$500 million cut in ACC levies

Nikki Kaye has announced:

Budget 2015 will signal ACC is on track to provide further levy cuts of around $375 million in 2016/17 and $120 million in 2017/18, says ACC Minister Nikki Kaye.

“These indicative levy cuts represent a total saving for New Zealanders of around $500 million, and will be spread across the motor vehicle, work and earners accounts,” says Ms Kaye. …

“The indicative reductions, if confirmed, will take total levy cuts since 2012 to around $2 billion, benefitting businesses, workers and motor vehicle owners alike.

“As an example, this year the average ACC motor vehicle levy, including the annual licence levy and petrol levy, will fall from around $330 to $195 a year.

“On current projections, this is likely to fall further to around $120 next year, making the average motor vehicle levy around one third of what it is right now.

You can’t complain about a reduction by two thirds.

“These levy cuts are possible because of ACC’s sound financial performance under the current government, which means the scheme is now essentially fully funded. In other words, it now has enough money invested to meet the future costs of all current claims.

“This is a far cry from six years ago, when we inherited a scheme that saw the gap between its assets and liabilities grow by $4.8 billion in one year alone.”

The levies will always, over time, reflect expected expenditure. Labour constantly increased ACC coverage which sent expenditure out of control. National has managed to get expenditure under control, which is why the levies can now reduce.

Ms Kaye is also introducing legislation, developed over the past year, to put in place a new ACC levy-setting framework, which will take effect in 2016/17. …

“The legislation I’m introducing will bring the levy setting process into line with the kind of accountability and transparency requirements that already apply to the operation of the government’s core budget under the Public Finance Act.

“New binding principles will be introduced to ensure the scheme is adequately funded to withstand economic volatilities, while ensuring levies are kept as low as possible and stable over time.

Greater transparency in the levy setting process will also be a good thing.