The Post: Manufactured crisis over ACC ignores the bigger picture

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We live in a moment of manufactured crises. We’re told the Government’s finances are unsustainable, when in fact spending under Labour was – at around 32% of GDP – barely above its long-term average of 30%, and heading downwards even before National set its razor gang to work.

Alarm bells are also rung over government debt, even though liabilities of roughly one-fifth of GDP are low by both historical and global standards, and at least one bank economist thinks the government could double its debt levels without troubling the credit-ratings agencies.

This week’s candidate for a manufactured crisis is ACC, which announced a $7.2 billion deficit for the financial year. Numbers like that are cheap fuel for the narrative that the state is broke, that we are drowning in seas of red ink, that vicious cutbacks are needed right now.

Nothing, though, could be further from the truth. The deficit is – at least in one key sense – a good thing.

Of crucial importance here is an $8.7b increase in the corporation’s estimate of how much it will have to pay out for future injury claims. That, in turn, stems partly from court rulings requiring ACC to cover more injuries.

There is, notably, an expected $3b-plus bill from a Court of Appeal decision that sexual abuse victims should be compensated for their loss of earnings from the time they were abused, rather than the date they sought treatment.

What the deficit partly represents, in other words, is one step further into the dawning realisation that we, as a society, have not been adequately wrapping our arms around those who have suffered harm.

It is not – to state the obvious – a good thing that this harm occurred. But it is a good thing to take, on our collective shoulders, the financial burden of trying to redress it. The deficit is a symbol, in cold hard cash, of a determination to do better by those who suffer.

Bear in mind the philosophical foundations of ACC, or the Accident Compensation Corporation as it is more formally known. It exists to help people who, often through no fault of their own, have suffered injury, and who we have rightly prevented from suing the perpetrators of that harm, in order to avoid an American-style culture of hair-trigger litigiousness.

When ACC was established in the 1970s, the intention of its intellectual godfather, Owen Woodhouse, was that it would cover not just those harmed by one-off, easily defined accidents, but also those experiencing long-term medical conditions. The latter, after all, are just as likely to suffer an uncontrollable and long-lasting loss of earnings, and just as likely to need treatment.

Campaigners have, over the years, forced a gradual expansion of what counts as an injury, including some of those experienced by women when giving birth or being fitted with surgical mesh.

The only party with a plan to fulfil Woodhouse’s vision, however, are the Greens, who in 2023 proposed spending around $3b a year to extend ACC’s services to cover health conditions and disability.

Because of the narrow fiscal lens through which they view such things, centrist politicians have always baulked at that cost. This is, however, a false economy, at least when it comes to health in general.

Not treating long-term illness saves the government money superficially, but only by forcing blameless individuals to shoulder those costs themselves, even when they can ill afford it. More seriously still, from a social point of view, the problems stemming from that long-term illness end up rebounding on the very Treasury that has tried to shrug them off.

The government’s own research into long-term illness suggests that “indirect” costs like lost productivity – never mind the wider social effects – are “at a rough approximation” equal to the amount that would have to be spent to treat them. That’s what fiscal conservatism amounts to: having to wear the same costs, but without having even treated the problem. It’s a specialised form of madness.

Which brings us to another contributor to ACC’s fiscal deficit. Its rehabilitation timelines are blowing out, in part because it’s so hard to get people treatment in the health system at present.

That, in turn, stems partly from the system’s current dysfunction, but also from the fact that, according to 2020 research by the Association of Salaried Medical Specialists, we spend an annual $6.7b less on health than the average of 14 other major economies.

Finance Minister Nicola Willis was quoted this week as saying that increases in ACC levies are “unsustainable”. And, given the continuing squeeze on household budgets, we need to find ways to cushion the levies’ impact on ordinary Kiwis.

But, ultimately, the real unsustainability lies in passing the burden of ill-health onto society, and in aiming to run fiscal surpluses at the expense of social deficits.