$1b ACC hole: Labour says Govt deflecting

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Former cabinet ministers are insisting they were under no obligation to reveal a $1 billion hole in the ACC budget before the election and deny Government accusations of a cover-up.

Prime Minister John Key yesterday ordered a ministerial inquiry after ACC officials told ministers the corporation needed $297 million more for this financial year and similar amounts in the following two years.

The blowout is in the non-earners account, which deals with claims from people like children, students and the elderly.

The Government meets all the cost of their claims.

Mr Key said the previous government knew about the shortfall and it should have been disclosed in the Treasury's pre-election fiscal update.

"Our frustration is that we found out about this after the election," he said.

"The previous government knew of the seriousness of the situation but did not disclose the information."

Labour's ACC spokesman, David Parker, said today Mr Key's assertions were wrong and the Government was trying to divert attention from its plans to privatise ACC.

He said he had spoken to former ACC minister Maryan Street who denied knowing any details of the shortfall until October, when she immediately told former finance minister Michael Cullen and the Treasury.

That happened after the Treasury prepared its pre-election fiscal update.

Mr Parker said officials told ministers at the time it would be improper for the extra money to be authorised during the election campaign.

"That's why we didn't do it. We would have done it immediately after the election if we had won it," he said on Radio New Zealand.

"There's some really alarmist language being used around this ... it's 6 percent of the ACC budget, it's been blown out of all proportion."

- NZPA