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Home / New Zealand

ACC levy setting 'reeked of political interference': Business NZ

Nicholas Jones
By Nicholas Jones
Investigative Reporter·NZ Herald·
23 Jul, 2015 03:37 AM4 mins to read

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In May, ACC Minister Nikki Kaye (pictured) announced new levy cuts of around $500 million over two years. Photo / Stuart Munro

In May, ACC Minister Nikki Kaye (pictured) announced new levy cuts of around $500 million over two years. Photo / Stuart Munro

• What are ACC levies?
Levies are paid by businesses, motor vehicle owners and employees for injury cover that is funded by ACC.
• Who decides how levies are set?
ACC makes a recommendation to the Government, which then has the final say. Last year, the Government reduced levies by less than had
been recommended by the corporation.
• What is changing?
New legislation will give the Government involvement from the start of the process through the setting of a funding policy, which will then guide ACC's development of recommended levy rates.

The decision to cut ACC levies by less than as was recommended "reeked of political interference" and changes to that process need greater independent oversight, BusinessNZ says.

The business lobby group found common ground with Labour at a select committee hearing on new legislation that will change how ACC levies are set.

Levies are paid by businesses, motor vehicle owners and employees for injury cover that is funded by ACC.

ACC is currently in excellent financial health as its investments perform better than expected, and Labour has accused the Government of using the corporation as a "cash-cow" in its efforts to reach surplus.

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They pointed to last year's levy-setting as an example. The Government rejected a recommendation from ACC that levies for the 2015/16 year be cut by 21 per cent for the work levy on employers, and by 5 per cent for the earners' levy on workers.

Instead the work levy was cut by 5 per cent, and the earners' levy remained the same.

In May, ACC Minister Nikki Kaye announced new levy cuts of around $500 million over two years, and legislation - the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill - that would put in place a new framework to set ACC levies, taking effect in 2016/17.

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It will give the Government involvement from the start of the process through the setting of a funding policy, which will then guide ACC's development of recommended levy rates.

Ms Kaye has denied that was done to avoid the political embarrassment of the Government not cutting levies as much as ACC recommended, but rather was to enable better long-term planning and say "at the outset what the rules of the game are".

However, at a select committee hearing on the Bill today John Pask, an economist at BusinessNZ, said that, although broadly supportive, "greater discipline should be imposed on the Government of the day".

"The proposed funding policy, in our view, should go to an independent agency for review. Any outcome of that review should be made public."

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Mr Pask said the Bill should also make clear that the Government's fiscal position should not be a consideration when levies were set.

Labour's ACC spokeswoman Sue Moroney told Mr Pask she was pleasantly surprised with elements of the BusinessNZ submission.

"You said...that the Government's 2014 decision to retain ACC levies at levels well above those recommended by the ACC board 'reeked of political interference and made the public consultation on levy proposals something of a farce'. That is a very hard-hitting statement - and one the Labour Party agrees with, by the way."

Mr Pask said it was important to note that the same charge could be made at a succession of governments since the ACC scheme started in the 1970s.

"It's across the board here, across governments and across generations, basically...often they [levies] would go up after an election, or in an election year they would either stay the same or even go down."

Dr Bill Rosenberg appeared on behalf of the Council of Trade Unions (CTU).

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Asked about the possibility of independent assessment of the proposed funding policy, Dr Rosenberg said the nature of levies was that they were very similar to taxes.

"And I don't think that any Government wants to completely lose control of what is levied. That is the nature of the beast, in a political sense.

"If we are going to go to a situation where the actual levy is set independent of any kind of political oversight, to me to be realistic sounds unlikely, then I don't see why we should not just hand it over the corporation itself."

CTU proposed that the funding policy statement be subject to consultation with the public, just as is the actual levy setting.

However, Dr Rosenberg said the ACC Minister would still be free to ignore the corporation's recommendations under the new legislation, and did not appear to be bound by their own funding policy statement.

CTU also wants the consequences of the phasing out of residual levies to be examined.

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The scheme is not currently meeting the needs of New Zealanders suffering from occupational disease and the removal of residual levies would likely make this worse, the union argues.

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