Accident Compensation (Financial Responsibility and Transparency) Amendment Bill — In CommitteeText is incorporated into the Bound VolumeAccident Compensation (Financial Responsibility and Transparency) Amendment Bill — In Committee[Sitting date: 22 September 2015. Volume:709;Page:6839. Text is incorporated into the Bound Volume.]Accident Compensation (Financial Responsibility and Transparency) Amendment BillIn CommitteePart 1 Amendments relating to principles of financial responsibility and funding policy statementSUE MORONEY (Labour): It is a pleasure to rise and speak to Part 1 of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill. The Labour Party will be exploring Part 1 in fine detail because this is the part of the bill that we have the most reservations about actually. It is the part that is supposed to give the financial responsibility and transparency—the main title of this bill—its oomph and its content but we have become quite concerned about what happened to this bill in Part 1 in particular as it went to the Transport and Industrial Relations Committee.Again just like what the Government did with the workplace health and safety legislation the bill was in one form when it went into select committee and when it came out there have been some amendments made that have caused us concern. The amendments that have come out the other end of the select committee process have caused us so much concern that I proposed an amendment during the course of this debate Supplementary Order Paper 123 to make the financial responsibilities and transparency of this amendment bill clearwhich I hope will be supported by all parties.Part 1 of the bill introduces a new process for ACC levy setting. In setting that new pathway I guess one of the most fundamentally new parts is that whereas currently ACC starts this process and does the consultation with stakeholder parties and has some guiding principles that guide it in terms of the recommendations it makes to the Government what this bill brings in is a political overview of that before ACC even gets to consider it. So what the bill does in Part 1 is that it says that the Minister actually gets to set up the parameters. The Minister will set out a funding statement that will guide ACC. That sounds like quite a good idea. However when you take into account that the history of this particular Government is that it hasin the past by its own admission been overcharging ACC levies—to the tune of about $350 million a year—in order to as the previous Minister for ACC Judith Collins put it get to surplus then this is giving a lot of political discretion to the Government to give direction to ACC.There are some good amendments that the select committee made to try to make sure that this would not become a political lever that can be used even more overtly than the current Government did to prop up its failed attempt to get to surplus. The select committee made some recommendations that before sending that funding policy out the Minister has to go to the stakeholders and consult over that funding policy to start off with. I think that will give those of us who are concerned about the Government’s agenda some comfort that there will be wider scrutiny of this and I think that that is a good amendment. That is not the select committee amendment that we are concerned about.However the funding principles that ACC has stuck to relentlessly throughout the yearswhen it sets ACC levies—the funding principle of ensuring that there is levy stability the guiding principle that it has used since 1999 of ensuring that the purpose of setting ACC levies is to fully fund the lifetime costs of injuries and accidents and the other principle that it has used to ensure that there is sustainability in the ACC scheme going forward—all of those things are now transferred into this legislation. The legislation went into the select committee in a shape where it said that those funding principles “must” be adhered to—that they “must” be adhered to—by the Minister when considering the levy setting. However when it came out of the select committee there had been some small but important changes. No longer “must” the Minister consider allof those three important principles; it had been watered down to a “should consider”.That alone would not be quite so concerning were it not for the Government’s contention that it has carte blanche to do whatever it wants in ACC levy setting because there is part of the Accident Compensation Act that says that the Minister can consider or take into account the public’s interest in setting ACC levies. That is the bit of the Accident Compensation Act that the current Government has used to excuse itself for setting ACC levies artificially high in order to do something that is nothing to do with ACC—in order to try to make its books look as if they are getting into surplus by its own admission. That is what we resile against.Not only is it the Labour Party that resiles against this but also it is indeed Business New Zealand the New Zealand Council of Trade Unions and a number of other submitters who said—and Business New Zealand was very clear about this—that it should not be allowable for the Government to set ACC levies with a view to propping up a fiscal surplus. The Labour Party agrees with that view and that is the reason why I have brought forward a Supplementary Order Paper that deals with their concerns.We had a discussion about this in the select committee and it was the view of the National Government members that the use of the Minister’s regard to the public interest with regard to setting ACC levies is to do with the public interest about ACC only. It is not broader than that; it is about ACC. So I am calling on those Government MPs who gave us that assurance in the select committee to vote for my amendment because in fact that is exactly what my amendment clarifies. It clarifies that when the Accident Compensation Act talks about the public interest it is talking about the public interest with regard to reducing accidents and injuries in the workplace on the sports field in the home or wherever they may occur.This amendment is important because it gives this Parliament some comfort that when the Government has moved to water down those three guiding principles for how ACC levies are to be set that that is not a signal that it intends to keep on using ACC levies to prop up its failed attempt to get to surplus because that is not what is intended by this Act.I take the members at their word—that it is not what the National Government members on the select committee believe it to mean—and I am now calling them to account for that by seeking their commitment on voting for my amendment which does in fact exactly that. It would make it absolutely clear that the public interest when it comes to talking about setting ACC levies is about reducing injuries and accidents and is not about things so far removed from the responsibility of ACC as ensuring that the Government can try to get its surplus.This is the surplus by the way that it has failed to get to so far. We will wait and see whether the Government’s promised surplus is ever going to happen but it has failed to do that despite the fact that it has been using inflated ACC levies to prop that up. Those are not—well those are my words but it was not me who made that assessment; it was Judith Collins the former Minister for ACC. She said very clearly when setting the levies in 2013 that one of the things—one of the factors—that she took into account and that has continued through to the current Minister is getting to surplus and the broader fiscal situation that the Government finds itself in through its own sloppy fiscal management.So I want to urge all of the parties to consider voting for Supplementary Order Paper 123. I hope that the Government MPs will find themselves in a position where they can because if they cannot then I think that is a very clear signal to the rest of New Zealand that this Government intends in our view to misuse ACC levies—to set them artificially high to ensure that they can actually prop up things like its failure to get to surplus. That is not what the New Zealand public requires from the ACC system and that is not what the public would see as in its interests when it comes to funding ACC levies. What they want them to be used for is to reduce injuries and accidents at work and that is what my Supplementary Order Paper makes absolutely clear. Today the Minister made a statement which we will come to when we debate Part 2.Hon NIKKI KAYE (Minister for ACC): I am very very pleased to speak on this Committee stage of the bill particularly focusing on Part 1—the principles of financial responsibility—but also dealing with the funding policy statement and I want to talk about that as well in the context of announcements that I made today.But first I want to correct a few things that the Opposition has already said. The first thing I want to say is that when we are talking about the principles of financial responsibility it is the members on this side of the Chamber who can talk about the principles of financial responsibility because we have taken a scheme that was in a $4.8 billion hole from $10 million of assets to $31 billion of assets. We have got all three accounts in solvency and members on this side of the Chamber need to be very proud of that.The second point that I want to make when we are looking at the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill and the changes that were made in the bill—Sue Moroney has just said that maybe some of these changes around the principles could mean some kind of conspiracy theory. If you look at the law and what we have passed what we have acknowledged is that if you look at those principles of solvency and stability there will be unusual situations whether it is the global financial crisis or in fact the Canterbury earthquakes. The Canterbury earthquakes were a clear example where we had several hundred million dollars of claims made. They were adverse events and it is just acknowledging that although we want stability of levies there may be situations whereby it is not possible because we have got to deal with those adverse events. So the second point I want to make is that there is no conspiracy theory; these are logical principles of financial responsibility solvency and stability for New Zealand businesses.The next point I want to make is actually about the funding policy. The big thing about this bill which is highlighted in Part 1 is that we are in this luxurious positon where we have got the books in order the scheme has matured and we are able to balance a funding policy that enables us to deal with the inherent volatility but ensures that we are not over-collecting. I am very proud to say that—and today if you read my press release you would have seen it—the Government will be consulting as part of the ACC levy consultations on a funding policy of 100 to 110 percent over a 10-year period. What that says to New Zealand is actually that we will ensure that we have got stability in levies and we will also ensure that we can adequately deal with this volatility without over-collecting. We have done it so no more of the Opposition members standing up and giving speeches about how somehow we are over-collecting. It is not true you cannot prove it you do not have any of the numbers and you are going to have to stop running that argument.The next point that I want to make is actually around this whole point of ensuring that we do have good principles of financial responsibility in this legislation and transparency of that. I do want to acknowledge the Transport and Industrial Relations Committee and their work on this particular part of the bill. Again we heard the Opposition member say: “Oh well maybe what this means is that the Government will go over there in a little corner by itself and not have transparency around what is actually happening in terms of the accounts.” Again what I would say to the member—and what I have tried to explain to her before—is that you cannot look at this bill in isolation in terms of particular clauses.What we are dealing with now is a framework that will enable not only a funding policy but publication of documents around how particular aspects affect the accounts whether that is entitlement provisions in the future or whether that is where you set the funding policy. That will be made public but I and members in this committee have gone even further and we have added another clause just to make sure there are no conspiracy theories here but actually there will be targeted consultation and I have confirmed in my press release today that there will be consultation as part of the ACC levy consultation next week on the funding policy.So again the Opposition says that we are over-collecting. That has been proven wrong. We have got a clear funding policy that shows that we are not. The second thing that is out there is that we are not going to consult on the funding policy. Well I have said that we are. We have got another clause in this bill and we will be doing it next week. Then finally there are so many businesses in New Zealand that have had to deal with what I think is volatility and the lack of stability. They are small businesses some of them and they do not have the ability to wear those costs. We are changing that with this framework. I think we are going to have much clearer transparent stable levy-setting.I am going to talk about the residual levy in a later aspect of the bill and I am sure that all members in this Chamber will be supporting the Government’s announcement today because they know better than anyone that this is one of the single best things that we can do to send the right signals around having the fairest possible levies.IAIN LEES-GALLOWAY (Labour—Palmerston North): I would like to—since this is the Committee stage—have a close look at Part 1 of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill starting at clause 4. Actually this bill is before Parliament partly because we are coming to the end of the transition phase from the old pay-as-you-go system to the full funding system. I have heard a lot of politics from the Minister for ACC in her previous contribution but actually if we get down to it the reason we have this legislation is that we now have to address some of the matters that arise because we had a transition period where technically if you want to say it for close to 15 years—actually more than 15 years—ACC has been technically insolvent. But we are now coming to the end of that transition period where full funding is now just going to be the norm from here on in.So what clause 4 actually does is repeal the definition of “fully funded” in the interpretation section of the Accident Compensation Act. Actually a lot of the words that were in the interpretation section are now in new section 166A(1) inserted by clause 5: “The cost of all claims under the levied Accounts are to be fully funded by meeting the outstanding claims liability in respect of the claims by offsetting an adequate level of assets to fund the cost of those claims.” Rather than being a new concept or something that we have been aiming towards which we have been for 15 or 16 years this is now going to be the norm. Putting aside all the politics that I heard in the Minister’s contribution that is actually one of the reasons why we need this legislation and I acknowledge that.One of the other reasons we need this legislation is that for the last few years we have had an issue with the overcharging of levies. I heard the Minister say I think—and I am pleased that the Minister said it—that the Government is aiming for each account to be funded between 100 and 110 percent. That sounds good. Actually if anything I might have been prepared to be a little bit more flexible than that—maybe up to 120 percent. If we are going to make sure we have got stability over time actually 100 to 110 percent is a little tight and perhaps the consultation will come back and say that maybe we need room up to 120 percent.So I am comfortable with that but some of the accounts are funded over 140 percent. So the Minister says that the idea that—[Interruption] It is not wrong Minister. It is in the ACC’s annual report. So go and have a look at the annual report. If you have not read it Minister go and read the annual report and the Minister will find that some of the accounts are funded 140 percent. If the Minister needs evidence that the charges have been too high over the last few years there it is. The Minister herself says that the range should be 100 to 110 percent. I am prepared to be a little bit more flexible than that and say that maybe we should go to 120 percent but what it—[Interruption] The Minister is now advising members opposite so that the select committee chair has a response to this—that is interesting. Actually the evidence is there that there has been overcharging.We agree that we need under new section 166B(2)(a) in clause 5 a target level or band for funding of each account. Absolutely we do because that has been far too loose over the last few years. The upshot of that being too loose is that it has been too easy for the Government to set the levies much much higher than what they needed to be. That is where Sue Moroney’s proposed amendment on Supplementary Order Paper 123 comes in. What Sue Moroney is trying to achieve here we think is what the original intention of the legislation was. It is simply about making it absolutely clear that when considering the public good when setting the levies the public good means the public interest with regard to reducing injury and accidents.For the last couple of years anyway we have heard the argument made—Judith Collins made this argument in a Cabinet paper that is publicly available—that the public good includes getting the Government’s books into surplus. That is exactly the argument that has been made up until now. Although we appreciate that the mechanism under new section 166B(2)(a) will allow more transparency and it will require the Government and the corporation to focus on setting levies that are appropriate for the band that is set we think that if you put that hand in hand with the definition of “public good” that Sue Moroney sets out on her Supplementary Order Paper 123 it makes it absolutely clear. People and businesses can have absolute faith that the legislation that the Government and the corporation is working under is designed to ensure that nobody is paying importantly too much in their levies or for that matter that we are setting levies too low.We agree. We have to have a long-term approach to this. There is nothing about Sue Moroney’s Supplementary Order Paper that detracts from having a longer view or a mid-term view about what the financial performance of ACC might be. Yes absolutely it can be volatile. In fact the volatility and the fact that the global financial crisis affected ACC’s investments just as much as it affected everybody else’s investments helped create that supposed gap in the funding that the National Government played up so much. Yes there is volatility although the ACC is one of the best-performing investment operations in the country. It proves that the public sector can actually be very good financial managers—you know alongside the Superannuation Fund two of the best-performing funds in the country. But we agree with the Government on that.What we are saying is just make it a little bit stronger. Make it a little bit stronger so that we cannot possibly get into the situation—so that the Government cannot even be accused. If the Government thinks we are wrong remove the opportunity for anyone to accuse it of using the ACC to get the Government books back into surplus by including the definition of “public good” and the definition of “public interest” that would be added under a new clause 6D amending section 330 under Sue Moroney’s Supplementary Order Paper 123. So what we are actually trying to do is work with the Government here to make sure this legislation not only does what it is supposed to do but it is also seen to be doing what it is supposed to do and gives businesses and other levy payers confidence in the accident compensation system.What people expect is that they will pay a fair levy and in return they will get fair compensation and fair treatment. At the moment people feel like they are paying an unfair levy that they are paying far too much that they are being denied compensation and that they are being denied treatment as well. This is about ensuring that people have confidence and faith in ACC. I would have thought that would be something that both sides of the House would want to support.So I absolutely commend Sue Moroney’s Supplementary Order Paper to the Committee and I encourage members to support it. If members have any concerns about it I encourage them to raise them with us so that we can have that conversation through this Committee stage and actually alleviate any fears that Government members might have. We just want to make sure this bill does what it is supposed to do and that is give people confidence in the accident compensation scheme.POTO WILLIAMS (Labour—Christchurch East): I too want to go over some history and some old ground just to remind the Minister for ACC that yes we are transitioning from one accounting model one reporting model to another model. Clause 4 really talks about moving to the new fully funded operation. I also want to remind the Minister that we are talking about a system that has been more than fully funded. We are really well aware that many of the ACC accounts have been oversubscribed. We too are looking to ensure that the bill does live up to its transparency title and will provide some assurance and some confidence to the public of New Zealand that ACC will be providing what they need to plus some buffer into the ACC accounts and will not be supporting what is clearly not a transparent action of supporting this Government to get into surplus.I want to turn to three important parts in Part 1: the principles of financial responsibility the funding policy statement and the consultation process and any amendments to the funding policy statement. The principles of course—new section 166A(1) in clause 5 states: “The cost of all claims under the levied Accounts are to be fully funded by meeting the outstanding claims liability in respect of the claims by offsetting an adequate level of assets to fund the cost of those claims.” That is very sensible ensuring that there are sufficient funds to pay for ACC costs as they occur to those people who may have accidents and need to have their medical costs and ongoing costs covered. Members—in particular electorate members—have constituents who come and see them on a regular basis to talk about ACC claims and the like. Often I wonder whether sometimes we do not take full cognisance of future ACC liabilities in that our populations do get older and sometimes their ACC concerns their health concerns and their accident concerns actually end up costing more than we have potentially set aside.New section 166A(2) in clause 5 states: “When making recommendations in respect of regulations made under section 329 setting levies the Minister must have regard to the following principles:”. That phrase “must have regard” of course is an important one because originally I understand the bill said “must be set in accordance with the following principles:”. We are talking about two different levels of requirement. We are concerned about the watering down of this particular part of the bill. The words “must have regard” of course do take those things into account but they do not have the same level of weight as “must be set in accordance with the following principles:”. So we are concerned about that.New section 166B talks about the funding policy statement. It is clear that the funding policy statement must be set based on the principles of financial responsibility. But the funding policy statement must also specify “a target level or band for the funding of each Account;”. In that process we are looking at the consultation process that the Minister must undergo to ensure that the Minister has sufficient information to be able to be comfortable with the target levels the band for each funding account. As such the Minister is able to consult persons and organisations. But the Minister must also have the ability to determine the amount within the band for each funding account in terms of ensuring that there are no huge changes in levies that could be set.One of the issues that many businesses have talked to us about is that there is a potential for levies to vary hugely over time. It makes it very difficult for businesses to set their budgets and be able to determine their costs particularly their costs of employment out for any significant period of time. So we would want to support ensuring that there are very limited variances in those levies and the ability to do that would mean that the Minister may take advice from ACC and may need to take regard of those ongoing concerns.Also within the funding policy statement we are very cognisant of the fact that we would not want there to be an oversubscription to those particular accounts. My colleague Iain Lees-Galloway did talk about potentially some accounts being oversubscribed to about 140 percent which clearly demonstrates that those basic principles of financial responsibility have not necessarily been applied and the consultation process has not been applied adequately. So we are really confident that used correctly the principles in the consultation and the funding policy will actually take care of ensuring that we do not oversubscribe by more than 120 percent.Just finally I do want to talk about what is a really important aspect of this which is determining what is “public good” and in the “public interest”. With public interest Supplementary Order Paper 123 which has been put up by Ms Moroney—we want to ensure that public interest takes into full regard the purpose of reducing accidents and injuries and in particular having regard for the interests of taxpayers levy payers claimants and potential claimants. It seems inordinately sensible to have that feature as part of this bill and I am hopeful that we can get some support for this Supplementary Order Paper to ensure that that happens. It states: “ ‘Public good’ means the public interest with regard to reducing injury and accidents.” and at the end of the day that is what accident compensation should be about. It should be about the prevention of accidents. It should not be about our wanting to build up funds—it is more about prevention. It should be about prevention rather than about setting aside money for accidents when really it is absolutely far better in the country’s interest to reduce that cost to us. Thank you.CLAYTON MITCHELL (NZ First): I rise on behalf of New Zealand First to take a call and—just to start things off—to really give assurances to those people back home that New Zealand First has got some good news today which is that we will not be supporting this bill the way it sits in the Committee. Some more good news: we do actually support the Supplementary Order Paper by Sue Moroney and I would like to talk to that in a few minutes. And we have some bad news for the Government which I think has missed quite a big opportunity here in this bill particularly—the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill.The first thing that jumps to mind when I read that out is the absurdity of having a bill that actually tries to encapsulate financial responsibility and transparency as if they were some kinds of new things that the Government should be doing. In actual fact it should have been doing this all along—having an open and transparent Government and making sure it is doing the right thing with New Zealand money and putting it in the right places as opposed to trying to balance the books and to get things straight which of course it has miserably failed to do over the last 7 years. I am sure it is going to continue to fail in that vein as well. There is $350 million - odd a year that has been over collected by ACC payers and I myself as a business owner and operator have been one of those business owners who have been charged. Nowhere in this bill—not in the first second or any of the parts in this bill—is there an apology by the Government to acknowledge that this has actually taken place or redress to actually compensate those businesses and those people who have paid excessive amounts of money and to give that money back to those businesses. I am sure that there would be a lot of business out there right now that would be a lot better off if this bill actually addressed those particular points that we raise—and we do have some serious concerns.I move on to Part 1 and clause 5 which inserts new section 166A “Principles of financial responsibility in relation to Accounts”. I have to say that the word “must”—albeit a very simple word; it is one syllable and four letters long—is a very powerful word. It does jump out at me from the page quite strongly and I will read out a couple of points from new section 166A(2). It says here: “When making recommendations in respect of regulations made under section 329 setting levies the Minister must have regard to the following principles:”. It goes down to new section 166B “Funding policy statement” where subsection (1) says: “Within 12 months after the commencement of this section the Minister must issue a funding policy statement.”—so far so good. It goes down to new section 166B(3) which says: “The funding policy statement must be consistent with and explain how it is consistent with the financial responsibility principles in section 166A.”—another “must”. Then it goes down to new section 166C “Consultation publication and amendment of funding policy statement” where subsection (2) says: “The Minister must consult such persons or organisations as the Minister considers appropriate before issuing the funding policy statement.” So those are all positive things in this part of the bill.However the bill has had some amendments and changes made in the Transport and Industrial Relations Committee that have created some grave concerns for the public and for New Zealand First and we would like to bring those to your attention now. In new section 166A(2)(b) it has got here that “if an Account has a deficit of funds to meet the costs described in subsection (1) or has accumulated surplus funds that deficit or surplus should”—it has changed the word from “must”—“be corrected by the setting of levies at an appropriate rate for a subsequent year …”. The word “should” is a fairly watered down statement after all the “musts” that the Ministers have been doing because that is where the rubber meets the road where the real changes can be made. Having a “should” as opposed to a “must” changes this piece of legislation considerably. We go down to new section 166A(2)(c) which says: “large changes in levies should”—changed from “must” to “should”—“be avoided.” This “should” is another watering-down of some legislation where we expect as New Zealand taxpayers and ACC levy payers to have openness and transparency and for the funding principles to be far more clearly outlined than they have been in the past which this current bill does not adequately do.We go through the whole proposed levy-setting framework and it goes down through some fairly strong steps as we are going through the procedure to determine what those funding costs are going to be. It gets to that final step in the levy-setting framework and it goes to Cabinet which may follow ACC’s recommendations. Again this is another watering-down piece of legislation that does not really give the people back home the support that they need to know that we are not going to go down the alley that they have once gone down with the overcharging of ACC levies in the past. The second part to that is that Cabinet may choose to set alternative rates having regard to broader public interest—Cabinet may choose. There are some serious issues in those very minor changes in this piece of legislation. New Zealand First understands those minor—but major—differences and the implications that they have and we cannot support this bill.We do however support the attempt by Labour to try to straighten up the ship if you like with Supplementary Order Paper 123 particularly around clauses 4 and 5 in this part and this is around the meaning of “public good”. It is simply rectifying that by stating: “Public good means the public interest with regard to reducing injury and accidents.” I think that is a very simple but a clear directional change to make sure that that is actually what the bill intends. We support the amendment to insert subsection (d) after new section 166A(2)(c) set out in clause 5 which says: “the state of the Government’s fiscal position is not to be a consideration when setting ACC levies:”. We do not want to see what has been happening in the past—this Government being able to use ACC levies to balance its books—so we do support with pride Sue Moroney’s Supplementary Order Paper with those amendments.JONATHAN YOUNG (National—New Plymouth): After hearing a number of contributions I thought I must stand and talk about why words such as “should” are there.Iain Lees-Galloway: Is it in the public interest?JONATHAN YOUNG: Indeed it is in the public interest I am sure. As I come to just make some comments on the principles of financial responsibility—particularly the third principle which provides that large changes in levies are to be avoided. This is intended as a safeguard to produce some certainty for levy payers.It is no surprise—and I hope the members on the other side know this—that when a bill goes to a select committee it often comes out changed. You understand that. It is not dire conspiracy; it is actually listening to stakeholders and people in our community.We consider their view we look at what the legislation proposes and we ask ourselves whether what went into the committee is actually fit for purpose after hearing submissions.This is what the Insurance Council of New Zealand said: “Clause 166A(c) states that ‘large changes to the levy must be avoided’. While it is desirable to avoid volatility of levies there will inevitably be occasions during the life of the scheme when extreme events occur.”—and of course this sectorthe insurance sector understands this better than anybody—“In the general insurance sector the period 2010-2012 saw some of the most expensive insured claims globally as a result of the massive flooding in South East Asia the Canterbury earthquake series the Tohuku tsunami and Hurricane Sandy to name a few catastrophes. The result was a sharp rise in reinsurance costs globally which saw a significant increase in premiums to consumers in New Zealand. It is quite conceivable that another global financial crisis would have a major impact on the ACC’s investments. ACC should be able to respond to such extreme circumstances.”That is one of the reasons why “must” was changed to “should” at the recommendation of a number of substantial submitters through the select committee process—one or two but substantial submitters. The Insurance Council of New Zealand you would have to say is a substantial submitter. It was not the only one. So what it does is it enables a degree of flexibility.We also know that retaining section 300 is consistent with this approach and it means that in making decisions on levies the Minister will also have regard to the public interest—in particular the interests of taxpayers levy payers claimants and potential claimants in the future. We want an accident compensation scheme that is here for decades and decades and decades to come so sustainability solvency and predictability around this are incredibly important. So this serves as a safety valve—for example in circumstances where there are concerns about the impact on levy payers of raising levies.During the global financial crisis ACC recommended far more levy increases than Cabinet signed off on—and here we are fully funded. We also know as do members on the other side that the fully funded figure as ACC reported to us at the beginning of this year was higher than the 100 to 110 percent but we also know that it reported to us that in January of this year a $4 billion loss happened to the asset base of ACC which in February was recovered by $2 billion. So there is a degree of volatility. So that percentage in terms of the solvency of that account drastically changed.What this bill is essentially about is smoothing out the peaks and the troughs as best as we possibly can in a very volatile environment where we do not know year by year how many claims we will receive. We know for example as the Insurance Council has said that globally there can be very high claims in the insurance sector certainly in the ACC sector when accidents occur—and let us hope they do not happen at an accelerated or larger proportion than what is estimated—and they become higher-level claims. So having the strength of a resource base an asset base that can be evened out to take those highs and lows is very important. Having a process of transparency around that instead of making adjustments at the very end in terms of levy setting and having a policy statement at the beginning that brings guidance through this whole process is very very important.I do hope that those few comments I have made around that word “should” actually brings some context and some understanding of what that word is about. Thank you.JENNY SALESA (Labour—Manukau East): Thank you for the opportunity to speak on the Accident Compensation (Financial Accountability and Transparency) Amendment Bill. Labour supports this bill but with amendments to Part 1. I find it quite ironic that the Government is putting through a bill with the word “transparency” in the title given Murray McCully’s bribe of a Saudi businessman with no transparency whatsoever.My colleague Sue Moroney has Supplementary Order Paper 123 on Part 1. Firstly it clarifies the interpretation of “public good” as meaning “the public interest with regard to reducing injury and accidents” in section 300 of the Accident Compensation Act 2001. Secondly the Labour Supplementary Order Paper ensures that the Government sets levies for the purposes outlined in section 3 of the Act and not for the purpose of achieving other objectives unrelated to ACC levies such as a Government surplus.Part 1 of this bill has the intention of consolidating and clarifying the framework for funding ACC’s levied accounts to make it more transparent to give it a longer-term focus and to address the previously inconsistent approach to setting levies with marked fluctuations in levy rates and prior confusion about factors driving final decisions on levies.Clause 5 which inserts new sections 166A to 166C into the principal Act deals with the principles of financial responsibility in relation to accounts. New section 166A(1) does indeed lay out that the cost of all claims under the levied accounts is to be fully funded by meeting the outstanding claims liability in respect of the claims by offsetting an adequate level of assets to fund the cost of those claims. However under the version of the proposed subsection (2) now before us the principles under which levies must be set where the Minister is obliged to have regard are now changed. It is no longer mandated that the levies derived for each account must meet the lifetime cost of claims in relation to injuries that occur in a particular year but merely that they should. It is no longer mandated that should an account have a deficit of funds to meet the costs described in new section 166A(1)(a) or have accumulated surplus funds that deficit or surplus must be corrected by the setting of levies at an appropriate rate for a subsequent year or years but merely that they should.So I agree with Clayton Mitchell from New Zealand First when he was talking about the use of “must” or the term “should”. It is no longer mandated that large changes in levies must be avoided but merely that they should. There was considerable consultation and debate when these things were discussed over at the Transport and Industrial Relations Committee in terms of the widely swinging levies amongst ACC issues.The Minister for ACC announced in May that “The legislation … [should] bring the levy-setting process into line with the accountability and transparency requirements that already apply to the operation of the government’s core Budget under the Public Finance Act.” The Minister also announced at the time that “New binding principles … [should] be introduced to ensure the scheme is adequately funded to withstand economic volatilities while ensuring levies are kept as low as possible and stable over time.” But how is this proposed amendment enshrining in law the solution to the issues raised in advance from officials and from businesses and industry groups? The obligations on the Minister which are to ensure that the levies are in fact more stable have been muted for no apparent good reason. This is like the Health and Safety Reform Bill all over again. The wording of some of the clauses has been changed with a resulting weakening of the legislative framework. These changes to the parameters of the Minister’s decisions and obligations seem to have been sprung unheralded on the public. It is my understanding that the focus of the submissions to the select committee did not actually focus on this.Labour is supporting this bill but I must note that the weakening of the framework in relation to transparency and stability of the levies is regrettable. Thank you.PHIL TWYFORD (Labour—Te Atatū): As my colleague Jenny Salesa said Labour is supporting this bill. There are a number of important principles that are reflected in the policy intent of the bill and let me just touch on them. The bill will improve the process for levy setting by requiring the Government to set out a funding policy in line with the principles in the bill which will inform ACC’s public consultation on the levy rates. It is a good thing. Setting a funding policy will also improve the transparency of the levy-setting process so that the public is better informed—so far so good. Perhaps most important the bill would have improved the framework for funding ACC’s accounts through levies by replacing the current provisions with a more comprehensive set of principles.The big concern that we have with Part 1 is that the very principles enshrined in the title of the bill—financial responsibility and transparency—have been watered down. As Jenny Salesa said there is more than a little echo of what we saw with the Health and Safety Reform Bill. It is a bill that is brought to the House and sets out to fix a political problem for the Government with great fanfare goes to select committee and then the usual vested interests rock up to the committee and exert a bit of influence. Then the result is a 10-minute apology from Jonathan Young in his most recent contribution—a 10-minute apology for the replacement of a lot of “musts” with a lot of “shoulds”.Iain Lees-Galloway: Coulda shoulda woulda.PHIL TWYFORD: Yes that is right—coulda shoulda woulda. Thank you Iain Lees-Galloway. So really the good intent of the bill—Labour supported it; we still support the intent of it—and the basic principles have been significantly undermined by this kind of weak-kneed backsliding in the Transport and Industrial Relations Committee which unfortunately has made this bill a lot less effective than it otherwise would have been.The principal example of that watering down is to be found in Part 1 clause 5 inserting new section 166A(2). Instead of saying levies “must be set in accordance with the following principles” it has been replaced with “When making recommendations in respect of regulations … the Minister must have regard to the following principles:” a much weaker and more inferior set of words. It is sad that a Government that so transparently cooked up a funding crisis when it came to office—a manufactured funding crisis in relation to ACC—and then hiked up the levies now seeks to repair some of that political damage with this bill but bottled out when it got to select committee with just the slightest bit of influence from the vested interests. What could have been a good bill has—Iain Lees-Galloway: Could have been a good bill.PHIL TWYFORD: Could should would—it “must” be a good bill but it will not be under the dilution of its core principles at select committee. That is a shame.I want to really just add my voice to the support for Sue Moroney’s Supplementary Order Paper 123 which I think would pretty much repair the damage that was done at select committee. It sets out for example in amending clause 4 to make it very clear that “public good” in this case “means the public interest with regard to reducing injury and accidents”. The public good should not be some kind of mask for the Government to milk ACC to support its ever-diminishing aspiration for getting its books back into surplus because—let us be really clear about it—that is what has happened. That is the story of this Government’s ACC policy over the last few years. Sue Moroney’s Supplementary Order Paper makes it very clear in amending clause 5 that the state of the Government fiscal position is not to be a consideration when setting ACC levies. If the Government was true to the principles if it was true to the policy intent if it was true to its rhetoric then it would support Sue Moroney’s Supplementary Order Paper. Why not? Why should the ACC be used as a cash cow to try to fund the Government’s surplus target?SUE MORONEY (Labour): I want to use my further contribution on Part 1 to clarify what Labour’s voting position is going to be and to also respond to some of the issues that have been raised by the Minister in the chair the Minister for ACC when she spoke and also the chair of the Transport and Industrial Relations Committee Jonathan Young when he spoke. The first thing that I want to clarify is that during the Committee stage of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill the Labour Party would love to support Part 1 and would love to vote for Part 1 but that will be dependent on the Government’s response to the amendment that I have proposed. The reason for that is I think hearing all of the contributions—well the members seem to have kinds of—I do not know whether to describe them as smirks or frowns. Maybe they are “smowns” or “frirks”—I am not sure which one it is—on their faces. But it is simply this: if what both the Minister in the chair and the chairperson of the select committee have said in their contributions is correct then they should easily be able to support my amendment because what my amendment simply does is give certainty to the New Zealand public—to the businesses to the workers to the motorcar operators of the country—that they will not be overcharged ACC levies for a purpose that is not related to ACC. That is simply what it does.I think that should be an easy amendment for the Government members opposite to support but I have not heard them make any response on the amendment yet. I would like to hear a response on it because I want to hear a commitment today via the vote on my amendment—or if the Minister chooses via simply getting up and saying it in the Chamber. I want to know that the Minister believes that the bill in its current form would stop any Government from using ACC levies and the levy-setting process for any other purpose but reducing injuries and accidents. I want that commitment because if the Government cannot give that commitment in this debate then it is not being financially responsible and transparent when it comes to ACC matters. One thing that I can say about Judith Collins—and I do not agree with her a lot of the time—is that in a funny way when she was the Minister for ACC she was absolutely transparent about this. She got up in the House when she set the levies in 2013 and specifically said—and her press statement said—that one of the factors she took into account in rejecting ACC’s recommended levies was to get to surplus. She was very transparent about it. What I want to know from the Government today is whether it believes that this bill would still allow it to do that. If the answer is yes then that is not financial responsibility when it comes to ACC and it is not transparency when it comes to ACC.I want to clarify for the members opposite that the objection from the Labour Party is not necessarily that “must” has been changed to “should” because we see the need for that level of flexibility. Sitting here today and discussing ACC levies we see the need in that we might not be able to foresee everything that is going to happen. That is not our objection. We agree with those sets of amendments around the guiding principles but only if there is the backstop to make sure the flexibility is not so large that it allows the Government to mislead the levy-setting process and use it for something that it was not designed for—to artificially hike up ACC levies for purposes that are not to do with accident compensation and for purposes that are not to do with reducing the incidence of injuries and accidents in our workplaces. I want that commitment from the Government today because its past performance tells us that it believes it should be used for that.However there is one rider that I will put on it. When I asked the Minister whether she had sought Crown Law advice on whether it was lawful under the current Act to use the ACC levies to get to surplus she said that she had not even asked Crown Law for advice. There is only one reason why in my view a Minister would assert that she had the legal right to do that but would not ask for Crown Law advice and that is because she probably knows that what has already happened is unlawful. If that is the case then I am kind of comfortable with the bill as it is. If we know that what the Government has already done was unlawful then there is no need for my amendment because the law as it stands is perfectly good. But if the Government does believe that it has got the lawful right to do what it has done since 2013—and that is by its own admission use the levy-setting process reject the recommendations made by ACC and have higher levies in place in order to get to surplus—then my amendment is absolutely needed.My amendment is needed because of what Business New Zealand said when it came to the select committee. I am going to read directly from its submission because people might not believe it. I mean it is hard sometimes to believe that the Labour Party and Business New Zealand are singing from the same song sheet but absolutely in this instance we are and the Government is on the wrong side of the equation. Business New Zealand said: “The state of the Government’s fiscal position (as expressed in the Government’s accounts) should not be a consideration when setting ACC levies.” I asked Business New Zealand when it came to the select committee whether it would support an amendment such as the one that I am proposing in Supplementary Order Paper 123 to ensure that the Government could not do that and it said that it would. It wanted to see a legislative fix to this to stop it from happening again and the Labour Party is offering exactly that legislative fix. So I want to hear from the Minister an assurance about that and her view as to whether in the new funding policy statement she can actually set out getting to surplus as a reason for ACC levy setting—that it could be one of the things that she asks for in that funding policy statement. I want to know from the Minister whether in fact it is her view that that is allowable or not under the law as it would exist without my amendment because that is going to be important for our vote going forward.I want to speak to new section 166C “Consultation publication and amendment of funding policy statement” set out in clause 5 in Part 1 of the bill that we are debating. This is because there will be a consultation on that and that is good for transparency. I accept that there are many parts of this bill that will add to transparency. But I want to know that when that consultation happens the people who are giving the information—the stakeholders who are consulted with—will be listened to. We had the shambolic situation probably early this year when the Minister for ACC went out for consultation on ACC levies. A number of people have told me that during that consultation process they told her that she was about to make a big mess of the ACC motor vehicle levy process. They told her of exactly the models that were in the wrong categories and they told her of exactly the problems that she was about to bring on by changing the model and she ignored all of that advice. She ignored all of that advice and look what happened next: I think 24 models—about 115000 motor vehicles—had to have their ACC motor vehicle levy reclassified and changed and reduced because that Minister did not listen when the stakeholders told her and warned her of the mess she was about to make of that new model coming in for the motor vehicle levy. That should have been a good news story for the Government; it has turned into a complete and utter shambles.With new section 166C and its consultation process being put forward again I want to seek an assurance from the Minister that when she puts out her funding policy statement first and foremost she accepts that one of the funding policy statements that she cannot require of ACC is for it to make a provision to help the Government out with getting its books in surplus. I want that assurance from the Minister. I equally want an assurance from the Minister that in consulting with the stakeholders over the funding policy direction she will listen to what people are telling her because she certainly did not when it came to the levy-setting process earlier this year. She was given specific information—and I have seen Minister the specific information that you were given—by stakeholders during that process that was utterly and completely ignored and that is the reason why you have got yourself in the mess that you are in now.TIM MACINDOE (Senior Whip—National): I move That the question be now put.IAIN LEES-GALLOWAY (Labour—Palmerston North): I also want to try to clarify some of the discussion points on Part 1 of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill. We have had the Minister for ACC’s contribution and we have had the contribution from Mr Young but I feel as though we are sort of talking past each other a little bit here. First of all I want to make it clear that we are not proposing that we go back from “should” to “must”. We understand the argument for why the word “should” in new section 166A(2)(b)(c) has been used rather than the word “must” because this is about ensuring that the Minister and the Government have some flexibility. I think Jonathan Young used the example of the global financial crisis coming along or a significant disaster like the Canterbury earthquakes or the Pike River mine which have had a significant impact on ACC and so we need the flexibility to be in there. That is fine. We understand that.Jonathan Young: So it got through.IAIN LEES-GALLOWAY: What we are saying though—if you will listen for a second Jonathan Young—is that it does open up an issue that can be solved with Sue Moroney’s Supplementary Order Paper 123. The issue that gets opened up is that if you go from saying for instance that the levies derived for each account “must” meet the lifetime cost of claims and change that to “should” or that if an account has a deficit of funds to meet the cost prescribed or has not accumulated surplus funds the deficit or surplus “should” be corrected rather than “must” be corrected then you open up the opportunity for the manipulation of the levies that has occurred in the past. So on the one hand we totally understand the change being made and we appreciate there are good reasons for making that change but it opens up a problem which actually this bill intends to solve. What we are saying is to make the change and support it with the changes to the definition of “public good” and “public interest” that Sue Moroney has offered. That way we would get the flexibility that the Government is looking for and we would get the assurance that the public is looking for that levies will be used strictly to ensure that ACC is appropriately funded to provide the compensation and treatment that people expect from it and I have yet to hear an argument against that.I do not at this stage know which way the Government is going to vote on Sue Moroney’s Supplementary Order Paper. I suspect I know what it is but I have not heard either from the Minister or from the Transport and Industrial Relations Committee chair Jonathan Young. We have got numerous members of the select committee sitting opposite. They have taken time out of their day to come down to the Chamber. I would be quite keen to see one of them at least get up and actually tell us what their view is—whether they are for or against Sue Moroney’s Supplementary Order Paper—because I cannot imagine why you would be opposed to it unless the Government wants to leave open the possibility that the levies can be manipulated. Everything the Government has said is that that is not what it wants and that the purpose of this legislation was to close down that loophole. So is the Government going to support Sue Moroney’s Supplementary Order Paper? If it is that is fantastic—we would welcome that. If it is not we would like to hear some constructive reasons why it thinks it is not necessary or why it thinks it might be detrimental to the legislation. At the moment as I say what I have heard is the two sides of the Committee kind of speaking past each other and what I would like is some clarification around what people’s views are on this.I just want to address one other thing very quickly in this contribution and it is that Jonathan Young said that there is volatility in the various accounts and that at the beginning of the year we saw a massive drop in some of the accounts. Well actually what happened was for instance the work account which is the one that was 140 percent funded as at 31 December at 31 January had plummeted to being 135 percent funded and then by 28 February it was back up to being 141 percent funded. So yes it can move around. We appreciate that it can move around and that is why we agree that there should be a funding band but it is still absolutely clear that the work account and arguably the earners account as well are both thoroughly overfunded because the levies that have been taken are too much.ANDREW BAYLY (National—Hunua): I move That the question be now put.A party vote was called for on the question That the question be now put.Ayes 63New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 58New Zealand Labour 32; Green Party 14; New Zealand First 12.Motion agreed to.The question was put that the amendment set out on Supplementary Order Paper 123 in the name of Sue Moroney to clause 4 be agreed to.A party vote was called for on the question That the amendment be agreed to.Ayes 58New Zealand Labour 32; Green Party 14; New Zealand First 12.Noes 63New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.Amendment not agreed to.The question was put that the amendment set out on Supplementary Order Paper 123 in the name of Sue Moroney to clause 5 be agreed to.A party vote was called for on the question That the amendment be agreed to.Ayes 58New Zealand Labour 32; Green Party 14; New Zealand First 12.Noes 63New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.Amendment not agreed to.A party vote was called for on the question That Part 1 be agreed to.Ayes 63New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 58New Zealand Labour 32; Green Party 14; New Zealand First 12.Part 1 agreed to.Part 2 Repeal of provisions relating to residual leviesSUE MORONEY (Labour): I rise now to debate Part 2 of the bill. You have just heard the Labour Party vote against Part 1. It is against our instincts to do so but we just cannot back up that part without that amendment being put in place. It is sad to see that there are a few parties that think it is all OK to use ACC levies for whatever purpose they see fit but that is not the view of the Labour Party. We will be supporting Part 2 wholeheartedly and that is because it actually exposes the way that the New Zealand public was misled by the National Government when it came into office and claimed that there was a funding crisis in ACC. That is what it claimed just 7 years ago and yet in Part 2 of this bill we are allowing flexibility for the residual levy to be taken off prematurely because things have gone so well Dr Smith.It was Nick Smith who tried to convince the country otherwise. He tried to claim that there was a funding crisis when this Government took over but here is the truth and this Part 2 exposes it. In 1999 what happened was that the Government of the day decided to move to a pay-as-you-go model—that is it was actually paying for the levies—[Interruption] Mr Chair this is about the residual levy and the history of how it was put in place—The CHAIRPERSON (Hon Trevor Mallard): Yes and—SUE MORONEY: The residual levy.The CHAIRPERSON (Hon Trevor Mallard): Right. The member did see me indicating that she should come to Part 2 of the bill. There is nothing historical in this. We have had our second reading debate. This is a narrow technical area to do with residual levies. There are matters that can be debated but this is about 2019 or some other date in the future and we cannot rehearse the history of ACC over the past decade.SUE MORONEY: Thank you Mr Chair. It is therefore going to be a bit difficult for the public to follow what the residual levy was put in place for but it was designed for a full-funding model and that is why when the National Government came in it tried to claim that there was a funding crisis. In fact it was going to take us—and we knew this—until 2019 to get to full funding and that is the purpose of the residual levy.So the fact that this part says that actually things have gone so well within ACC that it looks likely—and the Minister announced today that it looks very likely—that the residual levy will come off early just goes to show how misleading that whole debacle was. Nick Smith is agreeing now. He is agreeing now that about 7 years ago he misled the New Zealand public. We agree that if there is no need to keep the residual levy in place there should be flexibility to cease the operation of that levy prior to 2019. The Minister has indicated that that is going to be next year and we look forward to seeing that.However one of the consequences of this which it is important for the public listening to this debate to understand is that overall this is not actually going to mean a reduction in the ACC levies that are being paid in order to keep all of our accounts in good health—the work account the earners account the motor vehicle account. What it does is it simply readjusts what was a temporary situation that was created in 1999 based on the injuries and accidents that needed to be fully funded at that time and brings it forward into the modern day. So the impact of that will be that some companies and businesses will pay higher ACC levies than they are paying now particularly if they are in an industry or a sector that has had a lot more injuries and accidents in recent years than it did prior to 1999. Those companies and those businesses will in fact get an increase in their ACC levies. The ones that will get a reduction are the ones that have improved their safety record since 1999. They are the ones that are set to reap the benefits of this legislation because the residual levy will be removed.So my very strong hope for this is that if Part 2 is voted through and I anticipate that it will be when we make that adjustment and we decide which companies—Hon Dr NICK SMITH (Minister for the Environment): Part 2 of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill is about Parliament bringing forward the date on which the residual levy which is paid by thousands of businesses around New Zealand can be brought to an end such that ACC levy payers are then having to pay only for the costs of the accidents that occur in a particular year. That is something that this Parliament should celebrate: after over 30 years of the ACC scheme in this year and the next—this financial year—for the first time ACC will be fully solvent and fully funded. That is something we members of the National team are very very proud of.I must respond to claims around where this residual levy has come from.The CHAIRPERSON (Hon Trevor Mallard): Order!Hon Dr NICK SMITH: Oh look Mr Chairman!The CHAIRPERSON (Hon Trevor Mallard): The member will stand and apologise.Hon Dr NICK SMITH: For saying what? I apologise for saying “Mr Chairman”.The CHAIRPERSON (Hon Trevor Mallard): The member will now stand withdraw and apologise without reservation or he will leave the Chamber.Hon Dr NICK SMITH: I unreservedly apologise.The CHAIRPERSON (Hon Trevor Mallard): Dr Nick Smith will leave the Chamber. [Interruption]Hon Dr Nick Smithwithdrew from the Chamber.The CHAIRPERSON (Hon Trevor Mallard): Order! Dr Nick Smith will take a seat now. I am sorry. Minister Foss cannot take the seat because he cannot take it while Dr Nick Smith is here. The Serjeant-at-Arms will find Dr Nick Smith and ask him to return to the Chamber please. What I am going to do is I am going to ask Mr Foss to take the chair until such time as Dr Smith can be found. I make it clear to those in the Government whips’ chair that if he is not found within the next half an hour I will proceed with the measures that I am minded to do in any case.CLAYTON MITCHELL (NZ First): I rise to take a very short call on Part 2 of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill. It really is around clause 7 “Repeal of and amendments to provisions relating to residual levies” which inserts new section 336A part 1(a) and (b) around the effective date of the residual levies coming to an end. It is a finish to those residual levies that I am sure will please many New Zealanders.I have to say that 1 April 2019 is April Fool’s Day and to that end we have some concerns that if the later time takes effect—I am talking about running those residual levies through to that date in 2019—in that time this Government will have over-collected $852 million from the work account $155 million from the earners account and $468 million from the motor vehicle account. We take that very very seriously.I think anything that could be done to prevent that from happening would certainly give a fair amount of relief to those ACC levy payers back home who are out there slogging it out and finding it very very tough in their businesses. We would like to see done whatever can be done. That is a total of $1.475 billion over the next 4½ years until 1 April 2019.I have to say that the consultative process that this has gone through has been a very very quick one and I think there has been some oversight from the Government in respect of this. We would urge that this be looked at more clearly. Thank you.SUE MORONEY (Labour): I want to return to the clause of the bill clause 7 that I was referring to when the Minister for ACC took a call before. What I was talking about was the fact that industries will end up with ACC levies being set on their differentiated rate rather than a residual levy once Part 2 comes into effect. What I hope is that when this happens we will not see a repeat of some of the problems that this Government has exhibited when it has tried to get out of a situation by deciding which workplaces are safer than others—which industries are safer than others and which carry less risk. I really hope that we do not see that shambles reoccur as a result of the residual levy being removed.Under new section 336A inserted by clause 7 what it specifically allows for is that the effective date of the removal of the residual levy for the work account can in fact mean the earlier of either “(a) 1 April 2019; and (b) a date appointed by the Minister by notice.” It seems today that the Minister for ACC indicated that it is going to be subsection (b) of that section 336A that she is going to invoke and that she is going to propose after a consultation process on a date next year that is yet to be determined—that is when the residual levy will be removed. So the impact of that sounds like it is going to be that everyone is going to get a reduction in their levy but that is not the case.Under the work account scenario it does track back to 1999 when the residual levy was set at that point. It was set in order to make sure that the injuries and accidents that had been incurred as of that date would be fully funded. The way that this Parliament chose to do it then was to put a residual levy on. The residual levy was placed on those industries based on what their accident and injury record was at the time. What we know is that for a whole lot of those businesses particularly the ones in the Accredited Employers Programme that has had a measure of success and part of the measure of that success has been that the historic injury and accident rate has reduced. That is good news but unfortunately because the residual levy has been in place for those companies they have not necessarily seen the full impact of the reduction in injuries and accidents in their workplaces because the residual levy has kept it I guess at that 1999 level until we got to full funding.So it is a measure of success but I put it to this Committee that it is a measure of success—and I think Nick Smith actually backed this up when he was speaking before—over a 30-year period not a 7-year period and not even a 10-year period. It is a measure of success over a 30-year period that this ACC system is so successful—that the model is such a fantastic model. And yes it is a Kiwi-owned and operated model owned by the State. It belongs to the people. It is doing so well that the residual levy can be reduced earlier and that is not because of what one Government has done; it is because we have set up a fully sustainable model over a period of time.And that is why I started my earlier contribution by saying that Part 2 exposes how badly that Government and Nick Smith in particular tried to mislead the New Zealand public when he was Minister for ACC over what was going on with the solvency of ACC. Clearly Part 2 shows that that was all a sham.PHIL TWYFORD (Labour—Te Atatū): It is now clear I think that although we have expressed significant reservations principally about Part 1 of this bill we support the content of Part 2 of the bill. I just want to build on Sue Moroney’s comments really that the upshot of Part 2 of this bill supports the argument that we have been making for a long time now that the manufactured crisis in ACC funding that we saw under Nick Smith’s tenure as Minister was a sham. It was a political construct and as a result since the first term of the National Government New Zealanders have been overcharged to a gross extent. We made it very clear—[Interruption]The CHAIRPERSON (Hon Trevor Mallard): Order! I will just ask the member to resume his seat while we deal with this matter.Hon Dr Nick Smith: I raise a point of order Mr Chairperson. I understand that you seek my apology and you have it.The CHAIRPERSON (Hon Trevor Mallard): What I would like you to do now is to withdraw and apologise for the comment that you made as you left the Chamber indicating bias on the part of the Chairperson. The member will do it properly. He knows how to do it.Hon Dr Nick Smith: I withdraw and apologise.The CHAIRPERSON (Hon Trevor Mallard): The member will now leave the Chamber.PHIL TWYFORD: In December 2014 the solvency position of the earners’ account was 129 percent. The solvency position of the work account was 140 percent. But it is important to note that the position with regard to the work account excludes this extraordinary acronym “WRGPDI”—that is work-related gradual process disease and infection claims. As quoted in response to question No. 9 of the annual review of ACC this year the corporation said that the reported measures overstate the solvency position as assets include those work-related gradual process disease and infection claims but the liabilities exclude them and that a better measure of the true solvency position is to include these claims in the liabilities. So for the work account in fact the better figure is 116 percent.Since December 2014 the discount rates fell considerably during January and partially recovered through January. The figures that are available show just how volatile the solvency positions are with regard to discount rates. This bill shows very clearly that the manufactured crisis in ACC funding was a sham—The CHAIRPERSON (Hon Trevor Mallard): Order! I have warned two members previously about sticking to this particular part with one spectacular failure but I am going to warn this member that the second reading has accepted the principle involved here and all that we are discussing now is what is in Part 2. It is very very narrow.PHIL TWYFORD: Just speaking about residual levies what Part 2 does is basically repeal the provisions in relation to residual levies. Prior to 1999 the levies covered only the current costs of a claim and residual levies are required to meet the ongoing costs of earlier injuries. Currently the legislation provides that ACC must continue to collect those residual levies through to 2019 and what Part 2 does is abolish that provision. It means that residual levies can cease to be collected I think 2 years earlier than the original legislation allowed. That is very significant and what it shows as Sue Moroney pointed out is that we have a truly sustainable ACC and the transition from pay as you go to fully funded is in place. It has been successful and the provisions in Part 2 repealing the provisions for residual levies make that very clear.This bill provides for those levies to be discontinued by Order in Council reflecting the fact that residual liabilities will continue to fluctuate as they do and the decision to discontinue will be taken at a time closer to the time when that judgment can be made with much more certainty. The second objective is to ensure that the payment of those levies continues only as long as there are outstanding liabilities to be offset. I think that is pretty much all there is to say about Part 2. The repeal of provisions relating to residual levies is uncontroversial in our view but it is something that it is worth taking satisfaction from as it shows that the process of transition has been successful and that we have a sustainable funding system for ACC.TIM MACINDOE (Senior Whip—National): I move That the question be now put.The CHAIRPERSON (Hon Trevor Mallard): I think it is fair to say that we have had debate on all of the debatable points and the House is now in a position where it can make a decision.Motion agreed to.The question was put that the amendment set out on Supplementary Order Paper 123 in the name of Sue Moroney to Part 2 be agreed to.A party vote was called for on the question That the amendment be agreed to.Ayes 58New Zealand Labour 32; Green Party 14; New Zealand First 12.Noes 63New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.Amendment not agreed to.A party vote was called for on the question That Part 2 be agreed to.Ayes 95New Zealand National 59; New Zealand Labour 32; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 26Green Party 14; New Zealand First 12.Part 2 agreed to.Clauses 1 to 3SUE MORONEY (Labour): At this point in the debate I want to focus my contribution on clause 1 the title of the bill which is as we have mentioned before in the debate the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill 2015. I think we have alluded a number of times already to the fact that the Labour Party absolutely agrees with the title of the bill. We wanted a bill that would do exactly that. But unfortunately the course of this debate and some of the votes that have been taken particularly in Part 1 show that the Government is not really prepared to be transparent and we would say that the opportunity to get true financial responsibility into this bill was lost when the Government voted against the amendment that would have delivered exactly that.How can the Government argue that it is financially responsible to allow a situation in which ACC levies can be collected for purposes other than accidents and injuries? If Government members believed that to be the case they would have voted for my amendment. My amendment did simply that. It made sure that in the ACC levy-setting process only matters to do with accident compensation could be regarded and considered. Yet the Government has failed to support that initiative. That tells me that the financial responsibility and transparency that is set out in the title of this bill has not truly been there as this bill has passed through the Committee stage.I want to ask the members opposite to tell us how they believe it was financially responsible for the Government to use the current provision for the public interest to be taken into regard when setting ACC levies—how it was financially responsible to use that provision in the legislation—to allow more than $350 million to be collected in ACC levies that was not needed? It was demonstrably not needed in 2013 when the then Minister for ACC Judith Collins ignored the recommendation of ACC and set levies at a higher level becausein her words the Government wanted to get to surplus. That was transparency. Judith Collins was proclaiming loud and clear—and was probably proclaiming quite proudly—that she as the former Minister for ACC was using the ACC levy-setting process for purposes other than accidents and injuries other than treating accidents and injuries other than preventing them because those are the right purposes.The CHAIRPERSON (Hon Trevor Mallard): Order! I am going to do again what I have done previously. This is a very narrow bill. It is prospective not retrospective. The history has been well covered in the first and second readings and as a result of that this is very narrow now and the member in getting historical is outside the requirements.SUE MORONEY: Thank you Mr Chair for that direction. The point that I will come back to is that the Government and the Minister have missed an opportunity to truly make good on the title of this bill—the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill—because if they had really wanted to stay true to the title of the bill then they would have supported that amendment. After all what it did was seek to clarify ACC levies when they are being set through the new provisions that this bill brings in—that is the Minister setting out a funding policy direction before ACC even gets to think about it. This is the process that ACC needs to go through in its consultation process with regard to setting levies. This is the way that the Government gets to determine what the levies are at the end of that process and it would have been financially responsible to make sure that levies could be used only for the intended purpose.I think that the members opposite—the ones on the Transport and Industrial Relations Committee actually—expressed to us that that is what they believed the use of the public interest process was for. It was for making sure that if there were a disaster—and we have had them: the earthquakes and the Pike River mine disaster—there would be the ability for that to be covered.PHIL TWYFORD (Labour—Te Atatū): I know that it is a bit trite and a bit of a cliché in this stage of the Committee of the whole House when we are getting on to the title clause to litigate the precise words in the title clause and to suggest what the bill should more properly have been called. In this particular case it does tempt the speaker—in the case of a bill where the very title of the bill is a provocation to any sense of integrity about the process of naming bills.The very use of the words “financial responsibility and transparency” in the bill title is such a blatant attempt to repair by bringing in a bill that purports to introduce a set of principles and processes for the good management of ACC and to introduce more financial responsibility and transparency the political damage that has been done by the Government’s handling of the Accident Compensation Corporation. As we have rehearsed in this debate no sooner had the bill gone to the Transport and Industrial Relations Committee and as Jonathan Young so candidly explained no sooner had the Insurance Council shown up at the select committee and expressed some reservations about this did we see some pretty rapid back-pedalling from the very principles that underpin the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill.There was back-pedalling and dilution of the principles of financial responsibility and transparency so they are no longer required of the Government. This is the difference between treating a stop sign or a red light as a rule or as a mere suggestion and in this case the changes that have been made in the select committee—the last minute watering down that is coming to be a bit of a behaviour pattern with this Government—basically suggest that those core principles that are enshrined in the title of the bill are a suggestion or a guideline rather than a requirement. So it would be much better if the bill were called the “Accident Compensation (Financial Responsibility and Transparency If You Feel Like It) Amendment Bill” because that is basically the guts of what this bill does. It sets down some useful principles. It delivers transparency that is long overdue—and that is why we are supporting the bill—but unfortunately the Government has significantly weakened the provisions of the bill and as a result it is delivering a lot less than it could have.Hon DAVID CUNLIFFE (Labour—New Lynn): I believe that this bill should be named the “Accident Compensation (High Time They Paid Back) Amendment Bill” because in the Budget debates of both 2014 and 2015 it was clear from Treasury advice that there has been a surplus on the ACC accounts and Treasury has recommended to the Government that that be returned to taxpayers in a transparent and equitable way. This bill finally goes some way towards achieving that aim but it is worth noting in passing that at Budget day the Government’s accounts for both of the last two Budgets would have been seriously worse off—seriously deeper in deficit—had these surpluses not been held on the Crown account to try to achieve surplus. Even then of course history has shown that that was a vain hope—a forlorn hope—and surplus was not achieved.Let us reflect in the title and commencement part of this Committee stage debate on a specific point that goes to the solvency position in Part 2 which we have previously traversed. When changes are made to the cost structure of payments under ACC to payment rates or to the way that claims are managed and when that impacts on the operating balance of the fund that balance is then magnified through the actuarial process into the valuation of the fund.In turn it is that actuarial valuation that as you know shows up changes in gains and losses on the Crown’s operating account and those can be big numbers. It is not without cause that a Government of the day might wait—when those numbers are bouncing around between positive and negative—for a period of time to allow the trend to be clear. What has happened in this case however is that the waiting has gone on for at least 2 years longer than officials recommended was necessary. So we welcome this part of the bill—Part 2 essentially—because the earners account as of December 2014 was at close to 130 percent of fully paid; 130 percent. In January 2015 it was 121 percent. In February 2015 it was 128 percent. The work account was up to 140 percent trending to 141 percent and those numbers are just too high.The other name that is tempting for this bill is the “ACC Financial Return Off The Backs Of Suffering Kiwis Bill” because I have had—and I am sure Mr Chairperson that you and others have also had—cases of people who have been the subject of ACC reviews coming in. I can still picture one woman who came into my electorate office and could barely walk. She could barely walk and she had been thrown off ACC after a period of time because the injuries to her legs were deemed retrospectively to be a pre-existing condition.I will come back to the bill. The reason for this example is that the individual case decisions affect the cash flows which affect the operating balance which is then magnified into the actuarial surplus—The CHAIRPERSON (Hon Trevor Mallard): This is a lovely long bow but I think the member had better come back to the bill.Hon DAVID CUNLIFFE: In the end those are human circumstances. Those are New Zealanders—they could be the family of anybody in this House or out there—who through no fault of their own have come across an accident or hard times and there is the debate about how that is interpreted and how onerous or punitive the review system should be.I think most Kiwis are fair people. They want a review system that does not allow rorting—The CHAIRPERSON (Hon Trevor Mallard): OK the member will resume his seat. He has again taken—I think I indicated it—quite a long bow to this. This is not about the review system. This is quite a narrow debate on these clauses. This speech would have been a wonderful speech at the second reading or the introduction and it is probably relevant on the third reading but not in the technical stage now.Hon DAVID CUNLIFFE: Thank you Mr Chairperson for your guidance and I will reflect upon that. I had thought that one was allowed in the title and commencement clauses to summarise some of the arguments that the previous clause-by-clause parts of the Committee stage had touched upon.The CHAIRPERSON (Hon Trevor Mallard): If they had done it relevantly yes.Hon DAVID CUNLIFFE: I would have done had I been lucky enough to get a call on the previous part—thus the summary has occurred under the title and commencement clauses. Be that as it may I take your guidance.We support the passage of this bill in the Committee stage. We do it with reluctance in respect of Part 1 because the transparency has been watered down. We do support Part 2. We think that the legislation is overdue. It has been several years now that this payment has been due to New Zealanders. Thank goodness it is finally happening.CLAYTON MITCHELL (NZ First): Thank you Mr Chair—it is the quick or the dead before we stop for some dinner very shortly. I will be doing my utmost to stay standing throughout these proceedings and to make sure that I stay on cue. I think that the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill would have to be far more aptly renamed the “Accident Compensation (Financial Compensation For Those Overcharged And Sincerely Sorry) Amendment Bill” for New Zealand First to be able to support it as it stands here today. Nothing of what we have seen in here redresses the issues that have been going on for a number of years—the overcharging of ACC levies to those small and medium sized businesses and in fact to all businesses and people involved around the country. That is one of the biggest issues that we have some severe issues with.I think the other apt name that we could actually come up with in light of how quickly this has been turned round through the select committee and been rushed through Parliament is the “Whiz Boing Bang Bounce Amendment Bill” which of course was a game that we used to play in the surf lifesaving movement when we were young kids and which is a very fast paced game. That would certainly summarise the speed at which this bill has been brought through all stages to be here in front of us today. Without any further ado Mr Chair I bid you a farewell and a thankyou.A party vote was called for on the question That clause 1 be agreed to.Ayes 109New Zealand National 59; New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 12New Zealand First 12.Clause 1 agreed to.Clause 2 agreed to.Clause 3 agreed to.SUE MORONEY (Labour): I move That the Committee divide the bill into theAccident Compensation (Financial Responsibility) Amendment Billand the Accident Compensation (Residual Levies) Amendment Bill pursuant to Supplementary Order Paper 124.The CHAIRPERSON (Hon Trevor Mallard): The question is that the motion be agreed to. Those who are of that opinion will say Aye—Sue Moroney: Is it a debatable motion?The CHAIRPERSON (Hon Trevor Mallard): Yes.Sue Moroney: I am seeking the call Mr Chair.The CHAIRPERSON (Hon Trevor Mallard): Well the member did sit down. Have I put the question? I think I have. Yes I have.Sue Moroney: I think you were halfway through.The CHAIRPERSON (Hon Trevor Mallard): I am going to ask for just a little bit of tolerance on the part of the Committee because I might have done this a little bit quickly. I am going to seek the leave of the Committee for Sue Moroney to take a call on her motion which she is entitled to do because it is debatable and I may have cut her off. Is there any objection to that? There is no objection.SUE MORONEY (Labour): I do want to take just a short amount of the Committee’s time to explain why I have put Supplementary Order Paper 124 forward in my name. It is a little unusual. It is normally the Minister in charge of the bill who seeks to divide the bill but on behalf of the Labour Party I am seeking to divide the bill for this purpose.Increasingly it has become a tactic of the Government to put forward bills of which the Opposition will support one part but not another. This is the situation that the Labour Party finds itself in with regard to this bill. We are strongly of the view that Part 2 should proceed and we have voted in favour of Part 2. So we are seeking for Part 2 to be divided off as its own separate bill—as its own entity—so that we can bring forward our full support for that bill at the third reading. However we do have some strong objections to Part 1. That is the reason why I sought to amend Part 1. The Government may have felt that it was some sort of political trickery that the Opposition was up to but in fact what we were trying to do was to actually strengthen Part 1 and to make it the sort of bill that we could truly support. We attempted to do that by putting forward an amendment that would make it absolutely clear that ACC levies in this financially responsible and transparent way could not be used for any purpose other than to treat injuries and accidents or to prevent injuries and accidents. After all that is the purpose of the Accident Compensation Act which this bill amends and we were simply wanting to clarify that.The Government has blocked that clarification. It probably has its own reasons for doing that but it certainly has not explained them to this Committee. This leaves the Labour Party in the situation where we are not in support of Part 1—we have voted against it—but we are in support of Part 2. That is the reason why I have sought on the Labour Party’s behalf to divide the bill so that the parties across this Parliament can express what they firmly believe in with regard to the two quite distinctly different parts of this bill. It is a tactic that we find the Government is using more and more frequently. It puts some measures into a bill—sometimes it calls them an omnibus bill—that it knows the Opposition does not want to support alongside ones that the Government knows the Opposition will want to support. I want to make that very clear by dividing this bill into two distinct parts as two distinct bills so that the Labour Party can express its votes appropriately when it comes to the third reading.A party vote was called for on the question That the motion be agreed to.Ayes 58New Zealand Labour 32; Green Party 14; New Zealand First 12.Noes 63New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.Motion not agreed to.Bill to be reported without amendment presently.