Thursday 11 September 2008

Labour promotes law change to reduce ACC levy increases

Labour will seek support for an immediate law change after the election to reduce the pressure on ACC levy rates, says Labour’s ACC spokeswoman Maryan Street.

ACC has today released its consultation document on proposed levies for next year, an annual process determined by statute. Following public consultation on the proposals the government traditionally determines the new levy rates, which may or may not differ from those ACC proposes. This won’t occur until after the election.

“However Labour believes the proposed levies for next year, in particular the motor vehicle levies, will place too much of a burden on the public and is announcing today that it plans to promote a law change after the election to lessen the levy burden.

“Petrol and food price increases, together with high interest rates, have created additional spending constraints on families this year. There was a sizeable increase in the motor vehicle levy last year and I don’t want to see that repeated this year,” Maryan Street said.

“If we did, I think we would run the risk of people failing to register their vehicles.”

“ACC’s proposed motor vehicle levy for next year is $287, up from $254 this year. Under the change Labour is proposing, next year’s levy would reduce to about $203.

“A range of factors have influenced the proposed levy rates including: injury claim numbers, medical and surgical costs, rehabilitation rates and personal support costs and ACC’s investment returns.”

“The other key factor influencing current levy settings is the 1999 decision to ensure ACC accounts are fully-funded by 2014. This is set in law and Labour is proposing a change to that date,” Maryan Street said.

“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 large shortfall as it failed to account for the cost of ongoing serious injury claims and for those such as gradual process disease claims which related to a workplace injury sustained in previous years.

“While Labour has supported the deadline for accounts to be fully-funded, it has become increasingly clear the imposition of the 2014 date, together with the increased cost of claims, will place too high a burden on the public in the years leading up to that date.

“Instead of hiking up prices until 2014 and then dropping them dramatically, it makes sense to smooth out the process and extend the deadline until 2019 - a process which will effectively halve the residual claims costs for the next five years,” Maryan Street said.

“The average employers’ levy is now $1.26 per $100 of liable earnings and this is also ACC’s proposed rate for next year. This would reduce to about $1.01 if the date was pushed out to 2019.

“Because the earners’ (employees’) levy is already almost fully-funded the date change would not affect the proposed earners’ levy for next year, which is $1.70 per $100 of earnings, up from $1.40 this year,” Maryan Street said.

Key Facts

- Every year ACC runs a public consultation on proposed levy rates for the following year. It then finalises its proposed rates and submits them to the ACC Minister. The Department of Labour also advises the Minister, who then makes recommendations on rates to the Cabinet, which then determines the rates.

- Almost 85 per cent of levies collected pay for the cost of claims. The rest funds injury prevention programmes and operating scheme costs. Separate levies are set for employers (including self-employed people), earners and motor vehicle users. The government funds the non-earners’ account.

- The cost of claims and claim numbers are increasing. For example, motor vehicle injury claim costs have risen from $288 million two years ago to over $359 million last year – partly because there are more serious injury claims and because surgical, treatment, rehabilitation and home support costs are rising rapidly.

- For example: elective surgery costs have increased 16 per cent, the amount paid to family carers of injured New Zealanders has increased 17 per cent, contracted care provider costs have risen 12.6 per cent.

- The global credit crisis has also impacted on levy rates by creating an investment loss for ACC this year, despite the fact its investment performance outperforms market benchmarks. This loss was anticipated in documents released at Budget time.

ENDS

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