul mates? It’s like Henry Paulson withholding taxpayers money to Goldman Sachs. It won’t happen. The man won’t even listen to a public that says that it knows better than government bureaucrats how to raise their kids. It’s Muldoon all over again. And it seems there is no escape. You get Labour back who would now have sold-out the country and we would be like Latvia, or you get the National Socialists slowly suffocating it.
October 16th, 2009 at 2:59 pm
If ACC incentives suicide, then National Ltd® has just inventivised a dying person to go out and get murdered.
October 16th, 2009 at 3:10 pm
I think there should be another look at the scheme. It may be that the no fault principle so beloved by Geoffrey Palmer is simply unsustainable financially. Like many schemes devised by the Labour Party, if left unchecked they bankrupt the country. It would be really tempting to simply do nothing and let the shitty mess fall over. I assume that is the logical conclusion of the Labour Party who are opposing the Government’s attempt to sort the stinking clapped out mess and save it. I resent every dollar I pay into this scheme and it is quite substantual.
October 16th, 2009 at 3:25 pm
BB “None of this namby pamby crap from our Matthew, this is exactly what Key and co should be doing, Key should have made it his task to go after Kullen and Klark immediately he was sworn in as PM”
I also think back to David Caygill’s little ripper of a budget where he counted 2 years income in 1.
Can’t for the life think why National let themselves get shafted each time the get into office (BNZ!!)
It happened after Palmer, It happened after Clark, and it will happen if they let them get away with it each time.
Can only think that the reason National never went after them was they have got more to hide. Not a good look
Phillip Field – 6 years for fuck all compared to Cullen, Clark, Caygill, Street
I just look at the National font bench and shake my head and think soft cocks
October 16th, 2009 at 3:31 pm
And it’s been how many years since an ACC boss has been caught with their hands in the till?
October 16th, 2009 at 3:32 pm
They must have some shit about senior national MP’s. It’s the only explanation for national not going for the jugular. Or maybe national are just a pack of cowardly soft cocks.
October 16th, 2009 at 3:33 pm
I agree 6yrs for Field but Cullen and Clark and Street go free.
Key, English and McCully didn’t do the NZ taxpayer any favours.
Why?
October 16th, 2009 at 3:40 pm
Think about it if the boot was on the other foot?
Would Clark be so kind. Don’t think so. Every opportunity she got she went for the jugular
October 16th, 2009 at 3:41 pm
Yet again we see a clear plan to dupe the public, both Cullen and Street are clearly implicated in this one, the difference between this one and the Aussie scenario is that this one can be bailed out, albeit at the expense of the taxpayer and the motorist.
How much longer must we continue to elect incompetents’ to run our country? Sooner or later someone was going have to pay to top up ACCs tank, you don’t have to have much economic skill to work out that if you increased the entitlements you would have to increase the contributions, why didn’t this happen.
The sad thing is that Labour created this mess and now seem quite happy to sit on the sideline and take cheap shots at Nick Smith for trying to clean up their mess.
The only thing both Cullen and Street have proven is their incompetence to run a major government department and as such should be removed from any form of public office.
The incredible thing is since Cullen decided to bail like a rat from a sinking ship we have heard nothing from him, its as though he never existed, sadly he did, so we pay.
October 16th, 2009 at 4:00 pm
“The incredible thing is since Cullen decided to bail like a rat from a sinking ship we have heard nothing from him..”
Not entirely accurate. He was grateful and thanked the National government for his appointment to the board of New Zealand Post.
Two crooked parties embracing each other at every turn.
October 16th, 2009 at 4:22 pm
Oh dear
Hooton is on another planet again.
Facts:
1. ACC took in $1b more last year than it spent.
2. It used to fund about a third of its future liabilitieis, now it is more like half.
3. To slow down the increase in levies Labour has tried twice int he past few months to introduce legislation to put off the need to be fully funded from 2014 to 2019. National vetoed it each time.
If you need more details go to http://www.thestandard.org.nz/spin-busting-acc-rises/
Some of the details are fascinating like there being no explosion in claims. The fund’s performance is also very good.
Not that facts have ever stopped Hooton venting.
October 16th, 2009 at 4:31 pm
mickysavage
So have we got this right, if Labour had stayed in govt motor vehicle ACC costs would be reducing now ?
October 16th, 2009 at 4:32 pm
DPF
I know this has been kicked around before – but why oh why did National give the filthy cloth capped socialist Cullen a plum job rather than a prosecution?
What sort of message is it sending when it is acknowledged that the public finance act was breached and then we just move on ?
October 16th, 2009 at 4:33 pm
Senior UN officials in NY have diplomatic immunity AFAIK – they cannot be extradited.
October 16th, 2009 at 4:35 pm
peterwn
Said official had immunity when she was in NZ. If we ever had any doubt that MPs in NZ are above the law that doubt was removed after the 2005 election.
October 16th, 2009 at 4:53 pm
@mickeysavage: good stuff. And, of course, to make the point very simply, HIH was a private sector operation. ACC is not, and as Michael Littlewood of the University of Auckland has been patiently pointing out for some time, does not need to operate on a fully-funded basis. There is no crisis.
October 16th, 2009 at 4:55 pm
Robert Winter
There is indeed a crisis, a breach of the public finance act…. Oh that’s right – it was Labour MPs that breached it so we should just move on… as you were, nothing to see here because Labour MPs are above the law.
October 16th, 2009 at 4:59 pm
Something this week got me to reread Bruce Jesson’s ‘Other their purpose is mad’.
As the saying goes, the mistakes of history are repeated by those who fail to learn. It seems clear Key and co wait to repeat the failed experiment of 1984-1996.
I’m am not sure what the Nats are up to with ACC. Either they are going to to announce some savings which mean that fees won’t have to be increased so much or something else.
Me feels that something else is claiming, we had no option to but to privatise ACC as ACT insisted on it and those evil socialists in Labour and the Maori Party wouldn’t support our needed reforms. So off with ACC head.
History is going to repeat itself and a lot of people are going to get hurt. But the New Right in kiwiblog won’t care.
I do, ACC is a good system, the loss this year is mostly artificial, ACC got more money in premiums ($4.2 billion) than it paid out in claims ($3.1 billion) refer http://www.acc.co.nz/publications/index.htm?ssUserText=annual+report. Net cash flow are 500 million surplus.
The loss is to cover the future, expenses that may never happen and assumes that return on investments will be the same as in 2008/09.
Madness, only a fool would believe this. Though some clever people would love to privatise the profits of ACC
October 16th, 2009 at 5:03 pm
How can Mickey and the rest of the pinko’s have the balls to come here and tell blatant fucking lies?
October 16th, 2009 at 5:04 pm
“There is indeed a crisis, a breach of the public finance act…. Oh that’s right – it was Labour MPs that breached it so we should just move on… as you were, nothing to see here because Labour MPs are above the law.”
uh…
http://www.scoop.co.nz/stories/PO0903/S00019.htm
Or was this a cover up by Treasury to protect their (previous) masters?
October 16th, 2009 at 5:10 pm
Oh dear i must be lying! I did link a source and quoted actual number. Silly me, I should keep facts out of the argument.
Yes you are all right ACC is in serious trouble because Nick Smith said it is. I stop now before saying something that might get me banned
October 16th, 2009 at 5:13 pm
Burt
Cullen has been given job that is going down the gurgler big time. By the time he completes his term NZ Post will be a small shallow of its ever decreasing size.
To see Sullen have to put the failing NZ Post down will be a very happy day.
By the way when the Nats let competition into the ACC market the premiums/levies dropped by 35% and they made money.
Now all you lefties explain that.
October 16th, 2009 at 5:17 pm
Robert Winter and his little helpers might do well to go and have a look at the criteria which are applied to insurers by the Government Actuary. Were the same criteria applied to ACC they might not be so sanguine. The facts are undeniable. Their IS a major crisis. Liabilities exceed assets by how many billion?
In point of fact, dear deluded lefties, ACC IS a private insurer, for all its books except the non workers’ book – that’s all the scummy Labour voters who got shifted off welfare onto ACC. To my knowledge it receives no taxpayer subsidy for the other books.
It is the other books which are technically and practically insolvent.
October 16th, 2009 at 5:26 pm
Don’t think that matters to lefties. They regard their ‘right’ to reach deeper and deeper ino taxpayer pockets as sufficient to maintain cashflows, so long as that process creates more dependency of pseudo-welfare.
October 16th, 2009 at 5:28 pm
I wouldn’t call the standard the authority on balanced discussion Mr Savage. I got banned for pointing out that the Standard had pushed the H Fee story (my original comment including the links to standard posts got “lost”), then got called a liar, then when I said I would repost the links I got banned.
Taking in more than you’re earning doesn’t cut the mustard when you’ve got a mountain of liabilities ahead of you.
October 16th, 2009 at 5:34 pm
Oh and micky it might be useful if the standard writer understood the difference between a cashflow statement and a balance sheet.
October 16th, 2009 at 5:43 pm
Blue Coast
OK, that’s all good. But I’m wondering if I personally break a significant law like the public finance act can I receive a 5 year ‘penance’ earning hundreds of thousands of dollars rather than a prison term?
Would being a member of the Labour party be enough or do I need to have been personally involved in decimating the economy and sending it into recession well prior to the global economic crisis ?
October 16th, 2009 at 6:03 pm
I have heard many suggest that Cullen and Street be jailed .. very harsh considering the chances of this happening is ZERO.
Now, if we offered a lesser charge then maybe they would fess up and plead guilty. I suggest 300 hous community service. In my trips between my cute little town of Waiuku and the Big Harbour, I have had to use a few public dunnies that need a good paint and clean.
October 16th, 2009 at 6:17 pm
It’s such a shame the socialist pricks lost the last election, I bet they were praying on election night for the National Socialists. Had they won most of these bastards would be hanging from the street lights by now. There was a large portion of very upset and pissed off people in the country, Liarbore may have actually saved their own lives by losing to the Nats. Think I’m wrong, just imagine the bullshit we would be going through now had the arseholes won. We would be on the verge of becoming a communist country as there is no way the socialists could have collected enough cash without huge tax increases and those increases would be like a red rag to a bull.
October 16th, 2009 at 6:29 pm
is the balance really that good of an indicator?
The 2009 Annual report has $14.5 billion assets made up of $10.4 b investments and $4.1b other assets.
So what are the liabilities? $23.7b outstanding liabilities and $3.6b other liabilities. making a value of $12.7 net liabilities
So what are these $23.7b outstanding liabilities and why have they increased by $4.6b in the last year? What isn’t in the liabilities are huge sums of money owed to banks and other creditors
I have tried to understand their accounts and can’t. It just appears to be a made up number (an educated guess but based on flawed logic). The increase seems to be due to lower returns in 2008/09. It would be seem if returns on investment increase in the future that number will decrease.
The fact that ACC has a positive cash flow indicates to me that ACC is save. I am an economist and not an accountant however ACC looks safe to me.
October 16th, 2009 at 6:36 pm
A partially related joke.
Three people applied for a job, a mathematician, statistician and an accountant. They were each interviewed (separately) and asked the following question, What is 2 plus 2.
The Mathematician answered exactly 4.
The statistician reply plus or minus 5 percent.
The accountant looked around, got up closed the blinds and whispered to the interviewer, ‘what do you want it to add to?’
At this point the interviewer Smith and Hyde responded ‘We’ll tell you that in a couple of days, what do you want your salary to be?’
October 16th, 2009 at 6:47 pm
Inky_the_Red
That would be a position in Treasury just prior to a Pre-Election Economic and Fiscal Update to be released by the Labour party.
(Note: No Labour MPs were prosecuted breaking that law that was put in place because of the last time they didn’t disclose the dire state of the economy prior to an election)
October 16th, 2009 at 7:05 pm
didn’t Cullen announce just before the election that they would have an announcement (November I think) if they won? One can only guess what that would have been about.
Tim, I’m 1 up on you here .. I banned myself from the Std .. never seen/heard so much crap in my life .. some need to be investigated by the SIS.
Also Tim, how do you get away with your comments on RednotsoAlert .. I get done for far less?
October 16th, 2009 at 7:18 pm
weizguy
This post by DPF ACC shortfall should have been disclosed sems to be at odds with the link to scoop you provided.
Guess Treasure might have been trying to give National an excuse for being soft on crime.
October 16th, 2009 at 7:42 pm
Robert Winter>And, of course, to make the point very simply, HIH was a private sector operation. ACC is not, and as Michael Littlewood of the University of Auckland has been patiently pointing out for some time, does not need to operate on a fully-funded basis. There is no crisis.
So it would be illegal for a private insurer to run a multi-billion dollar pyramid scheme. But it isn’t illegal for the government to run a multi-billion dollar pyramid scheme. So why not go for it so the inevitable collapse will be huge?
October 16th, 2009 at 7:45 pm
Like I said in the previous kiwiblog thread I linked to above
DPF
This is a prima facie case of breaching the public finance act. If there is no prosecution then please encourage National to repeal all penalty clauses in all acts that we expected to control and limit the powers of or behaviour of MP’s. It’s just a waste of public energy and emotion even worrying if they are or are not complying with any laws. Lets confirm that they are as blameless as they appear to be during election campaigns.
October 16th, 2009 at 7:51 pm
Can someone tell me if its possible to lay a complaint at the police station against members of the old government for breaking the public finance act? Or is it not a ciminal matter?
October 16th, 2009 at 7:59 pm
Digressing slightly, I have often thought that the ACC levies imposed upon paye earners should be shown separately on wage slips much in the same way as kiwisaver and student loan repayements and WFF and other such things are.
I would even go so far as the have another known as unemployment fund to be used when one loses their job. No different than these toher s and we should also add health as a separate line. Only computer entries and can banked into a separate fund either Govt or self selected.
Way to go really if you want to protect those that work for a li. Those that don’t earn don’t get the privileges.ving
October 16th, 2009 at 8:07 pm
Viking2
I agree, the problem with ACC levies is that most people (people who don’t handle the payments of payroll etc) have no idea how much they are actually paying in ACC levies. I think if most people knew exactly where all the tentacles of collection were and how much they were clawing from their back pockets they might actually understand why some people don’t share their love of the one size fits all monopoly.
October 16th, 2009 at 8:08 pm
CharlieBrown – I should have thought they they were individual citizens. Their employment status (or bridge club memberships, affiliations etc) should have no bearing on any complaint process. One of our legal beagles and no doubt elaborate. That said, Treasury’s mea cupla back in March may well have been designed to prevent this type of action.
October 16th, 2009 at 8:21 pm
Yeah well I agree but the real question is why is Key not interested in that and in other obviously popular and hot issues like repealing anti-smacking?
The close observer is really left wondering if some above aren’t right when they say it’s because he doesn’t want to set a precedent because then what would happen to him if he encouraged prosecution of his former political opponents.
Key is an odd mix of Socrates and Machiavelli – remarkably astute, apparently benevolent and scheming all the time. I really hope he is mindful of the reason he was elected. It’s not about the politicians and their interests, it’s about the people and our interests. One of which is to ensure that Liarbore, as one said above, don’t repeat this same modus operandi yet again, next time they’re in power.
October 16th, 2009 at 8:23 pm
That’s brilliant! Yes – that’s excatly what he’s like.
October 16th, 2009 at 8:24 pm
I really think we should introduce a ‘Labour Supplementary Rate’ where if you voted for Labour since 1999 you should pay an additional tax (or, conversely, have your benefits docked by the equivalent). If we rated this at, say, 1% per election you could have an additional 4% of income tax thrown onto your bill, which could be used to pay for the mess Labour left us in (the tax would equally apply to the Greens). This way, instead of everyone paying for this ACC mess, only those who inflicted it upon us would be burdened. That’d be fair and make people understand their are consequences for trying to bugger the rest of us.
October 16th, 2009 at 8:25 pm
reid
The PFA only came into existence to ensure that this sort of thing didn’t happen again and then what happened when Labour did it again – NOTHING other than Cullen got rewarded with a plum job to give him a more comfortable retirement.
It’s a bit late for hoping that Labour don’t repeat that MO – they already have !
October 16th, 2009 at 8:29 pm
“Key is an odd mix of Socrates and Machiavelli”
Not at all. Key is much closer to a mix of Chamberlain and Quisling.
October 16th, 2009 at 8:31 pm
getstaffed, thanks.
burt, sorry, PFA?
Manolo, I understand why you might think that but he needs to be a realist.
redqueen, an outstanding idea.
October 16th, 2009 at 8:34 pm
reid
Public Finance Act.
October 16th, 2009 at 8:56 pm
Burt thanks, quite agree with you then.
Since you and others are absolutely correct, Liarbore did breach it and there has been no penalty, there probably needs to be something entrenched in the constitution to take prosecution out of the hands of the politicians otherwise what’s the point in having such a piece of worthless crap on the books?
Unfortunately lacking someone in power like a Geoffrey Palmer and Finlayson is a long way from him, for such a thing to arise we’re all totally reliant on the utterly ignorant reef-fish and the utterly ignorant MSM to rise up against the utterly resistant politicians.
Come to think of it it’s quite telling isn’t it that the current crop have absolutely no-one that even looks a vaguely likely candidate to perform such a public service. I hope some incumbent politicians read this and hang their fucking useless heads in shame you pricks.
October 16th, 2009 at 9:02 pm
The debate about end ‘08 is a complete distraction. You mean, with every global finance firm on the edge, where it was not clear where one could keep your capital, ACC was in financial difficulties? No shit, where were you clowns living after Lehman collapsed? And you talk of invoking the public finance act. What partisan rubbish!
There is no analog with HIH. Rodney Adler was a crook, who was a shithouse investor. He ran it into the ground trying to prove something to his father. A Jimmy Packer redux.
Now to issues of pragmatic governance. ACC is a systemically important, too big to fail, insurer. If it did an AIG and blew its capital on CDO’s and CDS’s the NZ taxpayer would have to bail it out, whether privatised or not. It is clear that it’s mandate has spread too far and should be trimmed. But it also clear that a capital injection of NZGB’s would allow it to become fully funded by 2019, and the only cost is interest. Moreover its long run investment returns are above the long run NZGB rate, so the gov’t may make money from the capital injection. Hooten has no clue what he is talking about.
October 16th, 2009 at 9:20 pm
Inky, I may be able to help you in your confusion. The liabilities of the ACC are largely contingent liabilities or the’tail’ as it is sometimes referred to. If a person has a motorbike accident today and becomes a paraplegic then ACC is liable for the future cost of this accident. To fully fund the liability, money required to pay for his/her ongoing treatment and living expenses into the future needs to be put aside. This seems to be eminently sensible in that it is unreasonable to expect levy payers in the future to pay for accidents occurring today. If it were a ‘pay as you go’ scheme (which even the labour party recognize is unsustainable) the liabilities would multiply and levies would hit the roof. Ideally in any given year the income should exceed the payouts by enough to cover the forward costs of that year’s accidents.
October 16th, 2009 at 9:52 pm
And well done to National for showing Cullen who was boss and punishing him accordingly for the crime at hand!!
Err right?
October 18th, 2009 at 11:15 pm
1990 – BNZ and a hidden bankrupt country. 2005 – use taxpayer money to deliberately overspend in the last week of one of the tightest elections ever. 2008 – hide the fact that ACC is broke.
Can Labour ever be trusted with the Treasury benches again?