Parker David: Urgent Debates — Accident Compensation Corporation—Removal of Chair of Board 
Parker David: Urgent Debates — Accident Compensation Corporation—Removal of Chair of Board 
[Volume:652;Page:1766] 
Hon DAVID PARKER (Labour) 
: 
 It is interesting to reflect on why the Government is already on the defensive on this issue. Why are we having an urgent debate today about its handling of the issue? The underlying reason is that Dr Smith and his colleagues tried to spin it. They tried to spin it and they have been caught out. They tried to present a picture to New Zealand that was inaccurate. That picture was that the accident compensation system was fundamentally flawed and in a parlous financial position. That picture was presented to justify the Government’s ambition to cut dramatically the scope of the scheme and reduce New Zealanders’ entitlements the entitlements they need when they have an accident and are injured or when they suffer some injury in hospital. 
Let us look at how the Government was caught out. Nick Smith said to this House and following his discussions with the  
National Business Review 
 he was reported as saying the Accident Compensation Corporation (ACC) was “technically insolvent”. Those were the words he used: “technically insolvent”. [ 
Interruption 
] Sir Roger Douglas says “Of course it is.” The definition of solvency is the ability to pay one’s debts as they fall due I say to Sir Roger Douglas. Nick Smith ought to know that and Sir Roger ought to know that. That is the traditional definition of solvency. It is absolutely clear that ACC has grown more solvent year by year not less. 
Sandra Goudie 
: What would that member know when he ran it into the ground? 
Hon DAVID PARKER 
: What would I know? In 1999 64 percent of ACC’s liabilities were unfunded. It had $2.5 billion worth of assets. Where are we today? Today after ACC has booked significant decreases in its asset values as a consequence of decreases in investment prices around the world even now it has more than $12 billion worth of assets looking at the latest figures from December 2008. There is over $12 billion worth of assets compared with $2.5 billion in 1999. 
Hon Dr Nick Smith 
: Get the latest info. You’re out of date. 
Hon DAVID PARKER 
: Those figures are as at 31 December 2008. Admittedly it will have gone down a little bit since then because of the financial crisis but that was after already booking a decrease in value of investments of $700 million from June to December. As a percentage of the total liability what was unfunded? We know as I have said that it was unfunded by 64 percent back in 1999. That figure is now down to 45 percent. It is now 55 percent funded. 
What other exaggerations did we have? We debunked the idea that ACC is technically insolvent. If we look just at current year performance we see that it took in $4 billion worth of income and spent $3 billion. ACC went forward by a billion dollars this year so it certainly is not insolvent on this year’s measure of performance. 
Other exaggerations we had from Nick Smith were that he said that unless there were significant changes to the scope of the scheme—that is his code throughout: “significant changes”—we will have households paying $2400 per annum extra by 2013-14. That is per family per household per year. That is what he said. He pretends that was an outcome that was going to happen. It was never going to happen. We saw it today in respect of the announcements about the registration fee levies. He was pretending they were going to go up by hundreds of dollars; they went up by $31. We already know that the substantial part of this problem can be cured by pushing out the date for full funding from 2014 to 2019. We already know that the substantial part of the problem for ACC currently is the decrease in the value of its investments not the underlying change to the scope of the scheme. 
We had Dr Nick Smith saying on  
Checkpoint 
 last week that the first thing is that the investment losses are only a very small part of ACC’s difficulties. I will repeat that. I am quoting it word for word from  
Checkpoint 
: “Well the first thing is the investment losses are only a very small part of ACC’s difficulties.” That is rubbish. Let us look at the PricewaterhouseCoopers report. It refers to the $2.58 billion decrease in ACC’s financial position in the period as at June 2009. About that change in position of $2.6 billion Dr Smith says that “the first thing is that the investment losses are only a very small part of ACC’s difficulties”. What does the report state? It states that $1.8 billion of that $2.6 billion is due to changes in economic assumptions. I will read out what PricewaterhouseCoopers said: “The liability … has increased by $1.830 billion due to the impact of revised economic assumptions most notably revised discount rate assumptions. The global financial crisis has seen a large fall in forecast yields across most economies with New Zealand having experienced an average 1.3% drop in yields over the 6 months to 31 December 2008. Due to the long term nature of ACC’s liabilities even a small reduction in yields leads to a large increase in the liability.” 
The very report that Dr Smith was relying upon was spun by him mercilessly to state that the major part of the problem related to some generosity of the scheme when in actual fact the big problem has been the decrease in investment returns on ACC’s ledger compounded by the fact that under current legislation the scheme has to be fully funded by 2014. This means that effectively the bucket of money we need to pay future claims has to be bigger because investment rates of return have dropped. We have only until 2014 to do it under the current legislation. Therefore it would see a big lift in levies if we did not change that date. But we have always known that we can largely fix that problem by changing the full funding date to 2019. It should have been done by Christmas and employer levies would be lower now than Dr Smith has already put them up to. I sought leave to table a member’s bill that would have very simply given that effect but Dr Smith and National members declined that leave. He now says he will do something. 
Hon Dr Nick Smith 
: You had 9 years mate. 
Hon DAVID PARKER 
: Dr Smith says we had 9 years. The latest bit of jargon we heard was that the National Government was going to increase motor vehicle levies to $585 by 2013-14. He was saying that by 2009-10 they should be going up to $376. He knew even when he said that last week that that was not the case. How do I know that? Because today less than 1 week later he did not put up the levies for motor vehicles by $120; he put them up by $32. He was spinning it and trying to scare people into thinking that the problems at ACC are fundamental. 
If we look at the changes the National Government proposes we see that the ones that people should be most scared of are changes to the scope of the scheme. Dr Smith—again I am quoting him—has promised “significant changes”. He means the word significant. We know that the last time the National Government was in power it left the accident compensation scheme so miserable and with so many injustices that the very basis of the social contract of giving up the right to sue in order for fair compensation to be given was put at risk. Since then the Labour Government has reinstituted various things that had been cut by the former National Government. 
What did we do? One of the gross injustices was that if someone was a seasonal worker and had an out-of-season accident—let us say he or she was hit by a drunken driver through no fault of his or her own—under the rules the former National Government left that person would receive earnings-related compensation based on his or her earnings for a short period prior to his or her being hit by the drunken driver which could exclude his or her seasonal earnings. That person might be unable to work but have no earnings-related compensation to reflect his or her seasonal earnings. 
What other examples were there? They are legion. The criteria necessary to prove medical misadventure were so narrow that some of those people who suffered injury in hospital when very sadly they suffered burn injuries when antiseptics caught fire did not get compensation. All of these things are at risk from National which wants to cut the scheme despite it already being far cheaper for employers than the Australian schemes.