Spinbusting: the anchor-story

Written By: - Date published: 12:27 pm, December 4th, 2008 - 52 comments
Categories: ACC, Media, national/act government, spin - Tags:

There’s a lot of talk about the ACC budget deficit and National’s use of the issue to create an environment in which their privatisation scheme can roll with the minimum political fall-out.

Any doubt I had that this was their plan evaporated this morning when I heard Nick Smith on RNZ moving the story along by talking about maybe having to increase levies.

You see the ACC “blow out” is an anchor-story. It’s a big newsworthy story that can be spun with an “urgent” media conference and get lots of press that then anchors a whole stream of smaller stories that wouldn’t have got any coverage without it.

And National is doing exactly that. The urgent media conference was a great piece of theater as was the “ministerial inquiry”, and the lines “billion dollar blow-out” (gotta love that alliteration) and “ticking time-bomb” (oh noz! the clock is ticking!) were clearly prepared well in advance. The aim was to make as big a splash as possible and they pulled out the stops to do so.

Now they’ve created this anchor expect to see lots and lots and lots of minor ACC stories such as Nick’s ‘levies could rise’ bunkum spill out over the next few weeks with lines like “this follows closely on the heels of the billion dollar blow-out” and “against the background of a government inquiry in to the ACC timebomb” in them.

After a few months of this coverage it will look like there are a million things wrong with ACC. And then? Well, who could blame them for flogging it off?

52 comments on “Spinbusting: the anchor-story”

  1. infused 1

    What a crap post. You still trying to blame National? Labour created this mess. Labour are paying for it.

    You’re not busting anything. Infact you’re doing what you say you’re trying to bust. You’re spinning this left side.

    IrishBill: so you’ve got nothing of substance to offer, infused?

  2. NX 2

    Okay, say you’re right & National are milking this for all it’s worth.

    But even so, it was still an advantage handed to them by Labour.

    If Labour were concerned about the Nats using this issue for political point scoring, then they should’ve done the right thing & announced the ACC funding shortfall before the election.

    Sure you can criticise the Nats for political point scoring, but ultimately it stems back to Labour – just like the issue with the 757s. So in that regard, you don’t really have a leg to stand on.

  3. Von Wereknel 3

    If God makes you laugh, one should wonder where ones future lies, Peter.

  4. IrishBill 4

    NX, show me where I’ve blamed the situation on National. This post is about having a look at how national’s spin works more than it’s about ACC.

  5. Here’s what I don’t understand…

    Why would Labour hide this ACC problem to ambush National? If Labour were in power, they would have to deal with it and the consequences thereof.

    If Labour knew about the deficit, and knew that if they made it back to the treasury benches they would have to deal with it, they must have had a plan (that didn’t involve privitising it). I wonder what it was?

    Also, why would you increase earners levies when the problem is in the non-earners account, funded by taxes? As I understood it, the two accounts are “hermetically sealed” but Smith seems to portray otherwise.

  6. IrishBill 6

    Chris, Labour were in an election campaign. They probably didn’t want this bad news coming out because of the traction it would have given National. Labour had the option of coming out with the info or letting it slide and providing National with the chance to soften the ground for privatisation. They took the route of least resistance. That was a poor decision.

  7. NX 7

    NX, show me where I’ve blamed the situation on National. This post is about having a look at how national’s spin works more than it’s about ACC.

    My point is that National wouldn’t be able to spin this if it weren’t for Labour’s incompetence.

    It’s kind of a chicken and the egg scenario. You can’t attack National without inadvertently attacking Labour.

  8. Thomas Beagle 8

    Let me get this straight…

    ACC is underfunded. The Minister for the ACC says that, because of this, levies might have to be raised to pay for the additional funding. This seems kind of reasonable to me.

    Trying to turn this into a conspiracy is just weird. How would you fix the lack of funding without raising levies?

  9. NX 9

    If Labour were in power, they would have to deal with it and the consequences thereof

    Two words – ‘December mini-budget’.

    It’s with deep irony that Labour campaigned on trust while claiming the opposition had a secret agenda.

  10. IrishBill 10

    Thomas, the increase in levies is for the earners account. That’s kept separate from the non-earners account, is in good financial conditions and doesn’t cross-subsidise. The real question is why would you raise levies for a healthy account when you can’t transfer them to the one in deficit?

    Of course if you want to discredit ACC as a whole you can take a punt that that nuance won’t be understood and then start saying things like “there could be a problem” and “levies might have to rise.” which would help produce the impression it was all going to hell.

    NX, I’ve never held back from criticising Labour before and I think this was stupid politics on their part. But like I said, this is a post about PR and how a story is manipulated more than it’s about ACC.

  11. Thomas Beagle 11

    I should note, in a followup to my own comment, that Nick Smith was talking about cost blowouts for the other accounts as well as the non-earners, therefore talking about raising levies does make sense.

    This wouldn’t make as much sense if only talking about the non-earners account.

  12. IrishBill 12

    There are no cost “blow-outs” for the earners account. In fact they’ve come under criticism in the recent past for holding too much in reserve rather than reducing levies. Smith will know this but he’s not provided a figure. I can tell you right now if they had a nasty big negative figure for the earner account they’d call an “urgent” media conference to tell everyone. They don’t so Smith has to resort to “if” and “maybe” statements to get the bad news story he needs.

  13. Bill 13

    Here’s a question. Why will the thoughtful original post on this topic or this current informative post never appear in any MSM outlet?

    Here’s the 6 500 word answer…http://www.medialens.org/forum/viewtopic.php?t=2860

  14. Concerned of Tawa 14

    IB “There are no cost “blow-outs’ for the earners account”

    Oh really?

    $1,300,000,000 blowout revealed today… Oops

    It was all about trust…

  15. NX,

    Did the then opposition deny they had a secret agenda?

    To all, the silly season cometh: workers and wouldbe affected by any change/s to weigh in for another bout of low conflict (so termed by their US-sourced forerunners with a close resemblance to followers nactional) industrial relations.

    Such jolly types.. christmassy.. and good will.. and riiight..

  16. Dean 16

    IB:

    “There are no cost “blow-outs’ for the earners account. In fact they’ve come under criticism in the recent past for holding too much in reserve rather than reducing levies. Smith will know this but he’s not provided a figure. I can tell you right now if they had a nasty big negative figure for the earner account they’d call an “urgent’ media conference to tell everyone. They don’t so Smith has to resort to “if’ and “maybe’ statements to get the bad news story he needs.”

    Compared and contrasted to:

    “”Department of Labour officials have advised the Government to increase the current ACC Earners Levy of $1.40 per $100 of earnings to $2.00 in 2009/10, $2.10 in 2010/11 and $2.20 in 2011/12 to cover the increased costs of the Earners’ Account.

    “The cost increases identified by officials is being blamed on increases in the number of claims, lesser rates of rehabilitation resulting in increased duration of costs, increased medical and treatment costs, expansion of the schemes entitlements, and increases in treatment injury cover.”

    Perhaps you’d care to revise your statement?

  17. tsmithfield 17

    Now there is a billion dollar blow-out on the earners account as well that Labour most likely knew about before the election.

    So, could someone here tell me, given the knowledge that Labour had prior to the election, how were they going to meet their promise to REDUCE levies? Or was that a promise to be scrapped after the convenient “mini-budget” after the election?

  18. gomango 18

    Irish Bill

    you have to be kidding with this comment:

    There are no cost “blow-outs’ for the earners account. In fact they’ve come under criticism in the recent past for holding too much in reserve rather than reducing levies.

    Read the ACC report:

    Current Total Asset position: 13.2 billion

    Current total liability position: 21.2 billion

    Lets look at the six accounts, just the net poition ie assets minus liabilities:

    Residual Claims -1.8 billion
    Motor Vehicle -2.7 billion
    Non-earners -2.4 billion
    Earners -0.8 billion
    Work +0.5 billion
    Treatment Injury -0.8 billion

    Total DEFICIT yes deficit across the six funds is 8 billion dollars. The numbers being bandied about in the press today (2.3 billion and counting) are th difference between the existing budget and the new budget. As of end of 2008 FY, the budget deficit was -6.2 billion.

    Where do you get any kind of statement saying ACC or any of the major accounts are “is in good financial conditions” or “healthy account”. You’re making facts up – please read page 91 of the ACC annual report.

    Can you please explain the following statement you made above?

    The real question is why would you raise levies for a healthy account when you can’t transfer them to the one in deficit?

    Which healthy earners account would that be – the one that is 800 million in deficit in June 2008, and now 1.3 billion in deficit? Or is it 2.1billion in deficit now – I think we’ll find its the latter.

    I appreciate the point you made about Labour sweeping this under the pre-election carpet, bad move and indefensible. Are National talking this up? Of course they are, any aura of financial mismanagement Nats can pin on Labour is obviously in their interest.

    Regarding ACC, as I sad in the other thread:

    Solvent? World Class? Best of breed? Yeah right………

  19. burt 19

    After a few months of this coverage it will look like there are a million things wrong with ACC.

    No, there is about 2,300,000,000 things wrong with ACC, just Labour didn’t want to tell us that before the election. No wonder Clark & Cullen quickly threw in the towel once they lost the election.

  20. IrishBill 20

    Well it looks like I got it wrong on the earners account. That’s a first. Go figure.

  21. Tim Ellis 21

    Okay, this is just getting more and more ridiculous. Unfortunately for IB, the very afternoon that he said that there were no deficits in the Earners’ account, the Minister announced a $1.3 billion shortfall in the Earners’ account. That was unfortunate timing, to put it mildly.

    For those who don’t know, there are six ACC accounts that are funded from a variety of sources:

    Work Account:Funded by levies on employers, according to the risk profile of the occupation for accidents in the workplace. National said pre-election that it will consider opening this account up for competition. Is self-funding, and not in deficit.

    Earners’ Account: Funded through PAYE as a levy on all earners, currently at $1.40 per $100 of earnings. Will be in deficit to the tune of $1.3 billion over the next three years. Will need to see levies rise to $2.00 per $100 of earnings to get out of deficit, or see a major reduction in cover. Complex and difficult to open up to competition. National said it would not do so.

    Non-Earners’ Account: Funded by direct transfer from the government for people not in the workforce (beneficiaries, children, superannuitants). In deficit to the tune of $900 million over the next three years. Complex and difficult to open up to competition. National said it would not do so.

    Motor Vehicle Account: Funded by petrol taxes and motor vehicle registration. Probably not in deficit. Labour announced on 28 October that levy rates would fall. Almost impossible to open up to competition, as it would involve private motorists getting individual cover. National has said it would not open up to competition.

    Treatment Injury and Residual Claims accounts: Funded from Earners, Non-Earners accounts, and employers’ accounts respectively for medical misadventure and historical employer claims. May be in deficit. Almost certainly impossible to open up the latter to competition; the former can really only be done by levying health providers. Almost certainly won’t happen.

    As for the claims that Labour didn’t want to bind the next government by making announcements prior to the election on the state of the ACC accounts, that is just plain rubbish. Labour campaigned on reducing employer levies and motor vehicle levies. They were the only accounts they mentioned when they pledged to “lower ACC levies”. Maryan Street did so almost certainly knowing of major cost blow-outs in the Earners’ and Non-Earners accounts. While promising lower employer levies, Street also announced a review of work-related pain injury cover to provide more comprehensive cover. This extra cost would have come through Employer levies.

    Street had the perfect opportunity then to set the record straight on the Earners’ and Non-Earners’ accounts. She didn’t. I find it just staggering that she could have sat on information that these accounts were facing enormous deficits, while going around the country saying she was going to reduce levies and increase ACC cover.

    I don’t have any doubt that there does need to be a full review of ACC. In the Earners’ and non-Earners’ Account, the two options are clear: either reduce cover, or have workers pay substantially more for their cover. Opening it up for competition just isn’t an option. Labour have given National a free-pass on this through their cover-up of the issues before the election. National can either continue to raise levies and blame those increased costs on Labour, or declare those increased costs as unsustainable and reduce cover. Either way, the shonky politicking that Labour played with the ACC system, and their hysteria-driven cries of “privatisation” have severely damaged their integrity on ACC.

    In the Work Account, where no real problems seem to exist, the issue of opening it up for competition is still on the table. There’s nothing in the information so far to suggest that this is more or less viable as a result of what’s come through in the last few days. There may be greater efficiencies and savings to be made from competition, particularly if the Work Account is effectively cross-subsidising other accounts.

    One further point, I was very surprised reading the ACC briefing to the Incoming Minister. It isn’t a briefing at all. It’s a propaganda document eulogising the ACC system, and Labour Party policy. It doesn’t include any of the key numbers on cost blow-outs. It reads like a cynical attempt by the ACC board to cover itself in glory. That document alone seriously undermines confidence in the ACC board.

  22. gomango 22

    Irish Bill

    I’m not really trying to score points by pointing out you got something wrong, though it would be helpful for everyone to read the latest annual report before commenting. And I must say your timing was impeccably bad to make the sweeping statements you did. After all you were only a few billion dollars wrong – hardly important, though I suspect it would have been important enough for Cullen to reverse his tax cuts were he still Finance Minister. The reality of ACC does not come close to your rose tinted view of ACC.

    What really irks me about ACC debate is the two extreme arguments (left/right) neither of which is sensible – loosely defined as “best scheme in the world/absolutely marvellous/don’t change anything versus deregulate/privatise. Neither is a sensible position, and taking the best parts of both arguments would vastly improve the system.

    Addressing the general left position – ACC IS IN A MESS and has been for years. If it were a company it would be insolvent, and its directors breaking the law. Thank god they have a stupid owner prepared to underwrite a negative equity position of over 8 billion dollars…….

    I won’t bother addressing the right position but I can assure you I would be just as negative on aspects of that too. What is clear is that any debate on ACC is uninformed unless you read their accounts.

  23. Lew 23

    Fundamentally even though National’s criticism of the previous government’s handling of the ACC accounts is valid, IB’s point stands: this is less a pragmatic issue of policy and spending than it is a symbolic issue of `socialist bureaucratic waste’, and it’ll be the mother hen to a whole lot of other issues in a similar vein which on their own might not have been worth a mention. National seem to have set this as the keystone of their agenda, and the previous government were fools to let them do so.

    L

  24. gomango 24

    Tim – the only account in actual surplus is the Work Account. I think you are confusing budgeted change in deficits with actual deficits. Some accounts may not be worse than their budgeted change in deficit (though this is unlikely in the current market environment). The other 5 accounts are all in actual deficit and I think we’ll find out over the next few days worse versus budget.

    It would be good for every post on the subject of ACC to begin with the following phrase:

    I understand ACC is over NZD 8 billion in deficit and technically insolvent, but…….

    BTW, 8 billion dollars is approximately $2,000 for every man, woman and child in NZ.

  25. Tim Ellis 25

    IB, just following up on gomango’s initial point, we all appear to have overlapped in our postings and I gave you a bit of a serve too, but good on you for being gracious enough to admit you got it wrong. It’s one of the hazards of making predictions and bold statements (I’ve done it a fair bit, too), that sometimes new information can come along and bite you. That one was a bit of a clanger but it wasn’t your fault and at least you had the balls to make the bold statement in the first place rather than sitting on the fence.

    One of the things I do admire about young SP, even though I often disagree with him, is that he does have the guts to get it out there.

  26. Tim Ellis 26

    gomango wrote:

    Tim – the only account in actual surplus is the Work Account. I think you are confusing budgeted deficits as opposed to actual deficits.

    I think I indicated projected deficits rather than actual deficits gomango. To be fair a reason that all the accounts, with the exception of the Work Account are in deficit is a function of the move from pay-as-you-go ACC funding up until 1999 transitioning to fully-funded accounts by 2014. When the Work Account was opened for competition in 1998, it was required to be fully-funded, the other accounts are still moving to that position.

    It was a near certainty, without aggressive management of the tail in each of the accounts, that levies across all accounts would rise from 1999 onwards even taking into consideration existing cover. For the last nine years Labour have pumped up the “world class system” mantra, and carefully not only ignored the massive cost of it under existing cover, but actually extended coverage as well.

    Moving from pay-as-you-go to a fully-funded model was one of the most fiscally responsible actions by any New Zealand government. It’s directly comparable to setting up the Cullen Fund to partially-fund future superannuation entitlements. Labour has dragged the chain on fully-funding ACC, not wanting to deal with the political reality that a gilt-edged accident compensation scheme is very expensive to pay for.

  27. rave 27

    Gomango:

    ” Addressing the general left position – ACC IS IN A MESS and has been for years. If it were a company it would be insolvent, and its directors breaking the law. Thank god they have a stupid owner prepared to underwrite a negative equity position of over 8 billion dollars…”

    You obviously don’t see the irony here. Right at this moment, the biggest capitalist institutions in the world eg. Citigroup, are insolvent, their directors are not in jail, and they are being bailed out to the tune of $8 trillion plus and still counting.

    The state funded ACC can be in deficit and legitimately charged to the government until the premiums are re-adjusted. There is no off balance sheet gambling going on here. No corrupt CEOs filling their bank accounts with workers savings. This is perfectly proper public financing compared with the right-wing ideological ‘socialism’ now being practiced by the worlds central banks.

    Its a right wing snow job to point to the broken toe on the thug who is busy kicking our brains out.

  28. Lew 28

    gomango: What really irks me about ACC debate is the two extreme arguments (left/right) neither of which is sensible

    I’ve been a staunch supporter of ACC in the past, and remain so – but only in comparison to the proferred alternative, which is eventual privatisation. I’ve written extensively on this and have issued a challenge to anyone who wants to try to demonstrate how opening the worker account up to competition will not eventually lead to full privatisation of that account, and nobody has yet done so (trawl through old ACC posts; I bring it up a lot).

    But while I suspect we might disagree on the balance, I think I agree with you that the system we have now is not optimal, and nor would be a wholly or partially-privatised system. The problem is that I think what we’re seeing here is a return to the old `privatise and then at least it’s not our problem any more’ ideas, which would be much worse than simply retaining the flawed system we have now. Yes, I know how flawed it is – I’ve lived through the cashflow shortages caused by their incompetence when the majority of my mum’s client base (and therefore income) have their treatment paid for by ACC. In that respect it’s a damned site better now than it was in the 80s and 90s when I was living at home.

    There are things which could be fixed – the degree of moral hazard which the cross-subsidisation system creates in some accounts, for instance. But the discourse about ACC’s problems seems to always argue for scrapping or utterly revamping the system,, reducing coverage or entitlement, or competition/privatisation, which amounts to both. We have a good system which has potential to be great – but `perfect’ is the enemy of `good enough’. The focus, in my view, should be on improving the system we have without fundamentally changing it.

    (And that’s why I’m opposed to the National policy.)

    L

  29. burt 29

    Serious changes are required in how we do accident insurance in NZ, this much is obvious and anyone who argues with that needs to answer why Labour didn’t disclose this before the election.

  30. gomango 30

    yes thats fair comment Tim- anecdotally the investment staff within ACC believe 2024 is more likely than 2014 (as they roll their eyes toward the ceiling.)

    I think we both agree is ACC is now a poorly structured system with obvious outcomes from specific public policy imperatives over the last 10 years. I don’t think the politicians can even claim unintended consequences, more like lets ignore as long as possible the consequences we know will arise from these particular policy inputs.

    The ACC board make up isnt too bad for a core quango – realistically only three are blatant political appointments without also having valid commercial, legal or investment skills – I’m thinking Butson, Fortuin and Karaitiana as the lightweights. And Pip Dunphy and Don Turkington are very sound operators. Even Neilsen and Wilson despite their past political positions bring something to the table, though maybe also an unwillingness to push back on the minister when they should.

  31. Tim Ellis 31

    Lew, I agree with you on many of your points.

    In my view, it just isn’t acceptable to continue delaying fully-funding ACC accounts. It is dishonest, and just passes the cost of current claims onto future generations. To a large degree the blow-outs are more about fully-funding (i.e., paying for the actual total costs) than significantly increasing costs.

    If we’re going to have an honest debate about the ACC system, then I think we can only have it in a fully-funded environment. Rationally, the only account that might be open to competition and privatisation is the Workers Account. The other accounts are just too difficult to unbundle and get individual cover for. It’s the only account that National has talked about opening up for competition.

    In the other accounts, citizens, taxpayers, and levy-payers do have a right to know what they’re getting in entitlements for the actual cost of the scheme. I suspect until now earners have been quite happy getting gold-plated coverage for $1.40 per $100 of earnings. Would they be just as happy getting the same cover for $2.20 per $100?

    My own view is that New Zealand just isn’t wealthy enough to pay for such a luxurious scheme. We need to have that public debate. Labour’s tactic, to shield people from the costs of the scheme, and then trumpet how wonderful the scheme was, and shrieking “privatisation” whenever National questioned it, was simply cynical and dishonest.

  32. gomango 32

    oops, broke my new rule on the last post.

    I understand ACC is over NZD 8 billion in deficit and technically insolvent, but Lew – what do you want someone to prove? I’m not sure what your competition/privatisation argument is about. There are successful govt owned entities which compete with the private sector and they haven’t been privatised. Why not ACC? Is your argument more a discussion about the meaning of the word privatisation. Are you a jesuit priest? Do I need to break out my magnifying glass and pin? Joking aside I don’t think our positions are too far apart – we want the same outcomes and don’t ant the same unintended consequences.

    And if your only proof that ACC is better now than it was is that your mothers business has better cashflow now – well really? I’m not sure your mothers earning should be one of the core objectives of a soundly designed, and carefully managed insurance scheme. I’m guessing she is not a physiotherapist?

    I don’t necessarily believe carte blanche competition is the answer, but a root cause of ACC problems is the fact it has become a social policy tool rather than, as originally intended, a workers accident compensation scheme funded by employers. Much of what ACC now does are functions that should lie with other govt departments – MSD, Health etc. Ministry of Tourism too?

    And there is no irony in my comment you highlight – I also say “thank god the banks globally have stupid owners willing to back them to the tune of x billion/trillion dollars”. We’d be in incredibly serious trouble (as opposed to the really serious trouble we are now in) if the likes of Citi, Fannie, Freddie, AIG etc fell over.

    Fundamentally here is the issue for ACC. It is a politicised outfit (in terms of the rules given to it by the minister), there is a fundamental mismatch between the political objectives which define its role, and the political will to fund it appropriately. Either ask it do less or give it more, but be honest. The one argument I like from the right is impose some discipline on its management – easiest way to do that is some targeted competition.

  33. burt 33

    Has anyone the got the energy to calculate how much $3b will cost once borrowing costs are factored in?

    By the time it’s paid back perhaps 6 years from now, after perhaps another $5b (for the same purpose) has been borrowed during the time to pay back the original $3b – what will the real cost be that was hidden from the election?

    Thankfully we don’t have a Labour govt that would try and do the whole thing from current taxation revenue. Now we can see why Cullen was such a big fan of fiscal drag, it allowed him to take so much more every year to sort this sort of shit out.

  34. tsmithfield 34

    The statement below appeared under my name. However, I definitely did not make the statement. Could someone please look into this.

    “tsmithfield
    December 4, 2008 at 8:03 pm
    Irish Bill
    Couldn’t have said it better!!
    Of course all the dunderheads who get their marching orders from the right blogs are like baying wolves at the moment chorusing with the devious Smith! A 3% shortfall in funding requires a ministerial inquiry? Give me a break! The earners shortfall will be an even smaller percentage! Wait until they are being fleeced by John’s rich mates – will they then be crying – “Oh! this is so much better!’

    captcha “norwich herman’ Now who could that be??”

    [lprent: I’m looking at it now. Checking IP’s]

  35. IrishBill 35

    TS, I noticed that too. I assumed you were being incredibly sarcastic. I’ll check it out.

    As for my comment on the earners account? I had confused it with the work account. I must be getting old. The current situation would seem to confirm that we couldn’t afford National’s extra tax cuts however. Although I’m impressed with the Nats gall in claiming the levy will claw back some of their tax cuts. One could equally argue that their cuts were unaffordable. In fact it opens up an interesting argument about whether the priority should be a solid ACC system for everyone or a tax package that primarily benefits the top 10% of earners.

  36. lprent 36

    ts: Definitely an identity jack from someone who knew your e-mail, which is why it didn’t get picked up here. It is a different IP range. I’ll contact the possible suspect, but it is a dynamic IP. Putting the IP range on moderation.

    I’d suggest that you start logging in.

  37. Mr Shankly 37

    Is ACC giving the country good value for money?

    Not really, unfortunately a system has developed in which many health professionals and others in the ‘faux private’ sector have become dependant on ACC sometimes lenient treatment and rehabilitation guidelines. If the public realised what the benefits of a treatement were and the cost of the treatment – spending would reduce dramatically.

  38. sux2bu 38

    It’s about Trust…

  39. sux2bu 39

    Funny how the Standard’s idea of “Spinbusting” is a story to completely change the focus from Labour’s concealment of their appalling mismanagement to being somehow about speculations on hypothetical future Nat policies…

  40. gomango 40

    Bill

    So your position now is ACC is a robust functioning system because the work account – the one account capable of being easily opened to competition – is in surplus whereas the rest is over 8 billion in the whole?

    Doesn’t this kind of prove the point about efficiency?

  41. tsmithfield 41

    I heard Larry Williams was talking about his experience with ACC on ZB last night. Apparently, he went in for some phisio for an injury. According to him, he had fully recovered and did not need anymore sessions. He tried to cancel the remaining ones. However, they pressured him into completing the remaining sessions anyway. Larry had the distinct impression that the phisio wanted to make sure they got the remaining ACC payments.

    I am sure there is a lot of this sort of thing that goes on. Thus, the system is probably being rorted left right and centre.

  42. justthefacts 42

    2.5 Billion and counting….”remember this election is all about trust”!

    If Clark and Cullen were people of integrity they would resign immediately, these two blatantly lied to the people of New Zealand and should have no place in our Parliament.

    Those of you who continue to defend them are equally guilty.

  43. Tim Ellis 43

    IB wrote:

    The current situation would seem to confirm that we couldn’t afford National’s extra tax cuts however.

    I don’t understand your point, IB. The cost increases in the Earners’ account will be directly paid for by Earners, meaning an increase in levies on earners to the tune of around $600 a year. That seems to me to be a very good reason to proceed with the tax cuts, with such an increased cost looming.

    I could see your argument if the blow-out constituted a cost to the taxpayer (and the non-earners account does, to the tune of $300 million), but the earners’ account isn’t paid by the taxpayer. Using an increase in levies in the earners’ account as a reason to delay tax cuts is stretching it, in my view.

  44. IrishBill 44

    Tim, as I understand it the earners account (and most of the others) have their deficits subsidised. The increased levies have been recommended to make the account self-funding by 2014. Labour looked at this and decided it would mean raising the levies to high too quickly.

    If National’s tax cuts didn’t go ahead there would be more than enough money to continue the subsidy. But it is about political priorities and National is obviously of the belief that taxcuts that focus on the top 10% of earners are a greater political priority than an ACC system that works for all New Zealanders. That’s their decision to make and having done so they need to sell it. That’s what they are doing with this media campaign.

  45. Lew 45

    Tim Ellis: In my view, it just isn’t acceptable to continue delaying fully-funding ACC accounts.

    I absolutely agree – but that’s pie in the sky at present.

    Rationally, the only account that might be open to competition and privatisation is the Workers Account.

    Correct. But my argument is that gutting this account will weaken the entire system such that it is no longer even as viable as it is today – which is to say, the only rational think to do at that point would be to sell it lock, stock and barrel for peanuts to IAG or some gang of crooks like that. That would mean an end to universal comprehensive no-fault accident cover in NZ, and that’s simply not an acceptable outcome for me.

    My own view is that New Zealand just isn’t wealthy enough to pay for such a luxurious scheme.

    I disagree, but …

    We need to have that public debate.

    I couldn’t agree more. It’s a matter of situational utility.

    gomango: but Lew – what do you want someone to prove?

    The initial gedankenexperiment was here. A fairly useful but unresolved discussion between burt, myself and others is to be found in this thread. Basically, I wanted some of the National true believers who claimed that opening the worker account up to competition would not lead eventually to privatisation to rebut this fairly elementary proof. It wasn’t a comment on the state of indebtedness of ACC or its operations – as I’ve made clear, I believe there are improvements to be made, just not via competition leading to privatisation. I’m not trying to bait anyone – I really want to see if anyone, anywhere can actually explain why it won’t happen in apparent contradiction to what we know about behavioural economics. If you want to argue privatisation is a good thing – then that’s a different argument, and one National aren’t prepared to have with the electorate.

    And if your only proof that ACC is better now than it was is that your mothers business has better cashflow now – well really?

    I meant no such thing as proof – just an offhand anecdotal observation than when an agency can’t even pay its own contractors something is badly wrong. At least they can do that now. But indeed, it shouldn’t be their top KPI.

    a root cause of ACC problems is the fact it has become a social policy tool […] it is a politicised outfit (in terms of the rules given to it by the minister),

    I agree, but we probably locate the source of the problem differently. National attacked and undermined the entire ACC concept and model with the 1998 privatisation, and did so on a strictly unilateral basis. This politicised ACC to an extent that it shouldn’t have been, and is why I think future changes must be made in consultation with those who’ll actually be implementing them, though of course not to the exclusion of other stakeholders’ needs. I think their first step should be to try and salve some of that bad blood, because like it or not, ACC and the Nats have to work together, and while they can fire the board or whoever, they can’t start rolling the tanks over the front-line staff, providers and contractors they’ve been so forthright in championing this election campaign.

    The one argument I like from the right is impose some discipline on its management – easiest way to do that is some targeted competition.

    In almost any other industry I would agree, but here we get back to my initial six-point schema of how it all turns into a US-style system which rewards providers who pay out the fewest claims at the lowest average cost to the lowest-risk clients, rather than a scheme whose objectives are properly compensating those who suffer accidents.

    And there is no irony in my comment you highlight – I also say “thank god the banks globally have stupid owners willing to back them to the tune of x billion/trillion dollars’.

    It ain’t me, babe – that was rave.

    L

  46. Tim Ellis 46

    IB said:

    Tim, as I understand it the earners account (and most of the others) have their deficits subsidised. The increased levies have been recommended to make the account self-funding by 2014. Labour looked at this and decided it would mean raising the levies to high too quickly.

    No, that isn’t correct IB. Pay-as-you-go doesn’t mean that the state subsidises it. It means that the cost of the present year’s injuries are funded from the present year’s levies. Fully-funding provides for all the future costs of accidents incurred in the one year. Let’s say you injure your back. The cost of treatment this year might be $20,000. But you might need twenty years’ treatment at that cost, so the total cost might be $400,000. By not fully-funding costs, the future cost of accidents incurred today are passed on to future levy-payers.

    If National’s tax cuts didn’t go ahead there would be more than enough money to continue the subsidy.

    It’s not a subsidy. It’s shonky accounting that puts a larger burden on future levy-payers.

    But it is about political priorities and National is obviously of the belief that taxcuts that focus on the top 10% of earners are a greater political priority than an ACC system that works for all New Zealanders. That’s their decision to make and having done so they need to sell it. That’s what they are doing with this media campaign.

    I think I’ve demonstrated that it isn’t about political priorities. As I’ve noted earlier in this post, you just can’t sell ACC. The structure of ACC and how it is funded mean that the only account that can be opened for competition is the Work account. People who understand how ACC works know that you can’t privatise the Earners, non-Earners, or Motor Vehicle accounts without removing universal cover. The earners’ account could include an opt-out provision for workers who take up private insurance, but that is effectively nothing more than an extension of the Accredited Employer scheme to earners’ cover. That’s a side issue, since it isn’t being advocated by National. So the claim that these accounts might be privatised is only ever made through mischief, or ignorance.

    Lew said:

    Correct. But my argument is that gutting this account will weaken the entire system such that it is no longer even as viable as it is today – which is to say, the only rational think to do at that point would be to sell it lock, stock and barrel for peanuts to IAG or some gang of crooks like that.

    If there is no cross-subsidy between accounts, Lew, then how would opening the worker account account up to competition, or even privatising it, weaken the system? Admittedly, ACC would lose some of its critical mass if work accident cover was removed, but ACC still would enjoy a monopoly across all other accounts, and still retain significant service buying power. A strong argument, in my view, to open the work account to competition is that it allows the ACC to focus on its other accounts.

  47. Lew 47

    Tim: There is no cross-subsidy between accounts, but that doesn’t matter to most people – as far as they’re concerned there’s `ACC’. If the earner account fails because of cherry-picking (and if you don’t think it would, I invite you to rebut my argument linked above) then it’s a short step to `ACC must be sold’.

    L

  48. IrishBill 48

    “So the claim that these accounts might be privatised is only ever made through mischief, or ignorance.”

    Perhaps I was lax with my language. If you want to be pedantic then I’ll restate: National want to privatise the work account. To return to my original post, they know that the difference between accounts is not clearly understood (even I mixed up the earners and the work account) and that the privatisation of the work account will come with less political fallout if the ACC brand as a whole is brought into disrepute with the electorate.

  49. While it doesn’t necessarily exist to make a profit, is it not a concern that by privatising the profitable part of ACC, i.e. the employer’s account, will make the rest of ACC an even bigger burden than it is currently?

    ACC will retain the dues of those who have the worst H+S records, and therefore shoulder a huge potential burden. Why should taxpayers be subsiding bad companies, and letting private operators take the best clients? The problem with the whole scenario is that it is an opening of the floodgates – comments above suggesting that we have a luxurious system do not inspire me with confidence regarding the future of universal accident cover in New Zealand.

    The claim that “competition in the employer’s account market would reduce premiums, and provide an incentive to workplaces safer” is simply bollocks. A overwhelming majority of the firms who would benefit from lower employer premiums are those whose employees are put at minimal or no risk in their occupational roles. The dangerous would remain dangerous, as they have little incentive, as the private operators would not want their business. This also omits the fact there are already strict H+S guidelines around workplaces, and that violation of these can result in criminal prosecution, a strong incentive, if any, to pay attention to occupational safety and health

  50. Tim Ellis 50

    While it doesn’t necessarily exist to make a profit, is it not a concern that by privatising the profitable part of ACC, i.e. the employer’s account, will make the rest of ACC an even bigger burden than it is currently?

    No, PP. The work account is not supposed to make a profit. It does not subsidise other accounts. Removing the work account from ACC doesn’t place a larger burden on other accounts. Arguably it allows ACC to put a tighter focus on other accounts.

    ACC will retain the dues of those who have the worst H+S records, and therefore shoulder a huge potential burden. Why should taxpayers be subsiding bad companies, and letting private operators take the best clients?

    I am not an expert in actuarial risk, but that isn’t how the scheme would work. Presently employers are already rated by risk. The worst employers, in the worst industries, with the worst health and safety ratings, do pay higher premiums. If ACC remained the default insurer for bad companies who could not get cover elsewhere, then the taxpayer wouldn’t be subsidising that burden, as they are not subsidising the work account now. In that scenario, were it to happen, then the worst employers would just face dramatically higher premiums than they do now.

    Cherry-picking is a convenient idea, but it just doesn’t stack up in a fully-funded model. Actuarial risk determines premium rates across all risk profiles.

    IB said:

    privatisation of the work account will come with less political fallout if the ACC brand as a whole is brought into disrepute with the electorate.

    Bill, it would really help the debate if we didn’t have hysterical calls from the Left of “privatisation of ACC” was not bandied about whenever the work account is discussed. As is agreed by pretty much everyone, it is really only the work account that we are talking about. This is only a small part of the ACC scheme in terms of levies collected, claims and expenditure, with around 15% of claims and 10% of claims liability. The non-earners account represents around 48% of all claims.

    National already faced the political fallout before the election by saying that they were open to moving the work account to competition. Further political fallout? I know it is a touchstone issue for unions and business, but the work account is only a very small part of ACC. Business would like to see lower premiums. Unions are concerned that coverage will be reduced in a privatised model. If coverage is guaranteed (as it was under the last National government when the work account was opened up), then I’m not convinced that opening up the work account is as likely to face political fall-out as you’re suggesting.

    Of course, it suits Labour to shriek privatisation and “ruining the integrity of the ACC scheme”, but there are much more fundamental and deeper problems with the ACC system than whether the work account is open to competition. Like whether the level of coverage across the earners’, non-earners, and motor-vehicle accounts is sustainable, and whether levy payers in those groups are prepared to continue to pay for this gold-plated scheme when they are properly fully-funded.

  51. And right on que: http://www.stuff.co.nz/4783487a11.html

    “Finance Minister Bill English has confirmed there is likely to be a “significant” rise in the amount workers pay to ACC from April 1 next year.

    ACC Minister Nick Smith yesterday said a blowout in the ACC earners account could see average wage earners lose almost a third of the value of next year’s tax cut if the incoming Government follows officials’ advice.”

  52. Rave,

    Its a right wing snow job to point to the broken toe on the thug who is busy kicking our brains out.

    Lovely!

    Now for the big question.. can’t say I’m too hopeful of an elegant answer.. but with everything else on the slide and – let’s say sanity plus markets-adjusting – how about the new administration doing the business and re-aligning costs instead of users pay more. Sure, the latter is quicker but the minister this morning yapping on about gottabe done(sorted) by Christmas can mean only servicing-to-price. aka costs-driven. Justified or not.

    So who says when enough is enough.. can you see providers.. users.. doing it?

    So how is that anybody’s brighter future if the government doesn’t unfurl the flag for folks back aways in the providers procession to recognise.

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