Accident Compensation—Opening Scheme to Competition

I seek leave to table an article dated 23 October that totally contradicts the Prime Minister’s answer. It is from the New Zealand Herald.

Leave is sought to table an article from the New Zealand Herald of 23 October. Is there any objection? There is objection.

Why is the National Government considering turning over the work account to private insurers when the Treasury advice that the Prime Minister tabled last week suggested that there may be little benefit from that change, because accident compensation levies are not excessive?

There has been no decision about the future shape of accident compensation. There is a discussion taking place, and there is consideration of how the future of accident compensation may be delivered for the betterment of all New Zealanders. I point out to Labour members that it was previous Labour Governments that, in the last 9 years, successively introduced private sector involvement into accident compensation—yet somehow, to Labour, that seems OK. Unfortunately, the other mismanagement by Labour Governments has left the entire scheme in a most perilous position.

Why is the National Government considering opening up the work account to the private sector when Treasury’s explicit advice is that this would have very little effect on cost pressures?

The member who asks that question chooses a very, very narrow part of Treasury advice. It is evident that the Accident Compensation Corporation (ACC) is an organisation under stress, and that its ability to continue serving New Zealanders has been impeded considerably by the neglect of the previous Government. We are looking at how it may be preserved for the future.

I seek leave of the House to table the Treasury comment that says that work account contestability would have little effect on the scheme’s cost pressures.

Is leave sought to table the document?

That is right.

Hide Hon Rodney Hide Link to this

Leave is sought to table that Treasury document. Is there any objection? There is objection.

I raise a point of order, Mr Speaker. I objected, and I now ask for clarification. Is that the document that has already been tabled?

Tremain Chris Tremain Link to this

That is not strictly a point of order. I dealt with the seeking of leave to table the document. Leave was not granted.

What other reports has the Prime Minister received about the benefits of competition?

The Prime Minister has seen a report that talks about “the fresh air of competition, choice, opportunity, and innovation. It has put the nation on the road to real sustainable growth that, over time, means a better life for everyone.” The Prime Minister has seen another report that states “The consumer had everything to gain from the cut-throat competition the Labour Government deregulation of the financial sector had brought about.” Those were comments from Phil Goff, who now seems to think that competition is not appropriate.

Why does the National Government intend to open up the work account to the private sector when the major report done by PricewaterhouseCoopers estimates that privatisation would add 10 percent to administrative costs and increase charges to ordinary hard-working New Zealanders who would have to pay that expense?

There are two PricewaterhouseCoopers reports in the system. One report was released in 2008 based on figures from 4 years prior to that. The most recent report is the actuarial assessment of the accident compensation scheme’s current position, which paints a very dire picture. The Opposition cannot have it both ways.

Why is it a good idea to add to the bill that ordinary New Zealanders face in paying their levies the estimated $200 million in net profit that Merrill Lynch says the big Australian insurance companies would make out of privatising the work account?

In 2000 the Hon Michael Cullen raised the residual claims levy from 31c to 35c, claiming that that would see the accounts of the accident compensation scheme fully funded by 2014. Although the Labour Government successively put up the amount of the residual claim levies, Labour never achieved that. Rather, Labour opened it up to a whole lot of extra claims that have left the system in a parlous position.

The question asked was about the competition in Australia, the profits made in Australia, and how opening up to competition in New Zealand would not lead to similar profits, or something to that effect. The Minister has not really answered that in any shape or form. It would be helpful if the Minister were to—

Perhaps the Leader of the Opposition could ask the question again, with all due respect.

I accept that totally. I invite the Leader of the Opposition to do that.

Why was it a good idea to add to the bill that ordinary Kiwis have to pay for accident compensation $200 million in net profit that Merrill Lynch says the big Australian companies would make out of privatising the New Zealand work account of the accident compensation scheme?

The question asked was dealt with last week. However, the point is that the question supposes that that would be an outcome. This Government is not afraid of investigating competition, because we know that the scheme is in a dreadful state at the moment and needs a lot of work. We are considering the best way forward.

Why did the Prime Minister tell the House last week that the failed experiment in privatising the scheme last time was effective, when PricewaterhouseCoopers, Treasury, and employers have all said that a period of dropping the levies to capture market share would be followed by a large rise in premium income by those insurance companies? Why did he say that, when doctors have said that for them the privatised system was a nightmare?

The suppositions in the Leader of the Opposition’s question are just that. To answer them as if they were fact would be quite wrong. The reality is, though, that during the short period that the scheme was open to competition, it was a very successful time for all involved.

Why has the Prime Minister broken his pre-election promise that any consideration of privatising would be related only to the work account, when he has now made it clear that he intends consideration for privatisation to go across the whole area, and why did the Minister for ACC, Dr Nick Smith, constantly mislead the House up until 10 days ago—

The member knows he cannot make an allegation, when asking a question, that another member has misled the House.

I will rephrase it. Why did Nick Smith constantly tell the House up until 10 days ago that the stocktake would not involve investigation of privatising the work account, because that was not a priority?

Firstly, I dispute the interpretation that the Leader of the Opposition has put on to the statements made prior to the election. But also neither the Prime Minister nor any of the Cabinet had any idea what a dreadful state accident compensation was in prior to the election. We had a loss in that scheme of $2.4 billion in 2008, and every account is in an utter mess. This Government is attempting to fix it.

I raise a point of order, Mr Speaker. Is it necessary for a Minister to authenticate a comment such as that, when 10 days ago Nick Smith was—