Woodhouse MichaelHon MICHAEL WOODHOUSE (National): Thank you Mr Chair. I appreciate the Minister's informing the committee of the sum of $327.8 million being the envelope to give effect to this legislation. By my calculations—and indeed they are very rough back-of-the-envelope calculations—that constitutes about 16 percent of the $2.05 billion that was the original funding envelope which increased care and support workers—at that time the 55000 of them—by an average of 21 percent over the five year period between 2017 and 2022. We're now dealing with 61000 care and support workers and it just seems to me that the $328 million - odd isn't going to be enough to fund what is essentially a 4.6 percent increase for those 61000 workers. I raise this in the context of the other two questions that I had in respect of the funding which was the relationship between that amount of money and the 4.6 percent increase with the offer by Health New Zealand of 1.9 percent. The question is about that $328 million which the Minister acknowledged in his response was over and above the labour cost index adjustment that was made at the end of last year under section 8 of the Act where if inflation had gone above 1.7 percent—I think it was—or something there was a formula in the Act that provided for an increase. I'm not sure actually—in the time that I've had to look at this—whether the 4.6 percent increase calculation I did was correct in respect of what the current rates are because I used the current rates in the Act but those rates must be below what is currently being paid in which case the increase is actually less than 4.6 percent. Now the Minister in one of his interventions said Oh well the prevailing rates at the moment are between 4 percent and 5 percent. This is 4.6 percent. We're kind of in the middle." But I understand—and I'd appreciate the Minister correcting me if I'm wrong—this is going to be for a period of 18 months. So the annualised effect of that is only 3 percent which means that this is well behind what the other pay increases within the health sector are. I'm very open to the Minister and his officials challenging my math on that. But my central question is about the relationship between this offer this legislative settlement—it's not even a settlement; it's just a legislative increase—and the 1.9 percent offer that's being made right now to aged-care facilities. Does that 1.9 percent include the $328 million and are they going to be expected to pay a 4.6 percent increase in staff costs with 1.9 percent of their total budget? Now I used to run healthcare organisations. I've got a pretty good understanding of the cost base. Between 66 percent and 70 percent of the total cost of running an organisation are staff. Health New Zealand were informed by the Aged Care Association that their assessment of the increases in costs right now are running at about 9.4 percent and that's what they were seeking. Let's just assume that for two-thirds of their cost base they're going to get 4.6 percent. Then for the other third of their cost base where general inflation is running at—what is it now?—Nicola Grigg: 6.9.Hon MICHAEL WOODHOUSE: —6.9 percent—thank you Ms Grigg. Then that's another 2.1 percent on top of the costs that they're including—that's a third of the current inflation. Now that's actually gilding the lily a bit because in my experience healthcare cost inflation runs at between 50 and 100 percent—more than general Consumers Price Index inflation. By any measure the 1.9 percent ain't gonna be enough for the aged-care facilities to go anywhere but backwards pretty quickly. So it's very important for the committee to understand whether the offer of $328 million is on top of another general offer for increases in bed fees and so on that is intended to cover those other costs."