13 May 2015

ACC: Political football du jour

The government's announcement of cuts to ACC levies has brought Labour's leader Andrew Little into the fray arguing that he would go one better and return ACC to its former pay-as-you-go model, which could mean even deeper levy cuts, at least for a while.
Since 1999, successive governments have moved ACC away from pay-as-you-go to fully-funded. The scheme now has more or less sufficient funds to pay off all future outstanding costs of current claims. In theory, the scheme could be wound up without further levies. This has meant that we (the people of NZ) have had to pay higher levies in order to amass a huge fund that (at 31 June 2014) was $27.4 billion. That's quite a big nest egg!
So, in the 2013/14 year, ACC collected $4.7 billion in levies from us. But its claims costs were 'only' $3.65 billion. On top of that surplus, ACC earned an investment income from that huge nest-egg of $1.5 billion. In short, the scheme is rolling in money. That's our money. And keep in mind that levy-payers and claimants are not two separate, competing groups of people. All New Zealanders pay into the scheme (except children, who will one day anyway). And, over a lifetime, I would guess that we all make (at least a few minor) claims. We all pay and we all benefit, and the good thing is that we do not have to share any of the investment income or the surplus with greedy shareholders or investors, because the scheme is a state monopoly.
It's easy to see from the figures that, now that the scheme is close to fully funded (and more than that in some accounts), levies can be reduced, and we can enjoy the benefits of the investment income.
In the past, I have opposed full funding, as the ACC has operated for most of its life without it, being a state monopoly. Full funding is a requirement for private-sector insurers, and is useful if the government wanted to privatise ACC. But that's no longer an issue (thank heaven!)
But, now that it is fully funded (at our expense), I would suggest that we just keep it that way. We, the levy-payers, have saved for years to get to this state, and we can benefit from the investment income. Businesses especially benefit from predictability in their budget-lines, one of which is the ACC levy. So, I disagree with political parties who want to throw ACC funding from pillar to post, as Mr Little is suggesting. Just leave it alone, and get on with the job of injury prevention and rehabilitation now, please. Oh, and thanks for the reductions in levies! We deserve them!


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