Parmar Parmjeet: Accident Compensation (Financial Responsibility and Transparency) Amendment Bill — First ReadingText is incorporated into the Bound VolumeParmar Parmjeet: Accident Compensation (Financial Responsibility and Transparency) Amendment Bill — First Reading[Sitting date: 02 June 2015. Volume:706;Page:4220. Text is incorporated into the Bound Volume.]Dr PARMJEET PARMAR (National):Thank you for the opportunity to speak in the first reading of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill. The aim of this bill is to amend the Accident Compensation Act—the ACC Act—to reform the mechanism of setting levies and to ensure that residual levies are not over-collected. ACC is there to support injured people to get back into work and to get back into their routine lives as soon as possible. ACC also has a role in stopping injuries happening in the first place. ACC is accountable to all New Zealanders. Everyone contributes to ACC and everyone wants value. Until 1999 ACC used to operate on a pay-as-you-go basis which was to collect levies to cover the cost of claims coming in in that particular year but then it changed to a fully funded operating model which means that levies are collected to cover the cost of full lifetime claims coming from injuries happening in that particular year. Sometimes people have to rely on ACC for a very long time in their life. It could be 10 15 20 30 years or even more so significant reserves of funding are required to cover those claims. The money collected is invested and the interest is also used to pay for the cost of claims. This fully funded model of operating is seen as fairer for levy payers because future levy payers do not have to pay for injuries that happened in the past.This bill inserts certain principles for setting ACC levies for the work earners and motor vehicle accounts—the levied accounts. The work account is the one that covers claims for all work-related injuries. As a result of the legislative change in the Accident Compensation Act in 2010 the work account was merged with the residual claims account. The earners account is for levies paid by people who are in the paid workforce. The non-earners account is funded by the Government using money collected from general taxation. The motor vehicle account is funded by a levy that is included in petrol prices and motor vehicle licensing fees. This bill makes provision for setting levies so that levies derived from each account are able to meet the lifetime cost of claims in relation to injuries that occur in that particular year. If an account is accumulating a surplus or if an account is in deficit then in order to meet the cost of claims that surplus or deficit needs to be corrected by setting levies appropriately in subsequent years. At the same time we want to make sure that changes to levies are not drastic. We want to avoid big changes to levies.The ACC scheme is critical to us because it provides 24/7 coverage for motor vehicle work-related and non - work related injuries. Since the National Government got in in 2008 the ACC scheme has been doing much better than before but there is more that needs to be done. Also at the same time we want to make sure that the levies are as low as possible. It is important to have consistency and stability for levy payers because that helps to build public confidence in the ACC scheme. Through the Working Safer package of workplace health and safety reforms our Government is committed to reducing workplace injuries by 25 percent especially serious and fatal injuries by 2020.We also have an interim target of reducing claims by 10 percent for people staying away from work for more than a week.As I mentioned the ACC scheme has been doing much better under this National Government since 2008. That is specifically because from 2004 until 2008 there was a period of significant deterioration of the scheme especially in its financial performance and outcomes. That translated into outstanding claims liabilities. This was because there was no transparency and also levy rates did not increase to keep pace with claims expenses. This led to the situation in 2008 when the National Government got in. What we got was a big hole in the ACC account—a big hole of $4.8 billion. There are various reasons for that big hole in the ACC account but I believe that the main reason was the poor management of the previous Labour Government. [Interruption] Yes it was the poor management of the previous Labour Government. So that is why in 2008 what we inherited was this big hole in the ACC account of $4.8 billion and also a scheme that was heading in the wrong direction because there was this significant funding shortfall and rising claims costs. So this Government and ACC have been working hard for the last 6-plus years to improve the scheme’s finances and also to deliver better outcomes for people who need the ACC scheme.Our focus is to keep improving our ACC scheme so people can get into work as soon as possible and people can get back into their routine life as soon possible and to return claims rates and costs to sustainable levels. The work earners and motor vehicles accounts—the levied accounts—are now at or approaching full funding. Also this National Government has put back $1.5 billion back into New Zealanders’ pockets since 2012. This is through levy reductions as we have heard from my colleagues from this side. This Government is working hard to achieve that appropriate balance between keeping that financial performance of the scheme and also delivering better outcomes for New Zealanders. We want to do more for injured people so that they get appropriate help but at the same time we want the scheme to be transparent. We want to make sure that there is visibility for levy payers. We all have high expectations from the ACC scheme: we want the ACC scheme to provide meaningful injury prevention we want the ACC scheme to provide better and faster dispute resolution we want the ACC scheme to provide consistent service and we want to make sure that complex issues are also resolved as soon as possible. At the same time we want the ACC scheme to be financially responsible. We want the ACC scheme to provide levy reductions that are sustainable and also we want the scheme to be transparent.Continued improvement is important to maintain levy stability and avoid unpredictability. Although the scheme’s overall performance including financial performance is going really well under this National Government there could be some short-term unpredictability for example for reasons like sudden population growth. There is no overarching legislative framework that establishes the objectives to be met or the principles to guide the process of levy setting. That is why this bill is required because it will give us that sound and responsible approach to setting levies. The application of the principles in the bill will see that levies are stable and that they are reflecting underlying costs in the absence of economic shocks or large swings in ACC claims performance. Most important transparency is needed—that is for the Government and also for people who are paying levies and it will also help us calculate downstream consequences of funding decisions.This is about improving accountability of the scheme. As I said the ACC scheme is accountable to all New Zealanders so we want to make this scheme more accountable. This bill will help us achieve a more sustainable and transparent ACC scheme. This is very important for New Zealanders so I support the bill and I commend the bill to the House. Thank you.Bill read a first time.Bill referred to the Transport and Industrial Relations Committee.