Parker David: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
Parker David: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
[Volume:654;Page:3781] 
Hon DAVID PARKER (Labour) 
: 
 This year has been a sad year for accident compensation because the accident compensation system has been under attack not from members of the public but from the Minister for ACC Nick Smith. The Minister soon after coming into office claimed that the system was fundamentally broken. He said that unless drastic changes were made to the scheme the costs would rise by $2400 per household. He claimed that the scheme was insolvent. The words he used in the general debate on 4 March were: “The reality is that ACC is effectively insolvent.” When challenged about that on  
Morning Report 
 on 1 April he thought the whole of the country was foolish because when I said: “You’ve been calling ACC insolvent. It is not.” the Hon Dr Nick Smith said: “I have not.” He obviously contradicted his express statement in the House that the scheme was insolvent. 
It is true that accident compensation costs have increased. Why have they increased? There are a number of reasons. The breadth of cover has been increased. Why was it increased? It is because there was unfairness in the previous scheme. I will give members an example. Some seasonal workers had an out-of-season accident—they were knocked over by a drunken driver. Their earnings-related compensation was calculated on the basis of the short period of their earnings prior to their injury. If they were disabled for life they would never get any earnings-related compensation relating to their seasonal earnings even though they paid accident compensation levies and their employer paid accident compensation levies in respect of their earnings. That was an unfairness that was righted by the previous Government—and so it should have been—and that did increase costs. 
There were other areas of increased costs in the scheme and there were some areas where expenses did increase. I have acknowledged previously as has the outgoing chair of the Accident Compensation Corporation board Mr Ross Wilson that changes needed to be made to physiotherapy because those cost increases were higher than was predicted. But that comes under the heading of housekeeping and it does not point to a fundamental flaw in the scheme. 
In terms of the outstanding liabilities of the scheme it is true too that they grew. It is also true that the amount of accident compensation that was pre-funded grew from 45 percent of its liabilities in 1999—when the previous Labour Government took over from National—to 64 percent when we left office. The amount of the scheme’s assets increased from $2 billion to $12 billion so to suggest that it was insolvent was a nonsense. National introduced a new definition of insolvency to accident compensation that made wrong every audit certificate the scheme has had since the day it was formed. If that was the measure of insolvency the scheme was insolvent from the day it was formed because it has never been 100 percent pre-funded although it is more pre-funded now than it ever has been in the past. The Government cannot have it both ways. 
What did the commentators say? They saw Dr Smith’s comments for what they were. The Minister’s gross exaggeration was roundly criticised by a number of commentators. An actuary pointed out that National was scaremongering that there was nothing wrong with the scheme and that much of the increase in liabilities arose from the decrease in the rate of return on the scheme’s investment portfolio which meant there needed to be a bigger portfolio in order to fund the tail of claims in years to come. That independent actuary said that there was nothing wrong with the scheme and that this was a case of scaremongering. 
Fran O’Sullivan from the  
New Zealand Herald 
 criticised Dr Smith by saying there was a fine line between using the international financial crisis to create a position to justify fundamental change and downright chicanery. Brian Fallow described Dr Smith’s behaviour as “bizarre” which is very strong language from a moderate commentator. He said that the Minister’s actions were bizarre and that he was causing unnecessary worry and stress to the many thousands of New Zealanders who were reliant upon accident compensation. Vernon Small at the  
Dominion-Post 
 said it was largely a manufactured crisis—manufactured by the Minister for his own ends. Rod Oram did the analysis. He showed that the vast majority of the increase in liability was a consequence of the decreasing rate of return on international finance markets. 
What is the underlying agenda here? It is to go back to prior mistakes. The Government wants to privatise accident compensation.