Parker David: Injury Prevention Rehabilitation and Compensation Amendment Bill — First Reading 
Parker David: Injury Prevention Rehabilitation and Compensation Amendment Bill — First Reading 
[Volume:658;Page:7431] 
Hon DAVID PARKER (Labour) 
: 
 New Zealanders should make no mistake: this year has seen already an unprecedented attack on our accident compensation system by the Government which has been exaggerating the degree of seriousness of problems in the accident compensation scheme in order to justify fundamental changes to accident compensation that are not necessary. 
New Zealand has long been proud of our world-leading accident compensation and rehabilitation system. Indeed many commentators in this country and many politicians in this House especially on this side of the House believe most strongly that we have the best accident compensation and rehabilitation scheme in the world—in the world bar none. It is second to none. It achieves that and is affordable in New Zealand because of its core principles which are that we should have no-fault rehabilitation and compensation for 24 hours a day 365 days a year whether people’s accidents are at work on the sports field in a motor car or in the home when they fall over. Wherever their accidents occur they should have no-fault accident compensation and rehabilitation. 
We have heard from the Government again today saying effectively that the accident compensation system is fundamentally broken therefore justifying the fundamental changes the Government has on the way. They are changes not just to the scope of cover but also to whoever will provide the social insurance under the accident compensation scheme which currently can be only the State or a large employer that self-insures. Contrary to what Dr Smith said in the House today not one private insurer in New Zealand is providing insurance cover at the moment because currently it is illegal under the accident compensation legislation. 
We heard Dr Smith say a $4.8 billion loss has been made in the accident compensation scheme this year. He said it again in the speech that he just gave. I say to Dr Smith that that is not correct. The Accident Compensation Corporation (ACC) takes great care to describe what has happened this year. There has been a $4.8 billion increase in the liabilities of accident compensation but there has not been a $4.8 billion operating loss by the corporation. Indeed page 72 of ACC’s annual report shows there was a $1 billion excess of levy income over claims expenditure this year. In other words the corporation took in $1 billion dollars more than it spent. But the National Government says that the scheme has made a $4.8 billion loss. Well it is true that the scheme’s liabilities have increased from where they were last year but that is not the same thing as an operating loss. This year the scheme took in $1 billion more—as shown on page 72 of the report—than it spent. Even if we look at the whole-of-life cost of the claims that were made last year the corporation still collected more revenue than was the cost. 
We can take the case of the person who was in a terrible car accident last year and became a tetraplegic. By the time we fully fund that claim to the end of that person’s life—because he or she will be on the system until death—and even if we fully cost all of those whole-of life-claims for every claim laid last year the scheme still collected more in levy income last year than the whole-of-life claims of every claim made last year. 
What have increased are the scheme’s liabilities. Dr Smith continues to misrepresent the increase in liabilities as being a loss made by the scheme in the one year which somehow points to the scheme being fundamentally flawed when it is not. What have increased are the corporation’s liabilities. What is the cause of that increase in the liabilities? Well one and a half billion dollars of it relates to economic factors—this is from page 34 of the annual report for those who want to have a look at the detail of how the liabilities have increased from $9.3 billion to $23.7 billion since 2004. Of that $1.4 billion relates to economic factors. That is the decreasing rate of return that ACC now expects the scheme to earn on its investments as a consequence of the recession and a long-term decrease in the expected rate of return on investments around the world a factor that is affecting not only ACC but every other insurance company in the world. 
Even more a liability of $2.6 billion arises from a change in accounting standards. Liabilities used to have to be reported based on the probability that investment funds would be able to cover those future liabilities. The probability to be assured was 50 percent but those setting the accounting standards said “No we’re going to change that. You’ve got to have enough money in the bank so that we are 75 percent sure that you will have enough money.” That change in accounting standards has caused $2.6 billion of change in liabilities. 
There have been some other undeniable changes in cost drivers. It is true that we now pay nurses and doctors more and that there has been inflation in the health sector that has run ahead of general inflation for some years. Those were changes that were made by the previous Government because New Zealand was losing too many doctors and nurses to Australia and overseas. At the time National members supported those changes because they knew that that was a real problem that we faced. So it is true that health inflation has increased at higher than the general rate of inflation but I say that that trend will not continue to the same extent in the future. 
It is also true that people survive accidents that they used to die from. Medical advances mean that many people who used to die in serious motor vehicle accidents now live but that they have long-term care costs and needs that are higher. That is a cost driver that is unavoidable. 
It is also true that our population is ageing and as people age more of them are falling over in their homes breaking their hip needing care at home and needing orthopaedic interventions. Again that is a real cost increase. But even when we take into account those cost increases and they are unavoidable cost increases the cost of the New Zealand accident compensation scheme is cheaper than the Australian equivalent. The National Government is forever saying that New Zealand needs to model itself on Australia because it is doing better than us but in the area of accident compensation New Zealand is already doing better than Australia. Our scheme has more scope. A New Zealander’s decision to play sport is not based on whether he or she can afford to pay the fees to cover insurance premiums. We do not have that problem. We have a broad scope of cover but lower costs than the Australian scheme. 
Where is the case for fundamental changes to the scope of the accident compensation scheme? John Key said a couple of weeks ago that there is a need for an honest conversation with New Zealanders about the trade-off between levies and the scope of cover. That is a very proper conversation to have in New Zealand. But we should have the conversation before we cut the scope of cover not after we have done it. That is why the Labour Opposition said that it would have backed parts of this bill. It would have backed the extension of the date for full funding. That is not the total panacea to all issues of accident compensation; I acknowledge that. But it is a big part of it. 
One of the things that the Government has been scaremongering about is an increase in car registration fees. It has said that unless it passes this bill registration fees will go up by $130 a year. But the actual increase the Government promoted after that scaremongering is $30 a year. It is less than a quarter. The Government was scaring people with levy increases four times more than were necessary. What is responsible for the vast majority of the difference between a $30 a year increase and a $130 a year increase? It is the extension of the date for full funding. We said to the Government: “We agree with you that full funding all of those historic claims by 2014 is too tough. It drives levies too high in too short a period of time. We will back that date extension.” Then let us have the honest conversation with New Zealanders about the scope of cover. Let us see whether this is truly affordable. 
I think we will find that most New Zealanders will agree that the date extension will cure much of the problem when they realise that most of these cost increases for the likes of the motor vehicle levy can be avoided by pushing out the date for full funding so that we catch up on those costs by 2019 rather than 2014. 
Hon Dr Nick Smith 
: Not true. 
Hon DAVID PARKER 
: Dr Nick Smith shouts out that that is not true; he cannot help himself. It is true. We know from the briefing to incoming Minister that more than $80 is knocked off the increase in registration fees by the extension to the date of full funding. The Minister has still refused to answer in this House the exact breakdown but we know that the majority of savings comes from that. 
Privatisation is next. We will see socialisation of losses and privatisation of profits in accident compensation as it is being fundamentally undermined.