Govt looks at raising ACC levies

ACC Minister Nick Smith. Photo / Sarah Mitchell

Just months after cutting employers' ACC levies, the Government is considering raising them in a move the Opposition says is intended to give "a leg up" to private insurers who will compete against the state-owned accident insurer.

In October last year, former ACC Minister Nick Smith confirmed cuts in ACC levies for workers and bosses that would save a typical small business employing seven people on the average wage about $1120 annually from April this year.

However, a Cabinet paper from Dr Smith's office obtained under the Official Information Act by ACC claimants' lobby group the ACC Futures Coalition shows just a month later he was considering hiking those same levies.

The proposal was part of the Government's plan to introduce private sector competition in the Work Account, which employers fund to cover the cost of workplace accidents.

Under the plan ACC "would be subject to regulatory safeguards to ensure it sets prices responsibly".

To give effect to that, Dr Smith proposed legislation "requiring ACC to price prudently by incorporating a surplus margin into prices".

Dr Smith also proposed legislation requiring the ACC to build up reserves which would then be paid to the Crown, "to avoid a build-up of excess reserves that could reduce financial disciplines or be used by ACC to reduce its prices (which would make it difficult for insurers to compete)".

Opponents of the plan to introduce private competition for accident insurance argue the ACC provides relatively low cost comprehensive cover partly because, unlike private insurers, it is not required to pay tax or turn a profit.

Labour ACC spokesman Andrew Little said the proposals would diminish the value of ACC to the taxpayer.

"There's no question this is about putting a manacle on ACC and giving a leg up to private insurers so they've got a better chance of dominating the market."

Hazel Armstrong of the ACC Futures Coalition said ACC's levies were very low and private insurers would find it difficult to compete.

She said the plan to raise ACC levies likely stemmed from the National Government's relationship with coalition partner Act.

Ms Armstrong said that agreement "will result in a hike in levies for employers in New Zealand".

"Higher levies are going to put pressure on employers.

"But the other problem is the private insurers are all going to be Australian-owned so that the dividends that they return will go back to Australia. The Government was delighted when levies went down but now they're putting a policy in place that will push levies up."

But current ACC Minister Judith Collins said Dr Smith's proposals were "very hypothetical".

"I'm not going to say that any of that's necessarily going to be accepted. I'm working on a solution that I think will hopefully solve all of the issues."

Ms Collins said she would take her proposals to Cabinet soon.