Debate on Crown Entities, Public Organisations, and State Enterprises — Accident Compensation Corporation

It is so appropriate that we go from the financial disaster that Labour left for this Government on rail and come to ACC. We know that in the last year Labour was in office, this corporation lost $2.4 billion. In the following year, the year that crossed over between the two Governments, ACC lost a further $4.8 billion. That amounts to over $4,000 for every New Zealand household—$4,000 for every New Zealand household. In the course of that aftermath, we had the inquiry that said that not only had there been these huge losses but—

The CHAIRPERSON (Lindsay Tisch): The member cannot say “Tell the truth.” I ask the member to apologise for that and withdraw the comment.

💬 Chris Hipkins: I withdraw and apologise.

It is a matter of public record that the Public Finance Act was breached in the non-disclosure—

💬 Hon Maryan Street: No, it’s not. That is absolutely untrue.

The guilty lady, Maryan Street, the one who presided over ACC in her first year, in good shape—

💬 Hon Maryan Street: I raise a point of order, Mr Chairperson. You have just pulled up my colleague for requiring the Minister, by interjection, to tell the truth. The Minister then went on to say something exactly opposite to the findings of that public inquiry, which was undertaken by Mr English. That is not the truth.

The CHAIRPERSON (Lindsay Tisch): These are debating points. The member will have an opportunity to rebut what the Minister has said, as any member can. My previous point is a very clear ruling—I refer to Speaker’s ruling 43/1, which I brought up the member’s colleague for earlier. But the point the member has made is something that she can rebut when the time comes.

It is a matter of public record that the Public Finance Act was breached, and that is extremely serious. Maryan Street—

💬 Hon Maryan Street: I raise a point of order, Mr Chairperson. I take offence at that. The Minister is perpetuating a mistruth. He is misleading this Committee. That is absolutely the wrong conclusion from that public inquiry, which the Minister of Finance ordered. It came out and said there was no breach of the Public Finance Act.

The CHAIRPERSON (Lindsay Tisch): I have previously ruled that although the member is obviously not happy with what the Minister has said, these are debating points, and the member will have the opportunity to rebut them if she wishes to take a call. The Minister did not argue the point about telling the truth, which was the point I brought up earlier on. There is a very clear ruling, Speaker’s ruling 43/1, that states that saying “Tell the truth!” is out of order. There is a very clear message here. The phrase “Tell the truth!” is unparliamentary. The Minister did not say it. I say to the member that she will have the opportunity to rebut all the points that have come forward.

I can understand why Labour is so sensitive about this point, because it goes to the core of the issues and the debates this year about the competency of the Government to manage the public’s finances. It is a matter of public record that the previous Labour Government breached the Public Finance Act in not disclosing hundreds of millions of dollars of losses in ACC. That member, Maryan Street, as the Minister for ACC at the time, must accept reasonability for that.

I will quickly correct what the Minister for ACC has just claimed. The independent inquiry that his Government called for found that the previous Government’s Ministers did not do anything wrong. That was clearly stated by this Government’s own independent inquiry. To suggest otherwise is simply untrue—full stop, end of story.

This Government is hanging a massive “For Sale” sign over New Zealand, and ACC is smack-bang in the middle of the fire-sale list. This Government is interested only in hocking off everything as fast as it possibly can. Nick Smith’s talk of a financial crisis in accident compensation is absolute nonsense. I tell him to look at the financial review from the financial year in question. ACC was over $2.5 billion in surplus, which is a $2.5 billion decrease in ACC’s liabilities this year. ACC is not now and never has been broke or broken, despite Nick Smith’s best attempts to suggest otherwise. Scaremongering has been done by Nick Smith because this National Government has one agenda in accident compensation, which is to carve it up and hock it off to its private sector mates.

National does not believe in accident compensation as it stands now. It believes that it should be provided by the private, for-profit insurance industry. That is the National Party’s sole goal in accident compensation: to prepare accident compensation to be privatised. It can use terms like “competition”, but its model of competition is privatisation by any other name.

Nick Smith is offensive enough to go around saying that it is no different to deregulating the broadcasting industry. I say that there is one major difference: New Zealanders did not give up any of their civil or legal rights under broadcasting law. Under the accident compensation scheme they have given up their legal rights in order to be part of the scheme. This Government sees that New Zealanders giving up their legal rights to be part of accident compensation creates all sorts of fascinating, interesting, profit-making opportunities for its corporate insurance mates. I think that is wrong—I think that is fundamentally wrong.

This Labour Opposition will be arguing and fighting against the Government’s plans to privatise accident compensation. We send a very clear word of warning to the insurance industry: insurers will invest in accident compensation at their own peril. A future Labour Government—and we already have a commitment from the Greens to support us in this—will not support this change. We have reversed a National Government’s privatisation of accident compensation before, and we will do it again.

This change will not stand, because ultimately it undermines what should be a world-leading scheme. Despite all Nick Smith’s scaremongering, the Government has still not come up with evidence to suggest that this change will work and that New Zealanders will end up with better cover or better compensation as a result. The independent PricewaterhouseCoopers study found that ACC is already offering the lowest cost accident cover in the developed world. Nick Smith’s own officials provided evidence to the Transport and Industrial Relations Committee that New Zealand employers are paying, on average, half what Australian employers are paying for accident cover.

Perhaps that is what National meant by catching up with Australia: loading a whole lot more compliance costs on to our employers. That is what this Government seems to think is meant by catching up with Australia. National certainly does not seem to want to catch Australia when it comes to wages any more; in fact, Bill English thinks that it is a competitive advantage to have lower wages than Australia.

Moving back to accident compensation, I say that this Government manufactured a crisis in accident compensation. It is not broke. It never has been broke, and it is not broken. This is all part of the National Party’s agenda to strip out accident compensation and hand it over to the private insurance industry. New Zealanders will end up paying more to get less. The only way the private insurance industry will be able to make money out of accident compensation is by declining more claims or decreasing cover, and that is fundamentally wrong. New Zealanders, having given up their legal rights in order to be part of the scheme, deserve better than that.

As the Christchurch earthquake showed us, a lot of unforeseen things can happen in this country. Accident compensation was there when Cantabrians needed it, and the extension of accident compensation cover that Nick Smith and the Government were able to offer following the Christchurch earthquake would not have been possible if he had already privatised accident compensation, as he intends to do.

Nick Smith and the National Government are hanging a massive “For Sale” sign over New Zealand, over our State-owned assets, over accident compensation, and over everything else—even over our law books—and saying that it is for sale if the foreign investors are willing to pay for it.

There has been a lot of agreement about the Accident Compensation Corporation here this afternoon, and I would like to recap that. It has been agreed that there was a loss of $2.4 billion in 2007-08, followed by the Labour Government outdoing itself with a $4.8 billion blowout in 2008-09, and now there is a surplus of $2.5 billion.

💬 David Shearer: That’s remarkable, isn’t it?

That is a remarkable turn-round by this National-led Government. The Opposition has argued constantly—and continues to argue this evening—that there was a never a problem and that things are just fine. Well, losing $4.8 billion of New Zealand’s money is not fine.

Costs and claims have also dropped substantially, and there is something else to celebrate here. Labour, it seems, equates higher claim costs with success. Lower costs come from fewer claims and improved rehabilitation, and I am sure employers and employees alike prefer that definition of success.

Much has been made of the $638 million savings over 4 years to the non-earners account. Those who object would prefer that the Government keeps increasing that account for all eternity. It is simply not sustainable. When faced with a record national deficit, the country must spend less, not more. We must live within our means, not borrow and hope.

With accident compensation National, again with ACT’s help, is on the right track. The proposed extension of the Accredited Employers Programme from next April is also to be applauded. Employers do a far better job of managing injury and rehabilitation costs than the State does. The Accredited Employers Programme has so far resulted in 12 percent fewer claims and 15 percent lower costs. Only 136 major employers are part of the programme, and it is past time that more were allowed to reap the scheme’s benefits.

One change that ACT is particularly excited about is the plan to open ACC’s work account to competition. This is an ACT initiative, and we are proud of it. It is hardly revolutionary, of course. A mix of private and State insurance is the norm in most developed nations. It worked very well when New Zealand last tried it in 1998. Levies went down, as did the number of accidents. It was scrapped by Labour, not because of poor results but because of poor ideology.

Choice forces everyone—employers, employees, and ACC itself—to lift their game. Let us put it this way. If a private insurance company suffered a $4.8 billion loss in 1 year, it would be out of business—unless, of course, the Government added it to its long list of taxpayer-funded bail-outs.

I will quote my colleague Sir Roger Douglas at this point. In this same debate 2 years ago Sir Roger said the following about ACC: “The real problem with ACC is that it is a monopoly … Monopolies always fail, and they fail for one simple reason: they are not required to offer cost-effective and good-quality services to attract customers. Monopolies fail to meet consumer demand because consumers simply have no other choice. Monopolies fail to reduce costs because they have no competition to drive out their high-cost structure. Only competition in this area will make the fundamental changes and restore ACC to some level of reasonable performance.” That statement was correct then, it is correct now, and it always will be. It holds true whether we are talking about accident compensation or any other part of society.

It is worth noting that in 2005, under the then leader Don Brash, National’s policy was to open to competition all aspects of accident compensation, except for the non-earners account. This has always been ACT policy, and it remains so. When the Government sees the benefits of competition in the work account, we hope it looks to implement National’s 2005 policy.

One of the things that perplex me is that if Labour is so comfortable with its performance in its term in Government, is so relaxed that there was no problem with the Accident Compensation Corporation, as Mr Hipkins claims, and that everything was all right despite these so-called paper losses, why does the member who was responsible for the debacle that was accident compensation under Labour get so excited every time we point out those shortcomings?

In the interests of reinforcing those shortcomings, I will reiterate what the Minister in the chair, the Minister for ACC, has said. In August 2008 the Labour Cabinet had every opportunity to include in the Pre-election Economic and Fiscal Update the $305,168,000 that ACC and the Department of Labour had told the Labour Government was required in the non-earners account. The Labour Government chose not to act, on the basis that the matter had not been subject to sufficient detailed scrutiny. How on earth can one get more detailed scrutiny than down to the nearest dollar?

The report into that matter showed unequivocally that choosing not to act was in breach of the Public Finance Act. Labour’s response was to hang Treasury out to dry. So much for loyalty to the Government department that stood by the Labour Government! That was very disloyal, in my view.

💬 Hon Maryan Street: That is quite wrong.

Amongst all that we have not just the $2.4 billion that was presided over by the member Maryan Street, who is ferreting on, but half of the $4.8 billion deficit that was incurred in the first 6 months after National came to power should also be taken responsibility for by Labour.

There are 7.2 billion reasons to improve the performance of ACC, and that party still says there were no problems. A couple of financial reviews ago, when the member interjecting was no longer the spokesperson on ACC, the then spokesman, Mr Parker, came to the financial review and made some very interesting comments about the Accredited Employers Programme, which the previous speaker Hilary Calvert referred to. He basically said there was no evidence of improvements in rehabilitation or cost as a consequence of the Accredited Employers Programme.

That comment was pretty consistent with Labour’s view that the only people who can operate ACC are the Government and ACC. There are a couple of areas where Labour very begrudgingly accepted that that was not the case. The first was elective surgery, where 88 percent of all treatments are undertaken in the private sector. When Labour came to power it was very keen to do something about that, but then when Labour realised how efficient, how cost-effective, and how important that elective surgery was to rehabilitation it left it alone.

The other thing that Labour very begrudgingly accepted was the Accredited Employers Programme—the partnership programme. Despite the programme being very much at odds with Labour’s ideological beliefs, Labour left the programme alone, although I note that the number of people in the Accredited Employers Programme drifted off in the last few years.

Mr Parker claimed there was a lack of evidence to support it, so I was delighted to see, amongst all of the stocktake reports that were prepared for the Minister in June last year, that the Review of Employer-managed Workplace Injury Claims had exactly answered those questions. It asked whether accredited employers show lower medical and rehabilitation costs. They do not; they show higher rehabilitation costs and medical costs. But guess what that does? It lowers weekly compensation costs. Employers invest early because they know that getting people back to work faster and in a lasting way reduces total costs to the employer. The review also found that the time between the date of the first injury—

💬 Hon Maryan Street: It’s not what he’s talking about.

It is what I am talking about; I am talking about the Accredited Employers Programme. We will come on to what the Government is proposing amongst the discussion document on increasing choice. Goodness me! “Choice” is a word that is the antithesis of Labour’s ideology. Choice? No, we could not have that.

The Review of Employer-managed Workplace Injury Claims by Martin Jenkins and the ACC’s stocktake report unequivocally showed that there was faster rehabilitation, higher costs on treatment, lower costs on weekly compensation, and overall better outcomes not only for employers but also for employees. They also showed that the really good accredited employers are doing the rehabilitation not just for the work-related personal injuries but for the personal injuries that are not work related. They do not really care how these people got injured; they just want them back at work. And so do we, which is why this document is a really good start. I look forward to the consultation on it. We keep ACC in the game. I think that is a really good improvement on the sensible changes that were made in 1998. If employers do not think there is cost-benefit in it, they do not need to change.

Report noted.

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