Douglas Roger: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
Douglas Roger: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
[Volume:654;Page:3784] 
Hon Sir ROGER DOUGLAS (ACT) 
: 
 The Minister for ACC’s analysis of the financial position that the new Government inherited from the previous Labour Government is I believe an accurate one. To call it a disgrace would be to treat it rather lightly. The question now is what the new Government intends to do about the situation that it inherited. The Minister said that there would be redundancies at the Accident Compensation Corporation (ACC) and there would be increased charges but I say to the Committee and to the Minister that such an approach is not likely to work over the medium term. 
The real problem with ACC is that it is a monopoly and that is the fundamental problem that the changes the Minister is talking about will not overcome. Monopolies always fail and they fail for one simple reason: they are not required to offer cost-effective and good-quality services to attract customers. Monopolies fail to meet consumer demand because consumers simply have no other choice. Monopolies fail to reduce costs because they have no competition to drive out their high-cost structure. Only competition in this area will make the fundamental changes and restore ACC to some level of reasonable performance. 
ACC is bankrupt. There is much confusion on this point—fostered I might add by the Labour Opposition—but the fact remains that if ACC was a private company or corporation it would already be in liquidation. It has what is called an unfunded liability and I ask the Minister what he intends to do about this unfunded liability over time. But the Minister has inherited more problems than just the unfunded liability. It may well be the biggest problem but another reason why ACC is bankrupt is that there are now 1.7 million claims per annum. Almost 40 percent of New Zealanders are making a claim. I note that despite that figure ACC is spending millions advertising its “You’re covered” campaign. What does ACC want to make it—2.5 million claimants? 
According to ACC’s PricewaterhouseCoopers 2008 report only around 5 percent of these claimants could attribute any fault to another party. Yet before 1972 we had a situation where around 5 percent of people who could prove third-party fault got compensation. There is something out of whack here. Now only 5 percent of people say they can attribute fault to someone else. Before 1972 only 5 percent could not show that fault could in fact be attributed to someone else. 
The corporation’s administrative spending is incredible. We have seen a situation where it now spends $468 million in operating costs. By my calculations that amount has increased by 30 percent since 2005—up from $341 million. Doing a quick calculation I think it is now $127 million more than it was 3 years ago. I would be interested in what the Minister in the chair Dr Nick Smith intends to do about that. 
But coming back I say it is really only competition that will rectify this situation. I ask the Minister what he will do about the situation where the scheme shields the negligent. The accident compensation levy schedule is based on aggregates. For example it presumes—