Editorial:Indecent haste to resocialise compo

Labour went to the election with promises that were moderate and reasoned on the whole. Even its commitments to rewrite employment law were excessive in only one or two areas. But on accident compensation it surrendered to ideological pique. As soon as workplace insurance was opened to competition from the private sector in mid-year, Labour threatened to restore the state's monopoly on principle. It had no interest in observing how deregulation might pan out in practice. Now that it has the chance, the Government seems in a desperate hurry to carry out its pre-election threat.

There is a suggestion that legislation to remove private insurers from the business may be introduced when Parliament assembles next week. That would be unfortunate on many counts. It is not a good sign for a new Government when its first legislative steps are negative, backward, setting it against the tide of change. If anything suggests that this is to be a short-lived Government it is this sort of measure, which already looks like a temporary suspension of the inevitable.

Hasty legislation next week would be unfortunate also because Labour has additional plans for the accident compensation scheme. Some of them are no more far-sighted, though there are not quite the vindictive overtones of renationalisation. There is no good reason that all the Government's contemplated changes to the scheme could not be considered together. That would at least give time for careful consideration of all issues associated with the administration of the employers' account, including the significant developments in the market since it became competitive.

Despite being the residual insurer for employers who haven't bothered to investigate alternatives, the ACC has been reduced to little more 10 per cent of the market as measured by premiums. And Labour has taken to arguing that the new competitors have offered cut-price premiums they cannot sustain, simply to win market share. That would not seem very smart of insurance companies; their market is not hard to enter and companies that could not sustain competitive premiums would soon find their customers going elsewhere.

Doubtless, the market has not yet settled. When competition wipes up to 30 per cent off the total premiums previously levied by ACC, there is probably some uncertainty at play. But that is unlikely to account for much of the savings. Competition can be expected to find savings unimagined by the previous monopoly. ACC's subsidiary in the contest for employers' accounts, @Work, is already perversely talking of matching lower costs and doing even better than the private sector if its monopoly is restored. The only lesson Labour can possibly draw from that comment is that competition has reduced the state rates and there is every prospect of premiums continuing to come down. If the ACC monopoly is restored, all bets are off for the time being.

But in fact Labour has no interest in drawing lessons from any experience of competition. It is determined to socialise accident insurance again as a matter of principle. That means some - probably employers - must pay higher premiums than their accident record warrants, so that others - probably sporting people and dependants - pay less. It means safety incentives become fuzzy and the overall rate of injury rises. The worst injuries receive less compensation than they would win elsewhere, so all the injured get something. It probably means longer periods on "compo" before anybody checks up.

And it certainly means constant political dissension over the terms of the cover, because none of the discontented can shop around. Labour is not restoring a scheme that has proved satisfactory; it is simply closing off the opportunity for alternatives. It will say it is doing no more than honouring a policy put to the voters. But did anybody hear a clamour for it? If, on reflection, the Government decided to let competition continue to lower a cost that consumers ultimately carry, it would be forgiven.