Little advocates huge increase in ACC costs

Vernon Small reports:

Labour ACC spokesman Andrew Little is urging his party to remove an “injustice” in the no-fault scheme by extending it to cover incapacity caused by illness or disease as well as accident.

First of all Andrew is correct that there is a disparity at the moment. If you are born disabled with only one leg, you get nothing from ACC. If you lose a leg in an accident you may get payments for life.

But his solution is massively expensive. It would lead to dramatic increases in ACC levies. It means that if (for example) someone was grossly obese and couldn’t work anymore due to their diabetes – they would get ACC payments based on their former salary for life. This would be far more costly than the Invalids Benefit.

Likewise as drug addiction is an illness, drug addicts would get ACC compensation rather than a benefit.

There is merit in looking at combining together the ACC and Welfare systems to remove the “injustice” but doing it by merely extending ACC to everyone with a temporary or permanent incapacity is likely to prove hugely expensive. It would mean a drop in take home pay for every employee and an increase in employer premiums.

He is also calling for it to dump the fully-funded model, which sets levies to cover the future cost of current injuries.

I’m against this also. Apart from the accounting argument, the benefit of having premiums reflect the full cost of current injuries is that it acts as a fiscal deterrent to widening coverage (as Labour did multiple times when last in Govt) because the premiums increase more under full funding (to reflect the full cost). It is all too easy under pay as you go to keep adding things into the scheme because the immediate impact on ACC finances is low. But the long-term impact can be quite massive. Basically full funding means that the Government is less likely to keep adding on extra costs to employees, employers, taxpayers and motorists who fund the scheme.