KEY POINTS:
Labour says there are options other than hiking ACC levies to meet a $4 billion hole and has accused the Government of trying to make the system look bad so it can privatise it.
ACC Minister Nick Smith yesterday said levies would increase from $1.40 to $1.70 for
every $100 earned from next April.
The employer and self-employed levy would rise from $1.26 to $1.31.
Recommendations by officials to increase motor vehicles levies and lift registration fees by $50 would not be considered until next year.
Dr Smith blamed predicted cost increases of more than $4 billion between now and 2011 as ACC covers more accidents and pays more for care and compensation.
Labour leader Phil Goff said when he was in Government there was conflicting advice from the Labour Department and ACC about how to deal with the shortfall.
ACC was faced with lower returns on investments and increased costs.
"I think you've got to do everything you can to keep the levies within a reasonable level and there were a number of options that were on the table - and still are on the table in terms of how you mitigate those costs," Mr Goff said on TV One's Breakfast programme.
Options were to extend the deadline to fully fund historical claims to 2019 and reduce car registration fees by $83 a year to offset increases.
"There's an element of politics in this - `let's make it sound as bad as we can and then we can justify privatising it'," Mr Goff said.
The idea of extending the deadline is one the Government would consider but Dr Smith did not think it would make a big difference.
Prior to 1999 only enough levies were collected each year to cover the cost of new claims expected to be made the following year.
This created a shortfall, as it failed to account the cost of ongoing claims.
Labour had supported full funding through levies by 2014, but it had since decided it would put too high a burden on the public.
It instead proposed extending the date to 2019, smoothing the increases.
Dr Smith said he was still looking at this issue, but it had very little impact on the earners account.
Dr Smith yesterday said he had advice that next year workers should be paying a 43 per cent increase to fully meet ACC costs but this would cause too much pain.
A person on the average wage of $47,000 a year currently pays $658 a year or $12.61 a week to ACC for the levy funding the earners account.
The Labour Department, which monitors ACC, had recommended an increase to $940 a year or $18.02 a week due to increased costs, more claims and lower earnings.
"In difficult economic times that level of increase was unacceptable. That is why the Government has opted for a lesser rate of $799 per year or $15.31 a week," Dr Smith said.
The pressure on ACC was so intense that officials were projecting that the earners account levy would rise from today's $1.40 to $3.00 in 2013/1014 and the work account (paid by employers) would lift from 72 cents to $1.13.
"These are unacceptable to the new Government and we will need to work hard to restrain costs."
A stocktake of ACC coverage and costs would be undertaken to get costs under control.
Dr Smith said the recent increase in the range of entitlements had to be examined, but he would not be taking a "bull in the china shop" approach to the review.
He also blamed an ACC culture which seemed to be willing to rack up the costs and send the bills to levy payers.
Drops in investments had not been taken into account when calculating the levies, but Dr Smith said ACC had been losing $100 million a month in the economic downturn.
This poor return would not drive up levies unless it continued for many years.
Dr Smith said officials were recommending a $50 increase in motor vehicle registration fees from next July, but decisions on this would not be made until next year.
In addition to the levy increases Cabinet has already approved meeting a $297 million shortfall in the non-earners account for this year.
Debt would increase by $1.2 billion in coming years to met the shortfall in the non-earners account.
The non-earners account provides accident insurance for people who do not work, such as beneficiaries and children.
- NZPA
