11 May 2015
Budget 2015: $500m of ACC levy cuts signalled
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 cuts are based on current financial projections and a funding direction which sees each of these accounts heading
towards a solvency band of between 100 and 110 per cent.
“While we’re committing to at least half a billion dollars in reductions over the next two years, it’s important people
understand that the exact reductions in each account won’t be known until after public consultation.
“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.
“There will also be further significant reductions to work levies, and the earners levy will also come down.
“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.”
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.
“There’s been ongoing work over several years between the government, ACC board and officials about what the framework
should be once the scheme is fully funded.
“This legislation reflects the outcome of that work and will deliver greater transparency around the levy-setting
process and more stable levies over time.
“There has been an inconsistent approach to levy setting, marked fluctuations in levy rates and some confusion about the
factors driving final decisions on levies.
“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.
“The new levy setting process will enable people to see the delicate balance between ensuring there’s a sufficient
buffer in each account to withstand volatilities, while demonstrating that we’re not over-collecting money that could be
in people’s pockets.
“ACC will also be required to report publicly on the long-term implications of the government’s levy decisions.
“The new legislation will also enable the residual levy, which funds ongoing costs of claims lodged before 1999, to be
discontinued when these costs have actually been fully funded. Existing legislation requires that the residual levy be
collected until 2019.
ends