John Minto: Nick Smith Thrashes About In The Shallows
John Minto will be providing Scoop readers with a regular column spanning public interest, political, and activist
issues.
If Nick Smith thought he would frame himself as the strong, decisive Accident Compensation Corporation Minister when he gatecrashed a parliamentary select committee
last week he failed. Instead he looked like a pompous prat.
Smith’s escapade in standing in for his new Board Chair appointee John Judge and taking questions meant for the ACC
Chief executive Dr White was a sexist, boorish display of spoiled-brat behaviour.
His appearance was part of a concerted National party push these past two weeks to convince us ACC is in a financial
mess, its board incompetent and unless drastic steps are taken it will become a basket case.
Smith has claimed ACC’s liabilities – the amount needed to cover future costs of all existing claims – will stand at
$21.8 billion by the middle of this year. This is like saying we have a $100 billion liability in our schools because we
will have to fund teachers’ salaries for the next 20 years. Give us a break Nick!
The problem behind ACC rests with the financial crisis and the fact the corporation’s balance sheet has been hit hard by
the past year’s stockmarket slide. If Smith complains about anything it should be the lunacy of successive governments
relying on markets to provide income for essential services such as ACC payments or retirement income. The Cullen
superannuation fund, which invests to subsidise future national superannuation payments, and private Kiwisaver
investments are caught in the same market trap.
National’s real goal is to manufacture a crisis to soften us up for privatisation of various ACC accounts. National did
this in the late 1990s and is desperate to do it again. So Smith went on the attack against the ACC board while ordering
the board not to make media comment to defend itself. He wanted a clear space to attack without retaliation. He wanted
the board’s hands tied before he got into the ring to give it a pounding.
More rational comments have been overlooked in Smith’s attacks on the corporation. A review by Price Waterhouse Coopers
last year praised the corporation. Among other things it said our ACC provides broader coverage than any other scheme in
the world; it returned 88% of people back to work within six months (compared to 85% in Australia); the cost to
employers was lower than comparable private schemes overseas and its administration costs were lower. Management
expenses were at 8% while Australian schemes ranged from 9% to 32%. And on it goes. In every significant aspect it is
performing better than any similar scheme, public or private, overseas.
There is understandably significant reluctance among employers to privatise the scheme. Instead ideologues in the
Business Roundtable, ACT and the National Party are those driving privatisation.
This is no bloated bureaucracy as National would like us to believe. It is efficient and able to easily expand its
services to New Zealanders. In fact last year the corporation collected $3.6 billion from levies while the cost of
claims was just $2.7 billion. The corporation was therefore able to build up its reserves. If ACC was privatised we all
know that $0.9 billion would have been available as private sector profit.
Nick Smith’s claims of a crisis at ACC will be used to open up to competition some of ACC’s accounts. These will be the
accounts where the private sector can be assured of making a profit while the corporation is left with accounts carrying
heavier liabilities. This was the pattern followed with privatisations and part-privatisations in the 1980s and 1990s.
The profits were privatised and the losses left to the taxpayer.
Nick Smith’s antics reflect a National Party having spent nine years in opposition and raring to get stuck in to the
public sector. However they have been hobbled by their assurance they would not sell state assets in their first term in
government.
So without the chance to enjoy the deep water of major policy change National ministers are thrashing around in the
shallows.
In the next few weeks we will see State-Owned Enterprises Minister Simon Power beat his chest and talk tough to the
heads of state-owned corporations. Power has summoned the heads of SOEs to a meeting in the Finance Minister’s office on
April 9th to tell them he wants better financial performance. Power hasn’t asked them to improve their level of service
or reduce their prices to the public in tough economic times. Instead he wants higher financial returns to the
government to help replace the revenue lost when tax cuts come in on April 1st.
Cynics will also say (and count me among them) he wants to trim them into efficient money-making organisations so they
can be readily privatised after the next election.
In the meantime the antics of Smith and Power reflect the frustrations of Ministers required to run services for the
public rather than turn them over for private profit.
ENDS