Injury Prevention, Rehabilitation, and Compensation Amendment Bill

Hon Dr NICK SMITH (Minister for ACC) Link to this

I move, That the Injury Prevention, Rehabilitation, and Compensation Amendment Bill be now read a second time. This bill addresses problems in accident compensation, which has become financially unsustainable. Reform is required to secure its long-term future for all New Zealanders.

The 2008-09 annual report of the Accident Compensation Corporation (ACC) showed a loss of $4.8 billion—almost half the $10 billion Government deficit last year. This loss comes on top of a $2.4 billion loss for the previous year. Over the past 4 years the accident compensation scheme’s unfunded liabilities—that is, the difference between its liabilities and its assets—have grown from $4 billion to $13 billion. This is a significant and serious problem that cannot be ignored.

The underlying issue for the scheme is the steep increase in claim costs—up 57 percent in the last 4 years, or rising at five times the rate of inflation. The scheme cannot sustain the ongoing increases in claim costs arising from greater claim numbers, deteriorating rehabilitation rates, and unfunded scheme extensions. The underlying problem is that accident compensation has drifted away from being a State insurer to being an extension of the welfare State.

This bill is a key part of the Government’s reforms to accident compensation that are needed to make the scheme affordable, sustainable, and fair.

Hon MARYAN STREET (Labour) Link to this

It grieves me to have to get up and speak to the Injury Prevention, Rehabilitation, and Compensation Amendment Bill. Here we have it: the systematic dismantling of a piece of New Zealand’s social fabric, which is second to none in the world.

The Minister for ACC’s speech is typical of the way he has presented accident compensation since he had the privilege of taking up that portfolio. He talks in half-truths. He gives half of the information, never the complete information. He continues to represent the accident compensation scheme as an insurance scheme and not a social contract. He continues to pretend that it has its equal in the private sector, when it does not. He continues to pretend, and to try to persuade New Zealanders, that this second-to-none, world-class system, which began as a worker compensation scheme and developed into something so much more than that for the protection of injured New Zealanders, is insurance like every other kind of insurance. It is not. It is nothing of the sort. It is not charged out at private sector rates. It is, in fact, not even charged out or levied, particularly on employers, in any way that is remotely comparable to our nearest neighbour. The levies that employers pay in New Zealand for work-related injuries are substantially lower, across the board, than any comparable scheme in Australia. My colleagues and I will talk about that further.

This bill represents the attack on accident compensation that that Minister has been threatening for the last 15 or 16 months. When he took up the portfolio, he responded hysterically to some issues related to the increasing costs of treatment and rehabilitation in New Zealand. In the course of the Minister’s misrepresentation of the scheme’s position people began to become concerned, until they realised that, in fact, the Minister’s definition of insolvency, which was the main point that he was trying to persuade the New Zealand public of, was based on a tissue of half-truths. That is the most complimentary way I can describe it.

The definition of “insolvent” that was used was that the scheme’s total liabilities exceeded its assets. What the Minister failed to tell the public was that the calculation of the liabilities was spread over many, many years over the life of an injury. That meant that some 30 or 40 years out there would be residual liabilities. That is because, until such time as this law is passed, we have a scheme that covers the life of injuries. It is not just the cost of going to the doctor after one has been injured; it is whatever it takes to support a person after he or she has been injured. Then the Minister repeatedly set that lifetime liability against the current assets, not recognising for a moment the ongoing income from the well-invested funds that the scheme gathers from levies from different quarters.

The public has been fed a tissue of half-truths about the state of the scheme. Certainly, there were increases in costs, because we have become better at saving people. Medical science has progressed, and there is case upon case where we now save people who would have died otherwise from motor vehicle accidents, injuries in the home, and sports injuries. Those people can now be saved, whereas some years ago they were not. The Minister never says that in his description of the scheme. He continues to say, untruthfully, that it is broke and it is insolvent.

In order to reinforce his point, he appointed a new chair to the board of the Accident Compensation Corporation, who agreed with his definition. We heard that definition in the Transport and Industrial Relations Committee shortly after the appointment of the new chair, John Judge. Certainly, it helps to pick people who will repeat one’s own words—obviously for that Minister’s benefit. Now we have the peeling back and the dismantling of compassionate, human provisions in the legislation, which were put there for good reason, and which benefited numbers of people.

Labour will oppose every part of this bill, with the exception of one part. That is the part where the date for the payment of residual levies—that is, the payment of treatment that has not been fully funded up until now—is extended. That, I have to say, derives from the last time National tried to dismantle and privatise accident compensation. That is why those injuries from pre-1999 are not fully funded—are not fully funded—and we are still having to fund them; the provision was not set out for them. They were meant to be fully funded by 2014, and the National Government at the time picked the period of 15 years out of the hat. The number was arbitrary. It could have been 10 years, it could have been 20 years, but National said that it would split the difference and make it 15 years.

Labour is in favour of the pushing-out of that date. In fact, we announced it. I, as the previous Minister for ACC, announced it prior to the election. It became apparent to me, even in the only 12 months I had in that position, that something needed to be done about residual levy payments, and the pressure was building. Pressure was applied to employers that was not reasonable.

The thing that this Minister should have done was introduce this bit a year ago. We have lost the ability, and employers and car owners have lost the ability, to have reduced levies by the tune of 1 year’s worth of levies because of the tardiness of this Minister, and because of his inability to get past his own hysteria and apply something with which we would have agreed. It could have happened immediately. It was only in 2008 that the pressure on that residual levies payment component became clear, and that was the only time when the pushing-out of the date started to be explored.

In this bill we have a reflection of a Government that has absolutely no respect for the history and purpose of this social contract. One of the things that becomes really apparent, as an example of the callous approach this Government is taking, is in the Morrison Low report to the Accident Compensation Corporation board, which talks about the need to “significantly cut back to essential and core services, effectively draining the swamp.”—“effectively draining the swamp.” The Minister and his Government are now saying that those who benefit from or apply to the corporation are no better than swamp dwellers. We have the case that was offered earlier in the House of an elderly woman who fell and hurt her shoulder, but who cannot get any relief from ACC; she is a swamp dweller.

DAVID BENNETT (National—Hamilton East) Link to this

I want to follow on from that speaker by going through a few points raised in relation to the Injury Prevention, Rehabilitation, and Compensation Amendment Bill that are simply not true. The first issue is the talk of the dismantling of the accident compensation scheme by the current Government. That is not the case. Members opposite are using political rhetoric to try to scare the public of New Zealand. They tried to do that during the election campaign; it did not work. They are trying to do it now, when we are making genuine changes to the accident compensation system in order to enable it to survive and provide the 24-hour cover that people expect from it. That is what the general principles of accident compensation were built on—the provision of that cover—and this National Government will make sure that the system can be maintained and deliver compensation to New Zealanders in the future.

Labour is also at a crossroads when it comes to the full funding issue. Its members say the system is not broken and is not in trouble. Well, the Accident Compensation Corporation (ACC) had a major loss in the year that the previous Labour Government left office, and even the previous speaker, Maryan Street, said that in 2008 that Government was looking at extending the full funding date. That shows that that had to be done, and that is what this bill does. It is amazing that Labour looked at extending that date then, but will not support doing that now. Those members will not support something that they were going to look at anyway. Although they say the assets are sufficient to cover claims, I say that is simply not the case. There is a lack of understanding about what residual claims actually relate to, and there is also a lack of understanding about what the assets of that organisation are at this moment in time. John Judge had been appointed by the previous Labour Government to many boards before National came into power, and I think that his financial expertise should not be questioned in this House. He has been shown to have been used by both major political parties, when they were in Government, to deal with issues such as the governance of big organisations like ACC.

I will concentrate now on what this bill does, though. It does extend the full funding date to 2019, which gives us another 5 years in which we can endeavour to make the accident compensation system sufficiently viable to be able fully fund itself in the future. Most political parties are in agreement with that concept. Only one party saw things differently from that in the Transport and Industrial Relations Committee. That party, the Green Party, said accident compensation should be funded on a year-by-year basis. Other parties are very much in support of our policy, but it is disappointing that Labour cannot vote for it in this House, even though its members know they support it. We also see that a number of entitlements have come in, in recent years. Those recent entitlements were not part of the original scheme in the first place, so it is a bit rich to say what we are doing is contrary to the Woodhouse principles. When the scheme was set up, it was set up for a reason, and that reason is what we are endeavouring to maintain and achieve by enabling the system to be one that can survive and deliver those results.

I thank the members of the select committee for their work on this bill, which was done under time pressure. I thank all the submitters who came along and made their views known to us. We dealt with a number of issues, ranging from hearing loss to entitlements, and also to the accident compensation system in general. Many submitters took much time to provide a good history of the system, and they also gave their perspective on what they wanted to see come out of it. We thank those submitters. I also thank the officials who provided advice to the select committee and were there to assist all members in achieving the changes that the committee made to the bill. They were minor changes, but they were necessary to tidy up a few things in the bill so that we can have legislation that is as robust as possible.

In essence, this bill is here in order to provide a long-term, sustainable accident compensation system. The Government has made the changes that will provide that system. We commend the bill to the House and look forward to its passage.

LYNNE PILLAY (Labour) Link to this

Given the absolute embarrassment for this Government over recent events with the accident compensation scheme, and the controversy, the heartache, and the absolutely shameful behaviour by the Government, I am amazed the Government is choosing this time to pursue the progress of this shocking bill through this House. It is just unbelievable. This bill is very clearly part of this Government’s deliberate campaign to strip the entitlements to accident compensation, to raise the levies, and to set up accident compensation to flog off to the highest bidder in the future. All the rhetoric is there—all the rhetoric about how difficult it is financially. We listened to the Minister drone on and on about how difficult things are financially, but, as my colleague Maryan Street said, it was a tissue of half-truths. In some ways the Government wants to validate this harsh attack on the rights of entitlements of New Zealanders. This bill should not have ever passed its first reading. It did so with the Government getting support from the ACT Party, no surprise; from Peter Dunne, no surprise; but also support from the Māori Party. That support enabled this bill to progress to the select committee.

What a proud moment it would have been if people in this House had said: “This is just not fair.” I am not talking about National members but I am talking about other parties in this House who could have said: “We uphold a principle of fairness.” This is an attack on the very fabric of our society and everything that we as New Zealanders hold dear. Our accident compensation scheme has put us up there on the world stage, and has been admired by every country in the world, yet we have a Government that is hell-bent on dismantling the scheme.

I pay tribute to the Labour members and the Green member on the select committee. They were the ones who had the guts, who actually looked at the issues, and opposed the bill. They opposed the bill for the right reasons. They opposed the bill because it was not just, and it was not fair. But it is a numbers game, and because of the numbers this bill came back to the House unimproved, and it was for all the wrong reasons. There are no improvements whatsoever to this bill. I heard the previous speaker, David Bennett, stand in this House and thank the submitters for coming to the select committee. He said “Thank you, we appreciate the submitters.” I think the best way to thank submitters when they come to the select committee and front up, is to actually listen to what they are saying, listen to what New Zealanders are saying, and listen to what the people said in the rally outside Parliament. Then they should say, quite honestly, as John Key says, “Sometimes we don’t always get it right.” This is one of those times. But that is not what happened. For Mr Bennett to stand up and thank the submitters really smacks of cynicism.

KEVIN HAGUE (Green) Link to this

Sir Owen Woodhouse is a truly great New Zealander. He is one of New Zealand’s foremost jurists of all time and the architect of a visionary accident compensation scheme that has been the envy of the rest of the world. Yet at the age of 91, when he should be enjoying a well-earned retirement, Sir Owen has found himself sufficiently concerned by the flawed reasoning behind the Injury Prevention, Rehabilitation, and Compensation Amendment Bill that he felt it necessary to put himself back into the public spotlight to condemn it. Sir Owen’s vision for an accident compensation scheme was that of a no-fault scheme based on the principles of community responsibility, comprehensive entitlement, complete rehabilitation, real compensation, and administrative efficiency. He recognised that the various activities we undertake in society are all interrelated and that the benefits and harms of each flow on to others rather than resting solely with those people undertaking the activities. Sadly, Sir Owen’s vision came under attack from vested interests almost from day one. Politicians responded to their lobbying and began to compromise the principles that Sir Owen had set out, and the accident compensation scheme we have today is littered with inequities.

This bill will significantly heighten those inequities. It is entitled the Injury Prevention, Rehabilitation, and Compensation Amendment Bill. The truth is that it will amend injury prevention, rehabilitation, and compensation by slashing each of them. It proposes a range of cuts to the scheme’s cover and entitlements and imposes funding requirements for the scheme that necessitate massive levy increases. In other words, people pay more and get less. The seeds of this inequity were sown back in 1998 when the National-led Government of the day decided to open up the scheme’s work account to private competition from the insurance industry. To ensure the private insurers could compete, that Government changed the scheme’s funding model for claims from a “pay as you go” model to the full pre-funding of claims that is required of insurance companies. The privatisation experiment of the late 1999-2000 period was a disaster for claimants, as the easiest way for private insurers to maximise profit was to deny legitimate claims in the knowledge that many claimants would have neither the resources nor the energy to contest their decisions. Of course some employers did not mind that either, as it helped to keep their premiums down. The incoming Labour-led Government, with the support of the Green Party, promptly reversed National’s ill-fated privatisation experiment. Unfortunately, we were unable to persuade Labour to return to a “pay as you go” funding model. That has now given the National Government an excuse for this pernicious bill.

Despite the huffing and puffing from Minister Smith, there is no funding crisis in the Accident Compensation Corporation (ACC). The corporation took in $1.5 billion more in levies last year than it paid out in claims. The so-called funding crisis is purely a creature of accounting, arising from the fully pre-funded model. Return to “pay as you go”, which was how Sir Owen Woodhouse always envisioned the scheme should be funded, and the crisis disappears. Return to “pay as you go” and levies would decrease rather than increase in the short term. Return to “pay as you go” and there would be no need for the mean-spirited cuts to entitlements and cover that are contained in this bill. They are cuts that will see the cost of injuries transferred from ACC to the public health system and to injured people and their families. We do not need our education system to be funded on the basis that when a child starts preschool, all the money has to be in the bank for his or her education through to tertiary level. We do not fund our public health system on the basis that when people are diagnosed with a chronic illness, all the money has to be in the bank for their future treatment right through until they die.

I see no reason that ACC should be any different; unlike an insurance company, the Government has the power to tax. I acknowledge that it is beneficial for ACC to have some reserves to mitigate wild increases in levies that would be necessary in the event of a natural disaster—for example, a major earthquake affecting an urban centre. But there is already over $10 billion in ACC reserves, and that is ample for that purpose. As the select committee report states, most submitters, indeed almost all, who expressed a view on funding mechanisms opposed full funding of accident compensation, preferring a return to “pay as you go” funding. These 33 organisations and individuals included the ACC Futures Coalition, the New Zealand Council of Trade Unions, the National Council of Women, the Service and Food Workers Union, the Maritime Union, the Rail and Maritime Transport Union, the New Zealand Christian Council of Social Services, the New Zealand Nurses Organisation, FinSec, the Public Service Association, the Bikers Rights Organisation of New Zealand, and, most tellingly, the retirement policy and research centre.

Despite ACC having deviated somewhat from the Woodhouse principles, there is still widespread satisfaction with the services it provides. That is likely to change under this bill. People become disgruntled if they have to pay more, but also if, when injured, they get less. I fear, however, that that is precisely what this Government wants. I fear this bill is part of a plan to undermine public confidence in our accident compensation scheme, and thereby soften up public opinion for privatisation of at least parts of the scheme, or as Minister Smith euphemistically calls it, “introducing private competition into the scheme”. Privatisation of accident compensation was supported by business lobbyists back in the 1990s. However, having experienced it in the 1999-2000 period their enthusiasm has waned too. In October last year Paul Jarvie, occupational health and safety manager for the Employers and Manufacturers Association (Northern) Inc., said: “The single year when we had a private market for ACC turned into a bun fight between insurers trying to capture business and employers trying to get accident insurance within prescribed time frames. Insurers at the time cut premiums to capture market share early on. Most commentators agreed at the time that the ensuing years would have seen large premium increases to offset the low entry price points. Having a full private insurance market won’t provide stability in the premium setting market, and it would make more forecasting and budgeting work for employers.”

With employers less than enthusiastic about the privatising of accident compensation, who wants it? The unions do not want it, and claimant advocacy groups, having experienced the rigours of 1999-2000, do not want it. I guess that leaves the ACT Party, whose members nod their heads in Pavlovian automatism every time the word “privatisation” is mentioned, and of course the insurance industry. Back in 2005 a memorandum from the Insurance Council to its industry members was leaked to the media. It stated: “Attached is a statement made today by the National Party on its Accident Insurance policy. It indicates competition will be introduced into all accounts except the non-earners account. This obviously means the motor account will be opened, along with the earners and self-employed. The details of the policy have been deliberately kept out of the announcement after consultation with the Insurance Council.” That suggests government of the very worst sort. It suggests decisions may have been made not in the interests of this country, but as a result of secret deals with corporate interests who very likely, but we will never know, were significant contributors to the National Party’s election coffers.

Whatever the motivation behind the National Party’s smoke and mirrors exercise to manufacture a crisis in accident compensation, the Green Party will continue to oppose this mean-spirited bill and work towards the restoration of the Woodhouse principles and the fundamental right to a fair go, upon which our accident compensation scheme was founded. Thank you.

ALLAN PEACHEY (National—Tāmaki) Link to this

I have some questions for Labour and for the next Labour speaker to answer. These are questions that, so far in this debate, neither Labour nor the Green Party have addressed. Why does Labour not want to save the accident compensation scheme? Is it because accident compensation was a National Government creation? Is that the reason? Or is the only explanation that Labour’s mismanagement of accident compensation for the last 9 years is an example of its lack of commitment to a sustainable accident compensation scheme? What are the answers to those questions? I shall listen to the next Labour speaker with interest.

Why does Labour not want accident compensation to be financially sustainable? Why does Labour not want to make accident compensation more affordable for current and future generations of New Zealanders? The Injury Prevention, Rehabilitation, and Compensation Amendment Bill, which the House is currently debating, makes a number of sensible changes that are necessary if accident compensation is to be saved. I will repeat my first question. Why does Labour not want to save accident compensation? Why is the Green Party part of that conspiracy? Do Labour members opposite and their Green counterpart not understand that the Accident Compensation Corporation’s (ACC’s) annual report showed a $4.8 billion loss in the 2008-09 year? That was on top of a $2.4 billion loss in the previous year.

What is it about the word “sustainable” that Labour and Green members do not understand? Does the Labour Party not care that the accident compensation scheme’s liabilities have grown from $9.4 billion to $24 billion in just 4 years? Liabilities have grown from $9.4 billion to $24 billion in just 4 years. Do Labour members not care that the scheme’s liabilities now stand at $13 billion more than its assets? Do Labour members not care that the scheme’s debt is the equivalent of $3,000 for every New Zealander? The reality is that the Labour Party and its Green friends are in denial about the changes contained within this bill, which are required to secure a financially sustainable, 24/7, no-fault accident compensation scheme for New Zealand. I await the answers to those questions.

RAHUI KATENE (Māori Party—Te Tai Tonga) Link to this

The Māori Party has a consistent track record of voting on legislation at its first reading in this House. Where there is any room for question, we always apply the benefit of doubt principle and vote the bill through to the select committee. This was precisely the position we found ourselves in with the Injury Prevention, Rehabilitation, and Compensation Amendment Bill.

Accident compensation is one of the issues in which every New Zealander has an interest, directly or potentially. On this important basis, we thought people should be given the opportunity to have a say on the proposed legislation. We had many questions that we wanted to put to New Zealanders, and, indeed, to those involved in the accident compensation scheme and the wider industry. We wanted to know, purely and simply, whether there was any ground for the changes required to a scheme that has been described as a “ground-breaking, world-leading no-fault compensation scheme”. In fact, the PricewaterhouseCoopers report of 2008 described the Accident Compensation Corporation (ACC) as having the best rehabilitation rates of any comparable scheme in the world, which is high praise indeed.

We wondered about the broader question of accident rates. Why is it that New Zealand is 23rd in the workplace fatal accident rate league table of developed countries? What is it about our wonderful country that sees our accident rates jump to more than five times those of the best countries? Do we take the No. 8 wire mentality too far, and cajole workers into a point of view that suggests that injuries are to be endured and that rehabilitation is for sissies? Of course, a key issue for the House must be that Māori are overrepresented in injury statistics across all age groups, in employment and sports. As most of these injuries are preventable, why is it that Māori, particularly men, are more likely to be injured at work than non-Māori?

When we are focusing on a scheme that has performed so highly on international standards and that has been demonstrably relevant to New Zealanders, it surely makes sense to go back to the reason why the accident compensation scheme was established in the first place. Before the 1967 royal commission into workers compensation, a person wanting compensation after an accident had to establish fault; that is, that something had been done to him or her. The process was often drawn out, expensive, unfair, and rewarded lawyers more than it did claimants. The principal architect of the scheme, Sir Owen Woodhouse, negotiated a virtual trade-off between the right to sue and comprehensive, no-fault cover in the event of an accident. The scheme was developed out of what has come to be known as the Woodhouse principles. They emphasise community responsibility, comprehensive entitlement, complete rehabilitation, real compensation, and administrative efficiency. This history provides us with a very strong context within which to view the changes tabled in this bill.

The rationale provided by the Minister for ACC is certainly compelling. The Minister has claimed that costs over the last 4 years have risen 57 percent, which is approximately five times the rate of inflation, unfunded liabilities have grown from $4 billion to $13 billion, and across all amendments there is the overriding principle of the need to be fair to claimants and levy payers. This aspect of fairness is one that I want to explore in more depth. In our policy statement, He Aha Te Mea Nui? He Tangata, He Tangata, He Tangata, the Māori Party supports the right for workers to be treated fairly and with dignity, to work in a safe and healthy workplace, and to hold employers accountable for preventable workplace-related deaths and injuries. We are also committed to reviewing business compliance costs so that there is no increase in such costs.

These principles have influenced the way in which we have viewed the bill and the advice in the 133 submissions received. Although the context for the bill is to make accident compensation affordable and fair, the changes will disproportionatly impact on vulnerable workers and low-income families as the bill decreases access to cover and decreases the level of compensation to these claiments. The impact on vulnerable New Zealanders is varied. For young people, the loss of potential earning compensation is reduced from 100 percent to 80 percent of adult minimum weekly earnings. The most significant health effect of the bill is in the reduced accident compensation cover for those already on low incomes who cannot afford health insurance or income insurance to cover them when injured. This can force people into untenable positions, including returning to work before they are ready or resorting to criminal activity to cover household costs.

Reduced access to accident compensation will also impact negatively on child poverty rates. The National Council of Women suggested that women are more vulnerable to negative outcomes through a lack of social services, and the bill will reduce those services further. The council also noted that many of the service providers, counsellors, physiotherapists, and home-care workers are women depending on ACC funding to deliver those services. Of course, some of the most vulnerable New Zealanders, those who have made sensitive claims, will suffer from both levy increases and a restriction of services. Again, this was an issue that the National Council of Women brought to our attention. It was the council’s assessment that the ACC sensitive claims clinical pathway was being followed in such a way as to be discriminatory on the dual grounds of gender and race. The council described Māori women seeking to access ACC’s subsidised counselling but leaving in tears, unable to know whether or what kaupapa Māori treatment plans will be utilised.

The issue of vulnerable New Zealanders is particularly relevant to this debate when looking at the experiences of Māori workers. Access for Māori has been consistently lower than for other groups. Māori receive treatment at a lower level than non-Māori. When Māori do access services, they access them later, and they also exit programmes earlier. Against this backdrop it certainly seems unfair that under this bill, Māori in high-risk occupations will pay higher levies.

There is a clear hierarchy of accident rate by industry, with energy and water, forestry, construction, transport and storage, and agriculture in the top five. Māori are overrepresented in all of these industries. High-risk occupations have significant numbers of Māori workers. The bill provides for a matching of risk environments and levy rates, so the costs of cover can be expected to increase. This would have the most atrocious outcome on low-paid workers who have the least power to negotiate, and, of course, many Māori are in that situation.

Because Māori are a small population group and constitute a small group of claimants, under a privatisation model they would not be considered a high-value market segment to provide a financial incentive for private insurers. The drive toward privatisation, therefore, is implied around the full funding of the residual claim liability fund and it not only increases the cost contributed by claimants but could be expected to impact negatively on Māori claimants through reducing access and lowering compensation.

Finally, I return to the submission from the National Council of Women, which threw doubt upon the impact of the ACC investment fund, suggesting that it is now fully recovered and the crisis is all but over. I quote directly from its submission: “It seems unfair and indeed ‘repugnant to justice’ to raise levies for some sectors to exorbitant levels, and to reduce entitlements and rehabilitation avenues for a population still suffering the effects of the recession, in order to achieve cost containment that is seemingly no longer necessary”. The Human Rights Commission adds further to this view, noting that “tinkering with entitlements at the margins undermines the concept of a truly inclusive scheme.” On the basis of the submissions made during the select committee process and the independent advice sought and attained by the Māori Party, we are unable to support this bill at its second reading. Kia ora.

Dr JACKIE BLUE (National) Link to this

I am pleased to speak in the second reading of the Injury Prevention, Rehabilitation, and Compensation Amendment Bill. The Government needed to bring this bill to the House because of a serious concern about the financial sustainability of the Accident Compensation Corporation (ACC). National would like to thank the ACT Party for agreeing to support the bill through all its stages and the Māori Party for getting the bill to the Transport and Industrial Relations Committee.

There has been a growing gap between ACC’s assets and liabilities. ACC’s 2008-09 annual report stated a loss of $4.8 billion on top of a $2.4 billion loss for the year before, and it shows that the accident compensation scheme is currently financially unstable. ACC’s liabilities have grown from $9.4 billion to $24 billion in just 4 years. Its liabilities now stand at $13 billion more than its assets—the equivalent of more than $3,000 for every New Zealander. The Government could not stand back and do nothing. We could not stand back, in denial, and think that everything was fine. That was unacceptable. Indeed, ACC chairman John Judge stated that if this trend was allowed to continue, the scheme’s very existence could be under threat. Under the current law, one option would have been to hike up all levies. However, it was the view of the Government that would be too hard for New Zealanders. It was clear that accident compensation could not continue in this way and that there had to be changes and strategies to tackle the huge increases in claims costs from greater claim numbers, deteriorating rehabilitation rates, and unfunded scheme extensions.

This bill is about securing a financially sustainable, 24/7, no-fault accident insurance scheme for New Zealand. There are a number of amendments that have been made to help accident compensation get back on a more sustainable path. These amendments will also make the scheme affordable, sustainable, and fair. Importantly, none of these changes will apply to current claimants or their entitlements. We are looking to the future. However, disentitlements for criminals will be retrospective. On the recommendation of the committee, entitlements for dependents of offenders are more clearly defined. Other changes to the bill include pushing out the full funding date from 2014 to 2019; reversing 2008 income compensation extensions covering casuals, part-timers, and non-earners; abatements for holiday pay; reversing vocational rehabilitation changes; a 6 percent hearing-loss threshold; reversing entitlements for wilfully self-inflicted injury and suicide; strengthening disentitlements for criminals; allowing safety incentives for employers and vehicles; and financial reporting. This Government is acting in a responsible manner to ensure that New Zealanders have a sustainable, 24/7, no-fault accident insurance scheme. I commend this bill to the House.

DARIEN FENTON (Labour) Link to this

I was privileged to be on the Transport and Industrial Relations Committee and listen to the submitters. The submitters came forward during the summer holidays because the Injury Prevention, Rehabilitation, and Compensation Amendment Bill was pushed through at such a pace. I start by thanking the submitters. The majority of submitters opposed this bill. They came to represent the people who work in the industries that they are covered by, or they were the professionals who end up having to deal with a claimant after an injury. I thank them.

This bill got off to a very bad start. I remember the Minister for ACC, Nick Smith, running around at the last minute because he did not have the numbers, and I think the whole thing has continued that way. The Māori Party agreed to support it through to select committee, which gave National the numbers. Then, of course, ACT came to the party, agreeing to support the bill through all stages, but it has a deal to open up the work account to competition—or, in other words, to privatisation. Māori Party members said that they wanted to hear what submitters said, and I am pleased that they have examined the submissions. I was a bit unhappy and a bit sad that they could not make it to hear the submitters. I know they are a small party, so I am not being critical, but I think that listening to what the people said was very, very powerful. I congratulate those members on listening, unlike the Government.

Coming back to this bill, it was introduced not only in a very haphazard way but also in a climate of fear about the future of the accident compensation scheme. We have heard from members opposite who continue to perpetuate the myth that the scheme is broke, it is in trouble, and they are somehow saving it. That situation is being deliberately manufactured by the Minister for ACC and the Government, and they are doing that to lay the basis for slashing entitlements and privatising the profitable parts of the scheme. It worries me that this is coming at a time when the number of workplace accidents and deaths are increasing, when injury prevention is not even mentioned in this bill and seems to be off the agenda, when we have cuts to health and safety training for workplace representatives, and when we have a general close-down on any independent advice or involvement from anyone outside the Government’s club. The preparation of the bill was rushed, as was the select committee process. The submitters gave up their time during summer to come along and have their say.

The consultation has been very clearly exposed as being inadequate. Te Puni Kōkiri warned that the impact of the proposed changes would have a disproportionate effect on Māori. The gender implications and disability perspective in the Cabinet paper is just laughable—absolutely laughable. There is one sentence for each one. Even Treasury warned that the regulatory impact statement was inadequate and incomplete in a number of areas such as cost shifting to other Government departments. That has not been quantified. We repeatedly raised questions about cost shifting. There is a lack of information on the nature and extent of the changes to enable experience rating and risk sharing in the work account, and Department of Labour officials admitted to the select committee that the work had not begun on this. Treasury also said that although risks are identified, there is little explanation of the likelihood or severity of the risks and no risk mitigation strategies. Of course, they also criticised the consultation requirements. They said that they had not been met, and where there had been consultation the concerns raised had not been addressed.

Other organisations such as businesses and unions were not consulted, and there was no consultation with professional organisations, such as audiologists, on key questions like removing cover for hearing loss of less than 6 percent. The concerns of the Ministry of Health about cost shifting from the Accident Compensation Corporation to the Ministry of Health were ignored, as well. There was no assessment, and no answers were forthcoming about those matters, even though the Ministry of Health said that decisions on the bill should be deferred until some answers could be given. As I said, there was inadequate consultation, an inadequate regulatory impact statement, and a lot of criticism in the Cabinet papers from key ministries and Treasury. However, having sat through the submissions—and I thought that they were excellent submissions—I am disappointed that the bill has only minor changes. The Government has not listened to what the submitters said when submitter after submitter came along and expressed concerns.

I will speak to a couple of issues, in particular. The first is the proposal to reduce the weekly compensation for seasonal and part-time workers. The Minister claims that this is to stop abuse of the current rules. He thinks that somehow these poor seasonal workers are on a bonanza, and that they are deliberately getting injured so that they can receive this wonderful—

JOHN BOSCAWEN (ACT) Link to this

One of the great advantages of joining the debate later in the piece is the chance to hear the contributions of all the members who spoke earlier. I intend to use most of my speaking time to address the issues raised initially by the Hon Maryan Street. The speakers who succeeded her all raised various issues that I feel I need to comment on to varying degrees. Jackie Blue made the comment that the ACT Party had agreed to support this Injury Prevention, Rehabilitation, and Compensation Amendment Bill all the way to the third reading. That comment was picked up by Darien Fenton. That is not the case. The ACT Party agreed to support this bill stage by stage, and we will be voting for it at the second stage, but we are approaching it on a stage-by-stage basis.

Rahui Katene said that the Māori Party approached bills on a bill-by-bill basis, on the basis of supporting them if there was any good coming out of them. I congratulate the Māori Party. I think it is a very good approach to take an open view on issues. Rahui Katene went on to say that the Māori Party was concerned about the impact of this bill on vulnerable people. I believe that the long-term consequences of passing this bill and addressing the issues that affect vulnerable people will be in the best interests of those vulnerable people, and of low-income people, and she identified Māori in particular.

Kevin Hague said that the ACT Party salivates like Pavlovian dogs at the thought of privatisation. That is not correct, but there is one thing that the ACT Party holds higher than anything, and that is competition—competition and choice. It is interesting to note that this morning at the Commerce Committee we heard from Kordia. Kordia is the State-owned enterprise that took over the ownership of Television New Zealand’s masts and antennas. Kordia is looking at the feasibility of building a trans-Tasman telephone cable that would compete with the Southern Cross cable owned by Telecom. Just the very mention of Kordia considering the opening of a second cable was enough for Telecom to offer significantly cheaper prices to some of its wholesale customers. Kordia is a Government-owned organisation, and I say to Mr Hague that the most important thing is competition and choice.

I mention that because we have had competition and choice in accident compensation before. We had it in 1998 and 1999. In the 12 months prior to the 1999 election campaign, the work account was open to competition. Some six companies offered accident compensation cover to employers, including the only Government-owned accident compensation company, At Work Insurance, and the effect of that competition and choice was to drive down premiums by 30 percent. That was the effect.

CAROL BEAUMONT (Labour) Link to this

I rise with a heavy heart because, like others, I know that the Injury Prevention, Rehabilitation, and Compensation Amendment Bill is just the start of the National Government’s agenda in relation to accident compensation. It has tried, and is continuing to try, to deliberately undermine confidence in the accident compensation scheme and to manufacture a crisis, and then to flow that on to the sorts of changes that the ACT speaker John Boscawen has just referred to, which was the previous privatisation of the scheme. Labour opposes the entire bill, with the exception of the provisions to extend full funding for historical claims.

Before I speak about some of the specifics of the bill and some of the submissions to the Transport and Industrial Relations Committee, I will make a couple of contextual comments. I note that there has been a scaremongering campaign and there has been, of course, an inflated levies consultation campaign. Then there has been the cancellation of the Falls Prevention Strategy for the elderly—that is a good one—and the 20-kilometre travel and petrol reimbursement threshold on carers. How about the cuts in car and home modification budgets? How about denying half of the claims for surgery after injury, and denying sexual abuse victims and survivors counselling in at least 70 percent of cases? I also found it very interesting to read a report recently released to Labour under the Official Information Act. It talks about the accident compensation scheme having moved too far towards a customer focus and says that there is a need to tighten the gateway by reducing the level and costs of treatment provided, especially rationalising the range and services available.

That is the context in which this legislation is happening. As my colleague Darien Fenton asked, where is the focus on injury prevention? I have sat and listened to the Minister for ACC in the House and in the select committee. Where is the focus on injury prevention? It is not in the bill. We in this House should agree that we need to focus on injury prevention. I note that there have been cuts in the number of health and safety representatives being trained—from 6,000 to 2,000 representatives. That is just crazy. Those are the people who, in their own voluntary capacity, make it their job to make sure that their workmates, they themselves, and the public are safe. It is just crazy.

A lot has been made of the costs of accident compensation. PricewaterhouseCoopers reviewed the accident compensation scheme in 2008 and identified a number of major points, including that it has afforded New Zealand’s society and economy four decades of added value and social economic value; that it compares with other worker compensation schemes, and performs well in terms of return to work; and that as a proportion of wages levies are substantially lower than in comparable Australian worker compensation schemes. In Labour’s minority report members will see, if they take the time, the figures that show the comparison. New Zealand has lower claims management expenses than all Australian schemes, and our dispute rate in comparison with others is very low; overall, the scheme performs incredibly well. These are some of the facts that need to be put into the mix.

I also acknowledge, as others have, the submitters to the select committee. I acknowledge the 133 individuals and submitters from interested groups, and the 47 whom we heard in person, for taking the time to share, in many cases, their own personal experiences. Many of them were actually first-time submitters. Some incredibly powerful and moving submissions were made. I take the opportunity to acknowledge the officials who worked with us on the select committee, because we certainly asked for a lot of information, we were challenging and questioning all the way through, and they continued to provide us with that information.

But I am sad to say that despite the submitters’ efforts—who were overwhelmingly opposed to what the Government is doing—they really did not get listened to. Only minor changes were made to the bill at select committee. None of the very real concerns that were raised have actually led to changes; members see that fact with this bill coming back to the House.

MICHAEL WOODHOUSE (National) Link to this

I assure the member who has just resumed her seat, Carol Beaumont, that we were listening, albeit, having a significant hearing loss of my own, it was difficult for me to hear at times. It is a hearing loss that is congenital and probably not helped by the fact that I blew a rugby whistle for about the last 11 years and shot a rifle for the last 30. But if an audiologist had said to me that even one skerrick of that hearing loss was work related, it would have been accepted for accident compensation cover, and I do not think that is appropriate. So I support the changes in the Injury Prevention, Rehabilitation, and Compensation Amendment Bill. I will talk more about them in the committee stage of the debate. Carol Beaumont’s speech reinforced the polarised views that a committee that is otherwise in a pretty good, cooperative state, had through the submissions. That rhetoric lacked quite a bit of substance, frankly. We had claims about breaches of International Labour Organization conventions that New Zealand has not even signed up to. There were claims that the changes proposed were in breach of the underpinning principles of the scheme, even when some of those changes were to realign scheme entitlements with the royal commission report. Self-inflicted injuries were one such example.

I will come back to the Woodhouse report in a moment, but one of the games the submitters, and even the committee members, played was the game of “my statistic is bigger than your statistic”. A really good example of that concerned motorcycle accident rates, and it came up during protests about motorcycle levies. It was not necessarily directly related to this bill, but those protests became the sort of vanguard of disaffection at the proposed changes in accident compensation. But it was a bit ironic, really, because the protest was about levy increases at the same time as motorcyclists also rallied against the perceived cuts to their entitlements that this bill might give effect to. But the worst of the statistic-versus-statistic exchanges were about the annual reports of Accident Compensation Corporation (ACC), and those exchanges continue in the House today. The Labour Opposition has attacked the veracity not only of the data that its Ministers put their signatures to but also of the people who prepared the data. They attacked the employees of ACC, the actuaries, and the Auditor-General’s staff, which is a shame on that Opposition.

Even now, the Opposition denies there is a financial problem. We have heard of climate change deniers, but now we have a large group in this House who are finance change deniers, including the previous Minister for ACC, Maryan Street, who put her signature to a $2.4 billion deficit and who now denies that that is a problem. In her call she described insolvency as a situation when liabilities exceed assets, but she did not say why that was not a problem to her. She thinks that all a Government has to do is reach its hand into the pockets of hard-working levy payers, even at a time when economic conditions do not warrant it. When the reality of the sort of nonsense that went on over the last 9 years started to bite, and the last financial report presented the House with a $4.8 billion deficit, the Opposition still denied the problem—finance change deniers.

I do not intend to cover-off any of the specific changes, in this reading; I will leave that for the Committee stage of the bill. But I will touch on some of those underpinning principles and the suggestions by some that the changes in this bill are against the principles of the royal commission report. I wonder whether many who have referred to the Woodhouse report have actually read it. I suggest they do read it, because it is a very illuminating insight into a different time and a different place. The Woodhouse report contains the five cornerstone principles that Rahui Katene listed—principles that I and my party very strongly support. But it also gives some pretty revealing insights into the society of that time, and the reasons why workers’ compensation was framed in the way it was. I will give members an example: clause 413 talks about cover for women, which is something that Ms Beaumont is very strongly in favour of, of course. I quote: “And we have attempted to resolve the administrative problem associated with minor mishaps to housewives by recommending that for 14 days their families might well take the strain themselves.” The report was replete with references in the masculine form, not only because that was the way reports were written in those days but because it simply did not contemplate that women would participate in the workforce to the degree they do now—much less get injured. The report was written about cover for external force injuries to men who worked on building sites, railway lines, in forests, and so on.

Forty-two years later, life has changed considerably, and the royal commission report, in my view, is simply not able to cover all the new issues that the scheme faces: treatment injuries, sexual abuse, and occupational overuse syndrome. Whole industries like the information technology industry were not even around in 1967. The principles that that report established are strong and enduring, but we should be careful not to deify the report. We should not treat it like some sacred cow, the details of which will endure for all time. The report simply is not capable of being that. Even from the financial perspective, the whole scope of the scheme, as anticipated by the royal commission report, has changed so much that now it is unrecognisable. The appendix to that report contains an estimate of scheme costs, and if we compare those costs—even on a cash basis only and forget the arguments about full funding—what it reveals about the way in which the scheme has grown beyond any sort of comprehension that the report authors contemplated, is quite compelling. If we take the figures in appendix 9 and plot them against population growth and inflation, we find that while there has been an eightfold increase in average salaries in New Zealand, there has been a fifty-onefold increase in the cash costs per person to manage the scheme. Most of that growth has occurred in the last 5 years. By any measure that growth requires a response, and this bill is a very good start along that path. I support the intentions of the bill, I look forward to debating the merits of those individual clauses in the Committee stage, and I commend the bill to the House.