Labour and ACC

Is Labour Being Clever or Dumb?

Phil Goff, leader of the Labour Party, has adopted a Churchillian stance, sans cigar, pronouncing that Labour would die in the ditch to maintain the Accident Compensation Commission as a state monopoly. If the current government allowed private insurance companies to enter the market to provide insurance cover against accidents as an alternative to the present state monopoly an incoming Labour government would reverse it again--as they have done once already.

The question is begged as to why. There are plenty of areas where apparently it is apparently perfectly acceptable to Labour to have the State competing against private non-state entities for the provision of services. Health and medicine is one. Education is another. Vehicle testing is a third. Banking is a fourth. And, postal services. No dying in ditches there.

The Labour stance can be seen as being motivated by dumbness or by astute calculation. Which is it? The "dumb" version would paint Labour as casting around for anything which they hope would find resonance with the hearts of voters. Hence, the constant reference to removing the ACC monopoly as privatisation. Their political antennae, rightly or wrongly, tell them that the public is opposed to the State selling off assets: therefore, confuse competition with privatisation (the public won't discern the difference) and bingo, they will get "cut through" to the voters.

This is dumb, not just because if the public has to choose between massive state debt versus privatisation, they will likely prefer to see the family silver sold off, and fast. It's something that every wage and salary earner understands and faces constantly. They intuitively understand it on the wider, national scene. But it is also dumb because would also show Labour up to be political opportunists who would prostitute themselves without principle to anything that would have appeal. It puts them in the Winston Peter's category of politician.

So, it is possible that Labour is just dumb. But, then again, maybe not. Maybe they are being very astute. It is possible they understand that opening up the ACC to competition actually means the end of the ACC in the long run. It is possible they have discerned that competition represents a terminal disease for the ACC. Since they are socialists and believe in the superiority of a state commanded and controlled economy, they oppose opening up the ACC to competition in principle, regardless of political considerations.

If so, they would be right. Opening up the ACC to competition is a death knell for the ACC as a state entity--eventually. Why? Well, insurance relies on actuarial averages. Without the existence of such statistical averages, insurance becomes a ponzi scheme. Private competitors will commence by focusing on the "good risks"--as they should, because that is where the greater margins lie. It is where they will be able to price keenly. If there are "good" employers, with a very low accident record, with a very low risk employee activity, and private insurers can target them and get enough of them as client accounts, they will be able to charge them lower premiums than the current ACC levy.

Private competitors will be able to pick the jewels from the ACC's crown. Over time, the ACC will be left with the "bad risks" which means its claim costs and premiums will rise inexorably; the corporation will not be able to balance out the bad risks with the good risks. It will not be able to subsidise the bad with the good--which it currently can do, under a state monopoly.

Employers will, of course, find that the competitor private providers are more cost effective, efficient, responsive and productive than the ACC--and if they get caught with one which is not so, they can change to a competitor relatively easily, which will help keep every provider honest--as competition does. The obvious gains and benefits will lead to "scope creep" and more and more facets of ACC monopoly come under pressure and are opened to competition. In the end, like the old State Insurance company, it will be sold off. Whenever private, free market businesses are allowed to compete freely with government owned companies, the private free-market companies eventually drive the state companies out of business.

If this is the reasoning in Phil Goff's mind then the case is arguable. But one suspects that if so, he would not want to argue it. It's politically embarrassing to have to admit that ACC needs to exist as a state monopoly so that it can continue to get away with overcharging and gouging.

Is the Labour Party being dumb or clever? Hard to tell. But either way, it's stance on the ACC is bad for the country in the long run.