Accident Compensation (Financial Responsibility and Transparency) Amendment Bill

It is a pleasure to rise and speak to Part 1 of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill. The Labour Party will be exploring Part 1 in fine detail because this is the part of the bill that we have the most reservations about, actually. It is the part that is supposed to give the financial responsibility and transparency—the main title of this bill—its oomph and its content, but we have become quite concerned about what happened to this bill, in Part 1 in particular, as it went to the Transport and Industrial Relations Committee.

Again, just like what the Government did with the workplace health and safety legislation, the bill was in one form when it went into select committee, and when it came out there have been some amendments made that have caused us concern. The amendments that have come out the other end of the select committee process have caused us so much concern that I proposed an amendment during the course of this debate, Supplementary Order Paper 123, to make the financial responsibilities and transparency of this amendment bill clear, which I hope will be supported by all parties.

Part 1 of the bill introduces a new process for ACC levy setting. In setting that new pathway, I guess one of the most fundamentally new parts is that whereas currently ACC starts this process and does the consultation with stakeholder parties and has some guiding principles that guide it in terms of the recommendations it makes to the Government, what this bill brings in is a political overview of that before ACC even gets to consider it. So what the bill does in Part 1 is that it says that the Minister actually gets to set up the parameters. The Minister will set out a funding statement that will guide ACC. That sounds like quite a good idea. However, when you take into account that the history of this particular Government is that it has in the past, by its own admission, been overcharging ACC levies—to the tune of about $350 million a year—in order to, as the previous Minister for ACC, Judith Collins, put it, get to surplus, then this is giving a lot of political discretion to the Government to give direction to ACC.

There are some good amendments that the select committee made to try to make sure that this would not become a political lever that can be used even more overtly than the current Government did to prop up its failed attempt to get to surplus. The select committee made some recommendations that before sending that funding policy out, the Minister has to go to the stakeholders and consult over that funding policy to start off with. I think that will give those of us who are concerned about the Government’s agenda some comfort that there will be wider scrutiny of this, and I think that that is a good amendment. That is not the select committee amendment that we are concerned about.

However, the funding principles that ACC has stuck to relentlessly throughout the years when it sets ACC levies—the funding principle of ensuring that there is levy stability, the guiding principle that it has used since 1999 of ensuring that the purpose of setting ACC levies is to fully fund the lifetime costs of injuries and accidents, and the other principle that it has used to ensure that there is sustainability in the ACC scheme going forward—all of those things are now transferred into this legislation. The legislation went into the select committee in a shape where it said that those funding principles “must” be adhered to—that they “must” be adhered to—by the Minister when considering the levy setting. However, when it came out of the select committee, there had been some small but important changes. No longer “must” the Minister consider all of those three important principles; it had been watered down to a “should consider”.

That alone would not be quite so concerning were it not for the Government’s contention that it has carte blanche to do whatever it wants in ACC levy setting because there is part of the Accident Compensation Act that says that the Minister can consider or take into account the public’s interest in setting ACC levies. That is the bit of the Accident Compensation Act that the current Government has used to excuse itself for setting ACC levies artificially high in order to do something that is nothing to do with ACC—in order to try to make its books look as if they are getting into surplus, by its own admission. That is what we resile against.

Not only is it the Labour Party that resiles against this but also it is indeed Business New Zealand, the New Zealand Council of Trade Unions, and a number of other submitters who said—and Business New Zealand was very clear about this—that it should not be allowable for the Government to set ACC levies with a view to propping up a fiscal surplus. The Labour Party agrees with that view, and that is the reason why I have brought forward a Supplementary Order Paper that deals with their concerns.

We had a discussion about this in the select committee, and it was the view of the National Government members that the use of the Minister’s regard to the public interest, with regard to setting ACC levies, is to do with the public interest about ACC only. It is not broader than that; it is about ACC. So I am calling on those Government MPs who gave us that assurance in the select committee to vote for my amendment, because, in fact, that is exactly what my amendment clarifies. It clarifies that when the Accident Compensation Act talks about the public interest, it is talking about the public interest with regard to reducing accidents and injuries in the workplace, on the sports field, in the home, or wherever they may occur.

This amendment is important because it gives this Parliament some comfort that when the Government has moved to water down those three guiding principles for how ACC levies are to be set, that that is not a signal that it intends to keep on using ACC levies to prop up its failed attempt to get to surplus, because that is not what is intended by this Act.

I take the members at their word—that it is not what the National Government members on the select committee believe it to mean—and I am now calling them to account for that by seeking their commitment on voting for my amendment, which does, in fact, exactly that. It would make it absolutely clear that the public interest when it comes to talking about setting ACC levies is about reducing injuries and accidents, and is not about things so far removed from the responsibility of ACC as ensuring that the Government can try to get its surplus.

This is the surplus, by the way, that it has failed to get to so far. We will wait and see whether the Government’s promised surplus is ever going to happen but it has failed to do that, despite the fact that it has been using inflated ACC levies to prop that up. Those are not—well, those are my words, but it was not me who made that assessment; it was Judith Collins, the former Minister for ACC. She said very clearly when setting the levies in 2013 that one of the things—one of the factors—that she took into account and that has continued through to the current Minister is getting to surplus and the broader fiscal situation that the Government finds itself in through its own sloppy fiscal management.

So I want to urge all of the parties to consider voting for Supplementary Order Paper 123. I hope that the Government MPs will find themselves in a position where they can, because if they cannot then I think that is a very clear signal to the rest of New Zealand that this Government intends, in our view, to misuse ACC levies—to set them artificially high to ensure that they can actually prop up things like its failure to get to surplus. That is not what the New Zealand public requires from the ACC system, and that is not what the public would see as in its interests when it comes to funding ACC levies. What they want them to be used for is to reduce injuries and accidents at work, and that is what my Supplementary Order Paper makes absolutely clear. Today the Minister made a statement, which we will come to when we debate Part 2.

I am very, very pleased to speak on this Committee stage of the bill, particularly focusing on Part 1—the principles of financial responsibility—but also dealing with the funding policy statement, and I want to talk about that as well in the context of announcements that I made today.

But first, I want to correct a few things that the Opposition has already said. The first thing I want to say is that when we are talking about the principles of financial responsibility, it is the members on this side of the Chamber who can talk about the principles of financial responsibility because we have taken a scheme that was in a $4.8 billion hole from $10 million of assets to $31 billion of assets. We have got all three accounts in solvency and members on this side of the Chamber need to be very proud of that.

The second point that I want to make, when we are looking at the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill and the changes that were made in the bill—Sue Moroney has just said that maybe some of these changes around the principles could mean some kind of conspiracy theory. If you look at the law and what we have passed, what we have acknowledged is that if you look at those principles of solvency and stability there will be unusual situations, whether it is the global financial crisis or, in fact, the Canterbury earthquakes. The Canterbury earthquakes were a clear example where we had several hundred million dollars of claims made. They were adverse events, and it is just acknowledging that although we want stability of levies, there may be situations whereby it is not possible because we have got to deal with those adverse events. So the second point I want to make is that there is no conspiracy theory; these are logical principles of financial responsibility, solvency, and stability for New Zealand businesses.

The next point I want to make is actually about the funding policy. The big thing about this bill, which is highlighted in Part 1, is that we are in this luxurious positon where we have got the books in order, the scheme has matured, and we are able to balance a funding policy that enables us to deal with the inherent volatility but ensures that we are not over-collecting. I am very proud to say that—and today, if you read my press release, you would have seen it—the Government will be consulting as part of the ACC levy consultations on a funding policy of 100 to 110 percent over a 10-year period. What that says to New Zealand is, actually, that we will ensure that we have got stability in levies, and we will also ensure that we can adequately deal with this volatility without over-collecting. We have done it, so no more of the Opposition members standing up and giving speeches about how somehow we are over-collecting. It is not true, you cannot prove it, you do not have any of the numbers, and you are going to have to stop running that argument.

The next point that I want to make is actually around this whole point of ensuring that we do have good principles of financial responsibility in this legislation and transparency of that. I do want to acknowledge the Transport and Industrial Relations Committee and their work on this particular part of the bill. Again we heard the Opposition member say: “Oh, well, maybe what this means is that the Government will go over there in a little corner by itself and not have transparency around what is actually happening in terms of the accounts.” Again, what I would say to the member—and what I have tried to explain to her before—is that you cannot look at this bill in isolation in terms of particular clauses.

What we are dealing with now is a framework that will enable not only a funding policy but publication of documents around how particular aspects affect the accounts, whether that is entitlement provisions in the future or whether that is where you set the funding policy. That will be made public, but I and members in this committee have gone even further and we have added another clause just to make sure there are no conspiracy theories here, but, actually, there will be targeted consultation and I have confirmed in my press release today that there will be consultation as part of the ACC levy consultation next week on the funding policy.

So, again, the Opposition says that we are over-collecting. That has been proven wrong. We have got a clear funding policy that shows that we are not. The second thing that is out there is that we are not going to consult on the funding policy. Well, I have said that we are. We have got another clause in this bill and we will be doing it next week. Then, finally, there are so many businesses in New Zealand that have had to deal with what I think is volatility and the lack of stability. They are small businesses, some of them, and they do not have the ability to wear those costs. We are changing that with this framework. I think we are going to have much clearer, transparent, stable levy-setting.

I am going to talk about the residual levy in a later aspect of the bill, and I am sure that all members in this Chamber will be supporting the Government’s announcement today, because they know better than anyone that this is one of the single best things that we can do to send the right signals around having the fairest possible levies.

I would like to—since this is the Committee stage—have a close look at Part 1 of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill, starting at clause 4. Actually, this bill is before Parliament partly because we are coming to the end of the transition phase, from the old pay-as-you-go system to the full funding system. I have heard a lot of politics from the Minister for ACC in her previous contribution, but actually if we get down to it, the reason we have this legislation is that we now have to address some of the matters that arise because we had a transition period where technically, if you want to say it, for close to 15 years—actually, more than 15 years—ACC has been technically insolvent. But we are now coming to the end of that transition period where full funding is now just going to be the norm from here on in.

So what clause 4 actually does is repeal the definition of “fully funded” in the interpretation section of the Accident Compensation Act. Actually, a lot of the words that were in the interpretation section are now in new section 166A(1), inserted by clause 5: “The cost of all claims under the levied Accounts are to be fully funded by meeting the outstanding claims liability in respect of the claims by offsetting an adequate level of assets to fund the cost of those claims.” Rather than being a new concept or something that we have been aiming towards, which we have been for 15 or 16 years, this is now going to be the norm. Putting aside all the politics that I heard in the Minister’s contribution, that is actually one of the reasons why we need this legislation, and I acknowledge that.

One of the other reasons we need this legislation is that for the last few years we have had an issue with the overcharging of levies. I heard the Minister say, I think—and I am pleased that the Minister said it—that the Government is aiming for each account to be funded between 100 and 110 percent. That sounds good. Actually, if anything, I might have been prepared to be a little bit more flexible than that—maybe up to 120 percent. If we are going to make sure we have got stability over time, actually 100 to 110 percent is a little tight and perhaps the consultation will come back and say that maybe we need room up to 120 percent.

So I am comfortable with that, but some of the accounts are funded over 140 percent. So the Minister says that the idea that—[Interruption] It is not wrong, Minister. It is in the ACC’s annual report. So go and have a look at the annual report. If you have not read it, Minister, go and read the annual report and the Minister will find that some of the accounts are funded 140 percent. If the Minister needs evidence that the charges have been too high over the last few years, there it is. The Minister herself says that the range should be 100 to 110 percent. I am prepared to be a little bit more flexible than that and say that maybe we should go to 120 percent, but what it—[Interruption] The Minister is now advising members opposite, so that the select committee chair has a response to this—that is interesting. Actually, the evidence is there that there has been overcharging.

We agree that we need, under new section 166B(2)(a) in clause 5, a target level or band for funding of each account. Absolutely we do, because that has been far too loose over the last few years. The upshot of that being too loose is that it has been too easy for the Government to set the levies much, much higher than what they needed to be. That is where Sue Moroney’s proposed amendment on Supplementary Order Paper 123 comes in. What Sue Moroney is trying to achieve here, we think, is what the original intention of the legislation was. It is simply about making it absolutely clear that when considering the public good when setting the levies, the public good means the public interest with regard to reducing injury and accidents.

For the last couple of years anyway, we have heard the argument made—Judith Collins made this argument in a Cabinet paper that is publicly available—that the public good includes getting the Government’s books into surplus. That is exactly the argument that has been made up until now. Although we appreciate that the mechanism under new section 166B(2)(a) will allow more transparency and it will require the Government and the corporation to focus on setting levies that are appropriate for the band that is set, we think that if you put that hand in hand with the definition of “public good” that Sue Moroney sets out on her Supplementary Order Paper 123, it makes it absolutely clear. People and businesses can have absolute faith that the legislation that the Government and the corporation is working under is designed to ensure that nobody is paying, importantly, too much in their levies, or, for that matter, that we are setting levies too low.

We agree. We have to have a long-term approach to this. There is nothing about Sue Moroney’s Supplementary Order Paper that detracts from having a longer view or a mid-term view about what the financial performance of ACC might be. Yes, absolutely, it can be volatile. In fact, the volatility and the fact that the global financial crisis affected ACC’s investments just as much as it affected everybody else’s investments helped create that supposed gap in the funding that the National Government played up so much. Yes, there is volatility, although the ACC is one of the best-performing investment operations in the country. It proves that the public sector can actually be very good financial managers—you know, alongside the Superannuation Fund, two of the best-performing funds in the country. But we agree with the Government on that.

What we are saying is just make it a little bit stronger. Make it a little bit stronger so that we cannot possibly get into the situation—so that the Government cannot even be accused. If the Government thinks we are wrong, remove the opportunity for anyone to accuse it of using the ACC to get the Government books back into surplus by including the definition of “public good” and the definition of “public interest” that would be added under a new clause 6D amending section 330 under Sue Moroney’s Supplementary Order Paper 123. So what we are actually trying to do is work with the Government here, to make sure this legislation not only does what it is supposed to do but it is also seen to be doing what it is supposed to do, and gives businesses and other levy payers confidence in the accident compensation system.

What people expect is that they will pay a fair levy, and in return they will get fair compensation and fair treatment. At the moment, people feel like they are paying an unfair levy, that they are paying far too much, that they are being denied compensation, and that they are being denied treatment as well. This is about ensuring that people have confidence and faith in ACC. I would have thought that would be something that both sides of the House would want to support.

So I absolutely commend Sue Moroney’s Supplementary Order Paper to the Committee, and I encourage members to support it. If members have any concerns about it, I encourage them to raise them with us so that we can have that conversation through this Committee stage, and actually alleviate any fears that Government members might have. We just want to make sure this bill does what it is supposed to do, and that is give people confidence in the accident compensation scheme.

I too want to go over some history and some old ground, just to remind the Minister for ACC that, yes, we are transitioning from one accounting model, one reporting model, to another model. Clause 4 really talks about moving to the new fully funded operation. I also want to remind the Minister that we are talking about a system that has been more than fully funded. We are really well aware that many of the ACC accounts have been oversubscribed. We, too, are looking to ensure that the bill does live up to its transparency title and will provide some assurance and some confidence to the public of New Zealand that ACC will be providing what they need to, plus some buffer, into the ACC accounts and will not be supporting what is clearly not a transparent action of supporting this Government to get into surplus.

I want to turn to three important parts in Part 1: the principles of financial responsibility, the funding policy statement, and the consultation process and any amendments to the funding policy statement. The principles, of course—new section 166A(1), in clause 5, states: “The cost of all claims under the levied Accounts are to be fully funded by meeting the outstanding claims liability in respect of the claims by offsetting an adequate level of assets to fund the cost of those claims.” That is very sensible, ensuring that there are sufficient funds to pay for ACC costs as they occur to those people who may have accidents and need to have their medical costs and ongoing costs covered. Members—in particular, electorate members—have constituents who come and see them on a regular basis to talk about ACC claims and the like. Often I wonder whether sometimes we do not take full cognisance of future ACC liabilities, in that our populations do get older and sometimes their ACC concerns, their health concerns, and their accident concerns actually end up costing more than we have potentially set aside.

New section 166A(2), in clause 5, states: “When making recommendations in respect of regulations made under section 329 setting levies, the Minister must have regard to the following principles:”. That phrase “must have regard” of course is an important one because originally, I understand, the bill said “must be set in accordance with the following principles:”. We are talking about two different levels of requirement. We are concerned about the watering down of this particular part of the bill. The words “must have regard” of course do take those things into account, but they do not have the same level of weight as “must be set in accordance with the following principles:”. So we are concerned about that.

New section 166B talks about the funding policy statement. It is clear that the funding policy statement must be set based on the principles of financial responsibility. But the funding policy statement must also specify “a target level or band for the funding of each Account;”. In that process, we are looking at the consultation process that the Minister must undergo to ensure that the Minister has sufficient information to be able to be comfortable with the target levels, the band, for each funding account. As such, the Minister is able to consult persons and organisations. But the Minister must also have the ability to determine the amount within the band for each funding account in terms of ensuring that there are no huge changes in levies that could be set.

One of the issues that many businesses have talked to us about is that there is a potential for levies to vary hugely over time. It makes it very difficult for businesses to set their budgets and be able to determine their costs, particularly their costs of employment, out for any significant period of time. So we would want to support ensuring that there are very limited variances in those levies, and the ability to do that would mean that the Minister may take advice from ACC and may need to take regard of those ongoing concerns.

Also within the funding policy statement, we are very cognisant of the fact that we would not want there to be an oversubscription to those particular accounts. My colleague Iain Lees-Galloway did talk about potentially some accounts being oversubscribed to about 140 percent, which clearly demonstrates that those basic principles of financial responsibility have not necessarily been applied and the consultation process has not been applied adequately. So we are really confident that, used correctly, the principles in the consultation and the funding policy will actually take care of ensuring that we do not oversubscribe by more than 120 percent.

Just finally, I do want to talk about what is a really important aspect of this, which is determining what is “public good” and in the “public interest”. With public interest, Supplementary Order Paper 123, which has been put up by Ms Moroney—we want to ensure that public interest takes into full regard the purpose of reducing accidents and injuries and, in particular, having regard for the interests of taxpayers, levy payers, claimants, and potential claimants. It seems inordinately sensible to have that feature as part of this bill, and I am hopeful that we can get some support for this Supplementary Order Paper to ensure that that happens. It states: “ ‘Public good’ means the public interest with regard to reducing injury and accidents.”, and, at the end of the day, that is what accident compensation should be about. It should be about the prevention of accidents. It should not be about our wanting to build up funds—it is more about prevention. It should be about prevention rather than about setting aside money for accidents when really it is absolutely far better in the country’s interest to reduce that cost to us. Thank you.

I rise on behalf of New Zealand First to take a call and—just to start things off—to really give assurances to those people back home that New Zealand First has got some good news today, which is that we will not be supporting this bill the way it sits in the Committee. Some more good news: we do, actually, support the Supplementary Order Paper by Sue Moroney, and I would like to talk to that in a few minutes. And we have some bad news for the Government, which I think has missed quite a big opportunity here in this bill, particularly—the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill.

The first thing that jumps to mind when I read that out is the absurdity of having a bill that actually tries to encapsulate financial responsibility and transparency as if they were some kinds of new things that the Government should be doing. In actual fact, it should have been doing this all along—having an open and transparent Government and making sure it is doing the right thing with New Zealand money and putting it in the right places, as opposed to trying to balance the books and to get things straight, which, of course, it has miserably failed to do over the last 7 years. I am sure it is going to continue to fail in that vein as well. There is $350 million - odd a year that has been over collected by ACC payers, and I myself, as a business owner and operator, have been one of those business owners who have been charged. Nowhere in this bill—not in the first, second, or any of the parts in this bill—is there an apology by the Government to acknowledge that this has actually taken place, or redress to actually compensate those businesses and those people who have paid excessive amounts of money, and to give that money back to those businesses. I am sure that there would be a lot of business out there right now that would be a lot better off if this bill actually addressed those particular points that we raise—and we do have some serious concerns.

I move on to Part 1 and clause 5, which inserts new section 166A “Principles of financial responsibility in relation to Accounts”. I have to say that the word “must”—albeit a very simple word; it is one syllable and four letters long—is a very powerful word. It does jump out at me from the page quite strongly, and I will read out a couple of points from new section 166A(2). It says here: “When making recommendations in respect of regulations made under section 329 setting levies, the Minister must have regard to the following principles:”. It goes down to new section 166B “Funding policy statement” where subsection (1) says: “Within 12 months after the commencement of this section, the Minister must issue a funding policy statement.”—so far, so good. It goes down to new section 166B(3), which says: “The funding policy statement must be consistent with, and explain how it is consistent with, the financial responsibility principles in section 166A.”—another “must”. Then it goes down to new section 166C “Consultation, publication, and amendment of funding policy statement”, where subsection (2) says: “The Minister must consult such persons or organisations as the Minister considers appropriate before issuing the funding policy statement.” So those are all positive things in this part of the bill.

However, the bill has had some amendments and changes made in the Transport and Industrial Relations Committee that have created some grave concerns for the public and for New Zealand First, and we would like to bring those to your attention now. In new section 166A(2)(b) it has got here that “if an Account has a deficit of funds to meet the costs described in subsection (1), or has accumulated surplus funds, that deficit or surplus should”—it has changed the word from “must”—“be corrected by the setting of levies at an appropriate rate for a subsequent year …”. The word “should” is a fairly watered down statement after all the “musts” that the Ministers have been doing, because that is where the rubber meets the road, where the real changes can be made. Having a “should” as opposed to a “must” changes this piece of legislation considerably. We go down to new section 166A(2)(c), which says: “large changes in levies should”—changed from “must” to “should”—“be avoided.” This “should” is another watering-down of some legislation where we expect, as New Zealand taxpayers and ACC levy payers, to have openness and transparency and for the funding principles to be far more clearly outlined than they have been in the past, which this current bill does not adequately do.

We go through the whole proposed levy-setting framework, and it goes down through some fairly strong steps as we are going through the procedure to determine what those funding costs are going to be. It gets to that final step in the levy-setting framework and it goes to Cabinet, which may follow ACC’s recommendations. Again, this is another watering-down piece of legislation that does not really give the people back home the support that they need to know that we are not going to go down the alley that they have once gone down with the overcharging of ACC levies in the past. The second part to that is that Cabinet may choose to set alternative rates, having regard to broader public interest—Cabinet may choose. There are some serious issues in those very minor changes in this piece of legislation. New Zealand First understands those minor—but major—differences and the implications that they have, and we cannot support this bill.

We do, however, support the attempt by Labour to try to straighten up the ship, if you like, with Supplementary Order Paper 123, particularly around clauses 4 and 5, in this part, and this is around the meaning of “public good”. It is simply rectifying that by stating: “Public good means the public interest with regard to reducing injury and accidents.” I think that is a very simple but a clear directional change to make sure that that is actually what the bill intends. We support the amendment to insert subsection (d) after new section 166A(2)(c), set out in clause 5, which says: “the state of the Government’s fiscal position is not to be a consideration when setting ACC levies:”. We do not want to see what has been happening in the past—this Government being able to use ACC levies to balance its books—so we do support, with pride, Sue Moroney’s Supplementary Order Paper with those amendments.

After hearing a number of contributions, I thought I must stand and talk about why words such as “should” are there.

💬 Iain Lees-Galloway: Is it in the public interest?

Indeed, it is in the public interest, I am sure. As I come to just make some comments on the principles of financial responsibility—particularly the third principle, which provides that large changes in levies are to be avoided. This is intended as a safeguard to produce some certainty for levy payers.

It is no surprise—and I hope the members on the other side know this—that when a bill goes to a select committee, it often comes out changed. You understand that. It is not dire conspiracy; it is actually listening to stakeholders, and people in our community. We consider their view, we look at what the legislation proposes, and we ask ourselves whether what went into the committee is actually fit for purpose after hearing submissions.

This is what the Insurance Council of New Zealand said: “Clause 166A(c) states that ‘large changes to the levy must be avoided’. While it is desirable to avoid volatility of levies, there will inevitably be occasions during the life of the scheme when extreme events occur.”—and, of course, this sector, the insurance sector, understands this better than anybody—“In the general insurance sector, the period 2010-2012 saw some of the most expensive insured claims globally as a result of the massive flooding in South East Asia, the Canterbury earthquake series, the Tohuku tsunami and Hurricane Sandy to name a few catastrophes. The result was a sharp rise in reinsurance costs globally which saw a significant increase in premiums to consumers in New Zealand. It is quite conceivable that another global financial crisis would have a major impact on the ACC’s investments. ACC should be able to respond to such extreme circumstances.”

That is one of the reasons why “must” was changed to “should”, at the recommendation of a number of substantial submitters through the select committee process—one or two, but substantial submitters. The Insurance Council of New Zealand, you would have to say, is a substantial submitter. It was not the only one. So what it does is it enables a degree of flexibility.

We also know that retaining section 300 is consistent with this approach, and it means that in making decisions on levies, the Minister will also have regard to the public interest—in particular, the interests of taxpayers, levy payers, claimants, and potential claimants in the future. We want an accident compensation scheme that is here for decades and decades and decades to come, so sustainability, solvency, and predictability around this are incredibly important. So this serves as a safety valve—for example, in circumstances where there are concerns about the impact on levy payers of raising levies.

During the global financial crisis ACC recommended far more levy increases than Cabinet signed off on—and here we are, fully funded. We also know, as do members on the other side, that the fully funded figure as ACC reported to us at the beginning of this year was higher than the 100 to 110 percent, but we also know that it reported to us that in January of this year a $4 billion loss happened to the asset base of ACC, which in February was recovered by $2 billion. So there is a degree of volatility. So that percentage, in terms of the solvency of that account, drastically changed.

What this bill is essentially about is smoothing out the peaks and the troughs, as best as we possibly can, in a very volatile environment, where we do not know, year by year, how many claims we will receive. We know, for example, as the Insurance Council has said, that globally there can be very high claims in the insurance sector, certainly in the ACC sector, when accidents occur—and let us hope they do not happen at an accelerated or larger proportion than what is estimated—and they become higher-level claims. So having the strength of a resource base, an asset base, that can be evened out to take those highs and lows, is very important. Having a process of transparency around that, instead of making adjustments at the very end, in terms of levy setting, and having a policy statement at the beginning that brings guidance through this whole process is very, very important.

I do hope that those few comments I have made around that word “should” actually brings some context and some understanding of what that word is about. Thank you.

Thank you for the opportunity to speak on the Accident Compensation (Financial Accountability and Transparency) Amendment Bill. Labour supports this bill but with amendments to Part 1. I find it quite ironic that the Government is putting through a bill with the word “transparency” in the title, given Murray McCully’s bribe of a Saudi businessman, with no transparency whatsoever.

My colleague Sue Moroney has Supplementary Order Paper 123 on Part 1. Firstly, it clarifies the interpretation of “public good” as meaning “the public interest with regard to reducing injury and accidents” in section 300 of the Accident Compensation Act 2001. Secondly, the Labour Supplementary Order Paper ensures that the Government sets levies for the purposes outlined in section 3 of the Act and not for the purpose of achieving other objectives unrelated to ACC levies, such as a Government surplus.

Part 1 of this bill has the intention of consolidating and clarifying the framework for funding ACC’s levied accounts to make it more transparent, to give it a longer-term focus, and to address the previously inconsistent approach to setting levies, with marked fluctuations in levy rates and prior confusion about factors driving final decisions on levies.

Clause 5, which inserts new sections 166A to 166C into the principal Act, deals with the principles of financial responsibility in relation to accounts. New section 166A(1) does indeed lay out that the cost of all claims under the levied accounts is to be fully funded by meeting the outstanding claims liability in respect of the claims by offsetting an adequate level of assets to fund the cost of those claims. However, under the version of the proposed subsection (2) now before us, the principles under which levies must be set, where the Minister is obliged to have regard, are now changed. It is no longer mandated that the levies derived for each account must meet the lifetime cost of claims in relation to injuries that occur in a particular year, but merely that they should. It is no longer mandated that, should an account have a deficit of funds to meet the costs described in new section 166A(1)(a), or have accumulated surplus funds, that deficit or surplus must be corrected by the setting of levies at an appropriate rate for a subsequent year or years, but merely that they should.

So I agree with Clayton Mitchell from New Zealand First, when he was talking about the use of “must” or the term “should”. It is no longer mandated that large changes in levies must be avoided, but merely that they should. There was considerable consultation and debate when these things were discussed over at the Transport and Industrial Relations Committee, in terms of the widely swinging levies amongst ACC issues.

The Minister for ACC announced in May that “The legislation … [should] bring the levy-setting process into line with the accountability and transparency requirements that already apply to the operation of the government’s core Budget under the Public Finance Act.” The Minister also announced at the time that “New binding principles … [should] be introduced to ensure the scheme is adequately funded to withstand economic volatilities, while ensuring levies are kept as low as possible and stable over time.” But how is this proposed amendment enshrining in law the solution to the issues raised in advance from officials and from businesses and industry groups? The obligations on the Minister, which are to ensure that the levies are in fact more stable, have been muted, for no apparent good reason. This is like the Health and Safety Reform Bill all over again. The wording of some of the clauses has been changed, with a resulting weakening of the legislative framework. These changes to the parameters of the Minister’s decisions and obligations seem to have been sprung unheralded on the public. It is my understanding that the focus of the submissions to the select committee did not actually focus on this.

Labour is supporting this bill, but I must note that the weakening of the framework in relation to transparency and stability of the levies is regrettable. Thank you.

As my colleague Jenny Salesa said, Labour is supporting this bill. There are a number of important principles that are reflected in the policy intent of the bill, and let me just touch on them. The bill will improve the process for levy setting by requiring the Government to set out a funding policy in line with the principles in the bill, which will inform ACC’s public consultation on the levy rates. It is a good thing. Setting a funding policy will also improve the transparency of the levy-setting process, so that the public is better informed—so far, so good. Perhaps most important, the bill would have improved the framework for funding ACC’s accounts through levies by replacing the current provisions with a more comprehensive set of principles.

The big concern that we have with Part 1 is that the very principles enshrined in the title of the bill—financial responsibility and transparency—have been watered down. As Jenny Salesa said, there is more than a little echo of what we saw with the Health and Safety Reform Bill. It is a bill that is brought to the House and sets out to fix a political problem for the Government with great fanfare, goes to select committee, and then the usual vested interests rock up to the committee and exert a bit of influence. Then the result is a 10-minute apology from Jonathan Young in his most recent contribution—a 10-minute apology for the replacement of a lot of “musts” with a lot of “shoulds”.

💬 Iain Lees-Galloway: Coulda, shoulda, woulda.

Yes, that is right—coulda, shoulda, woulda. Thank you, Iain Lees-Galloway. So, really, the good intent of the bill—Labour supported it; we still support the intent of it—and the basic principles have been significantly undermined by this kind of weak-kneed backsliding in the Transport and Industrial Relations Committee, which, unfortunately, has made this bill a lot less effective than it otherwise would have been.

The principal example of that watering down is to be found in Part 1, clause 5 inserting new section 166A(2). Instead of saying levies “must be set in accordance with the following principles”, it has been replaced with “When making recommendations in respect of regulations … the Minister must have regard to the following principles:”, a much weaker and more inferior set of words. It is sad that a Government that so transparently cooked up a funding crisis when it came to office—a manufactured funding crisis in relation to ACC—and then hiked up the levies, now seeks to repair some of that political damage with this bill, but bottled out when it got to select committee, with just the slightest bit of influence from the vested interests. What could have been a good bill has—

💬 Iain Lees-Galloway: Could have been a good bill.

Could, should, would—it “must” be a good bill, but it will not be under the dilution of its core principles at select committee. That is a shame.

I want to really just add my voice to the support for Sue Moroney’s Supplementary Order Paper 123, which I think would pretty much repair the damage that was done at select committee. It sets out, for example, in amending clause 4, to make it very clear that “public good” in this case “means the public interest with regard to reducing injury and accidents”. The public good should not be some kind of mask for the Government to milk ACC to support its ever-diminishing aspiration for getting its books back into surplus, because—let us be really clear about it—that is what has happened. That is the story of this Government’s ACC policy over the last few years. Sue Moroney’s Supplementary Order Paper makes it very clear, in amending clause 5, that the state of the Government fiscal position is not to be a consideration when setting ACC levies. If the Government was true to the principles, if it was true to the policy intent, if it was true to its rhetoric, then it would support Sue Moroney’s Supplementary Order Paper. Why not? Why should the ACC be used as a cash cow to try to fund the Government’s surplus target?

I want to use my further contribution on Part 1 to clarify what Labour’s voting position is going to be, and to also respond to some of the issues that have been raised by the Minister in the chair, the Minister for ACC, when she spoke and also the chair of the Transport and Industrial Relations Committee, Jonathan Young, when he spoke. The first thing that I want to clarify is that during the Committee stage of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill, the Labour Party would love to support Part 1, and would love to vote for Part 1, but that will be dependent on the Government’s response to the amendment that I have proposed. The reason for that is, I think, hearing all of the contributions—well, the members seem to have kinds of—I do not know whether to describe them as smirks, or frowns. Maybe they are “smowns”, or “frirks”—I am not sure which one it is—on their faces. But it is simply this: if what both the Minister in the chair and the chairperson of the select committee have said in their contributions is correct, then they should easily be able to support my amendment, because what my amendment simply does is give certainty to the New Zealand public—to the businesses, to the workers, to the motorcar operators of the country—that they will not be overcharged ACC levies for a purpose that is not related to ACC. That is simply what it does.

I think that should be an easy amendment for the Government members opposite to support, but I have not heard them make any response on the amendment yet. I would like to hear a response on it, because I want to hear a commitment today, via the vote on my amendment—or, if the Minister chooses, via simply getting up and saying it in the Chamber. I want to know that the Minister believes that the bill in its current form would stop any Government from using ACC levies and the levy-setting process for any other purpose but reducing injuries and accidents. I want that commitment, because if the Government cannot give that commitment in this debate, then it is not being financially responsible and transparent when it comes to ACC matters. One thing that I can say about Judith Collins—and I do not agree with her a lot of the time—is that in a funny way, when she was the Minister for ACC, she was absolutely transparent about this. She got up in the House when she set the levies in 2013 and specifically said—and her press statement said—that one of the factors she took into account in rejecting ACC’s recommended levies was to get to surplus. She was very transparent about it. What I want to know from the Government today is whether it believes that this bill would still allow it to do that. If the answer is yes, then that is not financial responsibility when it comes to ACC and it is not transparency when it comes to ACC.

I want to clarify for the members opposite that the objection from the Labour Party is not necessarily that “must” has been changed to “should”, because we see the need for that level of flexibility. Sitting here today and discussing ACC levies, we see the need in that we might not be able to foresee everything that is going to happen. That is not our objection. We agree with those sets of amendments around the guiding principles, but only if there is the backstop to make sure the flexibility is not so large that it allows the Government to mislead the levy-setting process and use it for something that it was not designed for—to artificially hike up ACC levies for purposes that are not to do with accident compensation and for purposes that are not to do with reducing the incidence of injuries and accidents in our workplaces. I want that commitment from the Government today because its past performance tells us that it believes it should be used for that.

However, there is one rider that I will put on it. When I asked the Minister whether she had sought Crown Law advice on whether it was lawful under the current Act to use the ACC levies to get to surplus, she said that she had not even asked Crown Law for advice. There is only one reason why, in my view, a Minister would assert that she had the legal right to do that but would not ask for Crown Law advice, and that is because she probably knows that what has already happened is unlawful. If that is the case, then I am kind of comfortable with the bill as it is. If we know that what the Government has already done was unlawful, then there is no need for my amendment, because the law as it stands is perfectly good. But if the Government does believe that it has got the lawful right to do what it has done since 2013—and that is, by its own admission, use the levy-setting process, reject the recommendations made by ACC, and have higher levies in place in order to get to surplus—then my amendment is absolutely needed.

My amendment is needed because of what Business New Zealand said when it came to the select committee. I am going to read directly from its submission because people might not believe it. I mean, it is hard sometimes to believe that the Labour Party and Business New Zealand are singing from the same song sheet, but absolutely, in this instance, we are, and the Government is on the wrong side of the equation. Business New Zealand said: “The state of the Government’s fiscal position (as expressed in the Government’s accounts) should not be a consideration when setting ACC levies.” I asked Business New Zealand, when it came to the select committee, whether it would support an amendment such as the one that I am proposing in Supplementary Order Paper 123 to ensure that the Government could not do that, and it said that it would. It wanted to see a legislative fix to this, to stop it from happening again, and the Labour Party is offering exactly that legislative fix. So I want to hear from the Minister an assurance about that and her view as to whether in the new funding policy statement she can actually set out getting to surplus as a reason for ACC levy setting—that it could be one of the things that she asks for in that funding policy statement. I want to know from the Minister whether, in fact, it is her view that that is allowable or not under the law as it would exist without my amendment, because that is going to be important for our vote going forward.

I want to speak to new section 166C, “Consultation, publication, and amendment of funding policy statement”, set out in clause 5 in Part 1 of the bill that we are debating. This is because there will be a consultation on that, and that is good for transparency. I accept that there are many parts of this bill that will add to transparency. But I want to know that when that consultation happens, the people who are giving the information—the stakeholders who are consulted with—will be listened to. We had the shambolic situation, probably early this year, when the Minister for ACC went out for consultation on ACC levies. A number of people have told me that during that consultation process they told her that she was about to make a big mess of the ACC motor vehicle levy process. They told her of exactly the models that were in the wrong categories and they told her of exactly the problems that she was about to bring on by changing the model, and she ignored all of that advice. She ignored all of that advice, and look what happened next: I think 24 models—about 115,000 motor vehicles—had to have their ACC motor vehicle levy reclassified and changed and reduced because that Minister did not listen when the stakeholders told her and warned her of the mess she was about to make of that new model coming in for the motor vehicle levy. That should have been a good news story for the Government; it has turned into a complete and utter shambles.

With new section 166C and its consultation process being put forward, again, I want to seek an assurance from the Minister that when she puts out her funding policy statement, first and foremost she accepts that one of the funding policy statements that she cannot require of ACC is for it to make a provision to help the Government out with getting its books in surplus. I want that assurance from the Minister. I equally want an assurance from the Minister that in consulting with the stakeholders over the funding policy direction she will listen to what people are telling her, because she certainly did not when it came to the levy-setting process earlier this year. She was given specific information—and I have seen, Minister, the specific information that you were given—by stakeholders during that process that was utterly and completely ignored, and that is the reason why you have got yourself in the mess that you are in now.

I move, That the question be now put.

I also want to try to clarify some of the discussion points on Part 1 of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill. We have had the Minister for ACC’s contribution and we have had the contribution from Mr Young, but I feel as though we are sort of talking past each other a little bit here. First of all, I want to make it clear that we are not proposing that we go back from “should” to “must”. We understand the argument for why the word “should” in new section 166A(2)(b)(c) has been used rather than the word “must”, because this is about ensuring that the Minister and the Government have some flexibility. I think Jonathan Young used the example of the global financial crisis coming along, or a significant disaster like the Canterbury earthquakes or the Pike River mine, which have had a significant impact on ACC, and so we need the flexibility to be in there. That is fine. We understand that.

💬 Jonathan Young: So it got through.

What we are saying, though—if you will listen for a second, Jonathan Young—is that it does open up an issue that can be solved with Sue Moroney’s Supplementary Order Paper 123. The issue that gets opened up is that if you go from saying, for instance, that the levies derived for each account “must” meet the lifetime cost of claims, and change that to “should”, or that if an account has a deficit of funds to meet the cost prescribed or has not accumulated surplus funds the deficit or surplus “should” be corrected rather than “must” be corrected, then you open up the opportunity for the manipulation of the levies that has occurred in the past. So, on the one hand, we totally understand the change being made, and we appreciate there are good reasons for making that change, but it opens up a problem, which, actually, this bill intends to solve. What we are saying is to make the change and support it with the changes to the definition of “public good” and “public interest” that Sue Moroney has offered. That way we would get the flexibility that the Government is looking for and we would get the assurance that the public is looking for that levies will be used strictly to ensure that ACC is appropriately funded to provide the compensation and treatment that people expect from it, and I have yet to hear an argument against that.

I do not at this stage know which way the Government is going to vote on Sue Moroney’s Supplementary Order Paper. I suspect I know what it is, but I have not heard either from the Minister or from the Transport and Industrial Relations Committee chair, Jonathan Young. We have got numerous members of the select committee sitting opposite. They have taken time out of their day to come down to the Chamber. I would be quite keen to see one of them, at least, get up and actually tell us what their view is—whether they are for or against Sue Moroney’s Supplementary Order Paper—because I cannot imagine why you would be opposed to it, unless the Government wants to leave open the possibility that the levies can be manipulated. Everything the Government has said is that that is not what it wants and that the purpose of this legislation was to close down that loophole. So is the Government going to support Sue Moroney’s Supplementary Order Paper? If it is, that is fantastic—we would welcome that. If it is not, we would like to hear some constructive reasons why it thinks it is not necessary, or why it thinks it might be detrimental to the legislation. At the moment, as I say, what I have heard is the two sides of the Committee kind of speaking past each other, and what I would like is some clarification around what people’s views are on this.

I just want to address one other thing very quickly in this contribution, and it is that Jonathan Young said that there is volatility in the various accounts and that at the beginning of the year we saw a massive drop in some of the accounts. Well, actually, what happened was, for instance, the work account, which is the one that was 140 percent funded as at 31 December, at 31 January had plummeted to being 135 percent funded, and then, by 28 February, it was back up to being 141 percent funded. So, yes, it can move around. We appreciate that it can move around, and that is why we agree that there should be a funding band, but it is still absolutely clear that the work account and, arguably, the earners account as well are both thoroughly overfunded because the levies that have been taken are too much.

I move, That the question be now put.