Foss Craig: Questions for Oral Answer — Questions to Ministers 
Foss Craig: Questions for Oral Answer — Questions to Ministers 
[Volume:652;Page:1617] 
3.  
CRAIG FOSS (National—Tukituki) 
 to the  
Minister for ACC 
: Has he received the latest 6-monthly valuation report of the ACC’s outstanding claims liability; if so what does it state? 
Hon Dr NICK SMITH (Minister for ACC) 
: 
 Yes I have received the PricewaterhouseCoopers valuation of 31 December 2008. It shows that the liabilities of the Accident Compensation Corporation (ACC) have blown out to $21.9 billion. That is a deterioration of $2.6 billion on 6 months earlier and a deterioration of $3.9 billion over the last year. 
Craig Foss 
: What changes have occurred in ACC’s liabilities over the past decade? 
Hon Dr NICK SMITH 
: ACC’s liabilities in 2000 were $6.3 billion and had declined over the previous 5 years—from 1995 to 2000—despite reductions in the discount rate over that period. The $15.6 billion increase in ACC’s liabilities during Labour’s term in Government—an amount in excess of the much lauded Superannuation Fund—puts a lie to the claim that Labour left the Government books in good shape. 
Craig Foss 
: What is the underlying cause of the large increases in ACC’s liabilities? 
Hon Dr NICK SMITH 
: The fundamental driver has been increased costs which were driven by cover extension more generous entitlements and cost increases to providers. These cost increases as noted by Martin Jenkins and Associates were masked by buoyant economic conditions a few years back but have now been brought into harsh focus in this recession. The cost of claims has more than doubled from $1.4 billion in 2000 to $3.2 billion this year. Ultimately this has to flow on into liabilities and into levies. 
Hon David Parker 
: Does the Minister accept that the proportion of ACC liabilities that is unfunded has decreased substantially from 64 percent in 1999 to 45 percent in December 2008? 
Hon Dr NICK SMITH 
: I can confirm to the member that the liabilities of ACC increased by nearly $16 billion during the course of the last Labour Government and that over the last 3 years the solvency of ACC has significantly deteriorated. I draw the member’s attention to the report released by the Minister of Finance that pointed out that although these may have been masked— 
Hon Dr Michael Cullen 
: I raise a point of order Mr Speaker. I was going to raise a point of order at the end about a different matter but at this point I raise a point of order about the length of the answer which is quite unnecessary given the very simple question that was asked. 
Mr SPEAKER 
: The honourable member makes a fair point. I think the answer should be curtailed at that point because it had gone on quite long enough. 
Hon Dr NICK SMITH 
: The solvency— 
Mr SPEAKER 
: No no. I think we have heard sufficient. 
Hon Dr Michael Cullen 
: I raise a point of order Mr Speaker. This is the further point that I was going to raise. The Minister was asked a very simple question about the proportion of the unfunded liability—a comparison from 1999 to 2008. It was a very simple question. Actually a yes or no answer to that particular question was possible. The Minister went off into a long ramble while incidentally along the way completely confusing the unfunded liability in 1999 with the total liability in 2008. 
Mr SPEAKER 
: I invite the honourable member to repeat his question and we will have the Minister answer it. 
Hon David Parker 
: Does the Minister accept that the proportion of ACC’s liabilities that is unfunded has decreased substantially from 64 percent in 1999 to 45 percent in December 2008? 
Hon Dr NICK SMITH 
: No I do not and the reason I do not is that the—[ 
Interruption 
] Oh they are tetchy today are they not? The member has failed to take into account the deterioration that has occurred in ACC over the last 12 months when the liabilities increased by nearly $4 billion. 
Craig Foss 
: Can the Minister give the House any examples of scheme changes that have been underfunded and have contributed to the blowout in costs? 
Hon Dr NICK SMITH 
: A good example is the area of physiotherapy. The previous Government made major changes in 2004 to provide no-cost services to ACC clients. The services were expected to cost $9 million per year but they are already costing nine times that figure. Costs have risen from $58 million in 2004 to $139 million this year and they are expected to reach $225 million in 2011. The current board advises that there has been no improvement in rehabilitation rates from that extra cost and the board says that the policy is untenable. 
Craig Foss 
: What other changes have contributed to the blowout in costs? 
Hon Dr NICK SMITH 
: The previous Government changed the medical misadventure provisions from those in the Accident Compensation Act in 1974 and was advised that those changes would add $9 million in costs per year. In fact it is costing more than $40 million additional per year. Even last year when the then Government knew that liabilities were blowing out and investments were going through the floor the Government made 13 changes to the scheme that added another $75 million a year in additional costs. 
Hon David Parker 
: I seek the leave of the House to table a document from the Parliamentary Library—[ 
Interruption 
] 
Mr SPEAKER 
: It is my fault—I did not actually announce that it was a point of order the honourable member was raising so I will let the Hon Annette King and whoever interjected off on this occasion. The Hon David Parker is raising a point of order. 
Hon David Parker 
: I seek leave of the House to table a document from the Parliamentary Library that shows that the unfunded liability decreased from— 
Mr SPEAKER 
: What is the document? 
Hon David Parker 
: It is a document from the Parliamentary Library— 
Mr SPEAKER 
: But what is it? 
Hon David Parker 
: A table providing ACC’s estimated unfunded liability in both— 
Mr SPEAKER 
: It would assist the House to know the source of the document. 
Hon David Parker 
: I have already said it is from the Parliamentary Library. It is in turn sourced from Treasury documents being the Government’s own projection. 
Mr SPEAKER 
: Leave is sought to table that document. Any— 
Hon Dr NICK SMITH 
: I raise a point of order Mr Speaker. Can the member clarify whether the report includes the latest report from PricewaterhouseCoopers? 
Mr SPEAKER 
: I will allow the member to respond to that. 
Hon David Parker 
: Indeed I can confirm that the figure I gave was based on an ACC liability of $22 billion. 
Mr SPEAKER 
: Leave is sought to table that document. Any objection? No objection. 
Document by leave laid on the Table of the House.