Foss Craig: Questions for Oral Answer — Questions to Ministers 
Foss Craig: Questions for Oral Answer — Questions to Ministers 
[Volume:652;Page:1745] 
1. CRAIG FOSS (National—Tukituki) 
 to the  
Minister for ACC 
: What reports has he received on the performance of ACC? 
Hon Dr NICK SMITH (Minister for ACC) 
: 
 I received the Department of Labour’s quarterly report on the Accident Compensation Corporation (ACC) last month. It is a quite critical report and notes that ACC is failing to meet six out of the seven key performance indicators that cover financial management that were set down by the previous Minister. Key performance indicators in which ACC is failing are rehabilitation costs per treatment costs per entitlement claim the return to work rate the long-term claims pool and the solvency ratio. By anyone’s measure that is not good and that is why the Government is making changes. 
Craig Foss 
: What reports has the Minister received on the long-term rehabilitation trends at ACC? 
Hon Dr NICK SMITH 
: ACC’s 3-month rehabilitation rate consistently improved from 1995 until 2001 but it has been declining since 2003. The latest rehabilitation data at December 2008 was the lowest since records became available. The 6-month and 12-month rates show a similar trend. This trend of workers being out of work for longer is bad for the individuals and increases costs for the accident compensation scheme. It is one of the areas where the new Government wants to see an improvement in ACC’s performance. 
Sue Bradford 
: What does the Government mean when for example John Key says that accident compensation will not be privatised but that private companies may have the opportunity to get involved? What is the difference? 
Hon Dr NICK SMITH 
: I am surprised that every time we raise issues about performances there is this old tired line and the sort of slogan of privatisation. I make plain to that member and members opposite that this Government is totally committed to a 24/7 State insurance model for accident compensation. 
Craig Foss 
: What reports has the Minister received on ACC’s long-term weekly compensation pool? 
Hon Dr NICK SMITH 
: I have received reports that show a consistent decline in the number of people on weekly compensation from 1995 until 2005 and a consistent and significant increase since that time. Long-term weekly compensation is a major expense for ACC and this upward trend in numbers is a factor in the latest reports which show a blowout in ACC’s liabilities. 
Sue Bradford 
: Will the Minister ensure that there is genuine worker representation on the reconstituted ACC board at the end of the month? 
Hon Dr NICK SMITH 
: I am working with the new chair Mr John Judge to ensure that we have a very well balanced and highly skilled board. This will ensure that ACC is able to deliver for all New Zealanders on a scheme that will ensure that when they have accidents they are properly covered but it will also ensure that accident compensation levies are affordable. 
Craig Foss 
: What has been the performance of ACC’s investment portfolio and how has this influenced the Minister’s decisions on changes to ACC? 
Hon Dr NICK SMITH 
: ACC’s investments have been adversely affected as have all investment funds since 2006. I note in the department’s report that this is one area of ACC’s performance that has been adequate and comparable to that of the other fund managers and I share that view. The only criticism I have of the board is that expensive extensions of the accident compensation scheme continued to be made in 2008 well after investment returns had plummeted. The board should have bluntly warned the Government of the risks of extending the scheme when income was going through the floor. 
Hon David Parker 
: Can the Minister confirm that at 1.49 this afternoon 11 minutes before question time he announced a $32-per-year increase in the motor vehicle levy as from 1 July 2009 and how does he explain that $32-per-year increase when last week he was scaring New Zealanders with threats of motor vehicle levy increases of some $500 per annum within a year or two? 
Hon Dr NICK SMITH 
: Mr Speaker—[ 
Interruption 
] 
Mr SPEAKER 
: The Hon Dr Nick Smith has the floor. 
Hon Dr NICK SMITH 
: The member exaggerates. The figure that the member mentions as being “in a year or two” for anybody who would read my press release was the projected figure by ACC in 5 years’ time. I am advised by the Department of Labour that the amount I would require to increase the motor vehicle levy to fully fund the scheme under current policy and legislation would be $121 this year. The Government said that that was unacceptable; that is why we have gone for the smaller amount of $32 which is significantly less than the $50 increase that Labour imposed last year. The reason we need to make changes to ACC is that I do not want to see those ongoing increases. 
Craig Foss 
: Is the Minister aware of any areas of ACC policy where the board has accepted that it made mistakes? 
Hon Dr NICK SMITH 
: Yes the board has advised me that its decision in 2004 in respect of physiotherapist funding was a mistake and it has described the policy that has seen costs blow out from $58 million a year to an expected $225 million per year as “untenable”. These policy changes were driven by the previous Government not by the board but the board must take some responsibility for the very poor projections of how much that policy change would cost. 
Hon David Parker 
: Can the Minister explain why he told Mr Ross Wilson and other board members in December 2008 not to speak out about ACC’s performance and why did he not allow the board to explain its understanding of ACC’s performance? 
Hon Dr NICK SMITH 
: It is the longstanding practice that boards do not speak publicly. It was the policy during the entire time of the 9 years of the previous Government. It is my view that nothing is to be achieved for the public and for ACC to have contradictory statements or other controversy between the chief executive the Minister and the board. It is my view that strengthening of the board is necessary particularly in respect of financial management skills. That is why I have appointed John Judge as the new chair. 
Hon David Parker 
: Can the Minister confirm that National has instituted a policy of gagging public servants and board appointees as it tried with Barry Matthews and now the ACC board when their views differ from the story the National Ministers want the public to believe? 
Hon Dr NICK SMITH 
: I find that question from a Labour member absolutely extraordinary in the sense that it has a record over the last 9 years of not just public servants but the private public—through the Electoral Finance Act—being unable to express their view. I am surprised that Mr Parker has had a sudden change of heart. 
Hon David Parker 
: I seek leave to table a letter that says that it is of concern to the board that at the Minister’s request it has been unable to respond to any public commentary on its performance. 
Mr SPEAKER 
: Leave is sought to table that letter. Is there any objection? There is no objection. 
Document by leave laid on the Table of the House. 
Hon Dr NICK SMITH 
: I seek leave of the House to table the most recent report from the Department of Labour on ACC’s performance showing that it had not met six of the seven key performance indicators in the area of financial management set by the previous Government. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is none. 
Document by leave laid on the Table of the House.