Smith Nick: Urgent Debates — Accident Compensation Corporation—Removal of Chair of Board 
Smith Nick: Urgent Debates — Accident Compensation Corporation—Removal of Chair of Board 
[Volume:652;Page:1763] 
Hon Dr NICK SMITH (Minister for ACC) 
: 
 This issue is all about performance and securing for New Zealanders an accident compensation insurance scheme that is effective efficient and affordable. My decision yesterday to have Mr John Judge replace Mr Ross Wilson was made because Mr Judge has the right skills for what is required by the Accident Compensation Corporation (ACC) and to secure its future which was put at risk by the reckless actions of the previous Government. 
Let me recite for the record exactly what occurred for me as the new Minister after receiving the phone call from the Prime Minister saying I was to be the Minister for ACC. Before I even received my warrant I received a call from the Department of Labour to say that unless it got an extra $300 million for the non-earners account the scheme would be unable to provide the basic accident compensation coverage for non-working New Zealanders. I asked the officials: “Hang on. How long has the previous Government known about that $300 million blowout?” They told me it had been known about for over a year. So when I see crocodile tears coming from members opposite about the integrity of our accident compensation scheme I ask where they were for the 12 months when they knew this scheme was in trouble and they did nothing. 
Then we go on. I have received three independent reports that bring up major questions in terms of the finances of the ACC. There is the MartinJenkins report. I invite members to read the fact that the previous Government broke the Public Finance Act—it broke the Public Finance Act; that is the first time since 1989 that that Act has been breached. Furthermore that report said the underlying problem of huge cost increases at the ACC went back many many years to the misadministration by that Government. 
Then we come to the report I received this year in February by PricewaterhouseCoopers. Let me remind members opposite of what it says because they would pretend all is well within ACC. Let me recite the first thing that the report says. It says that ACC’s finances had deteriorated by $3.9 billion in 1 year. The report identifies that during Labour’s tenure ACC’s liabilities increased from $6.1 billion to $22 billion. That is a deterioration of $16 billion. The report further said that over the last 6 months the situation had deteriorated by $2.6 billion. That was the second report. 
The third report I received was from the Department of Labour which I tabled in the House today. It said that of the seven financial reporting indicators or key performance indicators set by the previous Government six of them are not being achieved and will not be achieved this year—six out of seven. Let me go through what they are. In respect of rehabilitation rates ACC is not meeting the targets that the previous Government set; in respect of the return to work rates ACC is failing; and in respect of the costs per claim it is not performing as per the criteria set down by the previous Government. Mr Goff has made much of the investment returns. The interesting thing is that of the seven financial key performance indicators the one that ACC was meeting was on the rate of investment returns. I have never justified making the changes to the board on the basis of performance in that area because it is true that whichever investment funds one looks at whether it is the superannuation fund private funds or others there have been major holes. 
I have had three substantive reports that show ACC was underperforming. And what would members opposite have me do? 
Hon Members 
: Nothing! 
Hon Dr NICK SMITH 
: I say to this House that a responsible Minister would respond to those reports in such a way as to secure the future of ACC and that is just what I am doing. 
 Let me outline the advice I have received about what would happen if I was to do nothing. I am advised that if I do nothing motor vehicle levies would need to increase by 129 percent. 
Nathan Guy 
: What? 
Hon Dr NICK SMITH 
: By 129 percent. If I do nothing—and I know this will be a concern for the member for Otaki—the motor vehicle levy would need to be increased to $585 per motor vehicle. I think that is unaffordable. The report says I would need to increase the accident compensation levy on businesses by 71 percent. I ask how many people in this House believe that with the economy in its current shape it would be responsible to increase accident compensation levies on businesses by 71 percent. If we wanted to kill jobs that would be the surest way to do it. [ 
Interruption 
] I say to the previous Minister for ACC Maryan Street who is squawking that she should take some responsibility for the mess she left ACC in. The worst increase in levies would be for ordinary families and workers. ACC advises me that if I do nothing the levy for ACC would increase from $1.40 to $4 which is an increase of 185 percent on earners. Members on this side of the House say that is unaffordable and we need to make changes. 
Let me note some of the other areas. Again I challenge members opposite who came out and promised New Zealanders that they would make physiotherapy free. They advised that it would cost $9 million. How much did it cost? Well to date it has cost nine times that figure. In fact I am advised that the policy of providing free physiotherapy has expanded the cost of accident compensation from $58 million to $225 million per year. Who would say that we can go on? Even the current board of ACC has advised me that that is untenable that a mistake was made and that that is one of the things we will have to address. 
I take the area of medical misadventure which the previous Government changed to a more generous treatment regime. The previous Government said it would cost $9 million per year. I am advised that it is costing $40 million a year. Mr Goff and members opposite believe that we can have all those increased entitlements without anybody having to pay. Who believes that nonsense? That is why this Government has embarked upon a sensible programme of change. 
What are those changes? The first thing I have said is that I believe ACC needs to have a stronger level of financial governance skills. I say that John Judge who has been the chief executive of Ernst and Young and whom the previous Government appointed to Te Papa is a proper person to provide ACC with the governance skills that are required. I would note the editorial published in the  
Dominion Post 
 at the time Mr Ross Wilson was appointed. Let me tell members what the  
Dominion Post 
 said: “Labour is pushing the boundaries beyond what is acceptable in looking after its friends.” Is that what the editorials are saying about my appointment of John Judge? No that is what the editorials said about the appointment of Mr Ross Wilson. It is my intention to boost the skills of the ACC board so that New Zealanders can have confidence that it is running an efficient and effective 24/7 insurance scheme. 
Hon Steve Chadwick 
: To cut services. Give us the real agenda. 
Hon Dr NICK SMITH 
: The second change that I have flagged I say for the benefit of the previous member for Rotorua is that in my view we do need to make legislative changes. It is my view that the full-funding date of 2014 will put too much pressure on levies. That is why I said last week that this Government will introduce a bill to push that full-funding date out and provide some space for levy payers. I have also said we need to review a number of items of funding that are out of control. I have specifically noted physiotherapy. 
We need to have an honest debate not a debate where we say ACC can do everything but the levies will not go up. We need to have an honest debate where we say to New Zealanders: “Here are the entitlements; here are the costs. How can we do this in an effective way?” At heart here is a debate around how to make ACC secure for the future. Let me make it absolutely plain to members of this House and to New Zealanders that this Government is committed to the underlying Woodhouse principles of accident compensation. This Government is committed to a 24/7 State insurance scheme that can be secure for New Zealanders. But I also say I will not have this organisation go down the financial gurgler and put vulnerable New Zealanders at risk. That is why this Government will make responsible changes. 
It is our view that the previous Government converted accident compensation into some sort of social welfare scheme without knowing who would pay the bill. We will be financially responsible and we will secure a future for accident compensation because it matters. I challenge the next speaker from the Opposition to apologise to New Zealanders because the previous Government through its reckless approach put the scheme at risk. This Government will secure a future for accident compensation. It is my view that John Judge has the right set of skills to enable ACC to move forward to enable it to move out of the hole that the previous Government created and to enable us to provide New Zealanders with the all-important security of knowing that if they have an accident the accident compensation system will be there for them. That is the commitment that I give to New Zealanders.