Bayly Andrew: Accident Compensation (Financial Responsibility and Transparency) Amendment Bill — First ReadingText is incorporated into the Bound VolumeBayly Andrew: Accident Compensation (Financial Responsibility and Transparency) Amendment Bill — First Reading[Sitting date: 02 June 2015. Volume:706;Page:4212. Text is incorporated into the Bound Volume.]ANDREW BAYLY (National—Hunua):It is great to be able to talk on this Accident Compensation (Financial Responsibility and Transparency) Amendment Bill. It is interesting listening to the debate. It is full of misunderstandings and misinformation in my view. I just want to acknowledge at least that New Zealand First is supporting the proposed bill. Also I want to acknowledge the Greens for being positive although there are times when I could not quite understand what the previous Greens speaker was saying particularly when she made the point that she could not understand that ACC was not in fact an insurance scheme. To date I think the most disappointing of all the contributions has been from Labour. It showed a significant lack of understanding and I am hoping that we are going to get some further input over time.This bill must be seen in the context of the outstanding financial result that has been achieved over the last 6½ years. I think credit is due not only to the board but also to the management team. The board of course is led by Paula Rebstock and the chief executive Scott Pickering. They have done an outstanding job of turning this organisation round. Do you know when this Government came to power 6½ years ago the state of ACC’s accounts was appalling. In the year to June 2008 the corporation reported a deficit of $2.4 billion and it had assets worth a mere $9.6 billion. With good financial management ACC reported a surplus of $2.1 billion in the year to June 2014—as opposed to a deficit. That represents a $4.5 billion turn-round in income for the corporation. Not only that its assets have grown to $27 billion—$27 billion. That is basically a $17 billion increase over the past 6½ years.As a result of this performance the Government has already announced decreases in levies totalling $1.5 billion made up of some changes to levies effective on 1 April 2014. First of all the work account levies have been reduced from $1.15 to 95c for every $100 of liable earnings and in respect of the earners account a further reduction has been made from $1.48 down to $1.26 for the same $100 of liable earnings. In addition to that $1.5 billion we have announced more recently a further $500 million of savings with $375 million commencing in the year 2016-17 and a further $120 million in the year thereafter. These are great outcomes and this is about sharing some of the benefits with all New Zealand businesses and with hard-working New Zealanders also. These savings are large they are significant and they are welcome.What I find most exciting listening to what ACC is about is that during 2013-14 it had four key focuses. First of all it wanted to reduce road injury and it was putting in place a whole range of prevention programmes. It was about reducing public injury and again it was introducing a whole raft of prevention programmes around that. It had a specific thing around preventing falls. Fourthly and this is probably the most important to many of us ACC was about preventing workplace injury and working alongside WorkSafe New Zealand. To do that it has introduced a whole raft of new investment approaches for injury prevention.Sue Moroney: Cutting funding for programmes you mean.ANDREW BAYLY: This is about ACC designing and implementing more successful programmes. Unlike what is being said by the Opposition member from Labour who is quite incorrect the level of investment in this area has increased from $22 million in 2013 to $34 million last year. But that does not even take into account the other investment that has been made alongside organisations such as WorkSafe. Not only is it about the money which—The ASSISTANT SPEAKER (Lindsay Tisch): I am sorry to interrupt the honourable member. The time has come for me to leave the Chair for the dinner break.Sitting suspended from 6 p.m. to 7.30 p.m.ANDREW BAYLY: As I was saying just before the dinner break ACC has been investing $34 million in injury prevention schemes which is a great thing. That taken with the other entities involved in that area including WorkSafe is contributing to a large focus on reducing injuries in New Zealand. That is why I believe the Opposition is wrong in making the assertions that it has been making with regard to this issue.It is also interesting to note that in 2013-14 new claims increased by just under 5 percent taking the total to about 1.8 million new claims assessed that year. Despite the pressure of these additional claims 93 percent of all these claims resulted in people going back to work within 9 months. I think that is an admirable achievement by a well-run ACC. Also at the end of June 2014 the difference in terms of the assets of the commission had narrowed to just over $100 million. Again we were talking about that before. That substantial improvement was due in large part to a $2.1 billion surplus and also to improved investment returns. Although this is all good what most people do not appreciate is that the decreasing investment returns and the changes in discount rates have a significant impact on the returns that ACC reports.The volatility is due to two things. Firstly ACC is required to assess on a mark-to-market basis the market investments held under its investment account which means that every year it has to go through and look at the current valuation. Secondly when it comes to assessing liabilities it adopts Treasury’s view on an appropriate discount rate. Here we have an independent body Treasury determining what an appropriate discount rate is—in terms of assessing its future liabilities. As noted by the chair of ACC at a recent Transport and Industrial Relations Committee hearing changes in the discount rate can be substantial. She noted that it had a $4 billion impact in that year. The essence of what we are trying to do with this bill is to provide a framework for determining how ACC’s levied accounts are funded while having regard to this issue of volatility.I hear Opposition members claiming that ACC accounts are over-funded and therefore the corporation should be paying out more in terms of reduced levies. In my view Opposition members are wrong as they misunderstand the real situation. Just to be clear in the annual report in June 2014 the work account was funded at 138 percent the earners account was funded at 131 percent and actually the motor vehicles account was slightly underfunded at 99 percent.Sue Moroney: Ah! So how come the levies got cut there?ANDREW BAYLY: What the good member across the way does not appreciate is that the valuation of the liabilities that I spoke of before takes into account only 75 percent of the assessed fee. That is an approved rate but it does not take in the full liability. What the chair of ACC said to us is that the commission’s No. 1 concern is to make sure that we have got levy stability and to ensure the long-term viability of the scheme. That is what this bill is about. It will improve the framework for determining how ACC levies accounts it will make sure that the way that is being determined is clearer and more transparent and also it will make sure that the residual levy is not over-collected. We have spoken about this before where we have got this residual amount that needs to be dealt with—$3.4 billion—and this bill is going to address that in a comprehensive way.I think what is being proposed particularly in new section 166A which is inserted by clause 5 of the bill is firstly to deal with the cost of claims and to make sure that they are fully funded by offsetting adequate asset returns around those; secondly to make sure that the levies also meet the lifetime costs of claims; and thirdly if an account is in deficit to set out a framework to make sure that we can get to a point where there is an appropriate return. I believe this is a great bill and I strongly commend it to the House.