Spinning it on ACC levies

The advertisement below appeared in the daily newspapers last week – pure spin designed to counter outrage among motorcyclists against the huge proposed increase in ACC motorcycle levies.

It is based on the false premise that the risk of injuries among any particular group of people should be borne by that group of people. That sort of logic would also have cyclists paying a levy, sports clubs paying a levy, and even pedestrians having to keep a log book to record every time they cross the road.  But no mention of those in the Government’s proposals – it would all be too difficult, I guess, so just target the bikers.

acclevyspin

As the author of the ACC scheme Sir Owen Woodhouse reminded us last month, that isn’t how ACC is meant to run.  ACC is meant to be a no-fault scheme founded on the principle of community responsibility.

The community responsibility principle recognises that the various activities we undertake in society are all inter-related, and that benefit and harm flow on to others, rather than rest solely with the people undertaking those activities.

The community responsibility principle recognises that even though a disproportionately high number of motor vehicle injuries involve motorcyclists, a significant proportion of those injuries are actually caused by someone other than the motorcyclist.

The community responsibility principle also recognises that increased use of motorcycles where practicable has environmental benefits if single occupant car usage is consequently reduced, since the greenhouse gas emissions generated by a motorcycles are significantly less than from cars and the fossil fuel used per kilometre of travel is significantly less for a motorcycle than a car.

From that perspective, the Green Party would want to encourage motorcycle use as opposed to car use – however, the Government’s proposed levy increase for motorcycles does the opposite.

As for the advertisement itself,   there are two sentences at the end about the consultation process on ACC’s levy setting.  The rest of it continues a disturbing trend under the National-led Government of using public service funding – in this case your and my ACC levies – to promote Government political spin.

17 Comments Posted

  1. It is precisely because Labour viewed ACC as another form of Social Welfare that has produced the current state of it’s accounts.

    Toad: ACC is run as an insurance scheme. Should you chose to read the entire legislation instead of cutting and pasting from the preamble, you would see that that is precisely how it was envisaged to run. I would also submit that the entire scheme was flawed from the start, if it’s intention was to have “as its overriding goals, minimising both the overall incidence of injury in the community, and the impact of injury on the community”. The no-fault component and the tendency to spread the cost evenly over the poor and good accident risks has the exact opposite effect. A fact that should have been glaringly obvious from the start.

  2. @tomfarmer – good points tom.

    And a little closer to home, we should recall that HIH Insurance had the lion’s share of New Zealand’s workplace injury insurance during the 1999-2000 period of privatistion. Fortunately, it had been renationalised by 2001 when HIH collapsed.

  3. macdoctor 10.29pm on the 9th.. wrote:—
    Insurance companies pre-fund to ensure they can cover their liabilities. ACC initially did not because it thought it could just keep fleecing the taxpayer.

    Aside from much else you write I’d have to standout those two shrill sentences.. Smacking as they do of pre-derivatives-type deals. And modern margin-takers et al. That is to say pre the biggest ballsup by the biggest insurance corporation – AIG – ever. Too big to fail.. remember..? gross managerial incompetance.. prefunding—they couldn’t even manage day-to-day flows.. so corporatized were they.. get that for what it is.. topdown!!

    As for banks and other ‘too bigs’ fleecing the taxpayer (US rooted, but whosoever else as a current consequence.?) looks par for their coarse(sic). WE should be learning from such matters… not leaning toward..yes.?

  4. MacDoctor wrote: “We can (theoretically) choose not to fund them, whereas ACC actually owes the money, because they have accepted the claim.”

    would you similarly argue for pre-funding of prisons? After all, when a person is sentenced to prison, that’s an effective commitment to keep the person locked up for a certain period of time.

  5. Ah, macdoctor, that’s where I think you have it wrong. ACC was never envisioned as an insurance company. The purpose clause of its legislation reads:

    3. Purpose
    The purpose of this Act is to enhance the public good and reinforce the social contract represented by the first accident compensation scheme by providing for a fair and sustainable scheme for managing personal injury that has, as its overriding goals, minimising both the overall incidence of injury in the community, and the impact of injury on the community (including economic, social, and personal costs), through—
    (a) establishing as a primary function of the Corporation the promotion of measures to reduce the incidence and severity of personal injury:
    (b) providing for a framework for the collection, co-ordination, and analysis of injury-related information:
    (c) ensuring that, where injuries occur, the Corporation’s primary focus should be on rehabilitation with the goal of achieving an appropriate quality of life through the provision of entitlements that restores to the maximum practicable extent a claimant’s health, independence, and participation:
    (d) ensuring that, during their rehabilitation, claimants receive fair compensation for loss from injury, including fair determination of weekly compensation and, where appropriate, lump sums for permanent impairment:
    (e) ensuring positive claimant interactions with the Corporation through the development and operation of a Code of ACC Claimants’ Rights:
    (f) ensuring that persons who suffered personal injuries before the commencement of this Act continue to receive entitlements where appropriate.

    A social contract – not an insurance company. Sir Owen Woodhose makes the same point at frog’s link above to his comments.

  6. @toad:

    ACC is an insurance company, Toad. Both Education and Health are funded directly by the state. In addition, neither have long-term liabilities in the legal sense. Sure, there are long term education and health needs, but these are not dollar-attached liabilities. We can (theoretically) choose not to fund them, whereas ACC actually owes the money, because they have accepted the claim. These are two entirely different entities.

  7. @macdoctor 10:29 PM

    We don’t pre-fund education, we don’t pre-fund healthcare. When you first see a patient who is a smoker or heavy drinker or first diagnose an asthmatic or a diabetic they don’t get hit with a huge levy to pay for their future healthcare, even though they are a greater cost risk to the health system than patients without high risk behaviours or diagnoses.

    What makes injury rehabilitation and compensation so special, macdoctor?

  8. Is there an ACC levy on alcohol sales? Alcohol is responsible for a disproportionate number of accidents and also victims of violence.

    Is there an ACC levy on cigarettes? Careless discarding of lit cigarettes etc is responsible for a significant number of fires, and cigarettes can also be a distraction while driving, operating machinery, etc.

    Trevor.

  9. Katie: Heavens, what sort of outcry would there be if employers were asked to cover the actual costs of workplace injuries???

    Bring it on! Employers with safe workplaces are sick and tired of subsidizing employers who don’t give a damn about their workers.

    PS. Cumulatively the workplace account is usually in credit – i.e. employers do cover the costs of workplace injuries.

  10. Toad: Yet Labour, for some reason I’ve never established, still stand by the pre-funding model.

    Let me help you, Toad. It’s a little thing called fiscal responsibility. Insurance companies pre-fund to ensure they can cover their liabilities. ACC initially did not because it thought it could just keep fleecing the taxpayer. Unfortunately as Parker pointed out, there will be fewer and fewer taxpayers to fund a larger and larger liability. This is not a good economic model.

    Around 57% of ACC claims expenditure is on weekly compensation. Weekly compensation ceases when a claimant turns 65, so Parker’s comments are nonsense. More people over 65 will mean less expenditure on weekly compensation, not more.

    Sigh. Weekly compensation ceases at 65 but liability for disability does not. These liabilities and the cumulated liabilities from the past 25 years all have to be funded from a narrowing tax base. Pre-funding reduces this burden.

    You understand this for the Cullen fund and pensions but seem to have a mental block when it comes to ACC. Why is this?

  11. that ad sure looks black-and-white.. heh!

    the other thing that hits this occasional reader is how the government’s attitude appears to be LOSER PAYS.. motorcyclists and so on pre-deemed thusly..

  12. If motorcyclists have “some or all” responsibility for less than 60 percent of crashes, why are they being asked to fund 71 percent of the costs?

  13. Toad

    Their bi-partisan consensus is to front up on ACC now coz they are reluctant to deal with Super later – the problem they recognise is not the futre cost of ACC, but the future cost of Super. Thus the move to reduce the future cost of ACC.

    However this is a strange consensus when the money to afford the up front cost of future ACC now has to be borrowed (and the concern over borrowing is being used to justify user charges and compensation cuts etc) – it made more sense when Labour was running surpluses.

  14. Good spotting, Toad.

    Interesting that there appears to be a marked emphasis on pointing the finger at specific groups (motorcyclists, those receiving counselling for sexual abuse trauma) in an attempt not to holus-bolus increase levies for ‘mainstream’ population users of ACC – like employers, for instance.

    Heavens, what sort of outcry would there be if employers were asked to cover the actual costs of workplace injuries???

  15. I had thought that sports clubs, or at least their constituents, already had to pay levies and that those levies were the biggest component of playing costs?
    I agree whole heartedly that the levies should be borne by those whom are at the greater risk of inflicting the damage rather than those at the greatest risk of receiving it. It, especially if rates change based on driving record, puts the preasure on those with the weapon to use it safely rather than those potentially in the sights to try and constantly stay out of said sights. The person in the big SUV with three small bicycles painted on the side of the car should have to pay much larger levies than the person with a perfect record driving a morris minor simply because the former is the one whom is going to be putting the costs on ACC.

    I’m a little iffy about the whole incentives, “because its good”, thing though. Once you start doing that you are getting into subsidies and they hardly ever do any good.

  16. Labour have to take a share of the blame for this. When they re-nationalised the ACC workplace account they kept in place the pre-funding model National had implemented in 1999 to ensure that private insurers, who have to pre-fund future entitlements on existing claims, could compete.

    The fact that pre-funding remained in place has allowed National to now engage in their smoke and mirrors exercise in order to claim there is a “crisis”, hike levies, cut entitlements, and ultimately privatise it again.

    Yet Labour, for some reason I’ve never established, still stand by the pre-funding model. The link in frog’s post to Sir Owen Woodhouse’s comments also contains comments from Labour MP David Parker:

    Labour’s shadow ACC minister, David Parker, said Labour also supported moving ACC on to a fully-funded basis.

    The alternative was to load future costs on to future taxpayers at a time when there would be far fewer taxpayers for every older person.

    Around 57% of ACC claims expenditure is on weekly compensation. Weekly compensation ceases when a claimant turns 65, so Parker’s comments are nonsense. More people over 65 will mean less expenditure on weekly compensation, not more.

    The scheme functioned well under pay-as-you-go for 25 years for the first 25 years of its existence.

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