Injury Prevention, Rehabilitation, and Compensation Amendment Bill

Dr JONATHAN COLEMAN (National—Northcote) Link to this

Just to recap on National’s opposition to the Injury Prevention, Rehabilitation, and Compensation Amendment Bill, the key point is that by merging the employers’ account and the self-employed work account the Government is defying the basic insurance principle of matching premiums or levies with risk. What will happen with the merger of the employers’ account, which is associated with lower accident rates and lower claims, with the self-employed work account, which is associated with higher accident rates and, of course, higher claims, is that the employers’ account will then be subsidising the self-employed work account. In fact, the self-employed have twice the rate of entitlement claims as employees.

This bill means that the concept of experience-rating will be completely ignored, and those with higher injury rates who take greater risks will pay the same premiums as those with lower injury rates who are risk-averse. I think it is just a matter of common sense that that is an unjust situation. In fact, this will be an actuarial nightmare that goes against all the established principles of premiums being determined by risk. The upshot of this arrangement is that it will establish a perverse incentive. It will not be worthwhile investing in safety for one’s business or one’s workers because it will not be reflected in the accident compensation premium. This bill effectively rewards those individuals who take high risks and incur a higher rate of accidents, because they will be cross-subsidised by the employers’ account.

The Government’s argument that the self-employed tend to cluster in high-risk jobs just shows how out of touch it is with the realities of work and business today. A huge proportion of New Zealand workers are now in the service industry, working behind desks, working in jobs such as information technology, and working as consultants. The Government cannot carp on about economic transformation and then pretend that the New Zealand workforce is now made up of chainsaw wielding, self-employed people. The reality is that most of the self-employed in this country work in relatively safe environments.

This bill will be yet another nail in the coffin of this Government’s relationship with New Zealand business. It is a significant mark of bad faith that after employers have paid into this account over many years, on the understanding that it would be fully funded, the surplus that has built up will now be used to subsidise the self-employed. If the Government really did care about business, and if it were really serious about encouraging people to provide employment, it would pay that surplus back to the employers. With this bill, there really is not going to be a heck of a lot of incentive to stay in this country and continue to run a business. It is just one more nail in the coffin of New Zealand business. But one also has to ask: why is this merger of the accounts being rushed through with such indecent haste, and why is the levy consultation period for 2007-08 being bypassed? It is the mark of the arrogance of this Government that it has cynically weighed up the situation. It has decided that there will not be enough electoral damage for it to justify adhering to the normal consultation process. After forcing through the election spending validation legislation last year the Government has grown blasé about the need to follow the established rules and precedents.

This bill will also undermine what has been to date an efficient and successful part of the accident compensation workplace injury industry—the Accredited Employers Programme. The bill will make this account very unattractive. Employers will, therefore, opt out of this scheme, which will add yet more cost to the new merged account and add even greater liabilities to the residual account. Perhaps this is what Minister Dyson wants—to undermine a successful private sector venture so that it fails, which she can then try to blame on the private sector itself instead of taking responsibility as a Government Minister.

One has to ask: why, exactly, after 7 long years in Government, is Labour so eager to rush this legislation through in the space of just a few short months without giving the New Zealand public the right to be heard on the matter? Is not the unpalatable answer that this legislation is all about preparing the Accident Compensation Corporation (ACC) for life under a National Government and setting up an environment whereby it will be a lot more difficult for private insurers to enter the market in 2008 and make it work? Is it not all about the Government positioning accident compensation for the potential competitive environment, once the electorate has finally rejected this tired, deceitful Government, rather than helping employers?

How exactly will this be achieved? Basically ACC will move as many claims as possible to the residual account, which the corporation can control now and into the future because it does not believe it will ever be put up for competition. It is going to reduce the number of claims under the employers’ account management framework, thereby taking claims away from the management of employers who are presently within the ACC partnership programme. Finally, it will reduce the rating structure by a number of means: moving claims to the residual account; discounting the rate now, and then progressively increasing it over the following years; and removing the rate stability levy. The corporation will be transferring the liability to the residual account, but not the collective premium. All this will result in fewer claims and a lower rate in the employers’ account, and therefore a reduced premium pool. The upshot of it all is that it will be a lot more difficult for private insurers to enter the new market and to make it work—and that is the Government’s aim.

Obviously, the issues around this bill show a very clear and distinct philosophical difference between the Government and centre-right parties. Our policy is centred on early rehabilitation, incentives, and a system that provides a choice of insurer. Our current monopolistic system is perfect for this Government, which runs screaming at any mention of choice and competition in accident compensation. However, such a system does not benefit New Zealanders; it benefits only the Government.

National’s changes to accident compensation in 1999—although in effect for only 9 months, before the change of Government—saw a decrease in the number of injuries, as well as a decrease in the levies that employers, the self-employed, and others paid. Interestingly, since Labour took office accident compensation claims have risen each year. This is despite its claims that a monopoly system is so great, so fair, and so efficient. Severe and moderate injuries have also risen, despite the Government continually pouring money into accident prevention.

I will finish by restating that what needs to happen for the workplace injury accident compensation industry to become efficient, fair, and successful is an opening up of accident compensation to competition. Competition will provide incentives for workplace safety, it will provide greater efficiency in the industry, and it will provide fairness for both the self-employed and the non - self-employed. A choice in accident compensation delivers better results for New Zealanders.

This bill is not about fairness, and it is not about choice. It is not about open consultation, and it is certainly not about the best interests of workers and business in New Zealand. It is about a Government that is so bogged down in ideology that it is now incapable of doing the right thing by working people. For a Labour Government, that is very sad indeed.