KEY POINTS:
Finance Minister Bill English has confirmed there is likely to be a "significant" rise in the amount workers pay to ACC from April 1 next year.
ACC Minister Nick Smith yesterday revealed officials wanted to increase levies on workers to cover a $1.33 billion shortfall in the earners
account over the next three years.
Every worker pays a levy to cover the account.
Mr Smith said the government would try to constrain the recommended rise.
But Mr English today said that would prove difficult and large rises looked unavoidable.
He told Radio New Zealand there were likely to be "significant increases in the earners levy" from April 1 and accused the former Labour government of "manipulating ACC for political purposes".
If Dr Smith follows the officials' advice, the average worker on $47,000 a year could end up paying an extra $282 over the next tax year.
The sum would rise to $329 and $376 in the years after that.
The increase would take effect on April 1 next year - the same day as the National Government's tax cuts.
That would mean the average worker would have to pay $5.40 a week extra in ACC costs from their $16 to $18 tax cut.
The blowout in the earners account follows the billion-dollar hole over three years in the non-earners account revealed earlier in the week. The non-earners account is not covered by a levy but is still paid by taxpayers.
There are similar problems in the ACC motor vehicle account, too, and officials are proposing a $32.37 increase in that levy to cover a shortfall there.
Dr Smith said he did not want to impose these "very significant cost increases" on workers, but had to act responsibly.
He had to decide by Christmas on the levy increases. The alternative was to pay the money out of the Government budget, which would require borrowing.
Dr Smith said officials had blamed the increases on increases in the number of claims, lower rates of rehabilitation - extending the time over which costs were incurred - increased medical and treatment costs and expansions in entitlements.
The earners account is funded from a 1.4c in the dollar salary and wage levy.
Dr Smith said Department of Labour officials wanted to lift that to 2c next year, then 2.1c and finally 2.2c the year after.
For the average worker this would mean levy rises of $5.40 a week, then $6.33 and finally $7.23.
The earners account pays for non-work accidents involving employees.
Dr Smith said that as it was funded by a levy, the shortfall did not need to be included in the pre-election "opening of the books".
This was not the case for the hole in the non-earners' account which National is accusing Labour of trying to hide to make the government accounts look better than they were.
The non-earners account covers accident claims from children, students, beneficiaries and the elderly.
Dr Smith said the non-earners account needed more cash immediately, while the earners could be covered by the levy.
Dr Smith also indicated that things could get worse, as the investments held by ACC were performing poorly because of the international financial crisis.
Labour leader Phil Goff said the Government was making the problem look worse than it was to soften the public up for the privatisation of ACC.
The rise in the motorists' levy - paid through petrol sales and vehicle licensing fees - is being recommended by the ACC board to Dr Smith.
ACC is blaming increases in expected claim costs and costs for seriously injured claimants.
The ACC will collect two lots of levies - one for claims made in 2009-10 and the other for injury claims before July 1999 that were only partly paid for by motorists at the time.
The average of the two levies combined is $254.63, but the recommendation is for a rise to $287.
That is 51 per cent more than motorists were paying in 2006-07.
AA spokesman Mike Noon said the pre-1999 claims levy was responsible for most of the increase.
The AA was concerned the old claims levy would double inside five years.
He said the Government could ease this by extending the deadline to fully fund the pre-1999 claims by 2014.
Mr Noon said the AA supported a gradual move toward more of the levy being collected from fuel instead of annual licence fees for petrol vehicles.
It would mean frequent users of the road would pay more of the cost of claims than those who travelled infrequently.
- additional reporting Wayne Thompson, NZPA
