Let’s not fool ourselves that what we’ve seen from National over the last 24 hours on to the shortfall in the ACC non-earners account hasn’t been carefully managed in a way to lay the foundation for their arguments in favour of privatising the scheme.
I won’t go into a lot of detail around their motives, as this blog has covered it off already, including some very sensible comments from Economist Susan St John this morning in the linked podcast.
But there are two issues here worth exploring further. Firstly how this issue was handled by Labour in relation to the election, and secondly how National has handled it since.
On the first matter, Labour, by omitting to flag up prior to the election a cost pressure that they were aware of, may have scored a bit of an own-goal on their entirely sensible and defendable policy of retaining ACC as a government not-for-profit monopoly.
Yes there is convention not to commit a future government to new spending during an election campaign, and this convention is in place for good reasons. And it is entirely understandable, given the timeframes outlined in the Department of Labour’s report that Cabinet was not able to sign off on increasing the provisions in the non-earners account before the election.
But there was nothing stopping Labour adding their knowledge of the need for increased ACC provisions into the Pre Election Economic and Fiscal Update. There is a section of the PREFU specifically for things like this â€˜unquantified risks’, a section where government can outline risks that ‘would, if they eventuated, impact on the Government’s forecast new operating and/or capital spending amounts.’ (Indeed, s.26 (U) of the Public Finance Act would appear to suggest that adding the ACC shortfall to the PREFU wasn’t actually optional it was mandatory. The phrase ‘all other circumstances that may have a material effect on the fiscal and economic outlook’ is the key one here).
Now it’s not clear whether this was Labour’s omission or Treasury’s. It is of course Treasury’s responsibility to prepare the PREFU, and they should not have knowing left it out. But if it was Labour’s, it was a silly decision. If you try to fudge and hide things, you will always get found out.
But on the second point of National’s handling of the information.
Let’s not kid ourselves over this. This error on either Labour or Treasury’s part called for a response, but a proportional response from National is not what we saw.
John Key’s use of language at the press conference he called foreshadows a campaign they intend to run on creating public mistrust in what is in fact a world class accident compensation scheme.
There is no sense that ACC or the Department of Labour acted inappropriately. They followed protocols around giving advice to Ministers in regard to committing a future government during an election campaign. Further, based on comments John Key has made, it seems that when ACC knew of the future cost issue in May, they informed the ACC Minister that there would be an increase needed, although not the amount.
And on the case of the cost increases themselves, the four areas detailed in the paper John Key released seem straight forward. And as officials note in the paper, ACC’s consulting actuaries believe the movements between the current provision for the non-earners account, and the proposed provision, are reasonable.
Thus Nick Smith’s Ministerial Inquiry seems fairly pointless; the issues behind the need for the increase are already out in the public domain. As Linda Clark pointed out on Sunrise this morning, in some respects â€˜Ministerial Inquiry’ is a fancy, official-sounding way of sternly saying â€˜please explain’.
Based on their pre election comments over ACC, and John Key’s choice of words yesterday, in particular â€˜ticking time bomb’, it seems evident that there were other motives at play in yesterday’s press conference.
Disappointingly, although not surprisingly, the media have continued to uncritically use John Key’s spin. (How many times have you heard that phrase â€˜ticking time bomb’ over the last 24 hours )
And people should watch out for the Tory commentators who will join in, and start bagging ACC, using the current funding issue to call for privatisation.
Take Graeme Hunt for example: “Many people think ACC is paid for by general taxes while, of course, it’s largely paid for by employers and it’s long overdue for the system to be reformed.”
He is of course telling porkies: a quick look at page two of the 2008 ACC annual report reveals revenue from car drivers, workers and taxpayers (through the government) was $2,534 million over the last year, whereas revenue from employers and self employed was $1,118 million.
But that’s not the point. Tory commentators like Hunt, and John Key with his phrases like ticking time bomb, have a very precise purpose – to sully ACC’s reputation, and cast it as inefficient and in need of the disciplines of the private insurance industry. (A global industry, by the way, that includes companies like the recently bailed out US firm AIG. Hmm, the sort of people I want managing my accident cover )
They’ll ignore the PricewaterhouseCoopers report finding ACC to be a world leader.
Let’s not let them.
– From a Standard reader.