Govt eyes ACC levy cuts later this year due to "financial turnaround" of ACC's books

The government is looking at making cuts to ACC levies later in the year due to a "financial turnaround" of ACC's books, ACC Minister Nick Smith and Finance Minister Bill English said today.

See the release from ACC Minister Nick Smith and Finance Minister Bill English:

Improved performance by ACC in the Non-Earners’ Account has freed up $638 million of taxpayer funding over the next four years, Finance Minister Bill English and ACC Minister Nick Smith announced today.

The Non-Earners’ Account covers claims for injuries to people who are not in the paid workforce, such as students, beneficiaries, retired people and children. This account is funded by the Government, using money collected from general taxation.

“The ACC scheme got into real difficulty with claims costs increasing by 57% and liabilities by 109% between 2004/05 and 2008/09.  The Government in 2009 initiated changes to governance, reversal of entitlement extensions, putting increased emphasis on improved rehabilitation, containing costs, and increasing levies,” Dr Smith says.

“I am particularly proud of the work ACC has done to turn around rehabilitation rates that have had a huge impact on costs of the scheme.  The 70-day rate deteriorated from 73% to 68% in the five years prior to 2009, but has consistently improved and is now back at 71%.  Every 1% improvement in rehabilitation rates reduces liabilities by around $500 million.

“These reforms have led ACC back to a path of financial sustainability while ensuring claimants receive proper care, rehabilitation and compensation. This prudent management has resulted in a reduction in funding of $177 million for the ACC’s Non-Earners’ Account in the 2011/12 Budget and an expected $638 million over the four years to 2014/15.”

There was no increase in levies this year and ACC’s financial turnaround will give some room for levy reductions when considered later in the year. 

Mr English says the strong turnaround in ACC’s Non-Earners’ Account was not only good news for the many thousands of New Zealanders who rely on it, but it will make a significant contribution to the Government’s wider programme to return to budget surplus as soon as possible.

“It’s important that the Government plays its part in lifting national savings by getting its own finances in order, returning to budget surplus and repaying debt,” Mr English says.

“The Budget later this month will take further steps in that direction by setting a credible path back to surplus. We will do that while continuing to support the most vulnerable and maintaining public services.”

In the past two Budgets, the Government reprioritised almost $4 billion of spending and Mr English says there will be more progress on this score in Budget 2011.

“The significant amount of money freed up by ACC’s turnaround, when added to these other measures, show the Government is taking a responsible approach to managing its finances, while at the same time improving public services,” Mr English says.