5 Dec 2008

Warning of more funding problems at ACC

3:28 pm on 5 December 2008

The Government is warning of further funding shortfalls within the Accident Compensation Commission after what it has described as another big blow-out.

Finance Minister Bill English said on Friday that workers are likely to face "significant" increases to ACC levies from 1 April next year.

The Government has been told ACC needs to raise the earners levy by $1.3 billion over the next three years, which is paid for by workers.

The disclosure by Department of Labour officials follows the ordering of a ministerial inquiry into a shortfall in ACC's non-earners account of $300 million per year.

On Tuesday, the Government ordered an inquiry, claiming the previous Labour government had underfunded ACC by about $1 billion for the coming three years.

Prime Minister John Key said ministers had been told by officials that ACC is seeking $297 million in extra funding for the Non-Earners Account in the 2007-08 year, and a similar amount for the two years after that.

The earners account is funded by levies on employees, unlike the non-earners account which is funded by tax. An average worker will pay an extra $5.40 per week from 1 April next year if recommended increases go ahead for the earners account.

Labour Party leader Phil Goff says National is only releasing the figures to soften New Zealanders up to the idea of privatising ACC.

However, ACC Minister Nick Smith says there are no plans to privatise the earners and non-earners account, saying his immediate priority is to address the funding shortfalls.

However, Dr Smith warns that there could be more funding issues ahead, saying the ACC system is in a mess.

The potential increases in the earners and non-earners accounts were outlined in an ACC consultation documents issued in October.

Labour promise

In July, the motor vehicle levy was raised by $50. During the election campaign, Labour promised to reduce those levies by mid-2009.

A Radio New Zealand political reporter says Dr Smith is not giving any indication of the size of the problem in the motor vehicle account.

In its briefing to Dr Smith, ACC says the levy collection in the motor vehicle account may not be appropriate in the future, as petrol becomes more expensive.