Lee Melissa: Questions for Oral Answer — Questions to Ministers 
Lee Melissa: Questions for Oral Answer — Questions to Ministers 
[Volume:667;Page:14499] 
7. 
MELISSA LEE (National) 
 to the  
Minister for ACC 
: What progress has the Government made in addressing the financial losses reported by ACC of $2.4 billion in 2007-08 and $4.8 billion in 2008-09? 
Hon Dr NICK SMITH (Minister for ACC) 
: 
 ACC’s annual report tabled today shows a marked turn-round enabling the corporation to reduce its net liability by $2.5 billion or to $10.3 billion. This has been possible because ACC has contained the scheme’s liabilities and grown its assets. This has been achieved by the corporation delivering a marked improvement in rehabilitation rates. I note that just a 1 percent improvement in rehabilitation rates reduces those liabilities by $500 million. The strong recovery in investment markets has also contributed to this positive result. 
Melissa Lee 
: What impact will this much-improved result by the corporation have on levies? 
Hon Dr NICK SMITH 
: The result is good news. It means we have the scheme back on a sustainable financial footing enabling New Zealanders to have confidence that they will receive proper care and rehabilitation if they have an accident and that this can be provided without significant levy increases. I stress that ACC still has a long way to go to get out of the woods and reduce its net debt. The advice I have from the board is that noting that a big part of the turn-round is a bounce back in investments ACC is still not fully on track to meet the balance of assets and liabilities that is required under the Accident Compensation Act by 2019. This Government is very aware of the cost pressures on families and that is why we have said to ACC that our preference is to contain costs rather than look at significant levy increases. 
Hon David Parker 
: Is the reason the Minister has publicly said he is not recommending levy increases for ACC next year that he exaggerated ACC’s problems last year and so put up levies by more than was necessary? 
Hon Dr NICK SMITH 
: The accounts of ACC signed by Maryan Street in 2008 showed a $2.4 billion loss. In the following year under exactly the same reporting standards ACC made a loss of $4.8 billion. No amount of exaggeration is required; those figures speak for themselves about the level of mess that that member left ACC in. 
Melissa Lee 
: What is the significance of the turn-round in ACC’s financial position to the Government’s broader finances? 
Hon Dr NICK SMITH 
: ACC as a Crown entity directly impacts on the Government’s accounts. The $4.8 billion loss in the 2008-09 year made up 46 percent or nearly half of the Government’s $10.4 billion deficit. That this has been reversed significantly strengthens the Government accounts and helps New Zealand’s broader economic credibility in the difficult current global financial environment. 
Hon David Parker 
: Which is more cynical: his exaggeration to justify last year’s levy increases or his statement that he will have no increases next year because those increases would come into effect in an election year? 
Hon Dr NICK SMITH 
: Members opposite were able to achieve significant increases in 2008 when Maryan Street put up the levies—at the same time there were massive deficits the worst of all worlds. What we have from this Government is a very responsible approach to ACC. I simply draw the member’s attention to the audited accounts from Ernst and Young that show the scale of the deficits left by his Government. 
Melissa Lee 
: Is the Minister aware that ACC’s administration costs went up by $28 million in 2006 $44 million in 2007 and another $42 million in 2008 which is a total increase of 30 percent in just 3 years; if so what steps have been taken to get these administration costs under control? 
Hon Dr NICK SMITH 
: Yes I can confirm that the administration costs of ACC blew out by 30 percent in the last 3 years of the previous Government albeit that bureaucratic cost increase was typical across a whole number of Government agencies. Not only have we stopped this ongoing growth but ACC in the last year has trimmed $38 million off its administrative costs: $5 million has been trimmed off marketing and promotions—a bit excessive for a monopoly provider—$6 million has been saved in information technology; there has been a 52 percent reduction in travel costs— 
Hon Maryan Street 
: How do people know what their entitlements are if they are not allowed to be marketed? 
Hon Dr NICK SMITH 
: —I remind the member that there has been a 52 percent reduction in domestic travel costs; and a 45 percent reduction in international travel costs. 
Hon Maryan Street 
: You’re just cutting entitlements. 
Hon Dr NICK SMITH 
: I ask the member who is piping up why she does not apologise for the ACC mess she left the people of New Zealand.