Hon John Key Prime Minister

02 December 2008

ACC blow-out sparks Ministerial Inquiry

The previous Labour government underfunded ACC to the tune of about $1 billion over the next three years, Prime Minister John Key has revealed.

"This is a significant and serious hole in the Government accounts, so today I am signalling the Government's intention to conduct a Ministerial Inquiry to determine how this happened, and why the information was not included in the pre-election opening of the books."

Mr Key says the terms for the Ministerial Inquiry will be firmed up over the coming days.

"But my top priority is to offer an assurance to those who rely on ACC that their services will be maintained, despite warnings that the Non-Earners Account will run out of money by March.

The National-led Government has 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 increase for out years.

"The previous Government knew of the seriousness of the situation, but did not disclose this information prior to the election.

"Officials have told the Government that they became aware of the serious funding issues in the Non-Earner account as early as May, and previous Ministers were also made aware of the problem. However, the funding shortfall was not mentioned in the pre-election opening of the books.

"There are serious questions to be answered about this very large ticking time-bomb. In light of this, I have determined that a Ministerial Inquiry needs to run alongside any internal ACC review."

Mr Key says the Government signalled in the election campaign that ACC would be subject to a full review, so the shape of the accounts can be properly and publicly assessed.

The National Government was elected on a platform that includes, a full stock-take of the various components of the ACC scheme, an evaluation of progress to full funding, identifying areas of cross-subsidy or cost-shifting and underfunding of newly-legislated entitlements.

The Government has sought further information from ACC, and expects to have another paper in front of Cabinet before Christmas.

National supports a comprehensive, 24/7, no-fault accident insurance scheme that delivers certainty of coverage for all New Zealanders.

ENDS

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