Injury Prevention Rehabilitation and Compensation Amendment Bill — First Reading 
Injury Prevention Rehabilitation and Compensation Amendment Bill — First Reading 
[Volume:658;Page:7428] 
Injury Prevention Rehabilitation and Compensation Amendment Bill 
First Reading 
Hon Dr NICK SMITH (Minister for ACC) 
: 
 I move  
That the Injury Prevention Rehabilitation and Compensation Amendment Bill be now read a first time. 
 At the appropriate time I intend to move that the bill be referred to the Transport and Industrial Relations Committee with an instruction that the committee report finally to the House on or before 12 February 2010 and that the committee have the authority to meet at any time while the House is sitting except during oral questions during any evening on a day on which there has been a sitting of the House on a Friday in a week in which there has been a sitting of the House and to meet outside the Wellington region during a sitting of the House despite Standing Orders 187 189 and 190(1)(b) and (c). 
Accident compensation has become financially unsustainable and reform is required to secure its future for New Zealanders. The 2008-09 annual report of the Accident Compensation Corporation (ACC) showed a loss of $4.8 billion on top of a $2.4 billion loss for the previous year. Over the past 4 years the unfunded liabilities of the accident compensation scheme—for example the difference between its liabilities and its assets—have grown from $4 billion to $13 billion. This is a significant and serious problem that cannot be ignored. The underlying issue is the steep rise in accident compensation claim costs up by 59 percent in the last 4 years or rising at five times the rate of inflation. The accident compensation scheme cannot sustain the ongoing huge increases in claim costs arising from greater claim numbers deteriorating rehabilitation rates and unfunded extensions to the scheme. The underlying problem is that ACC has drifted from being a State insurer to being an extension of the welfare State. Changes in the accident compensation scheme are needed to make it affordable to make it sustainable and to make it fair. 
The changes in this bill are part of a wider reform of accident compensation that began with the changes that I made to the ACC board in March the stocktake that has been announced and other regulatory and operational improvements. The Government’s objective with this bill in that wider package is to make savings of $2 billion in the scheme’s liabilities. The first amendment in the bill will extend the full funding date for residual claim liabilities from 2014 to 2019. This is done by setting a final valuation of the residual claims liabilities as valued at 30 June 2009 and folding those residual liabilities into the main accounts. Some people have presented this as a panacea for the scheme’s financial woes. Shifting the full funding date does not actually save levy payers a dollar; it simply changes when they pay. Delaying payment actually increases the costs and it also increases the Crown’s net debt in the intervening years. 
There are 10 amendments in this bill that deliver cost savings most of which are reversals of scheme extensions made by the previous Labour Government. Over recent months with colleagues and officials I have been reviewing each of the add-ons that the previous Government made to the scheme. I note that not all have been reversed but a number have because of the financial problems. The first change relates to enhancing the rehabilitation rates of the scheme which have been declining over the last 5 years. The previous Government made it a mandatory consideration for a person’s pre-injury earnings to be considered. This means that a person who previously had a very high income did not have to return to work unless a job would provide a similar level of earnings. This is too tough a test and adds to the costs for accident compensation. This bill reverses that consideration. 
The second change reverses the changes to the vocational independence test in order to bring it better in line with what was there previously and with the standard definition that is used both by Work and Income New Zealand and by Statistics New Zealand—that is 30 hours of work per week. The third reform is to reverse the changes in respect of the three-part test for gradual workplace injury infection or disease. It will be simpler to apply and it removes the presumption that the accident compensation scheme should automatically provide cover. 
The next four changes in the bill relate to the way weekly compensation is calculated and return the scheme to the principle that accident compensation provides 80 percent of earnings for the first 4 weeks based on a person’s average earnings for the previous 4 weeks and then after that earnings compensation is based on income over the past 12 months. One of these changes reverses the decision to increase compensation for the loss of potential earnings—back from 100 percent to the standard 80 percent. 
Changes are also being made to the calculation for longer-term compensation for casual or seasonal workers. Our concern about the change that Labour made was that standard seasonal workers who were injured in the long term would find themselves better off on accident compensation than they would be in their normal pattern of seasonal work. We are also reversing the change around part-time workers so that their compensation again is based on those same averaging principles that go all the way back to the Woodhouse report. 
The eighth change around cost saving is to reverse the decision of the previous Government to include suicide and self-inflicted injuries within the accident compensation scheme. I acknowledge this is a sensitive area but the Woodhouse report never intended to include such injuries. Suicide is a tragedy but it is not an accident. I also want to make plain that in respect of these five amendments around entitlements the bill affects only future claimants; no existing person receiving compensation will receive a reduction. 
The bill contains two further cost-saving measures. The first is to introduce a hearing-loss threshold of 6 percent a provision that is in many of the Australian state schemes and is used in the United Kingdom. Hearing-loss claims have risen at a very strong pace in recent years. We are effectively concluding that the cost of hearing aids for low levels of hearing loss is not justified by the benefits. 
The last change is to strengthen the disentitlements for criminals. The proposal is that people who commit a crime that has a maximum sentence of 2 years or more and who are sentenced to imprisonment should automatically be disentitled from receiving compensation. The claimant will continue to get the emergency treatment that is required and the treatment that is required to restore function. 
The Government also wants to improve the incentives for safety so this bill makes provision for experience-rating or risk sharing in the work account and provides for no-claim bonuses higher or lower levies and claim thresholds to be set. It also enables risk rating in the motor vehicle account for vehicles and for vehicle owners to link safety to levy payments. Those are enabling provisions and the really important work will be in the regulations to make these practical and workable albeit the principle is important. The Government and ACC should be better rewarding those motorists and employers who have better safety records. 
A further amendment in this bill gives the Government greater flexibility to be able to use the petrol levy for residual claims in the motor vehicle account. A further provision allows self-employed shareholders to buy extra entitlements under the scheme. That is a programme that I think is actually quite useful for self-employed people who can voluntarily have the security of a higher level of income by paying a higher level of levy. 
The bill removes two statutory advisory committees. Ministers can establish advisory committees as is required relative to the particular challenges that exist for accident compensation at the time without them being enshrined in statute. A further provision enables information sharing between ACC and the Inland Revenue Department. There is also provision in this bill to link accident compensation with other parts of the Government’s programme. The Minister of Justice has done some very good work on increasing support for victims of crime and this bill will enable the accident compensation scheme to deliver some of those services. 
The last important amendment ensures that the accident compensation scheme does not again end up in this level of financial difficulty. That is why this bill provides for improved financial accountability for the scheme by requiring a financial condition report to be produced by ACC and tabled in this Parliament. This provision is similar to that which is best practice for insurance companies internationally in the wake of a number of high-profile collapses. I note for instance that in 2006 ACC’s actuaries noted with concern the very optimistic assumptions about investment returns but such information did not make it into the annual report. This additional check on the scheme’s finances is part of recognising that thousands of New Zealanders rely on accident compensation for their well-being and that they need the security of knowing that the institution is financially robust. 
I conclude by making plain that this Government is committed to the core concept of ACC being a 24/7 no-fault insurer for New Zealanders at work at play and on the road. There is not a person on the Government benches despite the rhetoric from members opposite who wants to return to the days of suing and the uncertainty that goes with it. What Government members say though is that to secure the accident compensation scheme’s future it needs to be affordable and financially sustainable and that is what this bill seeks to achieve. 
Hon DAVID PARKER (Labour) 
: 
 New Zealanders should make no mistake: this year has seen already an unprecedented attack on our accident compensation system by the Government which has been exaggerating the degree of seriousness of problems in the accident compensation scheme in order to justify fundamental changes to accident compensation that are not necessary. 
New Zealand has long been proud of our world-leading accident compensation and rehabilitation system. Indeed many commentators in this country and many politicians in this House especially on this side of the House believe most strongly that we have the best accident compensation and rehabilitation scheme in the world—in the world bar none. It is second to none. It achieves that and is affordable in New Zealand because of its core principles which are that we should have no-fault rehabilitation and compensation for 24 hours a day 365 days a year whether people’s accidents are at work on the sports field in a motor car or in the home when they fall over. Wherever their accidents occur they should have no-fault accident compensation and rehabilitation. 
We have heard from the Government again today saying effectively that the accident compensation system is fundamentally broken therefore justifying the fundamental changes the Government has on the way. They are changes not just to the scope of cover but also to whoever will provide the social insurance under the accident compensation scheme which currently can be only the State or a large employer that self-insures. Contrary to what Dr Smith said in the House today not one private insurer in New Zealand is providing insurance cover at the moment because currently it is illegal under the accident compensation legislation. 
We heard Dr Smith say a $4.8 billion loss has been made in the accident compensation scheme this year. He said it again in the speech that he just gave. I say to Dr Smith that that is not correct. The Accident Compensation Corporation (ACC) takes great care to describe what has happened this year. There has been a $4.8 billion increase in the liabilities of accident compensation but there has not been a $4.8 billion operating loss by the corporation. Indeed page 72 of ACC’s annual report shows there was a $1 billion excess of levy income over claims expenditure this year. In other words the corporation took in $1 billion dollars more than it spent. But the National Government says that the scheme has made a $4.8 billion loss. Well it is true that the scheme’s liabilities have increased from where they were last year but that is not the same thing as an operating loss. This year the scheme took in $1 billion more—as shown on page 72 of the report—than it spent. Even if we look at the whole-of-life cost of the claims that were made last year the corporation still collected more revenue than was the cost. 
We can take the case of the person who was in a terrible car accident last year and became a tetraplegic. By the time we fully fund that claim to the end of that person’s life—because he or she will be on the system until death—and even if we fully cost all of those whole-of life-claims for every claim laid last year the scheme still collected more in levy income last year than the whole-of-life claims of every claim made last year. 
What have increased are the scheme’s liabilities. Dr Smith continues to misrepresent the increase in liabilities as being a loss made by the scheme in the one year which somehow points to the scheme being fundamentally flawed when it is not. What have increased are the corporation’s liabilities. What is the cause of that increase in the liabilities? Well one and a half billion dollars of it relates to economic factors—this is from page 34 of the annual report for those who want to have a look at the detail of how the liabilities have increased from $9.3 billion to $23.7 billion since 2004. Of that $1.4 billion relates to economic factors. That is the decreasing rate of return that ACC now expects the scheme to earn on its investments as a consequence of the recession and a long-term decrease in the expected rate of return on investments around the world a factor that is affecting not only ACC but every other insurance company in the world. 
Even more a liability of $2.6 billion arises from a change in accounting standards. Liabilities used to have to be reported based on the probability that investment funds would be able to cover those future liabilities. The probability to be assured was 50 percent but those setting the accounting standards said “No we’re going to change that. You’ve got to have enough money in the bank so that we are 75 percent sure that you will have enough money.” That change in accounting standards has caused $2.6 billion of change in liabilities. 
There have been some other undeniable changes in cost drivers. It is true that we now pay nurses and doctors more and that there has been inflation in the health sector that has run ahead of general inflation for some years. Those were changes that were made by the previous Government because New Zealand was losing too many doctors and nurses to Australia and overseas. At the time National members supported those changes because they knew that that was a real problem that we faced. So it is true that health inflation has increased at higher than the general rate of inflation but I say that that trend will not continue to the same extent in the future. 
It is also true that people survive accidents that they used to die from. Medical advances mean that many people who used to die in serious motor vehicle accidents now live but that they have long-term care costs and needs that are higher. That is a cost driver that is unavoidable. 
It is also true that our population is ageing and as people age more of them are falling over in their homes breaking their hip needing care at home and needing orthopaedic interventions. Again that is a real cost increase. But even when we take into account those cost increases and they are unavoidable cost increases the cost of the New Zealand accident compensation scheme is cheaper than the Australian equivalent. The National Government is forever saying that New Zealand needs to model itself on Australia because it is doing better than us but in the area of accident compensation New Zealand is already doing better than Australia. Our scheme has more scope. A New Zealander’s decision to play sport is not based on whether he or she can afford to pay the fees to cover insurance premiums. We do not have that problem. We have a broad scope of cover but lower costs than the Australian scheme. 
Where is the case for fundamental changes to the scope of the accident compensation scheme? John Key said a couple of weeks ago that there is a need for an honest conversation with New Zealanders about the trade-off between levies and the scope of cover. That is a very proper conversation to have in New Zealand. But we should have the conversation before we cut the scope of cover not after we have done it. That is why the Labour Opposition said that it would have backed parts of this bill. It would have backed the extension of the date for full funding. That is not the total panacea to all issues of accident compensation; I acknowledge that. But it is a big part of it. 
One of the things that the Government has been scaremongering about is an increase in car registration fees. It has said that unless it passes this bill registration fees will go up by $130 a year. But the actual increase the Government promoted after that scaremongering is $30 a year. It is less than a quarter. The Government was scaring people with levy increases four times more than were necessary. What is responsible for the vast majority of the difference between a $30 a year increase and a $130 a year increase? It is the extension of the date for full funding. We said to the Government: “We agree with you that full funding all of those historic claims by 2014 is too tough. It drives levies too high in too short a period of time. We will back that date extension.” Then let us have the honest conversation with New Zealanders about the scope of cover. Let us see whether this is truly affordable. 
I think we will find that most New Zealanders will agree that the date extension will cure much of the problem when they realise that most of these cost increases for the likes of the motor vehicle levy can be avoided by pushing out the date for full funding so that we catch up on those costs by 2019 rather than 2014. 
Hon Dr Nick Smith 
: Not true. 
Hon DAVID PARKER 
: Dr Nick Smith shouts out that that is not true; he cannot help himself. It is true. We know from the briefing to incoming Minister that more than $80 is knocked off the increase in registration fees by the extension to the date of full funding. The Minister has still refused to answer in this House the exact breakdown but we know that the majority of savings comes from that. 
Privatisation is next. We will see socialisation of losses and privatisation of profits in accident compensation as it is being fundamentally undermined. 
Hon PANSY WONG (Associate Minister for ACC) 
: 
 In the year 2000 the Labour finance Minister Dr Michael Cullen said he would recommend that the House accept a 31c residual claims account levy and promised with that that the accident compensation scheme liability would be fully funded in 5 years’ time. In fact he went one better. He asked why the House should not take the increase to 35c so that the liability should be fully funded 2 or 3 years earlier. From my quick calculation the previous Labour Government had promised that the liability would be fully funded by 2014 or earlier. But here we are today in the House once again and the front-bench Opposition spokesperson on accident compensation the Hon David Parker is asking what the problem is and saying that all we have to do is push out the funding date for another 5 years. We can choose just to ignore those statements. 
In 1972 the 24-hour comprehensive no-fault accident compensation scheme was introduced into the House by a National Government. National is very proud of introducing that 24-hour comprehensive no-fault scheme but the problem is that every time Labour is in Government its ill-disciplined tax-and-spend mismanagement of the accident compensation scheme consistently wrecks the scheme and puts it under risk. 
I will focus on only three areas to demonstrate why our hard-working dedicated Minister for ACC Dr Nick Smith has been forced to bring into the House dramatic measures to ensure that the accident compensation scheme brought in by the National Government will continue to be sustained for a very very long time for the benefit of New Zealanders. First of all in 1999 the National Government opened up the work account to competition for 1 year. At that stage the Accident Compensation Corporation (ACC) was charging the levy for the work account at the rate of $1.47 per $100. Under the 1-year period of competition the amount dropped immediately to $1.20. Then the Labour Government took over ruined all the good work and chucked back the account to the ACC monopoly. But through this exercise ACC became disciplined so the levy amount continued to track downwards to $1.12 91c and 90c. Unfortunately today after 9 long years of ill-discipline and mismanagement by Labour we are staring at an increase that will put the levy back to the 1999 level. So I welcome the investigation into competition for the work account because that 1 year of competition introduced good discipline and showed the corporation that it could have managed the account much better. 
The other area I will touch on concerns fairness. As Associate Minister for ACC I have the delegated responsibility of answering individual complaints. Many good law-abiding New Zealanders have been totally frustrated with people who have incurred an injury during the committing of a crime and who have then gone on to claim all sorts of compensation. I remember that 2 years ago we heard a case about a burglar who demanded to have cosmetic surgery because a small part of his ear had been bitten off during a burglary attempt. The then Labour Minister for ACC came out and said: “Well he’s entitled to it.” and all that nonsense. But from this side of the House Dr Smith has brought in changes to say that if the injury is incurred during the committing of an offence that will incur 2 years’ imprisonment no compensation will be payable. It is about time that the accident compensation scheme answered to the needs of law-abiding New Zealanders. We will not squander compensation on people who are injured while committing a crime. 
The third issue I want to put on the table is the reason why the Labour Party is never going to be trusted again. Last year after the general election both the Minister for ACC and I were summoned to an urgent meeting with officials. There was an urgent request to inject $300 million into the earners account. We are supposed to operate on a no-surprises policy so this type of bad news set ACC off to a very bad start. 
The last point is that apart from this legislation the good Minister Dr Nick Smith has also set out to change the culture in accident compensation. I think that everyone in the House and out there will remember the extravagant $5 million Covered campaign run by ACC on television etc. That campaign was challenged by the Advertising Standards Authority for being misleading. We can contrast that time with this year when ACC ran a 1-week home safety campaign. It was very well-covered and effective and it cost only $500000. I congratulate the Minister for ACC on making the tough call to ensure that the accident compensation scheme that was proudly introduced into this House by the second National Government will continue to exist to protect and benefit New Zealanders. 
LYNNE PILLAY (Labour) 
: 
 It saddens me that it is necessary to take a call on this bill in the House. This bill is an absolute sham. It is based on a campaign of scaremongering that the accident compensation scheme is financially unsustainable. That is what we heard Pansy Wong say. She said effectively that it was broken but we know that that is absolutely not true. This is about promoting the idea that accident compensation is in crisis and it is about talking up National’s true agenda which is not a surprise—it is a return to privatisation. It is nothing new; what did we see in the 1990s? Is this new? This is an absolute rehash of the 1990s but worse. Again what did we see? In the 1990s we were told that accident compensation was unaffordable and that is when we saw the axing of lump-sum payments under a National Government. 
Hon John Carter 
: Really? 
LYNNE PILLAY 
: Yes really Mr Carter. You have a short memory if you cannot remember it. 
Mr SPEAKER 
: The member will not use “you”. 
LYNNE PILLAY 
: I am sorry Mr Speaker although I am sure that you can remember it too. It was the National Government that scaremongered and tried to convince the public that the scheme was unaffordable. 
Hon John Carter 
: What happened? 
LYNNE PILLAY 
: What happened is that many many people in New Zealand—many victims of horrendous accidents—received no lump-sum payment whatsoever under the National Government. I put it to this House that this legislation is the first of many changes and probably the axing of those payments is what is next on the agenda. But I think the Government thinks that perhaps it is just a little bit unpalatable at the moment so it will bring in this measure— 
Hon Dr Nick Smith 
: What’s your position on the bill? 
LYNNE PILLAY 
: My position on the bill is that we oppose it. We know that our accident compensation scheme is the envy of the world. I heard Pansy Wong refer to the introduction of the accident compensation system in 1974. 
Hon John Carter 
: It’s not a welfare system; it’s an insurance system. 
LYNNE PILLAY 
: It is a social insurance system; there is a difference. Let us talk about that. Let us talk about the difference between social insurance or social compensation where there is no-fault 24-hour coverage and where the principle is to provide the support etc. that is necessary as opposed to National’s agenda which is the shipping of accident compensation out to the insurance industry. I heard the leader of the National Party our Prime Minister say there is no difference. 
I say to members opposite that they have said that the scheme is broken and that it is running at a loss. Yet in the last financial year it had a $1 billion operating surplus—$1 billion—and a return on investment that was performing very well comparatively. I am sure that the National leader John Key who was in that industry will accept that the Accident Compensation Corporation has performed very well given the recession and given the challenges. I see the Minister nodding but still the scaremongering goes on that the scheme is broken and that despite the $1 billion surplus we have to cut costs. 
The costings have been done for all long-term liabilities—they go out 40 years. We can make all the worst assumptions—and be really conservative amongst the scaremongering agenda—such as low return on investments high inflation and the most expensive cost-management scenario of all the cases. I note that the Government has changed its mind in terms of full funding but this is not bad from a Government that has no commitment whatsoever to putting money aside for the Superannuation Fund. The Government is having a rush of blood and it is scaremongering about the dangers of accident compensation and the funding deluge there yet it is not making any commitment whatsoever to funding superannuation into the future. Where is the logic in that? I hope that someone from the National Party will explain the logic in that. It is an absolute indictment. 
As I said before our accident compensation scheme is the most comprehensive compensation system anywhere in the world. It is more effective than Australia’s system. 
Hon Dr Nick Smith 
: Is it financially sound? 
LYNNE PILLAY 
: It is financially sound. Labour members are asking whether we have to look at going into the future and keeping the scheme financially viable. Of course we do. We will do it through consultation; we will do it through working with people; and most important of all we will do it through investing in schemes that prevent accidents. But what are we seeing under this Government? We are seeing those schemes being axed. The very things that prevent accidents and that encourage the good behaviour that does not lead to accidents are being axed by this Government. 
Hon Dr Nick Smith 
: If they worked why are accidents still going up? 
LYNNE PILLAY 
: That is the Minister’s argument: if something does not seem to have worked then let us axe it. For the Minister for ACC to sit there and claim that preventive schemes that educate— 
Hon John Carter 
: No he never said that. 
LYNNE PILLAY 
: The Minister did say that. The best investment we can make in the accident compensation system is in accident prevention. 
Hon Dr Nick Smith 
: Even if it doesn’t work? 
LYNNE PILLAY 
: It does work. Again the Minister is scaremongering by saying that it does not work. 
I also want to talk about the cuts and they are cuts. Let us not misinform people by pretending that these cuts are here to help victims. In terms of the sensitive claims— 
Hon Dr Nick Smith 
: Do you support self-inflicted claims? 
LYNNE PILLAY 
: Never mind trying to change the subject! Every time members on this side of the House talk about sensitive claims—[ 
Interruption 
] Let us talk about the cuts in counselling compensation for victims and survivors of sexual assault. Let us talk about a Government that argues that it will implement guidelines no matter how many professionals are opposed to them no matter how many people meet or ask to meet the Minister about them and no matter how many people sign petitions. This Government says that guidelines are in the victims’ interests. That is simply just not true. I put it to this House that that is the biggest most offensive insult of all. At least with other groups such as motorcyclists etc. although there is a degree of untruth in it the Government is saying that it wants to cut costs. The most offensive thing to victims of sexual assault is that this Government is saying: “We are here to help you. That is why we are going to move the goalposts so it is even harder to access the counselling that you need and deserve. That is how we are going to help you.” 
Hon Dr Nick Smith 
: That’s your law. 
LYNNE PILLAY 
: That might be our law but I have just seen a press release that states the Minister is going to review the sensitive claims unit. Mind you it will take 6 months but the Minister will review that unit. I urge the Minister to delay the implementation of the guidelines until the review is complete. There is evidence from every professional spoken to from every victim of sexual assault and survivor of sexual assault who has the courage to speak out about this— 
Hon Dr Nick Smith 
: Not true. 
LYNNE PILLAY 
: The Minister should listen to them and say: “Right we have said we got it wrong. We will carry out the review. But until that time happens we will not implement these Draconian changes that will only serve to re-victimise victims.” That is what I urge the Minister to do. I can see that he is considering that very carefully. I thank him for doing that. 
Hon Dr Nick Smith 
: I am not going to interfere with clinicians. 
LYNNE PILLAY 
: The Minister says he is not going to interfere. That is really rich coming from him. I urge him to talk to the professionals. 
Hon Dr Nick Smith 
: What’s your qualification to make clinical decisions in this area? 
LYNNE PILLAY 
: I am not pretending to make them. I listen to the professionals. 
Hon Dr Nick Smith 
: Why won’t you come to the briefing with the clinicians? 
LYNNE PILLAY 
: I am coming to Mr Smith’s briefing actually and I do listen to the professionals. At the risk of sounding a little big-headed I coming from a nursing background probably have at least some understanding. But my claim to any knowledge about this comes from listening to counsellors psychotherapists victims and survivors of sexual assaults in New Zealand who have said to us: “Please don’t try to re-victimise the victims.” 
SUE BRADFORD (Green) 
: 
 The Green Party will oppose the Injury Prevention Rehabilitation and Compensation Amendment Bill at every step of the way. I am really sorry that National has chosen to stick to its ideological guns and once again begin the process of readying the accident compensation scheme for privatisation by cutting back entitlements and raising some levies unreasonably. 
In almost every respect this bill is a shocker and I hope all affected individuals and organisations will feel moved to make clear strong submissions to the select committee. Some of those impacted by the Government’s attacks on the accident compensation scheme notably sexual abuse survivors and those who work with them and also motorcyclists are very effectively filling MPs’ in-boxes and holding rallies already. But many more people are and will be affected than the people in those two sectors. Accident compensation is something most of us prefer not to think about until we are in a situation where we have had an accident or injury ourselves. Then suddenly it becomes a serious business in terms of whether we are eligible for cover and support and if so for how long and in which ways. Slashing people’s entitlements and making changes in the way that vocational rehabilitation works will have insidious impacts that will undermine the health and well-being of many New Zealanders for a long time to come. 
The fundamental problem with the bill in front of us today is that it is based on a false premise. The National Government has deliberately manufactured a crisis and even before the time of the shift to the new board chairmanship early this year National was cooking up this diabolical brew. All through 2009 and with accelerating intent National has been creating the notion that the accident compensation scheme has an impossibly huge deficit that its liabilities have blown out and that the only things that will save us all from impossibly huge levy rises are measures like those contained in this bill and the readying of the accident compensation scheme for partial or full privatisation. The major reason for the so-called liability blowout is not costs although there is no question that costs are continuing to rise but rather it is the change in the assumptions underlying the accounting and forecasting practices of the Accident Compensation Corporation (ACC). 
The big mistake that Labour made was to push for the full funding of potential liabilities by 2014. That was the first step on this slippery road. The one thing that National is doing that we do support is pushing out the date for fully funding the residual claims liability to 2019 although the Greens actually believe that if we are to have an honest conversation about accident compensation as the Prime Minister proposes we should look seriously at the possibility of returning completely to a “pay as you go” system. Full funding ahead traps the scheme and the Government in a private insurance accounting model. On top of that the ACC board had changed some of its other accounting methodologies. For example $1.3 billion has been added through claims experience and modelling changes $1.3 billion for revised economic assumptions $500 million for adding more safety to the risk margin and $1.3 billion for the cost of “future Cabinet and regulated rate increases” whatever that means. I thank last week’s excellent  
New Zealand Listener 
 editorial for that compilation of figures. 
At the same time as the ACC board and the Government continue to push the line that the scheme is impossibly in the red in fact this year its revenues were $4.5 billion which is $1.5 billion more than it spent on claims. As some experts keep saying—sadly like voices lost in the wilderness—ACC is a mature organisation with enough reserves to pay for around 3½ years of claims. That is the highest level of reserves the scheme has ever held. Sir Owen Woodhouse famous for the principles on which our current accident compensation scheme is founded has stated clearly that he did not intend it to be pre-funded and that the latest Government moves are beginning to undermine its very heart. 
The report of the Woodhouse commission recommended a 24-hour-a-day no-fault compensation scheme that covered people whether they were injured at work at home at play or on the roads. The underpinning Woodhouse principles are community responsibility comprehensive entitlement complete rehabilitation real compensation paid at 80 percent of previous earnings for as long as a person is incapacitated and administrative efficiency. An injury prevention rehabilitation and compensation scheme that at least strives to live up to those principles is what is at stake here today. The bill in front of us hacks into those fundamentals in a variety of ways only some of which I have time to mention here. 
One of the most pernicious changes is in relation to vocational independence assessments. They are used by ACC to decide whether a claimant who is receiving compensation is fit to return to work. Once people are considered to be ready to go back to suitable employment their weekly compensation is stopped within 3 months or sooner of course if they start a job. The bill removes the requirement that the vocational assessment takes into account what a person earned or did before the injury and reduces to 30 hours the minimum number of hours that the person can be assessed as being able to work per week. That means in practice that someone who was earning say $1500 a week before an accident will lose his or her weekly compensation if he or she is found to be able to do a job for 30 hours a week for the minimum wage—that is $375 a week. It does not matter that the job might be to do something far below the person’s experience education or capability. 
The broader impact of lowering the bar in this way is that overall people will be pushed out of the system a lot more quickly. For a number of them that does not mean necessarily that they will get a job but simply means that they will be forced into the benefit system or in the worst-case scenario which happens quite often they will end up with no work and no income because their partner is in paid employment. 
A second major area of concern for us is of course the many disentitlements that the bill contains. The cuts to sexual abuse counselling are one of the meanest attacks on people’s well-being and are deeply ironic when one considers National’s and ACT’s rhetoric about providing support for the victims of crime. That change in accident compensation policy is a deliberate reinterpretation of the law aimed at ensuring that only those sexual abuse survivors who are diagnosed as having a mental illness will receive financial assistance from the scheme. That will mean that many people who until now have had support will no longer get it. Many sexual abuse survivors simply will not seek cover and counselling for fear of the stigma of being labelled as being mentally ill. Others will go through the process and will find that they do not receive cover anyway which in some cases will actually increase the likelihood that they will go on to develop severe mental illness or even end up committing suicide in the future. 
On the subject of suicide I say this bill also goes as far as to end accident compensation entitlements relating to wilfully inflicted self-injury and suicide. That means that in future a suicide victim’s family will receive entitlements in only the very narrow circumstances of the victim’s mental injury being caused by sexual abuse or as a result of a physical injury or by a traumatic event in the workplace. The suicide victim will also need to have already gone through the process of having his or her claim for mental injury approved under the accident compensation scheme before his or her family can get any entitlement. It will not matter whether the victim was incapable of forming a rational intent or whether the suicide was caused by some abject failure of the mental health services to provide appropriate care and treatment. This law change will impact deeply on affected families especially low-income family and whanau at a time when they are most desperately in need of support. 
These disentitlements and others are why I simply cannot understand the Maori Party’s support for this legislation. Cutting back on who receives accident compensation and on how long people receive it for and lifting motorcycle levies by monstrously huge amounts will in different ways have a very damaging impact on people on low wages and benefits—a population among which sadly Maori are disproportionately represented. 
Instead of raising levies and cutting back on a whole range of entitlements we should be having the honest conversation that Mr Key referred to. For example let us talk seriously about a “pay as you go” scheme. If we reverted to that levies could be reduced in the short term because the accident compensation scheme would no longer have to add to its investment. In moving to full funding the Government is effectively borrowing in order to invest with the inherent risk of further losses being caused by investing as happened last year when the global financial meltdown added about $1.6 billion to the scheme’s liabilities. Reverting to a “pay as you go” scheme would simply mean that we would go back to seeing the scheme as being part of the functioning of the Government just as we do the provision of benefits and pensions health care and education. The reserves that have already been built up could be used to smooth out future levy increases. 
Hon Sir ROGER DOUGLAS (ACT) 
: 
 ACT will be voting for the Injury Prevention Rehabilitation and Compensation Amendment Bill. Unlike Sue Bradford the member who has just spoken ACT takes an opposite view. The member who has just spoken said that this legislation was too harsh but ACT believes that it does not go far enough. However the legislation makes improvements and we will therefore be supporting it. 
This bill does not reform the accident compensation scheme. This bill keeps the scheme largely in its current form. It continues to fund the scheme through compulsory levies and it does not apply any ongoing commercial pressure to the scheme’s operation. All it does in fact is manage the pay-out system a little differently. It stops those who harm themselves on purpose from getting payouts. It stops criminals who injure themselves breaking into someone’s house from getting payouts. 
In reality there is nothing of great substance in this bill. There is the same kind of management of the scheme that Labour undertook except that this bill rather than expanding entitlements reduces them in a number of ways. Nothing in this bill deals with the fact that from the scheme’s inception it was a flawed Ponzi pyramid scheme. In the beginning it operated on a “pay as you go” basis. That meant that for many years it seemed to be cheap. The full costs were not apparent because the scheme had not fully matured. All those people with long-term injuries were not in the claims system in those early years. Unfortunately those years of low costs saw the range of entitlements expand so that by the time the system had reached maturity and had absorbed all those with long-term injuries and covered the expanded entitlements the scheme no longer looked cheap. It looked as if it cost an awful lot. 
These problems are set to get worse. We have in New Zealand an ageing society. An ageing society implies not only payouts but also a lower proportion of people paying levies to cover the non-earners account. Because the scheme was essentially a Ponzi scheme in the beginning it required an ever-increasing number of people who were working to pay levies or substantial rate increases. 
To Labour’s credit it realised that that was a problem. It realised that operating the scheme as a “pay as you go” scheme was not viable when we have an ageing population. That is why I believe Labour announced that the scheme would be fully funded by 2014. Unfortunately Labour also undertook a massive expansion of entitlements under the scheme meaning that despite its promises to have the scheme fully funded the unfunded liability expanded. 
The scheme’s unfunded liability now stands at around $13 billion up $5 billion in the past year. If any private insurance company had the books that the scheme has it would be declared bankrupt. The only reason that the scheme still exists is that it has the capacity to increase its levies. In essence it is solvent only because it can force people to cover its costs and has the Government standing behind it. 
In these circumstances the only viable way to ensure that the scheme delivers results for reasonable prices is to open it up to competition. If people can get cheaper rates elsewhere then they should be allowed to leave. If that means that risky workplaces start paying higher premiums then so be it. It will encourage them to improve workplace safety. 
The benefits of competition become apparent if one listens to the nonsense peddled by Labour in its opposition to it. The first thing Labour will tell us—and its members said so today—is that costs will increase because we now have to pay the profit margins of private companies. The facts speak otherwise. The last time that competition was introduced premiums declined by around 30 percent. The argument that profit margins lead to higher prices is simply absurd. By that logic Labour would nationalise everything. 
The second thing that Labour has said is that premiums were lower only because private companies offered cheap rates as loss-leaders. Well that is very interesting. A private insurance company has to have its books signed off by an actuary. That actuary has to say that the income the company received in that year takes into account not only its costs in terms of what it wrote out in cheques during that year but also whether sufficient funds are left over to put into an account that would meet its future liability. Labour on the other hand oversaw a scheme that was meant to be moving towards being fully funded yet its funding liability moved in the other direction and actually expanded. 
The system needs to be fully funded but in my view and in ACT’s view it should also be opened to competition. We can look at it this way. Every single monopoly be it the post office Telecom or coal has always delivered more for less when it has been opened up to competition. Three things happened: prices went down the quality of their services went up and there was more variety in the products offered. I believe that that would happen if the accident compensation scheme was opened to competition. In other words there is no reason to think that the scheme would be any different from the post office or Telecom. In fact it is even more important in some ways to open up the scheme to competition. 
Currently the scheme sets a flat-rate levy based on the risk in an industry. Those employers that have a safe environment subsidise those that have an unsafe environment. There is little commercial incentive to create safer workplaces. Private competition would ensure that that happened. By keeping the scheme as a monopoly and not properly allowing risk pricing to emerge we are increasing the number of workplace accidents. 
In the private market we have insurance excesses. We have no-claim bonuses. We have risk-based insurance. The private market is all about mitigating risk. The scheme on the other hand is about forcing good employers to subsidise bad ones. That is why the last time the scheme was opened to competition not only did costs decrease but also we saw a decline in the number of accidents. Those who oppose competition in the scheme are not just wasting taxpayers’ money. They are also ensuring that more people suffer accidents in the workplace than is necessary. 
RAHUI KATENE (Maori Party—Te Tai Tonga) 
: 
 When Sir Owen Woodhouse presented the results of the 1967 royal commission report on workers’ compensation he summed them up by concluding: “Injury arising from accident demands an attack on three fronts. The most important is obviously prevention. Next in importance is the obligation to rehabilitate the injured. Thirdly there is the duty to compensate them for their losses.” They were simple goals arising out of an admirable commitment to principles such as community responsibility comprehensive entitlement complete rehabilitation meaningful compensation and administrative efficiency. The important challenge before Parliament now some four decades and more later is to assess whether these goals are still relevant whether they have been achieved and how successful the scheme has been in following them. 
Seven years after the Woodhouse report the Government of the day created the Accident Compensation Corporation (ACC) introducing what would later be described as a revolutionary model for cost-effective rehabilitation and compensation. The essence of the exchange negotiated by the State was that in return for giving up the right to sue all New Zealanders had the right to a new universal 24-hour no-fault coverage against injury along with associated rehabilitation and compensation services. For the last 35 years New Zealanders have been contributing to injury accounts that variously cover employers the self-employed earners non-earners and motor vehicle and medical misadventure. 
Part of the process of change introduced by the Injury Prevention Rehabilitation and Compensation Amendment Bill is the proposed increase to three of the levies: the work account levy the earners levy and the motor vehicle account levy. The justification is apparently an increase in the number of claims and rising health costs. Yet conflicting information seems to question why these levy changes need to occur. The recent ACC annual report suggests that claims have stabilised. In fact there was a 7 percent decrease in the last financial year. The annual report also points out progress in the rehabilitation of workers. The goal was to have an 88.5 percent rehabilitation rate 9 months after injury. The achieved rate was 87.5 percent. One percentage point hardly seems worth making a fuss about. Why would we want to review a scheme that has been lauded as a world leader on the basis of a one percent difference? What could be the rationale for a bill reforming accident compensation? 
The Maori Party has raised one major issue before in this House and consistently throughout the term of the previous Government and the current Government and it demands reform. That issue is the significant difference in the rate at which Maori and the general population claim for accident compensation services. This difference appears to be most marked for non-earners the young and the elderly who are arguably the most vulnerable New Zealanders. The difference in rates is even more inexplicable given that Maori are overrepresented in injury statistics across all ages and in all areas. In fact injury is the leading cause of death for Maori aged 30 and under and most of those deaths are preventable. The March 2008 report of Statistics New Zealand revealed that Maori have significantly higher injury rates by occupation with 155 injuries per 1000 fulltime-equivalent workers compared with 111 for Pakeha. It is higher particularly in occupations such as agriculture fisheries manufacturing and trades. There are also significantly more injuries in lower-paid occupations where Maori are overrepresented. 
Meanwhile ACC figures continue to show that Maori make fewer claims to accident compensation and are less likely to receive compensation entitlements. ACC has tried to do something about this by establishing formal channels such as the Maori advisory board Te Roopu Manawa Mai to exchange valuable ideas and information. It also introduced a Code of ACC Claimants’ Rights which contains eight rights encouraging positive relationships between claimants and ACC as they work together for the claimant’s recovery. Although ACC undertook initiatives to improve access through information programmes and better engagement with Maori communities these programmes have not demonstrated significant success in closing the delivery gap. Access for Maori has been consistently lower than for other groups. The data that is available demonstrates that Maori receive treatment at a lower level than non-Maori and where services are accessed they are accessed later and claimants exit programmes earlier. A similar record applies in the area of injury prevention. 
If any amendments are to be made to the Injury Prevention Rehabilitation and Compensation Act 2001 to reduce levies and Crown costs one would think that the broader question of eligibility for accident compensation support would be high on the change agenda. The absence of data around the business significance of Maori claimants could be something the corporation addresses as a priority going into the future. For example if we were to plan for a given level of improvement in access for Maori such analysis might estimate what the impact might be on ACC’s bottom line. Before we even begin this exercise we know intuitively that because Maori are a small population group and constitute a small group of claimants it is unlikely that Maori will be considered a high-value market segment to provide a financial incentive for private insurers to develop Maori-responsive business strategies such as the use of rongoa Maori or mirimiri treatments in the context of a rehabilitation regime. 
The Minister for ACC Nick Smith promoted the context for the changes outlined in this bill as the need to return to a position where accident compensation is both affordable and fair. The goal of being affordable and fair sets up a spectrum ranging from institutional racism at one end to cultural competency at the other. Under the bill Maori in high-risk occupations will pay higher levies. High-risk occupational areas have significant numbers of Maori workers and the bill provides for a matching of risk environments with levy rates so the cost of cover can be expected to increase. Across the board a possible result will be employers structuring employment relations to shift responsibility for risk to employees along the lines of the independent contractor model. There is reason to expect that this model would eventually apply across the board. Preliminary analysis of the changes also reveals that they will disproportionately impact on vulnerable workers and low-income families as the bill decreases access to cover and decreases the level of compensation to these claimants. 
At the other end of the spectrum is a scenario in which the accident compensation scheme values cultural competence. Professor Mason Durie describes cultural competence as being “about the acquisition of skills to achieve a better understanding of members of other cultures”. Culturally competent care involves practitioners establishing and maintaining positive relationships through improving their understanding of tikanga Maori and effective communication. The end goal of course is to achieve better health care outcomes for Maori. Cultural competence is a major focus for the Maori Party. We campaigned on it. We have consistently spoken of it across the health and social sectors and this bill is no different. 
There is another dimension to our decision to vote for this bill’s being referred to select committee to let the people have a say on accident compensation and that is the potential for Maori entrepreneurship and enterprise to rise to the opportunity for innovation. In 2007 ACC undertook a risk-profile review with groups within the Ngai Tahu umbrella resulting in a considerable annual levy reduction. The Federation of Maori Authorities has also been interested in pursuing dialogue around levy rates and the possibility of a Maori consortium leading a corporate arrangement with ACC possibly focusing initially on specific industry sectors such as forestry fishing construction and farming. 
For all of these reasons—and for more reasons that will no doubt arise from submissions—we agreed to support the introduction of the bill and its referral to a select committee so that people can express their views. We want to hear about people’s experience with the scheme. Among others we want to hear from workers and their whanau who have suffered an injury health workers and providers of rehabilitation services. We do this so that the accident compensation scheme can once again be a world leader; so that it can be affordable fair and culturally competent; and so that it can remember always to focus on the best interests of the community. 
ALLAN PEACHEY (National—Tamaki) 
: 
 Thank you for the opportunity to speak in the first reading debate of the Injury Prevention Rehabilitation and Compensation Amendment Bill. There is no better place to start in making a contribution to this debate than to go back to the words of the chair of the New Zealand Medical Association Peter Foley: “Along with the rest of New Zealand we are stunned at the situation ACC finds itself in.” That was Dr Foley chair of the New Zealand Medical Association. I listened with care to the contributions of the two Labour members who spoke Mr Parker and Ms Pillay. Both of them seriously missed the point. There is only one thing that New Zealanders want to hear from Labour on the subject of accident compensation and that is three simple words: “We are sorry.” 
Of course Labour has a major problem with the scheme. It has a major problem with the scheme I say for the benefit of Ms Pillay. It was not Labour’s idea. It was an example of far-reaching social legislation introduced by a National Government nearly 40 years ago. The National Government now finds itself trying to rescue the scheme from its mismanagement under 9 years of the previous Labour Government. I ask Mr Goff to say sorry. It is time for Mr Goff to say sorry to New Zealanders in respect of the scheme. They were so badly let down by the Labour Government that he was a part of. 
Members should look at the figures that Labour is in denial over. On 9 October the 2008-09 annual report of the Accident Compensation Corporation (ACC) was released reporting a loss of $4.8 billion. I invite the next Labour speaker to get to his or her feet and deny the accuracy of that figure. We know that it is true. That comes on top of a $2.4 billion loss for the year before. It tells the current Government that this scheme as it currently stands is unsustainable. The primary purpose of this bill is to save the scheme. It is too late for the crocodile tears on the other side of the House. It is too late to pretend that things are not as bad as that because they are as bad as that. Mr Goff should say sorry. That is what the people of New Zealand want to hear from him. 
The primary purpose of this bill is to reduce the scheme’s ongoing costs to make it more affordable for current and future generations of New Zealanders. The changes contained in this bill will make the scheme more affordable more sustainable and fair. It will improve financial reporting and accountability and will provide for closer working relationships between Government agencies and ACC. 
To sum up this bill will save the accident compensation scheme. This bill will rescue it from the mismanagement of the previous Labour Government. Mr Goff should say sorry. It is time to say sorry. 
Hon RUTH DYSON (Labour—Port Hills) 
: 
 There certainly is a lot to be sorry about as the House considers this legislation. I feel sorry for seasonal workers and their families. I feel sorry for people who have a work-related hearing loss. I feel more sorry than for anyone else for people who have attempted or committed suicide and for the loss their families have to endure not only because of the loss of their loved one but also because of the further insult that the Minister for ACC dished out to them in a pre-determined calculated way. Further they have to suffer because of their disentitlement in this legislation. 
Allan Peachey the member who just resumed his seat quoted Peter Foley the chair of the New Zealand Medical Association. Although Peter Foley welcomed this announcement of the privatisation of accident compensation his predecessor Dr Pippa McKay who is an obstetrics and gynaecology specialist from Canterbury said that when she heard the announcement of privatisation on the radio it made her groan and gave her a sense of déjà vu. She said that the last time the scheme was privatised during which time she was leading the doctors it was just a nightmare. She knows what she is talking about. She has been through this crazy experiment in the past and she has described it from a general practitioner’s point of view as a nightmare. 
This bill is very easy to summarise. It says that New Zealanders will pay more and get less. They will pay higher levies to the scheme or to their private insurance companies and they will get a lower level of entitlement. The legacy that Dr Nick Smith as Minister for ACC will leave New Zealand is this: pay more get less. It was only in March this year and it is not even November yet that Dr Nick Smith was adamantly denying any interest in introducing competition—any interest at all in opening the work account to private insurers. He said that would happen only if it were in the best interests of taxpayers business and workers. But he had one meeting with Rodney Hide and he said he would forget about that and forget about John Key’s commitment to having an honest and open conversation about how much people will want to pay and what their level of entitlement will be. 
In this bill Nick Smith has delivered what he wanted to do. He wanted to spend 6 months scaremongering around the country telling us that the accident compensation scheme was insolvent that it needed fixing and that it was totally broken. He wanted to do exactly the same thing that Bill Birch wanted to do. He wanted New Zealanders to pay more money into the scheme but to get a lower level of entitlement. This is part of Nick Smith’s reforms to ensure that people get less. 
The National Government knows from its polling that New Zealanders are allergic to the words “privatisation” and “private insurers” so it has been parading up and down the country talking about opening up the scheme to competition. Well New Zealanders fell for that in 1998 but they will not fall for it again. We know that this is not about more efficiency fairer entitlement better access to rehabilitation and an easier return to work. We know that this is about having private insurers come in and about having New Zealanders pay more money and get a lower level of entitlement. That is all that this is about. 
Some specific areas in this legislation are described quite accurately in the explanatory note of the bill. I was very interested in the comments in the section on “workplace gradual process disease or infection” which reinstates a three-part rule in order to get cover. It quite specifically says that this will reduce the number of people who receive cover. It quite specifically says that it does not matter whether someone has an injury. It does not matter any more to Dr Nick Smith and his National Government colleagues whether someone is so badly injured in his or her workplace that he or she cannot work any more. It does not matter that that person is in pain. To the National Government it matters only that that person is costing the country money and costing that person’s employer money if it is a workplace injury. That is not acceptable to the Government. It does not matter to Dr Nick Smith if a person has been injured at work and is so badly injured that he or she cannot even go to work any more. Under this legislation quite explicitly it says that this will reduce the number of people receiving cover. Does this legislation fix the injury? Does it make the injury go away? Does it suddenly restore a person to wellness? Does this legislation get people access to the treatment and to the rehabilitation they need to be able to work and support their families? No it does not. This bill states that it has upped the bar and increased the threshold. So even though that person still has exactly the same injury as he or she had last year—tough! That is what Nick Smith says to injured people. He says “Tough!”. They are injured but they will no longer get cover. 
This is the same approach as that for hearing loss. People who suffer hearing loss in their workplace currently get accident compensation cover. They have done so for a long time but that cover is out the door now. People with hearing loss now have a 6 percent threshold to reach before they are entitled to receive cover. So if someone has lost only 5 percent of his or her hearing in the workplace and wants some help to hear fully again what will Nick Smith say to that person? He will tell that person to sod off. That is basically what the Minister will say. He will say that yes he knows the person has a 5.9 percent hearing loss but the National Party does not care about that because that person is costing his or her employer money. Well in my view if employers allow a workplace to be so noisy that people lose part of their hearing then those employers should front up and bear the responsibility and the cost for the hearing loss their workers have suffered. That is an employer’s responsibility. 
This bill says “Tough!” to the people who have not reached that magical 6 percent threshold but the worse insult in my view is to the people who were so callously insulted by the Minister Nick Smith last week. That was when he said that under accident compensation legislation people get such great money if they kill themselves that if he had a terminal illness and his doctor said that in 30 days’ time he would die he would wait till the 29th day and then throw himself under a train so that his family would be better off. Not only was that a highly offensive comment about the state that people are in when they injure themselves or commit suicide but it is deeply offensive and hurtful to the families who have lost loved ones through suicide. Today in the House Dr Smith said that suicide was not an accident so it should not be covered. Well a lot of injuries are not accidents. A lot of injuries occur to people who know full well that they have a very high risk of having an injury. In my view if people are so unwell and so distressed that they attempt to do harm to themselves even to the point of killing themselves their families deserves all the support that we can give. If it is good enough for the accident compensation scheme to offer financial support to and cover the injuries of those who go hang gliding and then crash and do serious damage to themselves to those who go mountain climbing to those who play sport or to those who drive a car when all those people know full well the risks they are taking then in my view people who are so unwell that they harm themselves or commit suicide deserve to have their injuries covered as well. I think that the Minister made a highly offensive contribution. 
This legislation is a winding back of entitlements that New Zealanders signed up to in a social contract. We gave up the right to sue but under Nick Smith we are paying more and getting less. 
MICHAEL WOODHOUSE (National) 
: 
 I begin by affirming my party’s commitment to the principles in the royal commission report so well articulated by the member Rahui Katene but also to the Accident Compensation Corporation (ACC) itself and its goal of ensuring a fast and lasting return to work or independence for New Zealanders. But having said that an awful lot has changed in the 42 years since the Woodhouse report was published. It is important to periodically review whether the scheme continues to deliver value for New Zealanders; and if ever that review was necessary it is right now. 
I congratulate the Ministers on their timely and carefully considered amendments as set out in the bill. It is a bit surreal to have to defend the changes being proposed by this bill in the face of the accident compensation scheme’s recent financial performance. I think the public have been a bit numbed into disbelief by the scale of the numbers such as $2.4 billion 2 years ago and $4.8 billion in the last year. The first of those reports of course was signed off as correct by the previous Labour Minister Maryan Street. She had no problem doing so but now is part of a party that continues to deny that a problem even exists. Frankly it strikes me that Labour members are either completely ignorant of the way the scheme works or deliberately evasive about their role in the parlous financial state that it has found itself in. That is no real surprise given Labour’s contribution to the situation. Even Labour’s finance spokesman Mr Cunliffe adds to the chorus of people who think that because there was a cash surplus everything is all right in the scheme. It beggars belief that that is the extent of Labour’s financial literacy. But it does seem to be the theme of the previous administration which believed honestly that it left office with everything all right. It is a bit like saying somebody had jumped out of a plane without a parachute and is OK 50 metres above the ground. 
Members opposite might not think that the accounting result is real but the proposed levy increases that are the consequence of that are very real. The earners levy for example will have doubled in 2 years under the proposed levy increases if nothing happens. I certainly do not need to remind the House about the response that the motor vehicle levy increase has. At least the Green member who spoke was honest in her party’s preference that it wants to go back to a “pay as you go” system. In contrast the Labour Party does not oppose full funding but does not want to pay for it. Well it cannot have it both ways. 
Contributing to that confusion was Labour Party President Andrew Little who attacked just about everybody involved in the preparation of that financial report: the accounting staff the auditors the actuaries the independent overseers and even the Minister’s office. As a chartered accountant I am frankly insulted at the accusation that the report which was prepared absolutely in accordance with financial reporting standards should somehow have been made to look worse for political ends particularly when that accusation comes from the president of the party that is the main reason for the state that the accident compensation scheme finds itself in. 
Mr Parker would have us believe that the performance of the scheme is down to negative investment returns. It is true that it has suffered in the downturn albeit ahead of the rest of the market and it should pick up. But two things are not being said by Mr Parker. Firstly the projected upturn is already built into the projections; and secondly the increases in the scheme’s unfunded liability started 4 years ago which was well before the economic downturn. But even when it was apparent what was Labour’s response? It continued to widen the entitlement base and allow ACC to take its eye off the rehabilitation ball even though working to exit claimants is not only good for claimants but a legal requirement and then refused to accept ACC’s recommendations for levy increases that more accurately reflected the cost of those changes. In a nutshell when it should have been applying greater levy increases and at least holding entitlements it was doing the opposite on both fronts. 
When the financial chickens come home to roost what happens? We had the debacle of the failure to disclose the true state of the scheme particularly in the non-earners account. On several occasions in the lead-up to the pre-election fiscal update Labour had a chance to disclose what was going on and chose not to. Despite being in clear breach of the Public Finance Act the Opposition used a minor comment in the Jenkins report to lump complete responsibility for that on to Treasury in an attempt to remove itself entirely from any blame. So much for loyalty to Government staff or the ownership of one’s actions! 
Well the Opposition can blame Treasury officials all it likes. But I think Dr Cullen a very experienced Minister of Finance the previous Minister Maryan Street and the Cabinet knew exactly what they were doing. I think they made that decision not to include ACC’s parlous financial state in the Pre-election Economic and Fiscal Update and the responsibility should lie firmly at Labour’s feet. 
I come to some accusations that the Opposition levelled. It said that the changes in this bill are somehow against the stated intention of the original royal commission report. Members opposite would do well to familiarise themselves with that report because they quote it a lot but there are a number of changes that are entirely consistent with the Woodhouse report. The first has been mentioned; it is self-inflicted injury. The report recommended that it “should not be the subject of compensation” nor should the majority of sickness or disease. It said “the general basis for protection should be bodily injury by accident which is … unexpected” but to “the exclusion of incapacities arising from sickness or disease”. 
Another matter is the importance of using classification systems like ICD or DSM-IV—systems that have been very recently much criticised by the Opposition. All of this underscores the fact that the scope of compensation has been an issue that has challenged successive Governments since 1974 and it is not appropriate to say that remedying the nonsense that went on over the last 9 years by the previous administration is somehow in breach of the underlying principles of the scheme. 
I shall touch on comments by Labour spokesperson Mr Parker about whether changes to the scheme mean widespread cuts to entitlements and that the only way to save money in Vote ACC is by cutting those entitlements. It is absolute nonsense. The best way— 
Carol Beaumont 
: Then why are you doing it? 
MICHAEL WOODHOUSE 
: I tell that member to listen up and I will tell her. The best way to reduce expenditure is to reduce the rate of injury and to rehabilitate people in a more timely manner. It is as simple as that and frankly one of the more disappointing aspects of the changes being made to accident compensation by the previous administration was the way in which ACC was tacitly encouraged to take its eye off the ball in rehabilitation. It was a kind of “come one come all” approach. It meant that to get people back to work or to full fitness sooner than they otherwise might be is a bad thing or that they are being kicked off the scheme. It simply is not the case. 
The legislation requires ACC to work as hard as it can to ensure a return to work or independence. Not only that but we owe it to the claimants to do that even when the challenge of getting back to work after time off is pretty daunting for them. In fact that is when they need the most support. It is also when ACC should not shirk its responsibilities in that regard. Unfortunately rehabilitation rates have been declining significantly over the last few years and I do not think that is down to a change in the population base or an ageing population. It has to do with the way we approach the rehabilitation of our claimants. 
The bill extends the time for full funding of pre-1999 claims and I am sure the Opposition will not be opposing this because Mr Parker even had a member’s bill to that effect. We have a widening gap between the present value of the future cost of residual claims and the asset base to support them. Extending the time for fully funding on its own will not take pressure off levy payers in the long term so we need to ratchet up our rehabilitation for those claimants. Some who have been on income compensation for years will be a challenge to be rehabilitated but I support and encourage ACC’s efforts in that regard. 
One of the philosophical things to establish is whether accident compensation is an extension of the welfare system or an insurance scheme. There is no doubt in my mind that accident compensation is an insurance scheme. When premiums are being set according to pools of risk and when the premiums go up and down according to the claims rate and claims duration which is the key cost driver it is an insurance scheme. There is absolutely no doubt about that. 
I conclude by congratulating the Minister on his efforts to bring the public’s attention to this very important financial risk to the Crown and on involving me in some of the policy discussions on the amending legislation but mostly on his courage in doing the right thing by New Zealanders by ACC and by its stakeholders in the face of considerable hostility from the Labour Opposition and its union supporters. I congratulate the Minister and I commend the bill to the House. 
CAROL BEAUMONT (Labour) 
: 
 If the previous speaker Michael Woodhouse thinks that is hostility he has not seen anything yet. I rise proudly to speak against the Injury Prevention Rehabilitation and Compensation Amendment Bill and to confirm that Labour will be opposing this legislation. The bill is another example of a Government that does not care about the needs of ordinary New Zealanders. 
The changes being proposed in this bill and the other changes being mooted in the area of accident compensation will no doubt increase costs reduce entitlements and move further to an insurance model—I think that the previous speaker made that pretty clear—and away from the principles of our world-class accident compensation scheme. During tough times that will put costs back on to ordinary New Zealanders. It is a cost-shifting exercise and it will be New Zealanders who pay. The costs do not go away; they are merely shifted to the injured person. 
I want to talk about some of the history of accident compensation because a number of people including Mr Peachey have talked about that. I quote Sir Owen Woodhouse who said that accident compensation changes being mooted by the Government were uncaring and predatory and that they breached the principles of the scheme he authored as head of a royal commission in 1967. 
The accident compensation scheme implemented in 1974 was the first comprehensive no-fault accident compensation scheme introduced in any country using the British legal system and it did some very important things. In particular it ended costly legal battles to force employers to pay compensation for work injuries. It also cut administrative costs from about 30 percent in private insurance schemes to 10 percent. There was a very good comment by Tapu Misa in the  
New Zealand Herald 
 recently. She talked about the fact that it is easy forget how revolutionary our accident compensation scheme was and how visionary its architect Sir Owen Woodhouse was. 
It is easy to forget what life was like before April 1974 when the accident compensation scheme was introduced. It was not introduced just by National. It was introduced under a National Government certainly—the Holyoake Government—but it was bipartisan cooperation that led to the introduction of the accident compensation scheme. Sir Owen described the pre-1974 situation as constant litigation and arguments about how an accident should be defined and whether it had arisen in the course of employment. He said that the benefits were “meagre and limited in duration.” and that the process could be very long expensive uncertain and unfair—for example before 1967 only one negligence claim in every 100 was even partially successful. 
I think it is important to recognise that background because I do not believe that the changes in this bill go anywhere near what we will see from this Government. It will do a great deal more than this. So members opposite including the Minister can introduce this bill and say: “We had no choice but to make these changes and anyway they are quite specific and that is it.” but New Zealanders know that that is not it. 
I remind people of the Woodhouse principles because again we have referred to them in this debate. They are very important and I think the real conversation should be about a scheme that meets those principles of community responsibility. It was felt as a matter of national obligation and interest that the community must protect all its citizens. In other words we all reap the benefits of a modern fast-paced industrial society and we should be prepared to pay for the detriments and not leave those who are inevitably injured to struggle on alone. The second principle was comprehensive entitlement—that it should be financed on a uniform method of assessment regardless of the cause that gave rise to the injuries. Complete rehabilitation was another principle and none of us would argue about proper rehabilitation despite the comments from across the House that somehow Labour does not agree with or support rehabilitation. The next principle was that compensation needs to be real compensation. 
Those are very important principles and I want to know what at this stage the Government is doing to justify its moves to privatise increase costs and reduce entitlements. If we look at this bill and the things that have been said since the Government was elected we see a cynical manipulation. It is absolute scaremongering. 
Hon Dr Nick Smith 
: Oh yeah we made up the $2.4 billion last year! 
CAROL BEAUMONT 
: Let me give the Minister some examples. He talked about a very significant blowout in liabilities and that the accident compensation scheme is technically insolvent and going down the gurgler. Let us talk about that a little bit more. What is the definition of insolvency? Insolvency is the inability to pay one’s debts as they fall due. But Dr Nick Smith’s definition of insolvency is “unless the future cost of all existing claims is fully funded by investments set aside for that purpose it is insolvent”. Of course by his definition the accident compensation scheme has been insolvent since the day it started. So the member’s words are a nonsense. 
However Nick Smith is right in saying that Labour agrees with the extension of the period to fully fund residual claims from 2014 to 2019. That is the one thing in this bill that actually makes sense and actually that extension was proposed by the previous Labour Government. We said that it needed to happen. People are not being sucked in by the member’s comments. People are nervous about what is going on and they are starting to get very very angry. 
I quote a couple of media commentators who have been looking at what the Government has said. In the  
New Zealand Herald 
 Brian Fallow writes: “For the Government to wrap legitimate concerns about slippage in ACC’s performance in a whole lot of shrill scaremongering and scapegoating is gratuitous. Indeed it is downright irresponsible when talking about the scheme to use terms like ‘insolvent’ and ‘going down the gurgler’—even if the context is counterfactual—because there are people who are dependent on it to keep body and soul together and will do so for the rest of their days.” 
In the  
Dominion Post 
 Vernon Small writes: “costs are increasing investment returns are down the unfunded liability is swelling and some changes are necessary. But is ACC critically injured? Labour has called the assault on the state injury insurer—an assault coming from everyone in the government from the Prime Minister John Key down—a manufactured crisis and Labour is right.” 
Sadly as I said people are worried and they are asking questions. They are worried about what the Government is proposing to do and there is mounting anger. Over the course of the long weekend I went to a number of events and at every single one of them a range of people asked me what you were doing with accident compensation. 
Mr DEPUTY SPEAKER 
: Order! 
CAROL BEAUMONT 
: Sorry Mr Deputy Speaker not you. Well actually you too but the Government— 
Mr DEPUTY SPEAKER 
: Just stick to the point thank you. 
CAROL BEAUMONT 
: People are concerned about what the Government is doing. People do not trust this Government when it denies its real agenda with accident compensation. The Minister in his first reading speech on this bill said that the Government had no choice and that a small number of specific changes were being made. Sir Roger Douglas said that the bill is just about managing the payout system a little differently. 
But what is the Government really planning? There have been so many flip-flops and changes of mind—it is almost unbelievable. On 8 March for instance Nick Smith said that 2011 was the earliest date the Government would allow private insurers to compete with the Government in this area. On 2 July in response to a question from me he said that it is not intended that the stocktake group will do an investigation into introducing competition into the work account because quite frankly it is not a priority. He said that it is not the area where the scheme needs attention. Today Gerry Brownlee said that every account is in an utter mess. Well which of these is it? 
In relation to the privatisation of accident compensation the Government is talking about competition in the work account. Well that does not fool people any more. People understand that that is code for privatisation. Clearly this bill is the first step to full privatisation and an insurance model. We have all heard about some of the possibilities being considered such as people being required to pay excesses before they get any compensation. It is a slippery slope when we start setting up one group of New Zealanders against another. Now it is motorcyclists. What about extreme sports people or kids playing sport? In Australia children are being denied the right to play sport because their parents cannot afford the levies. Where is the honest conversation with Kiwis over these changes? 
JO GOODHEW (National—Rangitata) 
: 
 It gives me great pleasure to stand and support the Injury Prevention Rehabilitation and Compensation Amendment Bill. This bill brings the House to the stage where we begin debating how the National-led Government will preserve and protect our 24/7 no-fault accident insurance programme. Quite frankly after the debate over previous weeks it is time that we refine exactly what is going to happen. We need to get it out there get it debated and—I must say after years of neglect—get the accident compensation scheme back on track. It gives me great pleasure to support the first reading of this bill. 
A party vote was called for on the question  
That the Injury Prevention Rehabilitation and Compensation Amendment Bill be now read a first time. 
Ayes 69 
New Zealand National 58; ACT New Zealand 5; Maori Party 5; United Future 1. 
Noes 53 
New Zealand Labour 43; Green Party 9; Progressive 1. 
Bill read a first time. 
Hon Dr NICK SMITH (Minister for ACC) 
: 
 I move  
That the Transport and Industrial Relations Committee consider the Injury Prevention Rehabilitation and Compensation Amendment Bill 
 that the committee report finally to the House on or before 12 February 2010 and that the committee have the authority to meet at any time while the House is sitting (except during questions for oral answer) and during any evening on a day on which there has been a sitting of the House and on a Friday in which there has been a sitting of the House and to meet outside the Wellington region during a sitting of the House despite Standing Orders 187 189 190(1)(b) and (c). 
A party vote was called for on the question  
That the Injury Prevention Rehabilitation and Compensation Amendment Bill be referred to the Transport and Industrial Relations Committee. 
Ayes 69 
New Zealand National 58; ACT New Zealand 5; Maori Party 5; United Future 1. 
Noes 53 
New Zealand Labour 43; Green Party 9; Progressive 1. 
Motion agreed to.