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Accident Compensation—Changes

Wednesday 14 October 2009 (advance copy) Hansard source (external site)

Blue5. Dr JACKIE BLUE (National) Link to this
to the Minister for ACC

What changes is the Government making to ACC to make it more affordable, sustainable and fair?

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

Today I have announced a package of legislative, regulatory, and operational changes to accident compensation to secure its long-term future for New Zealanders. The board of the Accident Compensation Corporation has advised that levy increases of over 50 percent would be required under the current law. The changes I have announced today will more than halve those increases.

BlueDr Jackie Blue Link to this

Why is it that the Government’s legislative changes will not reduce the increased levies on wage and salary earners by much?

SmithHon Dr NICK SMITH Link to this

Pushing out the full-funding date makes a big difference to the motor vehicle account and the employers’ account, which have large residual claims. It is not a significant problem for the earners account, where it will save only a few cents on the levy per $100 of earnings. To illustrate this point, the average worker would pay an extra $500 without any change. Deferral reduces this by only about 40 bucks. That is why the Government needs to make broader real savings in accident compensation to get levies back to a manageable level.

BradfordSue Bradford Link to this

Is the Government intending to lower the upper limit on weekly compensation; if so, by how much, when, and in what circumstances?

SmithHon Dr NICK SMITH Link to this

The principle of the accident compensation scheme, going back to the Woodhouse report, is for it to provide 80 percent of a person’s average earnings in the event that he or she is incapacitated and unable to work. Some changes that were made by the previous Government took the scheme well above that principle. The changes that we are proposing restore the Woodhouse principles, where employees would get 80 percent, and not those higher sums. We will not reduce the entitlements of any existing accident victims, but people coming on to the scheme in the future will face that lower rate.

BlueDr Jackie Blue Link to this

Can the Minister confirm that pushing out the full funding date does not actually save money but simply changes when we pay, and can he tell the House what savings the Government is attempting to achieve from the changes?

SmithHon Dr NICK SMITH Link to this

The member is quite correct that pushing out the full funding date simply spreads the historical residual costs over a longer period. I also note that it adds to the Crown’s net debt in the intervening years. In terms of the broader package of reforms around entitlements, regulations, and the operational changes, the package that we have announced today is aimed at saving $2 billion in terms of the accident compensation scheme’s future liabilities.

ParkerHon David Parker Link to this

How does the Minister reconcile John Judge’s assertion on Friday that he will reduce the scheme’s administration costs with the information in the latest annual report showing that those administration costs jumped by 8 percent in the last year and were $29 million over budget?

SmithHon Dr NICK SMITH Link to this

I would point out that the biggest increase to the salaries of senior staff, noted in the annual report, was during Labour’s period in Government. A freeze was put on the salaries of senior staff members as soon as this Government came into office. The further point I would make to the member opposite is that it is a bit rich to raise a point about the staffing costs at ACC on the same day that members of the House are demanding we pay more to Public Service staff like those working for the ACC.

DouglasHon Sir Roger Douglas Link to this

Does the Minister agree with the National Party policy document of 2008 that stated: “In the brief time that these accounts were open to competition, before the Labour Government abolished the concept in 2000, there was a substantial reduction in levies for most employers and self-employed and greater attention to workplace safety and rehabilitation.”; if so, why will he not introduce that policy now?

SmithHon Dr NICK SMITH Link to this

National campaigned in 2008 on a policy that stated that we would have an investigation into the option of competition in the work account. I have made it plain that the work account is, in fact, the one that is in the least difficulty. It is the non-earners account, the earners account, and the motor vehicle account that are in the greatest difficulty. That is why that policy is not a priority and why other reforms have been given the greatest Government attention.

BradfordSue Bradford Link to this

Why does the Minister think that partially privatising the scheme through farming out long-term claimants to third-party administrators will save money or provide better rehabilitation outcomes, when 2008 evidence from Research New Zealand shows that the opposite happens, with claimants under that system going back on to accident compensation more frequently because they have been forced out of the system too early?

SmithHon Dr NICK SMITH Link to this

The first point I would make to the member is that if the current system is working, then I ask why there has been such a poor performance in rehabilitation, which has declined over the last 5 years, and such a huge increase in the income compensation portion of the scheme. The decision by the board to contract in third parties for dealing with long-term accident compensation recipients who are capable of going back to work is, in my view, a smart initiative and it is one of the things that we will need to do if we are to more broadly protect New Zealanders from very high levy increases.

ParkerHon David Parker Link to this

Can the Minister confirm that the annual report for the year ended 30 June 2009 shows that changes made to the scope of cover by the previous Labour Government in the period since 2004 account for only 4 percent of the increase in the scheme’s liabilities?

SmithHon Dr NICK SMITH Link to this

No, that is not correct, and let me tell the member why.

HughesHon Darren Hughes Link to this

It’s in the report?

SmithHon Dr NICK SMITH Link to this

No, the member is reading only part of it. When the previous Government changed the rules around when somebody could be rehabilitated—say, the change from the 30-hour test to the 35-hour test—and changed the rules with regard to taking into account a person’s high income, those changes all had an impact on the rehabilitation costs. The member is drawing attention to only part of the changes. I give a further example. The change made around physiotherapy was not a statutory change, but it was a very expensive and foolish change made by the previous Government.

DouglasHon Sir Roger Douglas Link to this

What message has the Minister got for Nelson residents who signed the petition opposing the Labour Government’s renationalisation of the workplace and employers’ account, which reverses savings of $1.5 million for Sealord, $433,000 for Nelson Marlborough Health Services, and a 40 percent reduction for Hislop Motors; a petition that was organised and signed by National MP Dr Nick Smith?

SmithHon Dr NICK SMITH Link to this

A very good member, too. If we look at those major employers, we see that both Sealord and Nelson Marlborough Health Services are part of the partnership programme, so they have the opportunity under that programme to be outside of the main accident compensation scheme. It is all very well to quote what might have been the case, but this Government is focused on what is right to do with the scheme now, and the package of reforms that we have announced is a responsible response to a pretty difficult challenge.

ParkerHon David Parker Link to this

What steps has ACC taken to reduce home-support costs for seriously injured New Zealanders, as reported in the Dominion Post last week, and how does the Minister reconcile the fact that such significant changes had already been undertaken before the public was able to engage in the honest conversation that John Key this week promised we would have before changes were made?

SmithHon Dr NICK SMITH Link to this

The Government has been very upfront about the fact that an organisation that lost $2.4 billion last year and $4.8 billion this year has to make significant changes. In coming to Government, we found many areas in which the previous Government was funding things that it was not allowed to under the law.

MallardHon Trevor Mallard Link to this

Like Bill’s house!

SmithHon Dr NICK SMITH Link to this

Well, I am not surprised that Mr Mallard cannot focus on the very substantive problems that the previous Labour Government left this Government in respect of the accident compensation scheme, without being his normal, personal, nasty self.

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