Woodhouse Michael: Injury Prevention Rehabilitation and Compensation Amendment Bill — First Reading 
Woodhouse Michael: Injury Prevention Rehabilitation and Compensation Amendment Bill — First Reading 
[Volume:658;Page:7445] 
MICHAEL WOODHOUSE (National) 
: 
 I begin by affirming my party’s commitment to the principles in the royal commission report so well articulated by the member Rahui Katene but also to the Accident Compensation Corporation (ACC) itself and its goal of ensuring a fast and lasting return to work or independence for New Zealanders. But having said that an awful lot has changed in the 42 years since the Woodhouse report was published. It is important to periodically review whether the scheme continues to deliver value for New Zealanders; and if ever that review was necessary it is right now. 
I congratulate the Ministers on their timely and carefully considered amendments as set out in the bill. It is a bit surreal to have to defend the changes being proposed by this bill in the face of the accident compensation scheme’s recent financial performance. I think the public have been a bit numbed into disbelief by the scale of the numbers such as $2.4 billion 2 years ago and $4.8 billion in the last year. The first of those reports of course was signed off as correct by the previous Labour Minister Maryan Street. She had no problem doing so but now is part of a party that continues to deny that a problem even exists. Frankly it strikes me that Labour members are either completely ignorant of the way the scheme works or deliberately evasive about their role in the parlous financial state that it has found itself in. That is no real surprise given Labour’s contribution to the situation. Even Labour’s finance spokesman Mr Cunliffe adds to the chorus of people who think that because there was a cash surplus everything is all right in the scheme. It beggars belief that that is the extent of Labour’s financial literacy. But it does seem to be the theme of the previous administration which believed honestly that it left office with everything all right. It is a bit like saying somebody had jumped out of a plane without a parachute and is OK 50 metres above the ground. 
Members opposite might not think that the accounting result is real but the proposed levy increases that are the consequence of that are very real. The earners levy for example will have doubled in 2 years under the proposed levy increases if nothing happens. I certainly do not need to remind the House about the response that the motor vehicle levy increase has. At least the Green member who spoke was honest in her party’s preference that it wants to go back to a “pay as you go” system. In contrast the Labour Party does not oppose full funding but does not want to pay for it. Well it cannot have it both ways. 
Contributing to that confusion was Labour Party President Andrew Little who attacked just about everybody involved in the preparation of that financial report: the accounting staff the auditors the actuaries the independent overseers and even the Minister’s office. As a chartered accountant I am frankly insulted at the accusation that the report which was prepared absolutely in accordance with financial reporting standards should somehow have been made to look worse for political ends particularly when that accusation comes from the president of the party that is the main reason for the state that the accident compensation scheme finds itself in. 
Mr Parker would have us believe that the performance of the scheme is down to negative investment returns. It is true that it has suffered in the downturn albeit ahead of the rest of the market and it should pick up. But two things are not being said by Mr Parker. Firstly the projected upturn is already built into the projections; and secondly the increases in the scheme’s unfunded liability started 4 years ago which was well before the economic downturn. But even when it was apparent what was Labour’s response? It continued to widen the entitlement base and allow ACC to take its eye off the rehabilitation ball even though working to exit claimants is not only good for claimants but a legal requirement and then refused to accept ACC’s recommendations for levy increases that more accurately reflected the cost of those changes. In a nutshell when it should have been applying greater levy increases and at least holding entitlements it was doing the opposite on both fronts. 
When the financial chickens come home to roost what happens? We had the debacle of the failure to disclose the true state of the scheme particularly in the non-earners account. On several occasions in the lead-up to the pre-election fiscal update Labour had a chance to disclose what was going on and chose not to. Despite being in clear breach of the Public Finance Act the Opposition used a minor comment in the Jenkins report to lump complete responsibility for that on to Treasury in an attempt to remove itself entirely from any blame. So much for loyalty to Government staff or the ownership of one’s actions! 
Well the Opposition can blame Treasury officials all it likes. But I think Dr Cullen a very experienced Minister of Finance the previous Minister Maryan Street and the Cabinet knew exactly what they were doing. I think they made that decision not to include ACC’s parlous financial state in the Pre-election Economic and Fiscal Update and the responsibility should lie firmly at Labour’s feet. 
I come to some accusations that the Opposition levelled. It said that the changes in this bill are somehow against the stated intention of the original royal commission report. Members opposite would do well to familiarise themselves with that report because they quote it a lot but there are a number of changes that are entirely consistent with the Woodhouse report. The first has been mentioned; it is self-inflicted injury. The report recommended that it “should not be the subject of compensation” nor should the majority of sickness or disease. It said “the general basis for protection should be bodily injury by accident which is … unexpected” but to “the exclusion of incapacities arising from sickness or disease”. 
Another matter is the importance of using classification systems like ICD or DSM-IV—systems that have been very recently much criticised by the Opposition. All of this underscores the fact that the scope of compensation has been an issue that has challenged successive Governments since 1974 and it is not appropriate to say that remedying the nonsense that went on over the last 9 years by the previous administration is somehow in breach of the underlying principles of the scheme. 
I shall touch on comments by Labour spokesperson Mr Parker about whether changes to the scheme mean widespread cuts to entitlements and that the only way to save money in Vote ACC is by cutting those entitlements. It is absolute nonsense. The best way— 
Carol Beaumont 
: Then why are you doing it? 
MICHAEL WOODHOUSE 
: I tell that member to listen up and I will tell her. The best way to reduce expenditure is to reduce the rate of injury and to rehabilitate people in a more timely manner. It is as simple as that and frankly one of the more disappointing aspects of the changes being made to accident compensation by the previous administration was the way in which ACC was tacitly encouraged to take its eye off the ball in rehabilitation. It was a kind of “come one come all” approach. It meant that to get people back to work or to full fitness sooner than they otherwise might be is a bad thing or that they are being kicked off the scheme. It simply is not the case. 
The legislation requires ACC to work as hard as it can to ensure a return to work or independence. Not only that but we owe it to the claimants to do that even when the challenge of getting back to work after time off is pretty daunting for them. In fact that is when they need the most support. It is also when ACC should not shirk its responsibilities in that regard. Unfortunately rehabilitation rates have been declining significantly over the last few years and I do not think that is down to a change in the population base or an ageing population. It has to do with the way we approach the rehabilitation of our claimants. 
The bill extends the time for full funding of pre-1999 claims and I am sure the Opposition will not be opposing this because Mr Parker even had a member’s bill to that effect. We have a widening gap between the present value of the future cost of residual claims and the asset base to support them. Extending the time for fully funding on its own will not take pressure off levy payers in the long term so we need to ratchet up our rehabilitation for those claimants. Some who have been on income compensation for years will be a challenge to be rehabilitated but I support and encourage ACC’s efforts in that regard. 
One of the philosophical things to establish is whether accident compensation is an extension of the welfare system or an insurance scheme. There is no doubt in my mind that accident compensation is an insurance scheme. When premiums are being set according to pools of risk and when the premiums go up and down according to the claims rate and claims duration which is the key cost driver it is an insurance scheme. There is absolutely no doubt about that. 
I conclude by congratulating the Minister on his efforts to bring the public’s attention to this very important financial risk to the Crown and on involving me in some of the policy discussions on the amending legislation but mostly on his courage in doing the right thing by New Zealanders by ACC and by its stakeholders in the face of considerable hostility from the Labour Opposition and its union supporters. I congratulate the Minister and I commend the bill to the House.