Time for some accountability at ACC

At times it can be easy to despair of the parliamentary process.

Select committee hearings for the financial review of the Accident Compensation Corporation is such a time.

Incoming ACC board chairman John Judge told MPs the assumptions the scheme has made about its liabilities are all too optimistic and the $21.9 billion liability current on the books is in fact on the low side.

He also says, almost as a by the way, that Minister for ACC Nick Smith indicated to him the government is unlikely to open up any part of the scheme to competition in the foreseeable future.

So in one fell swoop, the nuggetty Mr Judge tells MPs two important things.

First, if you think the current figures are scary you ain’t seen nothing yet.

Second, that Labour’s whole attack on National, which is based on the idea National cooked up the multi-billion dollar liability in order to privatise the scheme, is a crock of dog-whistling balderdash.

So what are opposition MPs most keen to question Mr Judge about?

The meaning of the word "insolvent."

You would also expect the most recent ACC Minister, Labour’s Maryann Street, to be, if not leading the attack but certainly taking a major role.

The most recent minister would, surely, be expected to be most in command of the issues, as well as the most keen to defend her tenure in the job, especially given that most of the problems arose on her watch.

But no.

Perhaps the most telling thing of all about Labour’s attack on this is Ms Street’s almost total silence.

Instead, Labour’s attack was led by veteran brawler Trevor Mallard, with the party’s current ACC spokesman David Parker providing a sort of more politely querulous tone to Mr Mallard’s sneer.

The pre-occupation by Labour with the word "insolvent" serves two purposes: it puts attention on ACC Minister Nick Smith’s extremely silly use of the word to describe the scheme (it has always been technically insolvent) and it also diverts attention away from awkward questions about how the blowouts in the scheme’s costs, which happened on Labour’s watch, got there in the first place.

Which might serve Labour well, but it doesn’t serve the rest of us very well at all. Nor did the fact that both parties did not push Mr Judge on the content of his answers.

Mr Judge told MPs that usually when you look at the books of an insurance scheme like ACC – public or private – one finds the long term assumptions about the costs of the scheme vary between optimistic, pessimistic, and somewhere in between.

Not so with ACC. All the assumptions being made are at the optimistic end of the scale – unrealistically so, he told the MPs.

Examples included superimposed inflation – the rate of cost increases faced by the scheme on top of the general rate of inflation.

These have been regularly running at 6% a year, he said – but the assumptions the scheme has made going ahead are for rises of 5% for the next four years and 1% after that.

“That is an heroic assumption. Normally you would not expect to see that until an organisation has proved it can deliver that.”

Other over-optimistic assumptions included the experiential discontinuance rates – i.e. the time taken for people to get through their treatment and back – are “considerably better rates than are being currently achieved.”

Another example was the assumption claims handling expenses would be at 6%.

“When looking at the cash going out one finds it at 11%.
“Now, each of those decisions on their own could be justified but when all of them are added up the end sum is simply wrong.”

In almost the next breath he said he is confident in the current management. He also said he did not want to get into the question of why all those assumptions were so unrealistic.

That is not good enough.

If the assumptions were rigged at the sunny end of the scale because of political interference, we are entitled to know about this.

This is not just a matter of blame mongering: if political interference is the reason, the current government should be making the changes necessary to stop that happening again.

Unless, of course, it plans some political interference of its own.

Secondly there is the question of the role of ACC’s management in all this.

If the assumptions were unrealistic for political reasons, ACC’s management should have been blowing the whistle on it.

And if those assumptions were not wrong because of political thumbs on the scales, but because of management recommendations which were too optimistic, we are entitled to know about that too.

It is not good enough to just say “move on.”