Govt ignored ministry call to trim ACC levies by $477m

ACC Minister Judith Collins announced the Government would not cut ACC levies for workers and businesses as recommended. Photo / Mark Mitchell

Struggling workers and businesses could have benefited from almost half a billion dollars in ACC levy cuts this year if the Government hadn't disregarded Ministry of Business Innovation and Employment advice, it has emerged.

Policy advice from the ministry released this week shows it recommended cutting the workers' and earners' levies by 17 per cent for the 2013-2014 year.

Labour says the Government's decision to disregard that advice and ACC's own recommendation to cut levies by 12 per cent was driven by its political goal of returning to surplus by 2014-2015.

Late last year ACC Minister Judith Collins announced the Government would not cut ACC levies for workers and businesses as recommended by the ACC board. ACC's 12 per cent cuts would have reduced levy income by about $330 million a year thereby undermining the Government's goal of returning to surplus.

But Ms Collins said it was decided not to cut levies because the Government was mindful of economic uncertainty and it wanted to have confidence that levy reductions were stable and sustainable.

However, Ministry of Business Innovation and Employment (Mbie) advice on ACC levies, which was released this week, recommended even deeper 17 per cent cuts that would have saved workers and businesses $477 million a year.

Mbie said even with ACC's proposed cut of 12 per cent, the corporation's funding position would be $5.5 billion higher than needed to cover claims.

"This would represent a significant opportunity cost and revenue transfer from levy payers. Higher levies required by this option are likely to negatively impact on the Government's priorities for economic growth and reducing costs for businesses."

Labour's ACC spokesman Andrew Little said the Government's decision not to cut levies was driven by "its desperate bid to achieve its much-hyped 2015 budget surplus".

Mbie's reduction would have meant an extra $125 year in the hands of someone on the average wage "and goodness knows how much for businesses", said Mr Little.

Higher than necessary ACC levies would have little effect on a real Government surplus, "because they can only be spent on accidents and injury prevention", he said.