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Full Funding for ACC a political swamp that must be drained
20 June 2012
Full Funding for ACC is a political swamp that should be drained
The CTU welcomes indications by two political parties that they would abandon "full funding" of ACC claims and return to pay as you go with a substantial reserve, CTU Economist Bill Rosenberg says.
"We would encourage the government to use its current review of ACC funding methods to review full funding", he said.
"Full funding has proven to be a political swamp because the funding target rises and falls by as much as annual levy payments. This is a result of changes in assumptions about discount rates, investment returns, rehabilitation rates and cost inflation. It provides excuses for political swamp dwellers to alternate between cries of 'ACC funding crisis' and 'unaffordable levies' without a real basis for either."
In addition building the reserves required for it has been a major driver of rising levies.
Full funding has no practical purpose for a publicly provided service backed by the government. Unlike the New Zealand Superannuation Fund, it does not provide for future generations. It just covers the highly variable estimates of the cost of current claims.
Even a major event like the Christchurch earthquake "will not have a significant impact on ACC’s overall financial situation" according to ACC's own Statement of Intent, and outstanding claims are estimated at just $52 million compared to the total $2.8 billion claims budgeted for in the year to June 2012 and total assets of $24 billion. A sensible level of reserves would cover such situations.
"ACC's history shows that the biggest risk it has to cover is the political risk of opportunist or hostile politicians undermining its credibility. An adequate level of reserves would insure against that and major disasters. The huge reserves required for full funding are simply a burden on the economy."
ENDS
New Zealand Council of Trade Unions
Te Kauae Kaimahi
The New Zealand Council of Trade Unions Te Kauae Kaimahi brings together over 350,000 New Zealand union members in 40 affiliated unions. We are the united voice for working people and their families in New Zealand.
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