Kiwiblog

Matt Stewart at Stuff reports:

He battled for seven years to win compensation – and now a Paraparaumu man has admitted he also spent seven years cheating the state insurer of nearly $86,000.

Simon John Kruidenier, 58, pleaded guilty in Porirua District Court last month to claiming seven years’ worth of weekly compensation payments from ACC while he continued to work as a repossession agent for 11 finance companies.

Kruidenier began receiving compensation in September 2005, paid on the basis that he was unfit to work because of occupational neurotoxicity – a result of his former job as a printer’s assistant.

He said he had developed bad headaches and migraines after working for three years at Porirua plastics and packaging manufacturer Cryovac.

He lodged a complaint with ACC in 1998 – and payments were event-ually backdated to that year – but he failed to tell ACC that he had started working again in 2002.

He kept working while claiming compensation until October 2009, receiving $85,878.99.

So he spent seven years battling to get ACC, and won his case, getting it backdated. And he was a fraud, as he was in fact not just capable of work – but actually working.

In 2005 he told The Dominion Post he had been assessed by six doctors and had been round and round the system since lodging the claim in 1998.

“I have been prodded and poked. They keep contradicting each other – one says yes, the other says no.”

Kruidenier said at the time that his condition was “a hell of a thing to live with”.

He could not work because his health was so unreliable that even petrol fumes or perfume triggered migraines.

“I think ACC is going to be bloody-minded about it. But I can’t quit now.”

So he actually went to the media, trying to build public sympathy for his right to steal money off us.

Brian Fallow writes in the Herald:

ACC has reintroduced experience rating to the calculation of levies for employers and the self-employed.

ACC Minister Nick Smith says it will make ACC levies fairer and provide better incentives for business to improve workplace safety.

The Council of Trade Unions, Labour and the Greens argue that it will encourage employers to pressure workers to lie about whether an accident occurred in the workplace or somewhere else.

I really wonder why the professional politicians of the left hate business so much. They smear and defame basically the entire business community with their claims that employers are criminals who will break the law in return for a small cash incentive. They do the same with their opposition to allowing employees to choose whether or not to trade in one week of leave for cash. They claim employers will break the law and coerce employees into taking the money instead of the leave.

Experience rating ACC premiums provides an incentive to employers. For “good” employers the incentive is to have a safer workplace, to reduce their ACC premiums. For “bad” employers the incentive is not to make their workplace safer but to break the law and “bully” staff into lying about where their accidents happened.

Now if one had to divide all employers into one of those two categories, how many would actually break the law and bully their staff into lying? 5% perhaps, if even that? Yet Labour and the unions want all employers punished and treated as if they are all criminals.

For smaller firms – with an annual ACC bill below $10,000 – there will be a no-claims discount of 10 per cent if they generate no compensation claims. If they generate more than 70 days’ compensation claims they will incur a 10 per cent loading on their levies. For those in between there is no change.

The vast majority of employers will have ACC bills of below $10,000 – this is a wage bill of under around $5 million.

Your ACC premium is around 2% of your wage bill. A 10% reduction means that a company will save 0.2% of its wage bill, if it gets the no claim bonus. Does Labour really think scores of businesses will break the law just to save $2 on every $1,000 of wages.

For firms with an ACC bill larger than $10,000 the system is more complex and could mean adjustments of up to 50 per cent, up or down, in their levies. There are two layers to the adjustment.

The more important, the experience rating modification, compares the firm’s performance with the other firms in its levy risk group, with a 75 per cent weighting for rehabilitation costs, including income compensation, and 25 per cent for medical costs.

That could result in adjustments of up to 35 per cent either way in a firm’s levies, depending on their relative performance.

Now consider you are a larger employer, and you have ACC experience rating. Here the incentives are larger to keep claims down. However it would be near impossible to “fiddle” the system with a larger number of employees making claims.

In a small business, it is conceivable that you might get one employee to claim an accidient happened outside the workplace, and get away with it.

But in a large workplace, you’d need to have many injured employees agreeing to break the law and file false details on their claim (remember the employee files, not the employer). And it takes just one employee to blow the whistle and say their employer asked them to lie.

Also the employer needs to have a corrupt safety officer on staff, who will falsify the accident log, and not record workplace accidents if the employees agrees to lie about where it happened.

Now sure there may be a handful of venal and corrupt employers who will risk criminal penalties by engaging their staff in a conspiracy to defraud ACC. But that is no reason to not provide incentives to the vast majority of employers, which rewards them for having safer workplaces.

The average employer reacts rationally to incentives. Oh if we have fewer accidents, we pay less to ACC. So what can we do to minimise accidents. Labour and the unions are defneding a system where an employer with no workplace accidents at all pays the same premium as a company (same size and industry) that has multiple workplace accidents.

Yay – some very good announcements from Nick Smith:

Key decisions announced today include:

• No increase in workplace, motor vehicle or earner levies for 2011
• Introduction of experience rating in the Work Account
• Extension of the Accredited Employers’ Programme (AEP)
• Greater independence of the Disputes Resolution Service
• Decision in principle for introduction of choice in the Work Account

No increase in levies will be welcome, however the changes made by Labour added so much extra costs, further increases may be inevitable.

Experience rating is excellent. It rewards safer workplaces. It means employers get a carrot, not just a stick, to be safer.

But best of all is the decision in principle to restore choice for workplace accident insurance. This was flagged in the 2008 manifesto and it is not privatisation. It is allowing other providers of workplace insurance to compete with ACC.

National was looking hestitant on bringing back competition, but this is where it is useful to have ACT in Parliament. They put the pressure on for choice and competition to occur in the work account, as an unofficial quid pro quo for the previous levy increases.

Simon Collins reports in the Herald:

The proposal follows a law change this year giving ACC the power to vary levies on employers in line with their accident records.

This system, known as “experience rating”, will take effect for employers next April.

The ACC’s consultation document suggests extending the same principle to levies on motorists and income-tax payers or “earners”.

An employee on the average income of about $50,000 a year will pay more than $1300 in ACC levies this financial year.

That is 2.6% or gross income or around 3.5% of after tax income, which is a huge cost.

The ACC document suggests that motorists’ levies, paid through vehicle licence fees to compensate road accident victims, could be increased for people who get many traffic tickets and for younger drivers, and reduced for people such as pensioners with good safety records.

Yes, absolutely. That retains the insurance component of the scheme, but provides incentives for safer drivers. Why should a 65 year old with a 45 year perfect driving record pay the same as a new driver who has already been involved in an accident and has several speeding tickets.

For earners, who now pay a 2 per cent income tax surcharge to compensate working people injured outside workplaces and roads, the corporation suggests a no-claims discount for people with no injury claims in the past five years, offset by higher levies for those with more injuries, such as many sports players.

Please. I don’t think I have had an ACC claim for well over 20 years.  Of course my employee levy is modest compared to the employer levy.

It also suggests an option to pay a lower levy in exchange for reduced benefits, and poses three questions:

“Would you prefer to pay lower ACC levies in return for a 10 per cent drop in compensation for lost income after a less serious injury, such as a sprained ankle?”

Yes.

“Would you prefer to pay lower ACC levies in return for a longer wait period. For example, extending the period without lost income compensation from a week to a longer period, such as three weeks?”

Yes.

“Would you prefer us to lower the earners’ levy in return for earners paying more of their accident-related treatment costs?”

Depends on the details of the trade off, but certainly keen to at least have the option so people can choose for themselves what best suits them.

Dr Smith said there would be problems in adopting ACC’s proposals for motorists and sports players.

Young drivers could register their cars in their grandparents’ names, and he did not want to harm the “broader social benefits” of sport.

I’m not sure the level of avoidance would be great. Agree you do not want to put people off sport, but I think the cost of ACC is not a major factor in decisions on sport.

Pete Hodgson takes a break from his normal dirt gathering on John Key operation, to try a half truth. He blogs:

Declare ACC to be in big financial trouble, even though it collects about $1 billion a year more in revenue than it pays out in claims.  Rachet up the levies for everyone.  Single out motorcyclists for an especially harsh increase.  Then cut the cover for lots of things such as hearing loss.  Make it really hard for the victims of sexual abuse.

Monty comments on the post:

You just don’t do this very well do you? This post is one of the worst I have seen from labour MPs – but it is short on facts. The increase in levies is to future fund the committed claims and is actually an extension of what Labour were already doing – in fact Labour’s target was more ambitious than National’s Target which was extended.

Hodgson is just doing his normal smear with his claim that there is no need for levies to go up, and that ACC is collecting far more money than it needs.

If, and this is a big if, Labour were against ACC being “fully” funded to cover the future treatment costs of today’s accidents, then he would not be a total hypocrite with his post.

But Labour is in favour of full funding. They fucking introduced it. They in fact had, as Monty said, a more ambitious target.

One can have a legitimate debate about the merits of full funding ACC. But it is a desperate smear to attack National for running a cash surplus in ACC, when Labour’s policy is to do exactly the same thing.

UPDATE: I’m informed that the policy to fully fund ACC actually was initiated by National in 1998, so Labour did not introduce it, but they did maintain it for nine years

The Herald reports:

Employers are being offered a carrot and stick to improve workplace safety under a Government scheme which gives discounts and penalties of up to 50 per cent on their ACC levies.

But the Government acknowledged Opposition concerns that the proposal carries the risk of bosses pressuring workers not to report injuries.

ACC Minister Nick Smith yesterday said the Government planned to apply “experience rating” – essentially a no- or low-claims discount on employers’ ACC levies – from April next year.

On the other side of the ledger, employers with poor safety records will pay higher levies.

The two-tier system will see larger employers receive up to a 50 per cent discount or a 50 per cent penalty according to their record over the preceding three years. Smaller employers including farmers will receive a 10 per cent discount or a 10 per cent increase on their levies depending on their record of employee injuries.

Excellent. Rewarding safe workplaces and penalising unsafe workplaces makes sense. Also on a personal front, will be nice to have a reduction in levies considering in six years of operations, we’ve not had one workplace accident or claim.

The proposal was welcomed by Business NZ and Federated Farmers. However, while Labour’s ACC spokesman, David Parker, said it seemed appropriate to reward employers who acted to prevent workplace accidents, some might not report accidents in order to protect their discounted levies.

“It is also a possibility that some employers will encourage employees hurt in workplace accidents to report their injuries as being non-workplace.”

Greens leader Russel Norman said it would not work for the same reasons.

Smith acknowledged those concerns but did not believe they were valid.

” I accept you might be able to fudge whether the sprained ankle was at work or tennis, it’s a lot more difficult to fudge where there was a serious accident.”

Norman is speaking nonsense. This is not some new thing – it has been used extensively in the past, and worked very well. The left always try to promote the scenario of the evil employer who will break the law and lie and cover up to save a few hundred dollars here and there – and then use that as the rationale for a lowest common denominator approach that all employers must be punished.

There are some bad employers out there. Yes. But don’t penalise all employers for a few. To 98% of employers, they would never not report an accident, just because it may slightly affect a future premium,

And as Nick Smith pointed out, a sprained ankle is not going to change your premium much – it will be the serious injuries that really affects levies or premiums, and they can’t be hidden away.

The Herald talks social media:

If anyone doubts how technology is changing the way people communicate with each other they should consult the latest research by the Privacy Commissioner.

Published this week, the survey of Individual Privacy and Personal Information shows that 43 per cent of us now use a social networking site such as Facebook or Twitter.

This is an enormous increase from the 14 per cent recorded three years ago. Clearly these sites provide a welcome service to large numbers of happy customers.

But there is a big difference which Privacy Commissioner Marie Shroff highlighted with the release of the survey results. She pointed out that more than half of those who used social networking sites assumed them to be private spaces.

However, this was really an illusion of privacy; personal details or pictures could be easily obtained by third parties, creating the real possibility of unintended, unacceptable and even dangerous consequences.

They are public places, but the sheer amount of info there, makes them semi-private. Unless someone is looking for your info for a reason, then people’s info generally stays with friends and families. But if you apply for a job, come to public notice in some way, it is all there to be seen.

A much better approach was suggested by Ms Shroff this week when she urged people to use internet safety resources available through Hector’s World, Netsafe and the Privacy Commissioner’s website.

As the survey has shown, most people join social networking sites with their eyes wide open and they understand the risks and issues and how to protect themselves.

Rather than bringing in more laws, the challenge should be to open the eyes of the few who fail to see the consequences of what they are doing.

I agree.

The Press wants better  roading infrastructure:

New Zealand has had a habit of under-investing in road infrastructure.

The most obvious example of this has been in Auckland, where decades of myopia has required multi-billion dollar catch-up projects, while in Wellington, the Transmission Gully route was until recently an exercise in dithering.

And in Canterbury it should not have taken a triple fatality crash on Saturday morning to highlight the driving risks on parts of State Highway 1 which require action. …

Steven Joyce has shown commendable speed in identifying roading priorities and pledging the money to them (the harder part).

This roading situation might have been adequate or acceptable a generation ago, when traffic volumes were far lower, but not today. Waimakariri and Selwyn, through which SH1 goes, are two of the fastest growing districts in New Zealand. Increasing numbers of commuters travel from small towns, including new ones such as Pegasus, into Christchurch, sharing the road with significant tourist traffic and with trucks.

The US do it quite well. Motorway and highways do not go through towns but around them.

The Dom Post looks at democracy in Tonga, or the lack of it:

The only good thing that could have come from the tragic sinking of the Princess Ashika off Tonga would have been a new openness and accountability in the Tongan political system.

The resignation of Attorney-General John Cauchi suggests that is a forlorn prospect.

The inquiry gave Tongans a rare glimpse of the inner workings of the elite who run their country – an elite who gain power based on hereditary links and personal contacts rather than talent. But having promised, and delivered, a fully transparent inquiry, it appears Tonga’s rulers are getting cold feet.

The Australian-born Mr Cauchi quit last week over government plans to abolish the judicial services commission which appoints judges. He believes the move is an attempt to interfere with the inquiry. Others say the cabinet is trying to discredit the royal commission.

The Tongan Government says Mr Cauchi was unable to properly exercise the powers he was granted and outsiders should butt out. Political reform is a matter for Tongans alone.

But as Tongans do not have the vote in a meaningful way, that is not true. They do not have the ability to get change internally.

And the ODT looks at ACC:

Unless it is a statistical blip, evidence points to procedures within ACC’s Sensitive Claims Unit having radically altered.

Figures show 32 sexual-abuse claims for counselling were approved in the first two months this year, compared with 472 in January and February 2009.

That is not far off a tenfold decrease.

And, on Monday last week, ACC Minister Nick Smith announced the way the corporation managed the claims of sexual-abuse victims was to be reconsidered.

To this end, he named a panel to undertake a “clinical review to ensure best possible practice in this sensitive area”. …

The conclusion must be that changes to the way in which ACC handles such claims, introduced in October last year by Dr Smith, have been responsible for the drop.

On the one hand, this will undoubtedly be helping to meet the savings of which the minister has made something of a mantra; on the other, it could mean that the changes have been “overcooked”, laying the minister open to charges of callousness and injustice.

Personally I don’t think sexual abuse victims should receive ACC. I do think they should get assistance for counselling etc from the state, but through Vote Health or Vote Justice. One of the problems of ACC is it has expanded too far from its original mandate.

The Dominion Post praises Nick Smith:

Machiavellian, arrogant, hot-headed. ACC Minister Nick Smith has been called all those things and more. And by his friends. He has a reputation for throwing tantrums and flying off the handle when things don’t go his way.

Don’t worry – the praise is coming.

But Dr Smith is also a passionate advocate of his constituents’ interests and a minister who takes his responsibilities seriously. For that, taxpayers have reason to be grateful. It is because he keeps his ear to the ground and takes an active interest in his portfolios that a potential fraud has been uncovered within ACC. The corporation said this week that it had sacked a staff member – known to be its property manager Malcolm Mason – and referred “matters of concern” to the Serious Fraud Office.

Those matters relate to property transactions involving ACC in several different parts of the country and that appear to go back some time. However, it was not until Dr Smith queried the rent ACC was paying for its new offices in Nelson that anyone within the corporation thought to compare the prices it was paying for office space with the going rates. Dr Smith did so because local retailers were worried that the $346,320 a year ACC was paying to rent its Nelson premises set too high a benchmark and because other locals feared ACC was not getting value for money.

The advantage of a Minister also being a well connected local MP.

Dr Smith signalled his unhappiness by refusing to open the building. Contrast his attitude with that of Labour’s former internal affairs minister, George Hawkins, who ignored newspaper reports and industry concerns about the leaky building crisis for more than 12 months about 10 years ago because officials had not formally advised him there was a problem.

“One would expect that, if there was a problem, the people set up to deal with that would inform their minister,” he said at the time. “They did not.”

If Dr Smith had taken the same approach, ACC would still be unaware it was paying twice the going rate for office accommodation in Nelson and would not have uncovered irregularities in other parts of the country.

Irascible? Yes. Economical with the truth? Sometimes. But also an example to other ministers of what the public expects. The job of ministers is not simply to sign pieces of paper put in front of them by officials, open new buildings, bandy unpleasantries across the floor of the House and enjoy their generous salaries and perks. It is to actively represent the interests of voters.

Dr Smith has done so. He deserves to be congratulated.

On this issue, few would disagree.

The ODT focuses on the UN declaration:

The latest manifestation is the sudden – it has been described as “secret” – accession on Tuesday to the United Nations Declaration on the Rights of Indigenous Peoples with a statement delivered by Maori Party co-leader and Maori Affairs Minister Dr Pita Sharples to the United Nations in New York.

It has been met with tension, and what might be described as a tantrum, by the third party in the coalition Government’s bed: Act New Zealand.

Leader Rodney Hide has responded to the news with a display seldom seen even within the somewhat elastic emotional parameters of coalition politics. …

Mr Key and senior National Party figures will be gambling that this gesture towards the Maori Party will further enhance the mana of the latter, cement more tightly the political allegiance between the two parties, and deflate the more demanding ambitions of radical Maori – personified in Parliament in the character and rhetoric of Hone Harawira – while, in practice, giving nothing at all away.

They appear to have decided that the subtlety of principle should be subjugated to the symbolic glue of pragmatism.

It may make political sense, but while National retreats to the safety of descriptors such as “aspirational” and “non-binding”, it is hard to escape the conclusion that, on this matter, it speaks with a forked tongue.

Matt McCarten writes in the HoS:

One hundred thousand workers on the legal minimum wage of $12.50 an hour get 25 cents added to their hourly wage this week. Thousands of others between the minimum and $12.75 an hour will get a top-up.

Given that we have a recession, many people may think those workers should be grateful to John Key for giving them anything. As Key said, at least the 25 cents would cover inflation, making them no worse off, and a group of low-paid workers told me this week that “it’s better than nothing”.

But as with many stories about workers and their relationship with the employment system, all is not as it seems. The fact is that, from today, low-paid workers will be worse off than they were this time last year even after the supposed largesse from our Prime Minister, because their Accident Compensation levies go up this week, too.

The Government hopes workers won’t notice, but those on the minimum wage will have an extra 3.75 cents an hour automatically deducted from this week’s pay packet.

It’s a tax increase, although National pretends it’s not. What is galling is that the levy increase is being imposed to ensure ACC can show a big profit and then be flicked off as a cash cow to some multinational after the next election.

Matt is right that ACC premiums are going up, from 1.7% to 2.0%.

However what he overlooks is that National’s pruning of ACC has prevented the premiums from going up even further. The massive unfunded liabilities left by Labour would have pushed the employee ACC levies up to over 3.0% of income.

Matt was one of those protesting the pruning of ACC’s costs, so for him to them protest about the levy increase is rather hypocritical.

This is not Disneyland, where you can have the costs of ACC increase, but not have levies increase.

And frankly the idea that anyone would buy ACC is as nonsensical as the notion that anyone would buy Kiwirail.

Michael Littlewood argues in this paper that neither ACC nor Superannuation should be pre-funded.

He argues that pre-funding of ACC should not just be delayed until 2019 (instead of 2014), but is inappropriate for a Government entity.

I suggest people read the full paper, bus his points in summary are:

• The ultimate owner of the provider, the government, will never disappear. Also, the government has the power to tax to meet future liabilities, expected or unexpected. The ACC has therefore no apparent need to maintain a pool of invested assets to pre-fund its expected, contingent future obligations.
• By maintaining the ACC Fund the government is effectively in the business of portfolio investing.. That is because, when the accounts for the ACC are consolidated as shown in Chart 1, the ACC’s investments become the government’s. The ACC does not itself
  need to address the issue (whether or not to be a portfolio investor) but the government should.
• Borrowing to buy portfolio investments (shares, bonds etc) is speculation – again, not necessarily a bad thing in itself. The borrower takes on the risk that the returns from those investments will be at least as great as the cost of the debt used to acquire them.
  Borrowing to invest magnifies the yields and the losses. It turns a good return into an excellent return; and a bad return into a potential disaster.

Interestingly both Labour and National support pre-funding of ACC.

As expected, the increase in ACC levies is less than proposed, but are enough to stop the unfunded liabilities increasing.

What I find interesting is that the average worker now pays $1,300 a year in ACC levies. That is a huge amount of money. If workers paid it directly, I suspect there would be far far more support for reducing the costs of ACC. But workers pay it in three ways – through the employee PAYE levy, petrol tax and vehicle registration levels.

On top of that is the employer levy. Ultimately workers pay for this also, through lower wage levels. Employers factor the total cost of employment into decisions on staffing and wage levels. This is another $700 a year

So the average worker has $2,000 paid to ACC. The average after tax income is around $40,000 so ACC consumes around 5% of take home pay.

Over a worker’s life, they pay a huge amount of money into ACC. Are they getting value for money? I have my doubts. Of course it is the nature of accidents that some will be injured more than others, and need more support. But I suspect for 95% of levy payers, the benefits they get from ACC are miniscule compared to their lifetime contributions.

The Government has started off in the right direction by trimming some of Labour’s expansions to the scheme. I hope they continue to trim.I’m all in favour of families not being left starving when an income earner is unable to work due to an accident. I am more sceptical about ACC funding the myriad of providers of different medical services from counselling to physio. I’d rather we fund them through Vote Health for low income families rather than have someone on $100,000 get free phsyiotherapy for their skiing injury.

NZPA report:

ACC’s higher than forcecast investment return has exposed the Government’s “scaremongering” about the corporation’s financial situation, Labour leader Phil Goff says.

Levies are going to be raised and some entitlements cut because the Government says ACC isn’t in a viable state to continue the way it is.

But Mr Goff, citing the latest Treasury figures, said today ACC’s investment funds had returned $500 million in the four months to October 31, which was higher than forecast.

I swear Labour oppose national standards for numeracy and literacy, because their election chances seem to be based on a hope residents can’t do basic maths.

I’m not sure what is scarier – taking (on paper) high returns for four months as some sort of guarantee of high returns over the long-term, or thinking that a $500 million return over four months will cover the $4.8 billion loss in the last year.

This is of course the same Labour that knew ACC lost $2.4 billion in 2007/08 and continued to increase benefits and entitlements. And then the Government broke the Public Finance Act, by not revealing the problem before the election.

Anyway let’s look again at Phil’s mathematics. Now the unfunded liabilities have increased from $9B to $24b in just four years. Part of the reasons is that the ACC Board and Minister assumed investment rates of returns that were grossly unrealistic – and Goff wants to do it all over again, on the basis on one four month period of good results.Does he really think that level of returns will persist for the next decade? If so, then I suggest he set up his own investment company.

Did you know?

• The number of ACC claims for motorcycle injuries has increased 637% since 1999 – from 684 to 5044
• The number of claims per annum per 100 motorcycles has increased 352% from 1.2 to 5.2. Yes there is an ACC claim for 1 in 19 motorcycles.
• In 2008 1314 motorcycle drivers were injured and 48 died.
• The injury rate per 1000 motorcyclists is 14.4 and fatality rate is 0.52
• For all vehicles (incl motorcyclists) the injury rate is 4.7 and fatality rate 0.11.
• Motorcycle riders (and a small no of passengers) account for around 13% of all fatalities and 9% of injuries, despite making up just 3% of the vehicle fleet
• That of the 211 drivers killed in 2008, almost 25% or 48 were motorcycle drivers.
• In 2008 there were 1,237 motorcycle drivers hospitalised with injuries for 8,571 days and only 2,764 car drivers hospitalised for 13,795 days.
• There are 2.63 million passenger cars and vans registered in NZ and only 71,648 motorcycles (plus 25,304 mopeds).

It amazes me that the same people who support banning pies from tuckshops on the basis it may extend someone’s life by a few months in 60 years years time, don’t think incentives to reduce the number of motorcycle accidents are justified.

Now don’t get me wrong. If people want to ride motorcycles, good on them. Unlike Labour/Greens, I don’t believe in banning things just because they may be bad for you.

But if you choose to drive a motorcycle, then you should at least cover the costs of the greater accident risk. At the moment car drivers massively subsidise the cost of ACC for people who choose to drive a far more risky form of transport.

We already have the rationale with employers levies. You don’t make employers with clerical staff pay the same ACC levy as employers in dangerous occupations like construction.

Now as I have said before, the exact levies proposed by ACC are open to legitimate scrutiny and criticism. You don’t want to ping owners of multiple motorcycles (or multiple vehicles of any sort). But the principle of motorcyclists paying more than car owners is sound. Not to do so, actually subsidises motorcyclists and means we end up with more people dead and injured, because safer modes of transport were subsidising the more dangerous modes.

The Herald reports:

Motorcyclists revving up for a mass rally at Parliament at noon tomorrow fear crippling accident-compensation levy rises will force some to scrimp on safety gear and courses.

Hundreds of bikers are expected to roar off from Whangarei and Auckland this morning for a two-day “Damn the Levies” protest ride to the capital.

Police expect the number to swell to 3500 as they are joined by others along the way and from the South Island.

I’ve got no problems with there being a protest. Good on them for getting involved. While I support the principle that if you choose a more dangerous form of transport, you should pay for the increased risk, there are some legitimate questions over whether the exact amounts proposed are fair.

But none of that excuses the stupidity of this statement:

But although the motorcyclists are angry about being singled out for annual levy rises of between $198 for mopeds and $493 for 600cc-plus machines, the Bikers Rights Organisation reports growing public support for their cause.

“Many of the general public are really affronted – they see it as just the thin edge of the wedge to a wholesale decimation of the ACC scheme,” Auckland branch president Les Mason said yesterday. “If they can get away with it with motorcyclists, who’s next?”

This is simply moronic. Increasing the levies is not decimating the ACC scheme – it is in fact the exact opposite – it is trying to raise the revenue to keep the scheme going,

What will decimate the scheme is not having levies increase, as Mr Mason wants.

Now as I said the motorcyclists have some valid points – especially about people who own more than one motorcycle – and I support some changes there.

But is is fundamentally dishonest to suggest their opposition to paying higher levies (I don’t like my levies going up either) is about stopping the scheme getting “decimated”.They are parroting nonsense from Labour.

This is like someone campaigning against higher bank fees on the basis increasing bank fees will decimate the banking sector.

The Herald reports:

Double-murderer Graeme Burton received a free titanium artificial leg worth $10,000 from ACC to replace the right leg lost when he went on a lethal shooting rampage two years ago.

He’ll probably use it as a weapon to bash someone to death. How about a paper mache leg? He can walk on it, but not clobber too many people with it.

But a proposed law change before Parliament would rule out compensation for anyone injured while committing a crime with a maximum penalty of two years or more in jail.

Criminals would still receive emergency treatment to maintain life, and rehabilitation to “restore function”.

ACC Minister Nick Smith said that under the bill, a decision on whether someone like Burton would receive a taxpayer-funded prosthetic leg would still be made by doctors.

“Burton is an extreme example. It will be up to doctors in individual cases to determine where that boundary is,” said Dr Smith.

“My hope would be that cases like Burton would be consigned to history. There’s not a bone in my body with compassion for him.”

Let the man hop.

The HoS report:

It was, perhaps, Phil Goff’s first Triumph in quite some time.

A thousand bikers roared their disapproval at proposed ACC levy hikes yesterday – along with Labour leader Phil Goff on a brand-new motorbike he had bought shortly before.

I’m betting that Phil didn’t tell them that the increase was due to his former Government increasing coverage and a resultant $4.6 billion liability blowout.

I’m also betting he didn’t tell them that the modest pruning of coverage done by National, he has vowed to reverse. This means that levies will increase even faster under Labour.

Labour are trying the maxim that you can’t fool all of the voters all of the time, but you can fool some of the voters. They are campaigning against both levy increases and decreasing coverage.

Most ten year olds can work out you can’t both cut revenue and increase expenditure.

I think Labour have made a huge strategic blunder on ACC. They have not just criticised the Government’s changes (which is expected) but have promised to reverse all the changes made by National.

This means ACC will be an election issue in 2011.

Labour in 2011 will be trying to distance itself from the Labour Government kicked out of office in 2008. It will be trying to appear as fiscally competent. And they have now made into an election issue, what Labour did to ACC in Government.

Matthew Hooton is only slightly exaggerating when he says there should have been prosecutions. The breach of the Public Finance Act is bad enough, as is the $4.8 billion blowout in liabilities. But what most damns Labour is the timeline of decisions which show in election year they time and time again voted to increase benefits and coverage, while also voting to reduce or not increase levies.

National will be able to slay Labour, reminding them of this. There is simply no defence.  Labour just had the Board assume a rate of return on investments that professional advisors said was “heroic” and they don’t mean that in a good way.

I fully expect Labour to oppose National’s changes – that is the job of the Opposition. But to have promised to repeal them all, if they win the next election, is the blunder as it will put them in the dock for what they did in 2007 and 2008. The public won’t get into the details – they will just hear National time and time again repeat “broke the Public Finance Act, $4.8 billion blowout, costs of new coverage areas were ten times what Labour projected, dropped levies while increasing costs etc etc”. It will be a slaughter.

The other thing Labour have not caught on to, is that the public do not want levies to go up. They will be campaigning on a policy of making employees, and motorists pay even more for ACC. Dumb, dumb, dumb.

The Herald editorial:

An excess charge of $50 or $100 a claim, as recommended by the corporation, could reduce its costs by about $1.6 billion over 10 years, a considerable saving for any service in the economy. The value would lie not only in the money raised from charges but also in the effect on claimants’ behaviour.

Insurance policies typically contain excess charges to discourage needless or frivolous claims. Accident compensation needs to do the same. The scheme may have been conceived as a form of social welfare rather than insurance, according to its venerable “father”, Sir Owen Woodhouse, in the Herald yesterday, but he was speaking of an era of closed, welfare-state economies with high taxation rates and universal benefits.

And I don’t think anyone can deem acceptable a household paying $45 a week in ACC levies alone.

Any excess charges introduced for accident compensation claims will have to provide exemptions for the bearers of community service cards. None must be denied treatment for injury because they cannot afford the excess, as ACC Minister Nick Smith has acknowledged.

That would be a sensible way to balance up the costs and benefits.

But it cannot be denied that the scheme is vulnerable to needless claims for minor injury. Most people have had the experience of visiting their doctor with a niggling ache and the first question asked is whether it might result from a known event. The ACC forms are always at hand and many a patient who is willing and capable of paying for treatment is invited to put in a claim.

It is human nature to make excessive use of any service that comes free. And for that reason it is usually in the interest of the service providers to oppose a charge. Even a token charge – much lower than the sums suggested for ACC – would cause many claimants to reassess their need. It would also force providers to satisfy paying clients that continuing treatment was worthwhile.

A charge would be unpopular and the Key Government has not yet shown a willingness to be unpopular when it needs to be. It did not adopt the corporation’s charging suggestion in the changes announced for the scheme last week. If it is suggested again when an independent panel completes an ACC “stocktake” next year, it should be accepted. The years of plenty have passed.

I agree.

The Herald reports:

The Government has confirmed that accident victims may have to pay the first $50 or $100 of their costs.

The move is under consideration as part of a second round of changes to the accident compensation scheme next year.

Accident Compensation Corporation chairman John Judge says requiring victims to pay an insurance-style “excess” of $50 or $100 for each claim would cut ACC costs by about $1.6 billion over the next 10 years, reducing the need for further levy increases.

ACC Minister Nick Smith said he had been briefed on the proposal, but no decision would be made on it until a wide-ranging “stocktake” of the scheme, led by former Labour Finance Minister David Caygill, was completed next July.

“It’s true that there is a very large transaction cost in ACC, with more than 1 million claims a year,” he said.

“The concept [of a $50 or $100 excess] would need to be carefully balanced with regard to low income earners for whom a $50 or $100 excess might prevent them getting medical attention.”

I understand the cost of processing those minor sub $100 claims is greater than the actual claims themselves, so the problem is quite clear.

However it is worth considering more generally the issue of part fees. As a starting point, I consider almost all Govt funded services should have part fees, as you get distorted decision making in their absence.

The prime example of this is the scam tertiary courses which have diverted so much tertiary funding. When the Govt pays 100% of the course costs, then the institution will simply target signing up as many people as possible, and they will sign up if there is no cost.

Now part fees should not be high enough to discourage people who would genuinely benefit from a Government service, and this is a valid concern.

And there are some situations where there should be no part fees at all. For example kids borrowing books from a library is a classic example.

In related news, 93 year old Sir Owen Woodhouse is reported as being upset with changes:

The father of New Zealand’s accident compensation scheme, Sir Owen Woodhouse, says changes announced last week are “uncaring and predatory”.

Sir Owen, 93, says proposals to double and treble levies on heavy motorbikes and mopeds, and to push accident victims back to work on much lower incomes than they earned before their accidents, breach the principles of the scheme he authored as head of a royal commission in 1967.

I think Sir Owen has just shown us the real problem with ACC. He has spoken out against both the increase in levies and the reduction of benefits. Now you can’t have it both ways. It is quite legitimate to say there should be no reduction in benefits, but then you have to accept that that levies will increase to around $45 a week for an average family. But if you do not reduce benefits, then levies have to increase even further. There is no magic pot of gold to fund the scheme.

Sir Owen’s 1967 report proposed a single flat-rate levy on all employers and another flat rate on motorists, on the basis that everyone benefited from the work of people in risky industries such as aerial topdressing.

Sorry, but wrong an unrealistic view. Firstly industries with higher work accidents should cover those costs, so that the prices of those goods or services reflect that.

I own a polling company. Over the last five years my ACC bill has been a large five figure sum. During that time not a single accident has occurred, or claim filed by a staff member. And Sir Owen is saying we should pay even higher ACC levies to cover not just workplace accidents in other clerical type firms, but workplace accidents in freezing works.

Yesterday he disputed claims by ACC Minister Nick Smith that levies needed to reflect different accident rates in different industries and different kinds of vehicles because that would give employers and motorists more incentive to be safe.

“We are saying people are willing to risk killing themselves for the sake of a few dollars of saved premiums. That’s just ridiculous,” he said.

“I think it’s simply shocking that they are proposing to load people on bicycles and this kind of thing with the extra amounts they are talking about.”

Well if you are saying you want less people killed on the roads, then yes the motorcycle premium makes sense as their injury rate is 16 times that of motorists.

Where I do have some sympathy for motorcyclists is if they own multiple bikes. What might be worthwhile is for the Government to look at a system for all vehicle registrations where the first vehicle per person pays the full license fee, while any subsequent vehicles pay a lower fee.

National actually won an election mandate for introducing competition and choice to ACC. It shouldn’t need ACT to push it in that direction.

The 1998 changes were a win-win. Not only did employers get choice, and lower levies, but workplace accidents fell as other insurers provided incentives to employers to have safer workplaces.

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!

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.

Nick Smith has announced some changes to the ACC scheme, to make it more affordable and stop huge employee levy and vehicle levy increases:

• Reversing 2008 income compensation extensions covering casuals, part-timers, non-earners and abatements for holiday pay
• Reversing entitlements for wilfully self-inflicted injury and suicide
• Strengthening disentitlements for criminals
• Enabling safety incentives for employers and vehicles
• Extending full funding date from 2014 to 2019
• Requiring far more open reporting on ACC’s liabilities

The changes are hoped to reduce ACC liabilities by $2 billion.

ACC costs have risen by 57% in the last four years. So even with those changes, levies still have to increase. They are:

• a $32 increase in the motor vehicle levy taking the fee for a petrol car up from $136.44 to $168.46
• ACC petrol levy will rise from 9.34 cents per litre to 9.90 cents per litre
• Motorcycle levies to now vary by size going from $252.69 for all to $257.578 for under 125 cc, $511.43 for 125 – 600 cc and $745.77 for over 600cc

Grahame Armstrong in the SST looks at the bad news:

Cabinet will tomorrow approve a bailout plan that also aims to safeguard ACC’s financial future. The proposed changes will be open to public discussion for four to five weeks before ACC makes recommendations to the government. …

Wage earners currently pay an ACC levy of 1.7% of what they earn, up to $110,000 (any income above that does not attract a levy). That is set to rise to 2.5%.

The Sunday Star-Times understands the ACC levy for a family earning $38,000 is likely to rise by $304 a year, plus an extra $52 to register the family car and 4c a litre more at the fuel pump.

If the government chooses not to increase the ACC petrol excise, which is now 9c a litre, the ACC component of registering a car, now $168, will go up even more – possibly by as much as $107.

Someone on the average wage of $45,000 will pay $360 more a year to ACC, plus the extra fuel and vehicle registration costs. The ACC levy for those on $65,000 will go up about $520 a year while those earning $85,000 will pay $680 more.

This is all because Labour kept adding on more and more entitlements, but didn’t fund them. It was fiscal folly. Don’t think this is just about the investment losses.

ACC chairman John Judge told the Star-Times ACC’s debt was worth about $3000 for every New Zealander, and it was going to take a “hard-nosed” approach – and possibly up to 10 years – to get it into a sustainable position. This would require “substantial” levy increases and legislative change to get people off the scheme and back to work quicker.

“In the last five years we’ve lost $9b. We need to act today because this liability is like a mortgage – if we don’t start paying it off tomorrow it gets bigger by $700 million-$800 million a year.”

Yes, the time has come to get the scheme under control. It really is about saving ACC, because if no changes were made the increased levy payments would be even more horrific.

ACC Minister Nick Smith said the choices for the government were “pretty ugly”.

“It is inevitable there will be levy increases,” he said. “The government’s preferred approach is to get savings out of ACC operationally and out of pulling back on some of the welfare-type entitlements … Without change, ACC is on course to go broke.

It has changed from a well intentioned scheme which provided support if you had an accident and were off work for a few weeks, to a massive extension of the welfare state.

Labour’s ACC spokesman David Parker said the situation was not as gloomy as the government was projecting. The ACC’s liabilities and costs were increasing but it was also the country’s biggest insurer, and the cost blow-out could not simply be blamed on poor management.

Oh yes we are going to believe Labour’s projections on this.

ACC has released its 2008/90 annual report. They lost $4.8 billion. Nick Smith says:

“This $4.8 billion loss for the 2008/09 year comes on top of a $2.4 billion loss for the year before and shows the ACC scheme is financially unsustainable,” Dr Smith says.

“The Government’s major concern is the growing gap between ACC’s assets and liabilities. It comes as no surprise that ACC’s investment returns have been lower through the recession and we are quite confident these will recover. The grave concern is the huge growth in the outstanding claims liabilities from $9.4 billion to $23.8 billion in just four years.

What a lovely Xmas present the last Government left behind for us.