28 October 2009

Roger Douglas damns Nats on ACC

ACC is a pyramid scheme. Who says? Sir Roger Douglas

He says of the government's ACC bill:

Nothing in this Bill deals with the fact that, from its inception, ACC was a flawed pyramid scheme. In the beginning, it operated on a pay-as-you-go basis. That meant that for many years, it seemed cheap, as the full cost was not apparent – all of those with long term injuries were not yet making claims. Unfortunately, those years of low cost also saw the entitlements expand – so that by the time the system had absorbed all those with long term injuries, and covered the expanded entitlements, it suddenly seemed to cost an awful lot.

These problems are set to get worse. We have an aging society. An aging society implies not only more payouts, but also a lower proportion of people paying levies to cover the Non-Work Account. Because it is a Ponzi scheme, it will require ever-expanding numbers of people working to pay the levies.

So you can see how it has gone wrong, as it progresses, more and more claim it, stay on it for extended periods, making it progressively more expensive. Concepts completely alien to the economically illiterate left.

He says Labour knew this, and sought ACC to become fully funded by 2014, but it also expanded "entitlements" effectively setting it up for bankruptcy. The nonsense spread by the left that ACC is in fine shape because it receives more than it pays out, ignores the unfunded liabilities it has:

If any private insurance company had the books that ACC has, they would be declared bankrupt. The only reason that ACC is still solvent is that it has the capacity to increase levies. In essence, it is solvent because it can force people to cover its costs.

In other words, it is solvent because it has a state monopoly - it is solvent because you are forced to pay for it.

He suggests competition "The only viable way to ensure that ACC delivers results for reasonable prices is if it is open to competition. If people can get cheaper rates elsewhere, they should be allowed to leave. If that means risky workplaces start paying higher premiums, so be it – it will encourage them to improve workplace safety"

He makes the same classic arguments about competition, including one I have repeated:

"Currently, ACC sets a flat rate levy based on the risk in an industry. Those employers which have safe environments subsidise those who have unsafe environments. There is little commercial incentive to create safer workplaces.

By keeping ACC as a monopoly, and not properly allowing risk pricing to emerge, we are in fact increasing the number of workplace accidents. In the private market we have insurance excesses, we have no claims bonuses, we have risk-based premiums. The private market is all about mitigating risk. ACC, on the other hand, is about forcing the good employers to subsidise the bad ones."

The ACC monopoly is classic socialism - all employers pay for the collective risk, the good employers subsidise the bad ones, but who cares, it's all warm fuzzy shared and we all feel good about it, don't we?

After all you hear the left saying privately provided accident insurance will include a profit component, increasing costs, which of course implies that profit should be eliminated, and everything provided by the state, because profit increases costs. Classic Marxism.

All the lies of the left about "privatisation" completely ignore the real debate - why the state monopolises a compulsory accident insurance scheme that means the careful and prudent subsidise the reckless and imprudent? So now, of course, National cuts back ACC coverage to try to fit the budget - meaning all complain about the monopoly delivering less than what people want.

The advocates of state monopoly don't have very good arguments against competition, except use of a Labour commissioned PWC report that had terms of reference to effectively justify the status quo (a classic case of commissioning a study to tell you what you want to hear).

No other country runs this sort of pyramid monopoly scheme for accident cover, it is time to dismantle it and move on. Opening the whole damned lot up to competition is the FIRST step.

Then it's time to look at the next Ponzi scheme - National Superannuation.


Anonymous said...

Crazy enough when last in power.

Now senile with it.

Anonymous said...

Anonymous LOL. So bloody true.

Shane Pleasance said...

Gotta love those anonnymouses. Cling, boys, cling. As you say, libertyscott, hatchet required.

Anonymous said...

Shane, blogs are ten a penny these days and you may have noticed that many of liberty's posts pass without comment. Mind you some of his posts are pretty awful, I mean that one about nuclear weapons. And harping on about EU farmers. Come on. But I reckon he likes us anons. At least we respond (occasionally anyway) and that must encourage him.

John Small said...

I think there are some tense problems here. ACC is not a Ponzi scheme because it is fully funded. That was not always the case, as the Roger Douglas quote says.