Cutbacks to ACC will be spelled out tomorrow

The Government will announce tomorrow plans to cut ACC entitlements so it can keep levy rises to politically acceptable levels, Prime Minister John Key says.

Increasing costs and a ballooning deficit to meet future demands on the scheme have led to signals that ACC levies would rise by at least 10 per cent and as much as 50 per cent.

ACC chairman John Judge said levies would need to rise as the scheme's claim liability - the future cost of existing claims - was $23.8 billion. Current net assets, which ACC uses to cover future costs, were $11 billion, leaving a $12.8 billion gap.

Mr Judge said the future of the scheme was at risk.

Mr Key said yesterday that the public needed to tell the Government how much they wanted to pay in increased levies, compared with an extension of the scheme.

"There will unquestionably be an increase but the sort of increase that's been floated over the weekend of 40-50 per cent is ridiculous and unacceptable," Mr Key said. "That is not an option on the table."

The Prime Minister said there would be levy increases, but the final decision was a political one which would be made by the Cabinet in February next year.

Mr Judge had signalled large increases because it was his job to ensure the scheme was sustainable.

"I understand that, but there are a series of political choices that have to be made."

The assumption that increases of up to 50 per cent would be needed was based on no changes to ACC and there would be announcements about these tomorrow.

Legislative changes would include pushing back the date for when the scheme had enough money to cover all its future costs from 2014 to 2019.

Mr Key said there would also be about 20 other changes to the legislation and regulations reducing entitlements.

ACC Minister Nick Smith has indicated that he will also be targeting the most recent extensions to the scheme including physiotherapy subsidies. Another area he has mentioned is income subsidies to thefamilies of people who commit suicide.

Mr Key said the previous Labour Government used ACC as "an extension of the welfare state". The scheme would still be comprehensive, but it would be affordable.

Labour's ACC spokesman, David Parker, said the Government was scaremongering as much of the levy rises being talked about would be reduced by pushing back the date for full funding.

"Prime Minister John Key says we need to have a public debate about the future of the scheme because of rising costs. Labour agrees - but we need to have it before irreversible changes are enacted, as they are being, not afterwards."

Engineering, Printing and Manufacturing Union national secretary Andrew Little said the figures on the cost of full funding should be independently reviewed. The books were being massaged with assumptions of ACC earning low investment returns and paying much higher medical costs, he said.

The hysterical attacks were a smokescreen to reduce cover and increase levies.

Mr Key said the problem with that argument was that the figures had been analysed by the ACC board, ACC's actuary and accountants PricewaterhouseCoopers.

- NZPA