Labour will support an urgent law change to reduce July motor vehicle levy increases

Labour is urging ACC Minister Nick Smith to make an urgent law change so that the increase in the motor vehicle levy will be limited to $20 rather than $120, says its ACC spokesman David Parker.

“I have today tabled a member’s bill which will make the necessary changes and urge the Government to either support it or adopt the bill for its own use in order to ensure New Zealanders do not face an unnecessary hike in the motor vehicle levy this July.

“Labour last year pledged to make the law change straight after the election, as it became clear that the global economic crisis was putting pressure on ACC.

“The PricewaterhouseCoopers report released by Dr Smith yesterday shows those pressures have continued to increase. The report shows $1.8 billion of the $2.5 billion increase in ACC’s liabilities over the last six months is due to the international economic slump,” David Parker said.

“This international situation is the primary reason for the increased pressures on the ACC levies – not “generous” entitlements as claimed.

“Dr Smith said yesterday the Government was now considering the law change proposed by Labour, yet used alarmist figures which ignored the substantial reduction of levy increases which can easily be achieved.

“This is the solution and what he now needs to do is to commit to doing it urgently so motorists don’t pay more than they need to in July,” said David Parker.

“Labour believes political parties need to unite to fight the common enemy which is the international recession. The law change would enable us to blunt the impact on the levy rates and Labour is willing to support the Government to ensure this happens.

“Last year ACC said the motor vehicle levy would need to be raised from $254 to $287 in the 09/10 financial year, which we found unacceptable. The information released yesterday says the changed economic situation means the July levy would now have to be increased to $376.48,” said David Parker.

“But PricewaterhouseCoopers said that if the law change was introduced just over $100 could be knocked off the levy. Dr Smith needs take this action now, instead of using alarmist figures in a blatant attempt to mislead New Zealanders into thinking fundamental entitlements for injured people must be slashed.”

ENDS

Injury Prevention, Rehabilitation and Compensation (Change of Date for Full Funding) Amendment Bill

Member’s Bill

Explanatory note

This Bill amends the Injury Prevention, Rehabilitation and Compensation Act 2001 to extend the date for full funding of ACC claims from 2014 to 2019.

The recent world financial turmoil has decreased the amount the Accident Compensation Corporation (ACC) expects to earn on its over $12 billion of investments. Price Waterhouse Coopers have advised the government in their report dated 2 February 2009 that;

The liability [of ACC for claims] has increased by $1.830 billion due to the impact of revised economic assumptions, most notably revised discount rate assumptions. The global financial crisis has seen a large fall in forecast yields across most economies, with New Zealand having experienced an average 1.3% drop in yields over the 6 months to 31 December 2008. Due to the long term nature of ACC’s liabilities, even a small reduction in yields leads to a large increase in the liability. The change in economic assumptions is discussed further in section 5.

The current Act requires the lifetime cost of all ACC claims, including old claims, to be fully funded by ACC investments by 2014. That pushes up ACC levies to motorists and employers to unnecessarily high levels. ACC recommends that date be extended to 2019, which would substantially reduce levy increases.

For example, the current ACC levies paid by each motorist through their car registration and petrol levies are $255 per year. This is projected by the government to increase to $376.48 next year if the full funding date stays at 2014. If the date is extended to 2019 the increase needed to fund the tail is projected to drop by between $83.70 (ACC projection at page 29 of Briefing to the Incoming Minister) and $101-56 (page 3 Minister’s Q & A, 4 March 2009).

This would substantially avoid increases in levies proposed for motorists. Similarly the levy to employers for the residual claims account would drop substantially, from 68 cents to 36 cents per $100 of liable earnings, a saving of 32 cents per $100 of liable earnings. This substantial saving would help employers and their workers.

This Bill achieves these outcomes by extending the date for full funding from 2014 to 2019.

Clause by clause analysis

Clause 1 is the title clause.

Clause 2 provides for the Bill to come into force on the day after the date on which it receives the Royal assent.

Clause 3 states that the Injury Prevention, Rehabilitation and Compensation Act 2001 is the principal Act.

Clause 4 states that the purpose of the bill is to insert a new date into the principal Act by which the Residual Claims Account, the Motor Vehicle Account and the Earners’ Account must be fully funded.

Clause 5 amends section 193(1) of the principal Act by omitting “30 June 2014” and substituting 30 June 2019.

Clause 6 amends section 215(a) of the principal Act by omitting “30 June 2014” and substituting 30 June 2019.

Clause 7 amends section 220(2)(a) of the principal Act by omitting “30 June 2014” and substituting 30 June 2019.

David Parker

Injury Prevention, Rehabilitation and Compensation (Change of Date for Full Funding) Amendment Bill

Member’s Bill

The Parliament of New Zealand enacts as follows:

1 Title
This Act is the Injury Prevention, Rehabilitation and Compensation (Change of Date for Full Funding) Amendment Act 2009.

2 Commencement
This Act comes into force on the day after the date on which it receives the Royal Assent.

3 Principal Act amended
This Act amends the Injury Prevention, Rehabilitation and Compensation Act 2001.

4 Purpose
The purpose of this Act is to insert a new date into the principal Act by which the Residual Claims Account, the Motor Vehicle Account and the Earners’ Account must be fully funded.

5 Liability to pay Residual Claims levy
Section 193(1) of the principal Act is amended by omitting “30 June 2014” and substituting “30 June 2019”.

6. Basis on which funds to be calculated
Section 215(a) of the principal Act is amended by omitting “30 June 2014” and substituting “30 June 2019”.

7 Rate of levies
Section 220(2)(a) of the principal Act is amended by omitting “30 June 2014” and substituting “30 June 2019”.

© Scoop Media