Mr SPEAKERI have received a letter from the Leader of the Opposition seeking to debate under Standing Order 380 the decision made by the Minister for ACC to remove the chair of the board of the Accident Compensation Commission and appoint a new chair. This is a particular case of recent occurrence and it involves ministerial responsibility. Important aspects of governance are raised and future new developments of public interest are foreshadowed. Given the significance of the decision, I consider that it requires the immediate attention of the House. I call on the Leader of the Opposition to move that the House take note of an matter of urgent public importance.
Hon PHIL GOFF (Leader of the Opposition) Link to this
I move, That the House take note of a matter of urgent public importance. The Minister for ACC moved yesterday to sack the chair of the board of the Accident Compensation Corporation (ACC), Mr Ross Wilson. No good reason was given for that dismissal. Mr Ross Wilson is well regarded across the industry. He is regarded as competent, he is regarded as efficient, he has more experience, arguably, than anyone else in New Zealand working in accident compensation, and the credits given to him by people, including the Association of Salaried Medical Specialists, indicate that there was huge confidence in the job he was doing.
This dismissal mirrors a pattern of dismissal that is appearing under this Government. There was the dismissal of the Chair of the Otago District Health Board, Richard Thomson. Richard Thomson was the guy who caught the crooks. The crime had actually happened before he took over the chair. He was dismissed by Mr Ryall. Richard Thomson’s successor, when asked whether he would do anything different from what Richard Thomson had done, said: “Nothing at all.” That is an exact parallel. Of course, there was also the blunder of the Minister of Corrections in trying to sack the Chief Executive of the Department of Corrections in order to put the blame on somebody else, where there was no evidence for it and no support. Mr Wilson’s dismissal is part of a trend of an arrogant Government that wants to remove anybody who might have a different view, a different outlook, or a different perception from that of the Government.
What was the dismissal of Ross Wilson really about? If it was not about his competence, if it was not about his efficiency, and if it was not about his skill and experience, why was he dismissed? He was dismissed for two reasons. Firstly, it was part of the National Government’s effort to remove any obstacle to cutting the benefits of accident compensation. It wants to cut the benefits of accident compensation, because it wants to privatise ACC—to pass it over to the private sector as a profit-making organisation. That is on the record. Merrill Lynch—and I ask who worked for Merrill Lynch once upon a time—last year let the cat out of the bag that National would do just that, long before there were any reports about any problems or deficits. It let the cat out of the bag, saying here was a big opportunity for the Australian insurance companies. Yes, it is a big opportunity for the Australian insurance companies, because National’s goal is to let overseas insurance companies come into New Zealand and pick out the eyes of the profitable parts of accident compensation. The inevitable consequence of that will be a system that is weakened and that does not deliver to New Zealanders the benefits, the entitlements, and the coverage they need.
We have seen a consistent attempt made by Nick Smith to undermine the credibility of accident compensation. First of all, he said that the deficit in the non-earners account was because Labour Ministers had suppressed it. National members were so confident that they set up a ministerial inquiry. The problem with the ministerial inquiry was that it found no fault whatsoever with the actions of Labour Ministers. It stated that Treasury should have included the deficit in the Pre-election Economic and Fiscal Update. It made no findings whatsoever against Labour Ministers. So tactic No. 1 failed. Tactic No. 1 failed, but tactic No. 2 was to try to frighten New Zealanders into accepting major cuts in accident compensation coverage. That was why Nick Smith went out and talked about the motor vehicle account requiring an increase in vehicle registration fees of $500. He talked about a figure of $500. Then today he said that it would be over 5 years. What was the increase? It was $31. Again, the tactic is exposed for exactly what it is—an effort to frighten New Zealanders into accepting cuts to the basic entitlements that are needed for us to have a fair and just system of accident compensation.
It is quite clear that we have the best system of accident compensation anywhere in the world. A 477-page report from PricewaterhouseCoopers said just that. It made the point that accident compensation is serving the public better than any comparable scheme in the world. But still National wants to gut the basic entitlement to a fair system of accident compensation. I would direct the Minister—if he is interested, but he will not be—to read an article written by the Rt Hon Edward Thomas, a former Court of Appeal judge, who gave this summary about what PricewaterhouseCoopers found. He stated that the survey “establishes that ACC leads in having higher coverage, a greater range of benefits, higher benefit levels, lower administration costs, lower premium levels, a lower rate of claims disputes, less delays in claim resolution, better return to work outcomes, and significantly superior long-term rehabilitation services.” What is it about that that Nick Smith does not understand? This system is a world-class system, serving New Zealand well, and giving extensive coverage at a lower cost than any other country in the world does.
We have only to look across the Tasman to see what is happening there. Employer levies are 250 percent higher per wages earned than those in New Zealand. Let us have a look at what PricewaterhouseCoopers—[Interruption] The Minister disputes this. Let us have a look at what the 2008 report found. In New Zealand it costs 78c per $100 of workers’ wages to fund workplace accident compensation—78c per $100. In Australia it costs $2 per $100 of workers’ wages. Does the Minister accept that? He has to; it is a fact. In New Zealand 88 percent of people return to work within 6 months of being injured. In Australia the figure is lower—85 percent. In New Zealand the cost of managing accident compensation claims is 8 percent of total expenditure. In Australia the cost of managing claims ranges from 9 percent to a whopping 32 percent. In New Zealand ACC disputes 0.2 percent of workplace injury claims. In Australia, on average, 9 percent of workplace injury claims are disputed by accident compensation providers.
Most people think that if a system is working, we should not tamper with it. The reason that the National Government wants to tamper with this system is to cut the benefits that are available to ordinary working New Zealanders who rely on this system, to the extent of making 1.7 million claims a year. These people are ordinary New Zealanders who deserve a fair go. Dr Smith is telling us that he is going to push back the entitlements that the Labour Government legislated for.
That is nonsense. The Law Society said that what Labour had effectively done was to remove the anomalies in the system—to remove the unfairness and to give people access to just outcomes. I will give Dr Smith an example of one person who suffered under the old system—which was the reason we changed it—in terms of mental trauma. His name is Terry Bristowe. He is a former engine driver. He is a 62-year-old grandfather. He was unfortunately involved in two fatal accidents when he was driving his locomotive. Two pedestrians walked across the line in front of the train. One was a 19-year-old, and one was in his mid-twenties. After the first accident he suffered 3 months of trauma, during which time he stayed at home, but he decided to return to work. The second accident happened in December 2002, when he hit a man on the Woburn line and killed him. After the second accident, he could not return to work.
Is Dr Smith telling the House that Mr Bristowe is one of the people who will no longer be entitled to the full range of benefits under accident compensation? Is he telling the woman who was set alight as a result of medical misadventure when she was undergoing a Caesarean—the anaesthetic caught fire—that she will not automatically be covered under accident compensation? Is he telling victims of rape that they will not be entitled to counselling for mental trauma—one of the changes that Labour introduced? Is Dr Smith telling the people of New Zealand that they will no longer get lump-sum payments for accidents that they have suffered? Lump-sum payments go back to the original Woodhouse commission scheme. They were part of the contract, but they were ripped out of it by an earlier National Government. Tories never change their spots. They are at it again. Labour brought back lump-sum payments. I want Dr Smith to rise to his feet and say why justice should not be delivered to the decent, ordinary, hard-working New Zealanders who have those particular entitlements.
Dr Smith would like to say that the increase in liabilities is because of inaction or inappropriate action by the ACC board. Dr Smith knows that is not true. Dr Smith knows that the major factor is that interest rates have fallen and the return on investments has gone down. That has affected not only accident compensation; actually, the superannuation fund has been more affected by it. Is the Minister going to dismiss the board of the superannuation fund now? Is he going to suggest that the management of every New Zealand insurance company that is losing money because of the lower return on investments ought to be dismissed? Of course he is not saying that, because he is not giving an honest answer about why the board chair has been dismissed. He knows also that some of the increases in liabilities are about changes to the financial reporting system. Those changes do not influence the bottom line at all; they just say that things that were always there, but were not added in before, have to be added in. There is nothing that this Minister can pin on the chair of the ACC board that in any way suggests inappropriate, incompetent, or inefficient handling.
What Dr Smith wants to do, along with the rest of the National Government, is carve back the benefits that New Zealanders enjoy because they need them as a matter of social justice. Is Dr Smith telling the 400,000 seasonal workers that they will have to go back to a system where their compensation is calculated in a way that disadvantages them in terms of the income support they receive? Is that what Dr Smith is telling the country? He needs to be upfront. When Dr Smith gets to his feet he needs to tell us, the country, why he wants to hive off aspects of accident compensation to the private sector to enable it to make profits at the expense of the system.
The last time that happened the Department of Labour produced a report on it—the Blue Lotus report. That report demonstrated quite clearly that a greater amount of money was being spent on administration, that more payments were being wasted and were not going to the victims of accidents, that insurance companies were late in making payments, and that the system was not working as well as the system that it had replaced. It was a clear report. It demonstrated that privatisation did not work for the taxpayer and did not work for the consumer. It worked for the private companies; they made money out of it. But where was that money coming from? It was coming from the benefits, the entitlements, and the coverage that New Zealanders who are injured at work would otherwise have got, and it was coming at the expense of the employers. Even the employers know that if they lose the accident compensation system as it was set up, then they will be worse off. The levies on employers will be higher, the costs to workers will be higher, and the costs to motor vehicle owners will be higher.
If it works, do not fix it. Our accident compensation system is fundamentally sound, and the ACC board has been appropriate in its actions and its governance of the scheme, and the claims that Nick Smith makes about that are quite incorrect. This is not a system that is failing to deliver to people. Dr Smith is promising New Zealanders lower entitlements at greater cost. That argument cannot be sustained.
Hon Dr NICK SMITH (Minister for ACC) Link to this
This issue is all about performance and securing for New Zealanders an accident compensation insurance scheme that is effective, efficient, and affordable. My decision yesterday to have Mr John Judge replace Mr Ross Wilson was made because Mr Judge has the right skills for what is required by the Accident Compensation Corporation (ACC) and to secure its future, which was put at risk by the reckless actions of the previous Government.
Let me recite for the record exactly what occurred for me as the new Minister after receiving the phone call from the Prime Minister, saying I was to be the Minister for ACC. Before I even received my warrant, I received a call from the Department of Labour to say that unless it got an extra $300 million for the non-earners account, the scheme would be unable to provide the basic accident compensation coverage for non-working New Zealanders. I asked the officials: “Hang on. How long has the previous Government known about that $300 million blowout?” They told me it had been known about for over a year. So when I see crocodile tears coming from members opposite about the integrity of our accident compensation scheme, I ask where they were for the 12 months when they knew this scheme was in trouble and they did nothing.
Then we go on. I have received three independent reports that bring up major questions in terms of the finances of the ACC. There is the MartinJenkins report. I invite members to read the fact that the previous Government broke the Public Finance Act—it broke the Public Finance Act; that is the first time since 1989 that that Act has been breached. Furthermore, that report said the underlying problem of huge cost increases at the ACC went back many, many years to the misadministration by that Government.
Then we come to the report I received this year, in February, by PricewaterhouseCoopers. Let me remind members opposite of what it says, because they would pretend all is well within ACC. Let me recite the first thing that the report says. It says that ACC’s finances had deteriorated by $3.9 billion in 1 year. The report identifies that during Labour’s tenure, ACC’s liabilities increased from $6.1 billion to $22 billion. That is a deterioration of $16 billion. The report further said that over the last 6 months the situation had deteriorated by $2.6 billion. That was the second report.
The third report I received was from the Department of Labour, which I tabled in the House today. It said that of the seven financial reporting indicators, or key performance indicators, set by the previous Government, six of them are not being achieved and will not be achieved this year—six out of seven. Let me go through what they are. In respect of rehabilitation rates, ACC is not meeting the targets that the previous Government set; in respect of the return to work rates, ACC is failing; and in respect of the costs per claim, it is not performing as per the criteria set down by the previous Government. Mr Goff has made much of the investment returns. The interesting thing is that of the seven financial key performance indicators, the one that ACC was meeting was on the rate of investment returns. I have never justified making the changes to the board on the basis of performance in that area, because it is true that whichever investment funds one looks at, whether it is the superannuation fund, private funds, or others, there have been major holes.
I have had three substantive reports that show ACC was underperforming. And what would members opposite have me do?
Hon Dr NICK SMITH Link to this
I say to this House that a responsible Minister would respond to those reports in such a way as to secure the future of ACC, and that is just what I am doing.
Let me outline the advice I have received about what would happen if I was to do nothing. I am advised that if I do nothing, motor vehicle levies would need to increase by 129 percent.
Nathan GuyHon Dr NICK SMITH Link to this
By 129 percent. If I do nothing—and I know this will be a concern for the member for Ōtaki—the motor vehicle levy would need to be increased to $585 per motor vehicle. I think that is unaffordable. The report says I would need to increase the accident compensation levy on businesses by 71 percent. I ask how many people in this House believe that with the economy in its current shape, it would be responsible to increase accident compensation levies on businesses by 71 percent. If we wanted to kill jobs, that would be the surest way to do it. [ Interruption] I say to the previous Minister for ACC, Maryan Street, who is squawking, that she should take some responsibility for the mess she left ACC in. The worst increase in levies would be for ordinary families and workers. ACC advises me that if I do nothing, the levy for ACC would increase from $1.40 to $4, which is an increase of 185 percent on earners. Members on this side of the House say that is unaffordable, and we need to make changes.
Let me note some of the other areas. Again, I challenge members opposite, who came out and promised New Zealanders that they would make physiotherapy free. They advised that it would cost $9 million. How much did it cost? Well, to date it has cost nine times that figure. In fact, I am advised that the policy of providing free physiotherapy has expanded the cost of accident compensation from $58 million to $225 million per year. Who would say that we can go on? Even the current board of ACC has advised me that that is untenable, that a mistake was made, and that that is one of the things we will have to address.
I take the area of medical misadventure, which the previous Government changed to a more generous treatment regime. The previous Government said it would cost $9 million per year. I am advised that it is costing $40 million a year. Mr Goff and members opposite believe that we can have all those increased entitlements without anybody having to pay. Who believes that nonsense? That is why this Government has embarked upon a sensible programme of change.
What are those changes? The first thing I have said is that I believe ACC needs to have a stronger level of financial governance skills. I say that John Judge, who has been the chief executive of Ernst and Young, and whom the previous Government appointed to Te Papa, is a proper person to provide ACC with the governance skills that are required. I would note the editorial published in the Dominion Post at the time Mr Ross Wilson was appointed. Let me tell members what the Dominion Post said: “Labour is pushing the boundaries beyond what is acceptable in looking after its friends.” Is that what the editorials are saying about my appointment of John Judge? No, that is what the editorials said about the appointment of Mr Ross Wilson. It is my intention to boost the skills of the ACC board, so that New Zealanders can have confidence that it is running an efficient and effective 24/7 insurance scheme.
Hon Steve ChadwickHon Dr NICK SMITH Link to this
The second change that I have flagged, I say for the benefit of the previous member for Rotorua, is that in my view we do need to make legislative changes. It is my view that the full-funding date of 2014 will put too much pressure on levies. That is why I said last week that this Government will introduce a bill to push that full-funding date out and provide some space for levy payers. I have also said we need to review a number of items of funding that are out of control. I have specifically noted physiotherapy.
We need to have an honest debate, not a debate where we say ACC can do everything but the levies will not go up. We need to have an honest debate where we say to New Zealanders: “Here are the entitlements; here are the costs. How can we do this in an effective way?” At heart here is a debate around how to make ACC secure for the future. Let me make it absolutely plain to members of this House and to New Zealanders that this Government is committed to the underlying Woodhouse principles of accident compensation. This Government is committed to a 24/7 State insurance scheme that can be secure for New Zealanders. But I also say I will not have this organisation go down the financial gurgler and put vulnerable New Zealanders at risk. That is why this Government will make responsible changes.
It is our view that the previous Government converted accident compensation into some sort of social welfare scheme, without knowing who would pay the bill. We will be financially responsible and we will secure a future for accident compensation, because it matters. I challenge the next speaker from the Opposition to apologise to New Zealanders, because the previous Government, through its reckless approach, put the scheme at risk. This Government will secure a future for accident compensation. It is my view that John Judge has the right set of skills to enable ACC to move forward, to enable it to move out of the hole that the previous Government created, and to enable us to provide New Zealanders with the all-important security of knowing that if they have an accident, the accident compensation system will be there for them. That is the commitment that I give to New Zealanders.
Hon DAVID PARKER (Labour) Link to this
It is interesting to reflect on why the Government is already on the defensive on this issue. Why are we having an urgent debate today about its handling of the issue? The underlying reason is that Dr Smith and his colleagues tried to spin it. They tried to spin it and they have been caught out. They tried to present a picture to New Zealand that was inaccurate. That picture was that the accident compensation system was fundamentally flawed and in a parlous financial position. That picture was presented to justify the Government’s ambition to cut dramatically the scope of the scheme and reduce New Zealanders’ entitlements, the entitlements they need when they have an accident and are injured or when they suffer some injury in hospital.
Let us look at how the Government was caught out. Nick Smith said to this House, and, following his discussions with the National Business Review, he was reported as saying, the Accident Compensation Corporation (ACC) was “technically insolvent”. Those were the words he used: “technically insolvent”. [Interruption] Sir Roger Douglas says “Of course it is.” The definition of solvency is the ability to pay one’s debts as they fall due, I say to Sir Roger Douglas. Nick Smith ought to know that, and Sir Roger ought to know that. That is the traditional definition of solvency. It is absolutely clear that ACC has grown more solvent year by year, not less.
Sandra GoudieWhat would I know? In 1999, 64 percent of ACC’s liabilities were unfunded. It had $2.5 billion worth of assets. Where are we today? Today, after ACC has booked significant decreases in its asset values as a consequence of decreases in investment prices around the world, even now it has more than $12 billion worth of assets, looking at the latest figures from December 2008. There is over $12 billion worth of assets, compared with $2.5 billion in 1999.
Those figures are as at 31 December 2008. Admittedly, it will have gone down a little bit since then because of the financial crisis, but that was after already booking a decrease in value of investments of $700 million from June to December. As a percentage of the total liability, what was unfunded? We know, as I have said, that it was unfunded by 64 percent back in 1999. That figure is now down to 45 percent. It is now 55 percent funded.
What other exaggerations did we have? We debunked the idea that ACC is technically insolvent. If we look just at current year performance, we see that it took in $4 billion worth of income and spent $3 billion. ACC went forward by a billion dollars this year, so it certainly is not insolvent on this year’s measure of performance.
Other exaggerations we had from Nick Smith were that he said that unless there were significant changes to the scope of the scheme—that is his code throughout: “significant changes”—we will have households paying $2,400 per annum extra by 2013-14. That is per family, per household, per year. That is what he said. He pretends that was an outcome that was going to happen. It was never going to happen. We saw it today in respect of the announcements about the registration fee levies. He was pretending they were going to go up by hundreds of dollars; they went up by $31. We already know that the substantial part of this problem can be cured by pushing out the date for full funding from 2014 to 2019. We already know that the substantial part of the problem for ACC currently is the decrease in the value of its investments, not the underlying change to the scope of the scheme.
We had Dr Nick Smith saying on Checkpoint last week that the first thing is that the investment losses are only a very small part of ACC’s difficulties. I will repeat that. I am quoting it word for word from Checkpoint: “Well, the first thing is the investment losses are only a very small part of ACC’s difficulties.” That is rubbish. Let us look at the PricewaterhouseCoopers report. It refers to the $2.58 billion decrease in ACC’s financial position in the period as at June 2009. About that change in position of $2.6 billion, Dr Smith says that “the first thing is that the investment losses are only a very small part of ACC’s difficulties”. What does the report state? It states that $1.8 billion of that $2.6 billion is due to changes in economic assumptions. I will read out what PricewaterhouseCoopers said: “The liability … has increased by $1.830 billion due to the impact of revised economic assumptions, most notably revised discount rate assumptions. The global financial crisis has seen a large fall in forecast yields across most economies, with New Zealand having experienced an average 1.3% drop in yields over the 6 months to 31 December 2008. Due to the long term nature of ACC’s liabilities, even a small reduction in yields leads to a large increase in the liability.”
The very report that Dr Smith was relying upon was spun by him mercilessly to state that the major part of the problem related to some generosity of the scheme, when, in actual fact, the big problem has been the decrease in investment returns on ACC’s ledger, compounded by the fact that under current legislation the scheme has to be fully funded by 2014. This means that, effectively, the bucket of money we need to pay future claims has to be bigger, because investment rates of return have dropped. We have only until 2014 to do it under the current legislation. Therefore, it would see a big lift in levies if we did not change that date. But we have always known that we can largely fix that problem by changing the full funding date to 2019. It should have been done by Christmas, and employer levies would be lower now than Dr Smith has already put them up to. I sought leave to table a member’s bill that would have very simply given that effect, but Dr Smith and National members declined that leave. He now says he will do something.
Dr Smith says we had 9 years. The latest bit of jargon we heard was that the National Government was going to increase motor vehicle levies to $585 by 2013-14. He was saying that by 2009-10 they should be going up to $376. He knew even when he said that last week that that was not the case. How do I know that? Because today, less than 1 week later, he did not put up the levies for motor vehicles by $120; he put them up by $32. He was spinning it and trying to scare people into thinking that the problems at ACC are fundamental.
If we look at the changes the National Government proposes, we see that the ones that people should be most scared of are changes to the scope of the scheme. Dr Smith—again, I am quoting him—has promised “significant changes”. He means the word significant. We know that the last time the National Government was in power it left the accident compensation scheme so miserable and with so many injustices that the very basis of the social contract of giving up the right to sue in order for fair compensation to be given was put at risk. Since then the Labour Government has reinstituted various things that had been cut by the former National Government.
What did we do? One of the gross injustices was that if someone was a seasonal worker and had an out-of-season accident—let us say he or she was hit by a drunken driver, through no fault of his or her own—under the rules the former National Government left, that person would receive earnings-related compensation based on his or her earnings for a short period prior to his or her being hit by the drunken driver, which could exclude his or her seasonal earnings. That person might be unable to work but have no earnings-related compensation to reflect his or her seasonal earnings.
What other examples were there? They are legion. The criteria necessary to prove medical misadventure were so narrow that some of those people who suffered injury in hospital when, very sadly, they suffered burn injuries when antiseptics caught fire did not get compensation. All of these things are at risk from National, which wants to cut the scheme, despite it already being far cheaper for employers than the Australian schemes.
SUE BRADFORD (Green) Link to this
The Green Party joins other colleagues here in the House today to express our extreme concern at the direction in which the Government is taking accident compensation, and to question whether this is the beginning of National’s blitzkrieg on much that we hold dear in this country.
National is using the tactics of shock and awe to try to soften up people for a major undermining of our accident compensation system. Whether National goes in the direction of privatisation, which it continues to deny, or whether it is undermining a whole lot of areas that accident compensation currently covers and is turning back the clock on them—whichever way National is going, or even if it is going in both directions—we do not want it. The accident compensation system has been in place for many years. It is underpinned by the Woodhouse principles, which I would hope National still subscribed to, of community responsibility, comprehensive entitlement, real compensation, and administrative efficiency. We do not want to see any of those go. We understand that there are concerns about aspects of the scheme’s performance, but we do not need the kind of undermining of the scheme that is happening at the moment.
First of all, in relation to funding, the Government has rapidly created a so-called financial crisis out of the issue that all claims are supposed to be fully funded by 2014. I understand that the Minister for ACC has accepted what the Opposition has put up and what the Accident Compensation Corporation (ACC) board has recommended, which is that the 2014 deadline for full funding should be moved out to 2019. I understand that Dr Smith is in agreement with that, that he thinks it is viable and should be done. That is good; that is great. So why are we rushing into this now? Why do we have to suddenly start looking at cutting back people’s entitlements? Why do we have to look at taking accident compensation out to private companies? I believe that all of this is scaremongering done by the Minister and the Government. None of it is necessary.
In terms of the losses on international markets, that is not happening for—
I have no idea, but I believe that it is scaremongering in terms of how it is paid. The PricewaterhouseCoopers report actually stated a whole lot of positive things about what accident compensation is doing. It stated that compared with other workers compensation schemes, our accident compensation scheme performs well in terms of people returning to work. Eighty-eight percent of New Zealand workers return to work within 6 months, compared with an average of 85 percent in Australia.
That is not a sign of a scheme that is failing. The PricewaterhouseCoopers’ report states that the accident compensation employer contribution rate as a proportion of wages is substantially lower than in comparable Australian workers compensation schemes—78c for every $100 in New Zealand, compared with an Australian average of $2 for every $100. Our motor vehicle contribution rates are significantly lower than rates in Australian states—although there has just been an announcement that our rates are going up today. The PricewaterhouseCoopers report also states that we have lower claims management expenses than all Australian schemes, and lower administration costs. This report is the very one the Minister is talking about.
The Government has gone on this week to sack the chairman of the ACC board, Ross Wilson, and we are concerned about what may happen to the rest of the board. We are not sure what is happening to the rest of it, but we are very concerned that Mr Wilson’s union colleague Wayne Butson may be removed. We question whether the Government will have any worker or union representative on the board, once it is reconstituted after the 1 month deadline that the Minister has given. Given that this scheme is a workers compensation scheme, it would be a total shocker if the board were to have no worker or union representation at all. I certainly hope the Minister will look at appropriate candidates for the board. Unions and workers absolutely must have representation on the board. One of the major parts of society affected by accident compensation cannot be suddenly left with no representation at all. Mr Wilson has been replaced by the previous head of Ernst and Young, John Judge—about whom, I must admit, I know nothing, and for all I know he will be a fantastic chair. He needs beside him at least one board member—if not more—who understands the real needs and the real situation of the workers of this country, who are affected by accidents, unfortunately, every day around this country.
The third area we are very concerned about is the threat by the Government to cut actual entitlements and services provided through accident compensation. Again, this is very unclear. We can only go on what little the Government has said and what has been in the media over the last few days, but it is clear there is a threat to physiotherapy. We had finally reached a point where physiotherapy had become accessible to all injured workers and others. Rehabilitation rates are going up. What we see now is a threat to that area—after we had finally got some decent changes. Will the Government be making cuts in the area of medical misadventure, where, unfortunately, there have been a large number of accidents? Will it cut accident compensation for seasonal workers? Why should they miss out? Seasonal workers are workers, too, and deserve cover just as much as anyone else does. What other cuts will the Government make? What rehabilitation do people not deserve, whether they are in work or non-earners? All injured people, whoever they are, deserve the best that this country can give them, on a no-fault basis. Worst of all, of course, would be to restore—and some people are calling for it—the right to sue, and to get rid of that no-fault basis. I certainly hope Dr Smith will not take us in that direction. I see him shaking his head. Thank goodness!
ACC must be maintained as a publicly owned company. The Woodhouse principles must be maintained. Accident compensation must not be put out for privatisation. I am very concerned about the comments Mr Key made the other day—and I asked about them in question time today—regarding taking the accident compensation scheme out to private companies. I fail absolutely to understand the difference between taking the accident compensation scheme out to private companies and privatisation. Is it partial privatisation that the Government is talking about? Where do these private companies come in?
I sat with the Minister on the special committee on accident compensation back in 2000, and we heard what a failure the first attempt at partial privatisation of accident compensation had been. I hope that some of the members who were on that select committee and are sitting on the Government benches now will remember the submissions we heard back then about the inequities, and iniquities, of that system as it was actually applied to workers in some workplaces. Workers were told they had to go through what was basically a company doctor scheme. Everything possible was done to avoid those people getting compensation. Income-related compensation and rehabilitation options were limited. We saw the beginning of a move towards the American system, which has manifestly failed people in that country.
The Green Party will continue to work with colleagues—where we can—across the House, and with trade unions, community organisations, physiotherapists, and everyone else we can work with out there in the community to resist what the Government is trying to do to accident compensation, and to try to retain the good system that we have to the maximum extent possible.
Hon Sir ROGER DOUGLAS (ACT) Link to this
The fact is that the accident compensation scheme is a total failure. It is a walking disaster. Over the last 9 years the Labour Government expanded the coverage of accident compensation far beyond what was originally intended, and, at the same time, told us that it would not cost more. It was absolutely wrong. The employers’ account will need to increase by around 55 to 60 percent over the coming years to make up for the shortfalls projected, unless strong action is taken.
The failure of accident compensation has not happened by chance. Accident compensation is failing, basically, because the concept is intellectually bankrupt. The idea that one can provide cheap insurance through monopoly provision is a myth. We know this to be true. Monopolies fail to meet consumer demand because consumers have no choice, at all. Monopolies fail to reduce costs because they have no competition to drive out the high-cost structures. Every State monopoly costs too much. Every State monopoly—whether it is accident compensation or otherwise—costs too much and fails to meet consumer demands.
I ask members to consider the problems with the accident compensation scheme. The Accident Compensation Corporation (ACC) is bankrupt. Any private insurance company that had such a large unfunded liability would be out of business. The only thing that keeps ACC in business, the only thing that keeps ACC from receivership, is that it is compulsory—that is, it has a claim on the income of each and every New Zealander. In other words, it is a tax by another name. Accident compensation shields the negligent. Employers with safe workplaces subsidise those with unsafe ones. What incentive is there under an accident compensation system to make workplaces safer, unless one pays for a lack of safety? That is why in the year after the introduction of accident compensation, workplace accidents increased by 400 percent. I repeat: 400 percent.
The third point I make is that the accident compensation scheme has surging costs. Schemes that have open-ended liability and no way to guarantee that revenue matches costs are unsustainable. In 2008 the number of claims increased by four and a half times the population growth. This suggests that the taxpayer is being defrauded. In the 3 years to 2008 the cost of the scheme’s medical treatment increased by 55 percent, at a time when inflation would not have increased by even 10 percent. The accident compensation scheme has a poor record of getting people back to work. For example, half as many New Zealanders receive an action plan for how to return to work as do Australians living in Tasmania who have private insurance. Many people say that private provision would increase costs because there would be a profit motive, but it is the profit motive that ensures that private businesses do not become excessively bureaucratic and bloated. Competition would allow consumers to purchase a much wider range of insurance products. Competition would decrease premiums overall, and especially the premiums for safe workplaces, while increasing them for unsafe workplaces, thus providing an incentive for greater safety. That is how the system would work. Competition would stop bureaucratic expansion and help end insurance fraud.
Once again, the real story here is that State monopolies are destined to fail. But if we look at ACC, we see that the real problem is that it has a cost-plus culture. Under a Labour Government we had unrealistic cover extensions, loss of provider management, the removal of co-payments for services, increasing claim escalations and service utilisations, limited case management, and limited employer involvement. It is no wonder that it is a mess, and no wonder that it is basically bankrupt.
I have sat here and listened to members go on about the PricewaterhouseCoopers report. The fact is that the Labour Government depended on erroneous international comparisons to counter the clear performance deterioration of ACC. That report cost $1.3 million but it did not undertake a meaningful analysis of ACC’s emerging and comparative performance. No adjustment was made for demonstrable differences between our accident compensation scheme and the Australian scheme. Let me quote two lower-income replacement rates: 100 percent in Australia and 80 percent here. We have significantly lower lump-sum common law payments, with payments of 30 percent in Australia compared with 1 percent here.
If those two factors are taken into account, it would mean 40 percent extra costs in Australia, over and above those in New Zealand. The previous Government has not mentioned that, because it does not want the facts; it wants to pretend. But at the end of the day pretence gets us nowhere, and it is no wonder that we in this country are finding that our productivity and our standard of living have declined. There are no performance incentives to positively influence behaviour and utilisation. There is no risk rating and very limited excesses or service co-payments, which are so necessary in order to keep a cap on expenditure. ACC, as I understand it, is actively preparing for competition while not actively addressing the substantive deterioration in its core statutory businesses.
What the Labour Government did over the last 3 or 4 years is a disgrace—an absolute disgrace. ACC used phoney estimates to give the appearance that it was solvent. For example, it overstated the discount rate, which put a gloss on the figures of $5 billion or $6 billion. ACC’s optimistically projected reductions in expenditure trends were reduced—for example, the rehabilitation liability came down from 10 percent to 1 percent in 4 years. What the Labour Government did over the last 4 or 5 years with the accident compensation scheme is nothing short of disgraceful—absolutely and utterly disgraceful. The fact is that the scheme during that period was a total failure and it is now a walking disaster; members opposite should be ashamed of themselves.
RAHUI KATENE (Māori Party—Te Tai Tonga) Link to this
I am somewhat bemused at the reaction to the announcement from the Minister that the Accident Compensation Corporation (ACC) needed a fresh start in order to face up to its funding issues. What is wrong with a fresh start? In all other spheres of the world it seems that the deteriorating economic forecast is dominating our thinking. We are calling for results-based accountability, funding for outcomes, efficiency of services, and better targeted support.
Let us not forget that we are talking about an agency in which a shortfall of $1.5 billion is supposedly of such little interest to its management that it was deemed unnecessary to disclose the amount in the statutory Pre-election Economic and Fiscal Update. For 3 whole months before the 2008 election the ACC board had recommended that more funding would be required, specifically $1.559 billion—gasp—over the next 5 years, including $307 million in the current year. Despite the requirements around limited powers that every good public servant knows about, officials in ACC and Treasury had not deemed it necessary to pass that information on. On top of the Pre-election Economic and Fiscal Update we then received the latest 6-monthly PricewaterhouseCoopers valuation of ACC’s liabilities. In this report it was revealed that ACC’s liabilities have increased to $21.875 billion, with dramatic increases needed in the earners levy and the vehicle levy.
Today New Zealanders have had to accept the shock announcement that the motor vehicle levy will be increasing by $32 from 1 July 2009. The motor vehicle licence fee for a petrol car will increase from $136.44 to $168.46, and on top of that the ACC petrol levy will rise from 9.34 cents per litre to 9.90 cents per litre. To many in this House, those numbers may just seem like dollars and cents and hardly the stuff to get concerned about, but for my constituents, the constituents of Te Tai Tonga, those dollars and cents come at a time when they can least afford it. The families in my electorate are on a median income of $54,500 for an entire household. That is a whole $5,000 less than the median family income for New Zealand as a whole, and for many of the people in this establishment it is an income level that might be regarded as being too low for even an individual, let alone a family.
But that is not all we need to think about when we think about ACC—bad enough though it is. I want to drill down further into the experiences of our constituents with ACC, and specifically the experiences of Māori. All the research tells us that comparisons of need with actual care consistently show us that across the health sector, Māori have greater need but less access to treatment. We have seen that for heart disease, for respiratory health, for cancer, for strokes, and the list goes on. But the data that is particular to ACC reveals that Māori are not receiving the entitlements they should receive in the areas of care, rehabilitation, and compensation. They are not receiving their entitlements at a level comparable to the proportion of Māori in the population, and so we have to ask why.
I ask again whether the case of appointing a new chair for ACC justifies the use of the urgent debate formula. The situation that should really warrant urgent consideration is the situation outlined by Dr Peter Jansen of Mauri Ora Associates. His research paper Māori consumer use and experience of health and disability and ACC is fascinating reading for all of us, because it reveals in some depth that the reasons for the large health disparity include barriers to access, barriers to treatment, provider behaviours, cultural competence, institutional racism, differences in utilisation, lack of knowledge by Māori patients, and Māori preferences for care. I know that that is not news to anyone in this House, but it should be. What could explain why so little has been done to address that situation?
We know that Māori are dissatisfied with the care they receive and with the barriers to care. Now is the time to do something about it. In our world view, we have a saying: ruia taitea kia tū, ko taikākā anake—strip away the sap wood, gather only the heart wood. It literally means to clear away the rubble in order for us to get to the heart of the matter—the ultimate outcomes in terms of health and care.
We are not about to say that an individual—Ross Wilson or John Judge—is capable or incapable of earning the trust of the public. It is not our place to do that, and it is certainly not appropriate to target or finger-point individuals, but we do believe it is useful to look afresh at accident compensation. The ministerial inquiry, the funding shortfall, and the continuing saga of ballooning accident compensation entitlements and levies signalled this week are all vital areas of examination in their own right. But when we overlay the situation for Māori on top of that context, it most certainly appears to us that nothing could be wrong with taking a fresh approach and a good look at a system that is clearly experiencing some problems. In the interests of our constituents, of Māori, of taxpayers and of everyday New Zealanders, we say let us be brave enough to withstand the challenge of change and let us look anew at the accident compensation scheme.
The ASSISTANT SPEAKER (Hon Rick Barker) Link to this
I call Grant Robertson. I remind the member that this is a 5-minute slot, and I will give you a bell at 4 minutes.
GRANT ROBERTSON (Labour—Wellington Central) Link to this
Thank you, Mr Speaker. What we have seen from the National Party with the sacking of Ross Wilson is simply stage one of its plan for accident compensation. It is a plan to move to privatisation, to reduce coverage, and to increase the role of private insurance providers—largely Australian private insurance providers. It is a message of “cut and sell”, and it is petty politics to sack Ross Wilson from the role of chair of the Accident Compensation Corporation (ACC) board. Ross Wilson is a person with years of experience in ACC. He is somebody who has been there and done that at the worker level and at the board level of ACC, and sacking him is simply a matter of petty politics from Nick Smith.
National’s agenda for accident compensation began before the election. Merrill Lynch gave it away to us. It told us that the work account was going to be opened up to private insurance. We have heard a lot today about the principles of the accident compensation scheme, the principles that Owen Woodhouse put forward. One of the things Owen Woodhouse said was that involving private insurance providers in the scheme would fundamentally undermine it, because their motive of profit fundamentally goes against a 24-hour, no-fault scheme. As Owen Woodhouse said, the compensation regime, before we brought in universal coverage, was a lottery, and that is what National wants to return us to: a lottery where New Zealanders are exposed to litigation.
We have given away the right to sue. New Zealanders should be and are proud of the accident compensation scheme, because it is our scheme. It is Kiwis looking after Kiwis. It is our collective response to injury, to accidents, and to rehabilitation. It prevents New Zealanders from being exposed to an American-style insurance scheme, and that is the scheme that the National Government is taking us back towards.
I ask Dr Smith whether he said to the Australians that this scheme was going to be opened up for private insurance, because if he did, then he is fundamentally undermining the scheme that Owen Woodhouse put forward. Owen Woodhouse said that this was our collective response to injury and accidents, and it would be undermined by the role of the private sector.
We need to be clear today that Nick Smith has put up a straw man to show that New Zealanders cannot afford the accident compensation scheme. We are saying to him that that straw man is based on a loss of investment income, on interest rates going up, and on some accounting changes. Yes, there have been some costs, but fundamentally the accident compensation scheme is affordable with the coverage we have now. The agenda here is to reduce coverage. National needs to come clean on its agenda for accident compensation, because it is not acceptable here in this House that the principles that Owen Woodhouse put forward are somehow being upheld by a National Government that wants to bring in private insurers. Private insurers are driven by a profit motive. This is a scheme Kiwis can and should be proud of, because it is a universal, no-fault scheme that looks after New Zealanders throughout their lives. It is a scheme that Labour in Government has tried to uphold.
National has never liked the scheme, and in the 1990s it brought in private insurance to undermine the scheme. We know that private insurers in this scheme will cherry-pick to ensure that they pick off those cases that can be easily dealt with. That will leave the Government provider, ACC, as the default provider and the last-resort provider, putting further pressure on the corporation. It is an unacceptable approach, and it is the approach that the National Party is taking today.
New Zealanders should be proud of the accident compensation scheme, because the PricewaterhouseCoopers report has shown that it is working best in the world for accident compensation schemes. It is supported by a range of people across the board, and it is supported because the costs have been very internationally comparative. In New Zealand, it costs 78c per $100 of worker wages to fund workplace accident compensation. In Australia, it is an average of $2 in every $100 of wages. In New Zealand, 88 percent of people return to work within 6 months of being injured, compared with the Australian average of 85 percent. In New Zealand, the cost of managing claims for accident compensation is 8 percent of ACC’s total expenditure, and in Australia it is up to 32 percent.
That is because we are not focused on management costs. Private insurers are focused on management costs, as that is where they make their money. In New Zealand, we have a scheme that is focused on rehabilitating people and on people getting back into work. That is the kind of scheme New Zealanders should be proud of. That is the kind of scheme that Ross Wilson spent 25 years working on and ensuring that it works well.
Hon Dr NICK SMITH (Minister for ACC) Link to this
I raise a point of order, Mr Speaker. The previous speaker made a claim that it was Labour that brought in the accident compensation scheme. I seek leave—
The ASSISTANT SPEAKER (Hon Rick Barker) Link to this
If the member wants to seek leave, he seeks leave, but with a long introduction like that he is entering into debate. A point of order is not about debate.
Hon Dr NICK SMITH Link to this
I seek leave to table the original Woodhouse report and the legislation passed by Prime Minister Holyoake.
The ASSISTANT SPEAKER (Hon Rick Barker) Link to this
Leave is sought for that purpose. Is there any objection? There is no objection.
GRANT ROBERTSON (Labour—Wellington Central) Link to this
I raise a point of order, Mr Speaker. At the beginning of Dr Smith’s point of order, he claimed that I had said that Labour had introduced the accident compensation scheme. I did no such thing.
The ASSISTANT SPEAKER (Hon Rick Barker) Link to this
The member has just transgressed against what I said before, and told the Hon Dr Nick Smith not to do, which was to use a point of order as a debating mechanism. Points of order are about order and structure.
Hon MARYAN STREET (Labour) Link to this
This Government is trying to perpetuate a number of myths around accident compensation, and they need to be busted.
Hon MARYAN STREET Link to this
The extravagant language of the Minister for ACC tempts me into using unparliamentary language, but I will resist that.
The solvency myth is the first myth that needs to be busted. The $22 billion in liabilities may well be the case. I do not doubt that, but the $22 billion over time is what matters. The Accident Compensation Corporation (ACC) is in a long-term game, and that is why the investment portfolio has taken a hit in recent months. When I was the Minister there was a little over $12 billion in assets, and I understand from the current Minister that it has gone down to a little over $10 billion. It is taking the same kind of bath that all investment portfolios around the world are taking.
Hon Trevor Mallard Link to this
I raise a point of order, Mr Speaker. I think you have heard the barrage from the member opposite to the member who is speaking, but when he brings you into the debate, as he did then, that is inappropriate. I ask you to ask him to cease and desist from doing that.
The ASSISTANT SPEAKER (Hon Rick Barker) Link to this
The member is correct; the Speaker should not be brought into the debate. I invite the member to continue her speech.
Hon MARYAN STREET Link to this
The whole point is that the liability of ACC is spread across the lifetime of the injuries.
So the $22 billion is not liable, and that is why some of the backbenchers in the National Government ought to ask their Minister for a few correct facts, not just the spin he wishes to put on things. It is about the liability that is payable over the lifetime of the injury.
I will go on to the question of the principles of the Woodhouse report, because the Minister has said, even as recently as today, that the Government intends to uphold the principles of that report. There are five principles: community responsibility, comprehensive entitlement, real compensation, administrative efficiency, and complete rehabilitation. It is patently obvious that the direction this National Government is taking in respect of accident compensation will infringe at least three, if not all five, of those principles.
In the first instance, introducing competition is about introducing private insurers into the scheme, which cuts absolutely across the principle of community responsibility.
Hon MARYAN STREET Link to this
That Minister is the only National member to be returned to this House with a reduced majority. When the tide was coming in for the National Party, the tide was going out for that member. I am sorry that it hurts him so much, but it is true. Dr Nick Smith was the only one of his caucus to have a minus figure beside his results at the latest election. The point is—
Hon MARYAN STREET Link to this
This member did not breach the Act, and Dr Nick Smith’s own ministerial inquiry found that to be the case.
Hon MARYAN STREET Link to this
It absolutely did. The fact that the Minister keeps repeating it does not make it true.
I will talk about the other principles underpinning the Woodhouse report that would be breached by this Government were it to proceed with its intentions. The first is the introduction of private insurance companies. Because that Minister does not understand the fundamentals of accident compensation, he does not recognise the extent to which private insurers would jeopardise the principle of community responsibility. He does not understand that principle. This is not an ordinary insurance scheme; this is a social contract. I say to Sir Roger that this is not an ordinary private insurance scheme; this is a social contract.
The citizens of New Zealand have given up the right to sue in order to get one of the Woodhouse principles, which is comprehensive entitlement. That means that New Zealanders get comprehensive entitlement—full cover for an injury—in exchange for giving up the right to sue, and that principle is in jeopardy.
I will go further and look at some of the specifics that the Minister has been parading recently, in more or less inflammatory language depending on how the editorials run the next day. Another one of the Woodhouse principles is administrative efficiency. Let us go back to the 1990s, when the National Government put a cap on the number of physio visits one could have under accident compensation. It limited the number of visits to five, after which there were huge hurdles to overcome in order to get another treatment. The risk of sending incompletely rehabilitated workers back into the workplace is very high with such a limit, so that would also infringe the complete rehabilitation principle. This Government is looking to limit the extent of the treatment that could be given to people who are injured, and to send them back on to the shop floor inadequately rehabilitated, which would only rack up costs against the health system later on as their injuries revisit them.
I will go into some more specifics to do with the levies. If one looks at the question and answer section of the Minister’s own media release, which was publicly released the other day, one finds that he said, in respect of the residual claims account, that if one were to push out the residual claims date to 2019 it could bring down the expected levy rate per $100 of liable earnings from 68c to 36c. Let me just make that plain: this Minister could have, had he been on top of his game—which he is not—reduced these levies.
Hon MARYAN STREET Link to this
I say to Dr Smith that that does not wash, because the residual levy—
Hon MARYAN STREET Link to this
I had announced that change. It was not required before that point.
The point is that this Minister could have reduced the levy to employers and reduced the levies on motor vehicles. Instead of putting them up by $32 today, according to his own paper he could have reduced them by $100. He could have reduced by $100 the motor vehicle levy, according to his own paper, for every family with a car. Why did he not do that? Why did he not take down the employer levy? I will tell members why. It is because he wanted an articulate and vociferous lobby group such as the employers to be grumbling about high levies. Why did he not take down the car levy? Because he wanted every family in the country to say that accident compensation is unaffordable. That is why he did not take it down. That is why he did not drop the levies when it was in his power to do so.
It was in the Minister’s power to drop those levies at the end of last year, and he should have done it then. If he had done so, there would have been no need to raise motor vehicle levies now.
Hon MARYAN STREET Link to this
Absolutely. He could have lowered by $100 the car registration levy. He did not do that, because what National is looking for is constant noise about accident compensation, against which it can say that the system is failing and that it needs to cut it down and take away people’s entitlements.
MICHAEL WOODHOUSE (National) Link to this
I find it very interesting that in a snap debate called by the Labour Opposition on the merits of the Minister for ACC’s decision to remove and replace the chair of the Accident Compensation Corporation (ACC), not a single member of the Labour Opposition has questioned the competence of the new chair. Not a single reference has been made to that in the debate. This debate is about the merits of the Minister’s decision. Instead, the Leader of the Opposition introduced this debate by saying: “No good reason was given for that dismissal.” Well, frankly, I can think of over 10 billion good reasons, and none of them are funded.
We have had a total smokescreen over this scheme that has deflected attention from the abysmal performance of the previous Government over the last 4 years. Last week we had David Parker standing up here and saying in question time that the measurement of the unfunded liability was completely irrelevant. He said that as a percentage of the total liability the unfunded liability had gone down from 65 percent to 45 percent. Well, frankly, that is a nonsense, for two reasons. The levy payers do not pay in percentages; they pay in dollars. Sixty-five percent of a mouse is a hell of a lot smaller than 45 percent of an elephant, which is what this issue is about.
This situation is the financial elephant that had been in the room of the previous Labour Government for several years. The Labour Government knew about it, and in the face of diminishing returns and increasing costs, it continued to load cost after cost on to the scheme.
I can tell members that this National Government is very firmly cognisant and supportive of the Woodhouse principles—I know what they are; I have lived by them as a member of staff at ACC and I continue to do so—which are 24-hour, no-fault cover that has community responsibility, comprehensive entitlements, complete rehabilitation, real compensation, and administrative efficiency. I ask those members on the other side of the House to tell me how it is responsible behaviour that a previous Minister who knew on 1 July last year that there was a $300 million blowout in the non-earners account did not disclose it, which is in breach of the Public Finance Act. The fact is that either she knew and did not disclose it or she did not know and should have known. Either way, it is a problem. Members can choose their poison.
I will go back to another comment by the Leader of the Opposition in relation to comparisons made with similar schemes in Australia, trumpeting the fact that the scheme here costs 78c per $100, against $2 per $100 in Australian schemes. The fact is he is not comparing like with like. He well knows that motor vehicle accidents that occur in the workplace setting are covered by the Australian scheme, and over here they are not. Frankly, the very obvious case is that this 78c in the $100 is not currently managing to cope with the costs of the scheme.
The Leader of the Opposition said we have the best scheme in the world; it works, it is cost competitive, it has great rehab, and it has great claims rates. Well, my question is if it is so great, if it is the envy of the Western world, then why is nobody copying it?
I will take back members to a time when the scheme was cost competitive, when there was great rehab and early exits. I will tell members who was in charge of the corporation at that time. The person in charge of the corporation at that time—and he was appointed by a National Government—was a former Labour Minister of Finance. So I think members on the other side of the House should reflect on whether some political interference is at work here.
At that time, during the introduction of the residual claims fund, the idea was to reduce the residual claims to zero by 2014 and to fully fund the other parts of the scheme. At that time over 26,000 claims were still on ACC’s books, and the number steadily reduced from 1998 to 2005—from 26,000 to 15,500 to 12,500 and so on, down to 4,000. The fact is the number has not moved that much more, which is probably to be expected because those are the tougher claims, the longer claims, that will have higher rehabilitation costs and higher scheme costs.
The fact of the matter is that the majority of the unfunded liability is not in the residual claims account; it is in the “others” accounts, which was never intended. So why is that? In the face of 9 years, when we have had a huge investment in health and safety, in injury prevention initiatives, in workplace promotion, in advertising, and with safer cars and safer roads, why do we continue to have claims rates increasing by 4 and 5 percent year on year since 2004?
We had investment performance during that period that exceeded the market average, sometimes up to 12 and 13 percent. Yes, since 2008 there has been a downturn in the average claims rate, but I note that in the Department of Labour’s recent report on ACC’s performance, of the seven key performance indicators the department considered most important to the corporation’s financial state, the only one that was met was investment returns, which were continuing to exceed the market. What were not being met were key liability drivers, the cost per treatment claim, the cost per entitlement claim, 3-month rehabilitation rates, long-term claims pools, and return-to-work rates—all missed. So why is that?
It is very clear that claims numbers are increasing in the face of all that investment in injury prevention. Claims duration—the most material influencing factor on the costs of claims and total scheme costs—is going up. Three-month exit rates are down by 5 percent. Six-month exit rates are down. Twelve-month exit rates are down. Treatment costs are significantly up. We have already talked about physiotherapy costs, but it is interesting that the highest intervention rate by physiotherapists in the Western world occurs in this jurisdiction. We have the highest number of physiotherapists as a percentage of the population anywhere in the world.
Surgery costs are up. Ambulance costs are up. Vocational rehabilitation is up. Social rehabilitation is up. The fact is this scheme has been softened away from entitlements into benefits. The Leader of the Opposition in his opening debate used the term “benefit” four times. The scheme is an entitlement-based scheme, which is focused on 24-hour, no-fault cover and a relentless drive to a fast and lasting return to work and independence. Instead, it has become a soft and socialised scheme. We need to have a discussion, debate, and dialogue with the public of this country about what kind of scheme they want. The fact is—
Darien FentonMICHAEL WOODHOUSE Link to this
This has nothing to do with that. The fact is this issue is about what kind of scheme we want—a scheme that sets out very clearly what people can expect and what levies people can pay—and sets to work within that.
I do not blame the very hard-working staff of ACC, many of whom are known to me and who do a very good job in the circumstances, but the fact is that expectations that have been put on them have changed from those that existed a few years ago, and they should be turned round. A fast and lasting return to work and independence has to be the goal.
Instead, we have a corporation that has had expectations set for it that are outside of the parameters of the legislation. I am advised by staff who work at ACC that they have been encouraged not to follow the legislation but to adopt different policies for the acceptance of claims and the payment of weekly compensation, which are outside the legislative framework and have caused no end of trouble when cases like that go to review, because the reviewer has the legislative framework only to consider.
We have to have that discussion about whether we want a social contract or a real contract with real levies and real entitlements. It is a scheme that is designed to cover people who have injuries, and no more. The drift from the health sector to the non-earners account is consistent, marked, and increasing, and boundaries have to be put on the scheme. The fact is that with any scheme that has entitlements that some people will qualify for and some will not, there will be people who miss out. So let us have an intelligent discussion about that and say where those boundaries should be and what the costs of that scheme should be.