Jacinda Ardern confirms ACC levies won't increase, some will drop

The Government has decided to reduce the Accident Compensation Corporation (ACC) Work Levy and keep all other ACC levies at their current rate, Jacinda Ardern confirmed.

When the rises in ACC levies were first discussed, the Government "took a clear position that a compelling case would need to be presented in order for us to agree to levy increases," the Prime Minister said on Monday.

She said that Cabinet would consider the wider public interest.

"We have done just that, and concluded that the levies would not increase, and actually decrease for work levies paid by employers and self-employed people.

"This will save New Zealand businesses and their customers around $100 million over the next two years compared to current rates."

The ACC proposed in September higher levies for motorists in New Zealand, which could see petrol prices increase by almost 2 cents a litre.

The Government would have to agree on the changes for the 2019-2021 levy. It included an increase of 1.9 cents per litre for petrol, part of an overall 12 percent increase in the average motor vehicle levy (including petrol and registration).

ACC Board Chair Dame Paula Rebstock said at the time the increases would substitute the growing number of claims for injuries in New Zealand, which have increased by 6.4 percent, with "more people than ever needing our support".

Alongside increases to motor vehicle levies, ACC proposed decreasing the average levy for employers from $0.72 to $0.67 - a 6.9 percent decrease. But earners' levy on income would be increased 2.5 percent from $1.21 to $1.24.

The Prime Minister said she and ACC Minister Iain Lees-Galloway received guidance from MBIE and the Treasury in reaching the decision not to increase the levies.

"This Government is committed to keeping ACC levies fair for businesses, workers and motorists, and no higher than needed to meet the real costs of injury claims," said Ms Ardern.

"The Treasury advised that they support the proposed reduction in the Work levy and maintaining the current Earners' and Motor Vehicle average levy rates."

Confirmed ACC levies for 2019/20 and 2020/21

  • the average Work levies paid by employers and self-employed people will decrease from 72 cents to 67 cents per $100
  • the Earners levies paid through PAYE (or invoiced directly through ACC for self-employed people) will remain at its current level of $1.21 per $100
  • the average Motor Vehicle levies, which include the annual license levy and petrol levy, will remain at $113.94

Dame Rebstock gave reasons why ACC proposed increases to levies. She said New Zealand has experienced a period of economic growth over the last few years, which has influenced people to expose themselves to "greater risk".

Other factors were the "increased costs for care and support workers resulting from the pay equity settlement agree by Government," she said, as well as the "introduction of free doctor visits for under-14s".

Mr Galloway said he "carefully considered" the advice on ACC's assets and accounts. The Government, he said, "needs to consider the wider public interest and these rates strike the right balance, fully-funding ACC accounts without increasing the burden on New Zealanders".

Referring to ACC's Vehicle Risk Rating programme, which applies different levy rates to different makes and models of cars based on their safety ratings, Mr Lees-Galloway said it is "challenging for ACC to administer, and lacks evidence that it is contributing to a safer vehicle fleet in New Zealand".

ACC breaks down the classification of cars using VRR. It assesses a vehicle's risk and classifies them into bands. The band you're in decides how much your registration levy is.

"There is no evidence that variable levies based on VRR contribute to injury prevention or encourage the purchase of cars with higher safety ratings," said Mr Lees-Galloway.

"It also loads more of the burden onto low-income people and families, as they are generally less able to buy cars with the best safety ratings.

"The Government has made road safety a priority in the transport budget, investing $4.3 billion over three years in programmes and projects aimed at saving lives on the road. This is a $1.2 billion increase over the previous three years."

The new Work and Earners' levies will come into effect on April 1, 2019.

The vehicle risk rating will no longer apply from July 1, 2019, with the Motor Vehicle rates coming into effect on the same date.