National plans big ACC shake-up after blow-out

Bill English says the Government must get the liability and costs under control. Photo / Mark Mitchell

The National Government is planning "significant changes" to the ACC scheme, saying soaring costs and deteriorating performance show the present scheme is not working.

Finance Minister Bill English yesterday said ACC's "liabilities are blowing out, rehabilitation rates are dropping, claims costs are out of control and levies are going through the roof".

This required action, and so significant changes would be announced.

But he refused to disclose what they would be.

"The status quo can't stay in place now because of the problems," Mr English said.

"We've got to get the liability under control and the costs under control so that the levies don't blow out. That's what we want to achieve - we've got a lot to do."

Mr English's call for action is in contrast to National's pre-election policy, which indicated it would take a cautious approach to changing ACC.

The proposed changes follow the release of a ministerial inquiry into why a blow-out in ACC's non-earners account was not declared in the pre-election opening of the books.

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Labour's finance spokesman David Cunliffe said Mr English was using the ministerial inquiry as a "political charade that was softening ACC up for privatisation".

Mr English said the $300 million shortfall the Government found in the account after the election had grown to $384 million and had to be paid by June.

A further $1.2 billion was needed to fund the account over the next three years - meaning a total shortfall of $1.5 billion.

The non-earners' account covers accident claims from the elderly, students, children and the unemployed, and is financed directly by the Government, rather than by levies.

The Government has already increased levies on the earners' account, paid by workers and self-employed to cover non-work injuries, and the work account, paid by employers and self-employed to cover work-related injuries.

It must also decide this month on a $32.37 increase officials have recommended for the motorists' levy, which is paid for through petrol sales and licensing fees.

ACC's cost pressures have been blamed on increased medical costs, extended coverage for claims such as medical misadventure, and a fall in revenue from its investments, hit by the global economic crisis.

National's election policy did not signal wide changes, only that it would "investigate" opening the work account to competition.

Decisions would be made carefully and only after a full evaluation of the benefits.

The policy said National was "committed to the principles of competition and choice as the appropriate means of ensuring efficiency of ACC provisions".

The absence of the blow-out in the non-earners' account from the pre-election fiscal update prompted National to accuse Labour of trying to hide the sum to make the Government's books look better than they were.

But the inquiry found Treasury officials had not done their job properly, and were responsible for not disclosing the shortfall in the pre-election opening of the books.

The inquiry did not speak to or make any adverse finding against the Labour Government's Finance Minister Michael Cullen or ACC Minister Maryan Street - although it did note that they knew about the blow-out.