Injury Prevention, Rehabilitation, and Compensation Amendment Bill

In Part 1 we established that the law sets out very clearly that the Accident Compensation Corporation (ACC) would impose a levy to make sure that the employers’ account and the self-employed work account are fully funded. But the history of the employers’ levy account is that ever since 2003 the surplus in that account, which started with $108 million, increased. In 2004 it was $300 million, in 2005 it went up to $500 million, and in 2006 it was $757 million. I think that is a clear demonstration that the ACC has always played a conservative role in terms of the rate at which the levy was set at a point, just in case it made a mistake in setting it. That was why my good, hard-working, intelligent colleague Dr Paul Hutchison asked for transparency and openness by getting an independent person to look at how the ACC set those levies.

This part, Part 2, is about the merging of the two accounts and combining the surpluses—estimated to be about $600 million in the employers’ account and about $60 million in the self-employed work account. Any person who thinks logically about ACC policy would eventually say that ACC will be quite comfortable to have a surplus margin of about 11 percent. But with the merging of these two accounts—one of which carries 63 percent surplus and the other 20 percent surplus—it says it would quite like a combined margin of 53 percent.

The problem of simply adding those two together and arriving at this average would mean that for the next 2 years those who are self-employed will be penalised. They will have to come up with $100 million extra to bring the 20 percent margin up to 53 percent. Then the employers will also be penalised because they have a margin of 63 percent, and the ACC refuses to bring it down to 11 percent. But the irony is stated in the official paper. By the year 2010 it would like to bring down the surplus to 11 percent. It would quite like the surplus sitting at a high amount, just in case something happens in between and they might call on this high surplus.

Firstly, I encourage ACC management and officials to be confident of their ability. They have shown in the past 4 years that the surplus amount has kept growing. They should stop holding on to other people’s money and compounding the problem with a surcharge of $100 million for the self-employed for the next 2 years. Self-employed people—for example, people in the meat industry—are saying that they will suddenly face a hefty bill in the next 2 years. As a small pool of people they have to front up with an extra $100 million, while the ACC has every intention of reducing that surplus margin in about 4 years’ time.

This legalised stealing simply does not make any sense. That is the practice I describe—legalised stealing of money that was paid in by the employer on behalf of their workers’ earnings or by the self-employed. So I have moved a very simple amendment that states that before the merger, the surplus margin of the employer’s account should be adjusted down to 20 percent. The impact of this amendment would be that the self-employed would not be penalised by having to pay a surcharge of $100 million. Then—rightly so—the employers who have contributed on behalf of their workers’ earnings in the past—

I speak to Part 2—as I believe we are required to, Mr Chairperson, by your instruction to the Committee of the whole House—unlike the member who just resumed her seat, Pansy Wong. She might have been talking about something entirely different.

Part 2 has just three clauses, which cover the transitional provisions. There are two amendments to clauses 14 and 15 proposed by the current Opposition spokesperson on ACC, Pansy Wong, on her Supplementary Order Paper. If one were to go back to the primary purpose of the Injury Prevention, Rehabilitation, and Compensation Amendment Bill, one would understand the transitional provisions. The purpose of this bill is to ensure that people in the paid workforce have their risk assessment based on their exposure to risk rather than on the company structure or business arrangements they happen to be set into. To ensure that the merger of the accounts that is required to achieve that fairness—so that two people doing exactly the same job have their levy assessed on the basis of their exposure to risk rather than on their company structure—is a smooth amalgamation we have the transition periods outlined in clauses 14, 15, and 16. So unless one believes that people should be assessed for risk on the basis of their company structure—which is what I presume Pansy Wong might be trying to say, although it was not really clear—then I think people should support these three clauses unamended.

I just want to refer briefly to the comment that Pansy Wong made in her final contribution in her last speech, which was in reference to Paul Hutchison’s amendments. Frankly, if information is available under the Official Information Act, then I would recommend to the current and former—recently dumped—Opposition spokespersons on ACC that they should use its provisions. When I held that spokesmanship in Opposition I used Official Information Act provisions a lot, and they were very worthwhile. I do not think I will give them as much pleasure as Murray McCully gave me, but I would recommend they use the provisions of the Official Information Act. That information is available.

My final point is in response to Pansy Wong’s Supplementary Order Paper containing the two proposed amendments to these clauses. Firstly, she should recognise that the volatility of levies is something the entire House should be anxious about. Business people—whatever their company structure—like to have some certainty. That is why I think the information about the levy setting is important, and it was a valuable contribution to the debate. But if we have no smoothing policy at all, then we will get back to the good old bad days when people had no idea from one year to another what their levy was likely to be. That is a totally unsatisfactory situation.

Mention has been made of the Accredited Employers Programme. I challenge the National Party to front up before the end of this debate in the Committee stage to what its actual policy is on the Accredited Employers Programme. In my view, it is a good programme. We put it into the 2000 legislation because we believed it was a good programme. It gives opportunities for employers and unions to work together in genuine partnership, as outlined in the legislation, to reduce injury incidents within the workplace and to work together to improve safety in the workplace. Paul Hutchison said it was the best thing since sliced bread. I do not think it is as good as that, actually, but I think it is very good, despite the concerns I have.

David Bennett—I think he is a list member from the Waikato—said the Accredited Employers Programme was a sham. That is an outrage. If accredited employers do not know that that was what he said—although it is on the record now that David Bennett from Waikato said the Accredited Employers Programme was a sham—then I will make sure they understand that that is his view.

💬 David Bennett: I raise a point of order, Mr Chairperson. The member is misrepresenting what I said.

The CHAIRPERSON (H V Ross Robertson): I would like the member to have a look at Speakers’ ruling 36/5. When it comes to misrepresentation, you do not raise points of order now. You raise them at the end of the speech.

So with those concluding comments, I thank the members for their contribution over the next little while on these three single clauses. I urge members to vote against Pansy Wong’s Supplementary Order Paper.

That is a real concern, is it not? I gave the Minister plenty of notice when we were debating Part 1 of my specific concern about the reserve margin and of an amendment to adjust it. I will give her the benefit of the doubt and assume that she actually understands what the issue is all about but refuses to debate it. It would be worse if she was hoodwinked by the officials and did not even attempt to address it. The Minister had no answer and then resorted to personal attacks on my hard-working colleague from Hamilton—the hard-working, diligent David Bennett—who won the seat and is absolutely loved by the people of Hamilton. Good on him! We are very proud of him.

The Minister resorted to personal attacks, but that will not deter me from asking her to look at her own official’s paper, which stated categorically that the 150 percent margin of the work account as at 1 April 2007 would be progressively reduced in 2008, 2009, and 2010 towards the target of 111 percent. That is the stated position of her officials. Yet, at the same time, the Minister is asking all the other parties to support her in imposing a surcharge on self-employed people that will increase their margin from 20 percent to 53 percent. It simply does not make sense for the Government to impose a surcharge of an additional $100 million and then, in a few years’ time, to bring the rate down again. That defies logic.

First of all, let me acknowledge United Future’s support for my amendment. It is a sensible party that can exercise its own independent thoughts, and it is on the side of the self-employed. I will make sure the self-employed are aware of United Future’s support for the amendment. New Zealand First and the Green Party will just have to face up to self-employed people, who will be irate when they receive their bills in the next 2 years.

Second, I propose the amendment because we feel outrage, particularly at this point, about the legislation the Government wants to pass to do away with consultation. Actually, that is telling. The Minister says that if anybody wants information, he or she can make a request under the Official Information Act. But why should anybody have to make a request under the Act? Why can the Minister not simply make the information available as public information? I thought the Labour Party believed in open government and consultation. What is happening is that the Government is legislating to do away with consultation. It does not want to hear from self-employed people, because it knows what would happen. Labour members know that those people will be outraged when they are asked to pay a surcharge of an additional $100 million. Labour members do not seem to understand that hard work produces the incomes of those people. They think nothing about penalising people to pay that money to a monopoly organisation, “just in case something happens”. We have bad news for the Labour Government: self-employed people understand what the Government is trying to do to them. They know it will penalise them in the next 2 years for $100 million, without consultation. That will add insult to injury.

Once again, I acknowledge that United Future is the only party, so far, that has indicated it will exercise its own independent thinking and support my amendments. It believes it is a party that stands up for the self-employed, and it does not think the Government should penalise those people with a surcharge amounting to $100 million for the next 2 years, just so that a monopoly organisation can feel good. We want the self-employed, hard workers, and employers to feel good about themselves, not a monopoly organisation.

I rise to take a call on the amendment in the name of Pansy Wong to clause 14. I do so with some experience of risk management ratios from my business background. The facts of this matter are fairly straightforward. The Accident Compensation Corporation (ACC) has set itself a risk management ratio of 111 percent. In other words, its assets at any given point in time will exceed its liabilities by 111 percent. However, the present situation, according to figures supplied by ACC, is that the employers’ account presently has a cover of 163 percent. In doing the sums quickly in our mind we find that this is 52 percent higher than the risk ratio established by the corporation. Pansy Wong’s amendment very reasonably suggests that 163 percent ratio figure could be reduced, by way of a refund, to a ratio of 120 percent, which is still 9 percent higher than the self-imposed risk ratio that the board of ACC itself adopted.

When this matter was brought to my attention by the member Pansy Wong, I was quite staggered. I have done the sums. The reduction that Pansy Wong is seeking amounts to $468 million. The plain fact is that employers have been already overcharged that amount and more. I find that absolutely outrageous. The employers of this country have been overcharged levies by an amount way over $500 million. That money should never have been collected in the first place, because the risk management ratio was already satisfied and this figure is well in excess. Therefore, the only just thing to do in those circumstances is to give the money back. The money does not belong to the ACC; it belongs to the ACC only if it comes within the corporation’s own defined policy of risk management.

I heard briefly the statement made by the Minister in the chair, Ruth Dyson, about ebbs and flows and I can understand that. But I say to the Minister that it is more than an ebb and flow when the ratio goes from 111 percent to 163 percent, and when the corporation is collecting more than $500 million extra. That is not an ebb and flow. That, in my opinion, amounts to a deliberate, concerted campaign of overcharging employers over an extended period of time. It is wrong. It should stop. The money should be given back. It does not morally belong to the Government in the first place. It belongs back in the pockets of those employers.

Therefore, as a caucus we had little hesitation in agreeing to support Pansy Wong’s amendment, because it is the right thing to do.

It is indeed salutary to hear Gordon Copeland, from a party that supplies confidence to the Government, point out that the Government should give this substantial amount of money back, based on principle. He points out that the Accident Compensation Corporation (ACC) has recommended a risk margin of 111 percent and that at present it is 163 percent. My colleague Pansy Wong has an eminently sensible amendment, in that she suggests a risk margin of 120 percent, which is above that recommended by ACC. Gordon Copeland quite rightly suggests that the Labour Government should give this money back to the employers. The employers have paid it in good faith. They have paid it thinking that the employers’ account would be fully funded, but it has gone well over that level.

It is unfortunate that this particular phrase “give the money back” has such a familiar ring when it is applied to the Labour Government. I will not go back to the credit card again, but let us just say, for the record, here again we have this mischievous Labour Government taking money from employers in the private sector and using it for the Government’s own purposes and for its own ideology.

It is absolutely appropriate that we speak about the principles of this particular issue. We heard the Hon Mark Gosche talking about a rugby team and how one person should not have a premium different from another person’s. I absolutely agree with that. Premiums should be risk rated individually. This Government wants to pool the lot of them, defying basic principles of insurance. It is unfortunate we cannot get it into the thick skulls of this Labour Government, including the chairman of the select committee. This is the chairman who insisted that submissions to the select committee close after 2 weeks. He is the man who might talk about democracy, but, no, he wanted to rush the submissions through quickly. In fact, the time for submissions might have been even less than 2 weeks. There is absolutely no question that a lot of employers out there very much wanted to submit on this bill, but Mark Gosche, the chairman of the Transport and Industrial Relations Committee, prevented them from doing so by instructing that submissions would close so fast.

One other principle is extremely worrying about this bill, and that is the transitional provisions. They are ominous and unprecedented. In the Labour Government’s hurry to get this legislation through, the levy consultations for 2007 and 2008 will be bypassed. The Labour Government says: “To hell with the levy consultations! Forget about democracy, and forget about listening to the employers and the self-employed. We will just bypass the levy consultation process for the convenience of merging these two accounts.” Talk about principles!

I say to the Hon Mark Gosche, the chairman of the Transport and Industrial Relations Committee, that he has certainly not displayed principles in terms of allowing time for submissions to be heard in a democratic way through this process. Certainly, when we come to the levy consultation process we see that he has bypassed normal precedent.

I will take just a brief call in response to some of the comments made by Gordon Copeland, who, without exception, makes well-considered contributions to debates. In my view he has omitted quite a major consideration in his deliberation of, and support for, Pansy Wong’s Supplementary Order Paper 91. In any one of the accounts there will be a considerable investment opportunity, because the amount of money that is required to be collected in levies each year is not just to cover the cost of a claim for that year; it is to cover the cost of a claim for the life of the claim. We know that with some serious injuries, tragically, the life of that claim could be 30 or 40 years. So more money is collected in levies in the accounts in any 1 year than is required to fund the cost of the injuries in that year, and that money is invested.

So what should the money that has been acquired from sensible—or, indeed, wise—investment be used for? Should that money go back to the levy payers in that account? Or would it be better used for future investment in order to reduce the overall levy in that account because of the return from the investment? Or, indeed, should it be used for increased investment generally, so as to give advantages to the scheme in areas such as injury prevention?

Although the member’s comments were cute, and might be quite good in a debate about a number of other areas that we have debated in this Chamber, I believe that the member is doing the debate, his party, and this Committee a disservice by saying that it is an outrage that the employers’ account should not have that money paid back, without his giving in the debate any consideration of or recognition to the amount that has been accrued to that account and all the other accounts from wise investment. In my view, first of all, to take away a large percentage of that money from employers’ liability now for the possible increased cost of claims that have already been incurred by the scheme and, secondly, to reduce the investment opportunity would be to do the entire scheme a disservice.

The other implication of the amendment from Pansy Wong’s Supplementary Order Paper would be the lack of parity between the Accredited Employers Programme and the employers’ account, and that should be a major concern to every member in the Chamber. If the levies for employers were artificially dropped because of a combination of overfunding from the amount that has been accrued and the returns from investment, and the employers’ account became very attractive to accredited employers because there was no disadvantage financially to them, they could join the employers’ scheme, which would mean we had an increased number of employees being covered by the employers’ account without any contribution being made by accredited employers to that account, at all. So not only are the potential advantages to the scheme of the investment money that would accrue from that amount being left in being ignored but an opportunity is also being provided for the current accredited employers, who have made no contribution to the employers’ account, to benefit from a one-off windfall. In my view that is not a fully considered position, and I say that with the greatest of respect to the member, whom I believe has given Pansy Wong’s Supplementary Order Paper some consideration—but, in my view, not full consideration. It would do a disservice to the overall levy stability, it would do a disservice to future employers and employees because of the lack of opportunity for investment returns, and it would give a windfall opportunity to accredited employers who, frankly, on this occasion, do not deserve it.

The question was put that the amendment set out on Supplementary Order Paper 91 in the name of Pansy Wong to clause 14 be agreed to.