Accident Compensation (Financial Responsibility and Transparency) Amendment Bill — First ReadingText is incorporated into the Bound VolumeAccident Compensation (Financial Responsibility and Transparency) Amendment Bill — First Reading[Sitting date: 02 June 2015. Volume:706;Page:4198. Text is incorporated into the Bound Volume.]Accident Compensation (Financial Responsibility and Transparency) Amendment BillFirst ReadingHon NIKKI KAYE (Minister for ACC):I move That the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill be now read a first time. I nominate the Transport and Industrial Relations Committee to consider the bill. At the appropriate time I intend to move that the bill be reported to the House by Tuesday 3 November 2015. This will help to ensure that the provisions of the bill if enacted by the House can come into effect before ACC consults on levies in 2016. The Government is committed to ensuring that the ACC scheme remains sustainable and effective so that ACC can continue to provide comprehensive no-fault cover to injured New Zealanders long into the future. This bill will amend the Accident Compensation Act 2001 to improve the governance and transparency of ACC funding and the setting of levies. The ACC scheme is a longstanding and critical part of New Zealand’s social and economic fabric. It has served generations of New Zealanders well. The Government is committed to strengthening the ACC scheme for our most vulnerable and for all New Zealanders. We want to reduce the incidence and severity of personal injury. To achieve this we are focusing on better injury prevention improved disputes resolution for injured people improved management of our most complex and serious claims and more consistent and timely decision-making on claims.In addition to this work it is also vital that we consider the framework in which ACC funding and levies are set and that we better meet the public’s expectations that ACC should be responsive and transparent. In 2008 the Government inherited a $4.8 billion hole in the ACC accounts. Over the last 6 years we have worked really hard alongside ACC to improve the scheme’s finances. As a consequence for the first time in history ACC’s three levy accounts hold or will soon hold enough funds to meet the expected lifetime of all existing claims. This is a significant achievement that reflects the work undertaken by our Government to turn things round. However we cannot be complacent. Continued improvement is crucial to maintaining levy stability and avoiding volatility. ACC’s $30 billion balance sheet is subject to frequent shocks including changes in investment discount rates claim numbers and medical costs. Interest rate movements alone can have a significant impact on ACC’s balance sheet at any one moment. For example a recent decrease in the discount rate over the period of 1 month was estimated to have increased ACC’s outstanding claims liability by almost $3 billion. These shocks can impact on ACC’s solvency.As ACC’s accounts have approached full funding over recent years this Government and officials have been considering how to best manage the inherent economic volatility to which the ACC scheme is exposed. A delicate balance needs to be struck. On the one hand the public needs to have assurance that levies reflect underlying costs and that ACC will have sufficient funds to pay ongoing entitlements to claimants. On the other hand volatility in levy rates can undermine public confidence in the ACC scheme and create uncertainty for business and individuals. When levied accounts are at or approaching full funding they may appear to have an excess of funding. However returning to what appears at one particular point in time to be an excess of funds could result in a reduction in solvency and create a need to collect more funding in the following years. As such we need to ensure that successive Governments have an appropriate range of tools to enable them to make funding and levy decisions in a principled and equitable way and to smooth out the effect of economic shocks over time to maintain both the solvency of ACC’s levied accounts and provide levy stability.For these reasons two of my key priorities for ACC are to create a more financially responsible and transparent levy system and to enable more sustainable and stable levy reductions. The bill represents a significant step towards the achievement of these priorities and addressing the issues that I have just outlined. The bill takes this step through making two key changes to the ACC scheme. The first and most significant change in this bill is to introduce greater clarity and transparency to the approach for funding ACC and the levy-setting process. The bill achieves this through three key measures. First the bill establishes a robust framework for funding and levy setting. It does this by requiring that levies must be set in accordance with the following three principles: meeting the lifetime costs of claims in a particular year reasonable stability in levy rates and long-term solvency of the levied accounts. These principles will promote relatively stable levies that reflect underlying costs.Second the bill will require the Government to set the overarching funding policy which ACC will be required to give effect to when developing and consulting on levies. The funding policy will need to be consistent with the principles of financial responsibility included in the bill. This contrasts with the current approach where the Government’s role generally involves making a decision on levies at the end of the levy-setting process after ACC develops its own funding policy and presents the Government with levy recommendations based on this policy. Responsibility for setting levies ultimately lies with the Government of the day as it must for levies of this kind. The mandate for collecting levies has been given to the Government by Parliament and the Government must make the final decisions on levies that the public will be charged. The responsibility needs to be properly reflected in the process for setting levies from the very beginning and outset not just at the end. The bill establishes a more robust governance structure where the Government sets the policy and ACC as the responsible Crown agent implements and is held accountable for it. Ultimately this will support a closer match between the levies that ACC consults on and recommends and the final decisions on levy rates made by the Government. Taken together these two measures will increase the stability and transparency of the levy-setting process.Third the bill increases the reporting requirements for ACC so that the public is better informed about the impact that the new levy rates will have on future levy rates and other aspects of ACC’s funding. More transparency is needed so that we can ensure that the downstream consequences of funding decisions are clear and that both the Government and the public are fully aware of them and that we do not repeat the history of the last Labour Government with a $4.8 billion hole being handed to this Government. As well as ensuring that levies are set through a robust process the bill includes the kind of accountability and transparency requirements that already apply to the operation of the Government’s core budget under the Public Finance Act.The second change in the bill is to ensure that the residual levies are not over-collected by allowing for their collection to be discontinued sooner than currently required in legislation. It may be helpful to provide the House with some context about this proposal. In 1999 ACC moved to a system of fully funding the lifetime costs of an injury claim. Prior to this levies covered only the costs of a claim in a given year. Residual levies are therefore required to meet the ongoing costs of historical claims. However we need to ensure that the payment of residual levies continues only as long as there are outstanding liabilities for residual levies to be offset. This bill provides for residual levies to be discontinued from a set date by Order in Council. This will allow the collection of residual levies to be discontinued earlier than the end date currently set out in the Act which is the 2018-19 levy year.Residual liabilities will continue to fluctuate so a decision to discontinue residual levies needs to be made closer to the time at which it is appropriate to discontinue them. In practice the removal of residual levies will have no impact on the overall amount of levies collected but it will have some impact on the distribution of those levies right across New Zealand businesses. The $500 million of indicative levies announced in the Budget allows for the change in the bill which could see the collection of residual levies discontinued earlier than the date currently required in the Act. This will allow the actual end date to align with the best estimate of when residual levies will have been fully offset by the change outlined in the bill. Just to be clear: the bill allows the Government to manage only the timing of when the distributional impact occurs not whether it occurs.The measures I have outlined form an important part of the Government’s vision for the ACC scheme. It is important to have consistency transparency and stability for levy payers and stability for the hundreds of thousands of small businesses in New Zealand. It is important to continue to strengthen the public’s confidence in the ACC scheme. There has been significant leadership by people like the chair of the board Paula Rebstock and the chief executive Scott Pickering as was actually outlined today but there is a need to do more and it is important that the ACC scheme continues to be fit for purpose and that we support people to be as safe and as healthy as possible. Alongside the Government’s work that is under way I consider that this bill represents the beginning of a new era of financial sustainability and high performance for ACC. Of course many fundamental aspects of the levy-setting process will remain in place once this bill becomes law. In particular when considering changes to levies ACC will still need to consult with levy powers and make a recommendation to the Government on the levies. Certainly the changes in this bill will complement these existing processes but more important the changes in this bill will allow us to realise the benefits of improving the Government’s—The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! The member’s time has expired.ANDREW LITTLE (Leader of the Opposition):I rise to take this call because the ACC scheme is very important to the Labour Party and has been since its inception nearly 41 years ago. It had a long gestation arising out of the Woodhouse commission. It was hotly contested and hotly debated. It was supported by the Labour Party in Opposition and then by the Labour Party in Government after the 1972 election which made some very important changes to make it the scheme that it was when it came into force in 1974. This bill prescribes or creates a process that the corporation and the Government of the day can do already. There is nothing in this bill that cannot already happen.If we have a look at section 6 of the existing legislation—the Accident Compensation Act 2001—and the definition of “fully funded” we see that that definition encapsulates the very thing that this bill says it is doing. It takes into account the fact that the scheme has to be fully funded and defines what that is and requires the corporation to take into account that there can be fluctuations from one period to the next. We have this process already when it comes to levy setting that involves the corporation itself that involves the ministry that gives policy advice—the Ministry of Business Innovation and Employment—that involves Treasury and that involves a public process and it ultimately ends in Cabinet taking in all that advice and making a decision reflecting and representing that a political decision is taken because ACC levies are so widespread and important to the economy. That is all there at the moment. What this bill does is add a process whereby the Minister gets involved in a preliminary climate setting if you like which can happen already and indeed may already happen.The one thing that this bill will not do which is actually the most important thing is stop National Party interference in ACC and levy setting which is the real problem that we are desperately in need of a remedy for. The Minister’s account of the background and the need for this legislation demonstrates the problem. She cannot even give a straight account today of the history of the issues behind ACC levy setting.So let us get it straight. In the 1990s the then National Government and the then Minister Bill Birch ran down ACC levies. ACC under its old pay-as-you-go levy-setting process had built up reserves as was always intended. You read the Woodhouse commission report and the late Sir Owen Woodhouse was very clear about the way ACC would operate. It was a social insurance scheme and the corporation was expected to put aside reserves of levies—it would build them up over time—and that is in fact what happened under successive National and Labour Governments. And then the 1990s National Government came in and its members never liked ACC. They hated ACC. That is why they ran it down precipitated a crisis and said: “This is no good. We have to hike the levies.” and then they embarked on the campaign to privatise ACC because that is what National Governments do. They do not like social providers. They do not like the State being involved in social provision. They ran it down and they mounted the case for privatisation.But it did not last. The Labour Party at the time in Opposition was very clear that when it took Government it would not accept privatisation and it would reinstate the corporation as a proper publicly owned publicly run corporation doing what was required to prevent accidents and provide a basis to assist people who had been victims of accidents. Then it was fine and under the Labour Government of the 2000s the corporation went back on to its steady footing. It maintained the levy-setting process put in place in 1999 precisely so it could build up reserves. It maintained the full-funding model so it could build up reserves and its reserves were built up. By the end of that Labour Government it was generating surpluses of around a billion dollars a year—modest in the scheme of things but entirely appropriate to ensure some financial certainty and security for the corporation.Then there was a change of Government and then perhaps the biggest economic shock to hit the corporation hit in the form of the then Minister Nick Smith who could not be relied upon to keep his sticky paws off ACC. He mounted a silly campaign about a crisis. Nick Smith had not realised that New Zealand and the rest of the world were going through a thing called the global financial crisis. It was very interesting that in Minister Kaye’s account of the history of the justification of this bill she never once mentioned the global financial crisis. Well ACC as one of the top-performing managed funds of the country suffered the same fate as every other managed fund in the country privately or publicly managed—that is its balance sheet took a hit. The valuation of equities took a hit and went down. That was termed by Nick Smith and his National Party counterparts in Government as somehow a crisis caused by the previous Labour Government. It was not. It was typical National Party rubbish—nonsense trotted out to justify what National Government members really wanted to do and that is to hike ACC levies. They either got very poor advice or the advice they got they did not listen to or they just did not understand how financial markets worked which is surprising given the Prime Minister and his background. But anyway that is what they did.So ever since that time for the last 7 years they have left ACC levies artificially inflated not because it is good for the corporation but to meet their political agenda. The truth is we now know because we have had the independent research done on it that ACC is now over-levying New Zealand businesses and workers to the tune of $350 million—$350 million.Hon Nikki Kaye: Publish it. Where is the Infometrics report? Where is it? You’ve never published it.ANDREW LITTLE: The Minister is uncomfortable because she knows that is right. She knows that she has had advice and her predecessors have had advice that they are over-levying New Zealand businesses and New Zealand workers and she will not do a thing about it. So to give the appearance of doing something she then contrives this legislation to put in place this extra process so that she can sort of say “Oh no we want stability of levies and we want to make sure we’re doing it right. It’s going to take us another 2 years before we start doing the right thing by New Zealand businesses and New Zealand workers.” Here is the reality: the Government could do that now. It could do it now—reduce ACC levies. ACC is in a very healthy condition not because of anything that that Government has done but because ACC has been very good at retaining outstanding financial managers who have made good investments wise investments which have built up the reserves built up the value of the reserves of ACC to the point where now they are worth over $30 billion.I look at the title of this bill and it is hard not to break out in a wry smile when you look at a bill called in part the “Financial Responsibility” Bill and that fact that this Government when the work accounts and earners accounts are funded to the tune of 130 percent calls it financial responsibility. Well it is irresponsible to take levies off businesses and workers when you do not need to do so. Then the other word the Government uses in the bill is “transparency”. This is from a Government that cannot be open and transparent about things like its deal with Skycity over the convention centre. It still cannot be transparent over its deal with a Saudi businessman flying sheep around the world at New Zealand taxpayers’ expense. And Government members want us to take them seriously.This bill looks like it is doing something that is unnecessary. We will consider this bill in the select committee. We will support this bill in its first reading so it can be closely examined in the select committee and so New Zealanders can have their say and can say “Tell us whether this is needed or not.” and the experts can come in and say “This Government has got its history wrong.” We can do this. We do not want to be overpaying our levies. We just want a corporation that can act properly ideally independently of the Government and that can do the job it has been doing: looking after New Zealand workers’ interests when it comes to accidents; looking after New Zealanders’ interests when they are in their leisure time and have an accident; and levy them fairly responsibly and properly which is not what this Government is doing. Let us have a look to see whether this process adds anything. If we are not satisfied that it is going to add anything of any value at all then we will not support it beyond that. Let us have it examined—let us have it examined—but we will not support yet another convoluted process to protect this Government from the reality of its actions which are that it is continuing to over-levy and overcharge good businesses and good workers right across New Zealand.JONATHAN YOUNG (National—New Plymouth):Well just to colour in perhaps the historical picture that the previous speaker Mr Little spoke about when he referred to for example the global financial crisis and the effect that may have had in creating the $4.2 billion hole the other side of that story is that under Labour the cost of claims increased by 57 percent in 4 years. So there was an opening up of the floodgates of people who came and used that scheme. It was used as a welfare programme rather than an insurance scheme. That is what happened and that was what contributed largely to the hole that we inherited as a Government.If we can do all that Mr Little says we can do right now why is it that voices out there in the business community are saying that this piece of legislation will become a breakthrough for ACC in this country? Let me just read out a quote from the chief executive of Business New Zealand Phil O’Reilly who said: “While BusinessNZ welcomes the $500 million proposed cuts in premiums to be announced in the Budget 2015 which is positive for businesses employees and motor vehicle owners the more important issue is the proposed new ACC Financial Responsibility and Transparency Amendment Bill. This will ensure levies reflect sound insurance principles”—there it is: not welfare but sound insurance principles—“ and is a major breakthrough …”.So if we could always do what Mr Little said we can do why is it that people who look from outside in the business world into what happens here in the House of Parliament and look at legislation call it a major breakthrough that ACC levies will now reflect sound insurance principles? So although yes we know that the ACC fund can be at times affected by what is happening out there in the equity world we also know that there needs to be strong principles in order to bring stability to that fund.He went on to say: “BusinessNZ hopes the bill will receive cross-party support as it proceeds through Parliament to ensure the public has faith in the principles of the ACC scheme.” I believe everyone in this House believes that ACC is a good thing. In order to ensure that it is stable and continues to offer New Zealanders what it intends to offer in the future it is important to have stability around that fund. We know what would have happened immediately if Labour had been in power. Yes it would have taken $350 million out of the levies. We know that that sort of short-term pay-as-you-go attitude is going to contribute to instability. It is important for us to have a long-term view so that we can take an actuarial approach to ACC.We know and some members on the opposite side know that when ACC came to the Transport and Industrial Relations Committee at the beginning of this year to do its annual review as ACC discussed its equity position it said that it worsened from negative $108 million on 30 June 2014 to negative $600 million by 31 December 2014. And in January this year for reasons beyond ACC’s control the asset base diminished by $4 billion and then bounced back by $2 billion in February. Short-term volatility exists around the assets of ACC. We are very thankful for the fine managers of that fund because they work hard for the benefit and interests of all New Zealanders. But we understand that even beyond a global financial crisis there are factors that affect this fund and therefore we need to take a prudent careful and yes a transparent but stable approach to how we manage and set those levies. It is very important.Due to short-term volatility in both the asset value and the outstanding claims for liability the Government’s approach is that a longer view is essential when it comes to levy-setting. This is what this bill is about. It is good to hear people like Phil O’Reilly who understands that and calls this bill a major breakthrough.If I could also read out what Kim Campbell chief executive officer of the Employers and Manufacturers Association said: “the $500 million reduction over two years comes at the right time following ACC’s sound financial performance and the solid footing which has the scheme now fully funded.” He says further: “We also like the fact there will be a more transparent levy-setting framework in the future and the Minister’s assurance around more stable levies in the future.” Let me just read his shout-out to the Minister: “We’re also pleased to see that as a new Minister to the ACC portfolio the Hon Nikki Kaye has quickly come to terms with the issues and made such a positive step in the proposed Accident Compensation Financial Responsibility and Transparency Amendment Bill.” That is worth saying as well. I think we are pleased to see the way that the Minister is very ably handling a very complex portfolio. I think it is good for all New Zealanders.I believe there are many components around that that makes ACC stable and strong. When the cost of claims increases by 57 percent in 4 years you wonder how much sicker we were how many more injuries we have had over that period of time and how many more accidents have occurred in our country. I think at that point in time Labour lost ACC’s proper focus on getting claimants back to independence—the independence that they deserve. There seemed to be such a huge flow of increased claims. I believe that over that period of time ACC suffered a $7.2 billion loss in 2 years and levy-setting was divorced from the reality of ACC’s burgeoning costs at that point. ACC’s long-term liabilities over that period of time increased by $15 billion.Yes it was hard work and yes it was at times controversial but getting this scheme back into the strength that it presently has is very very important for what it offers New Zealanders. It is a 24-hour no-fault scheme that is the envy of many countries in the world. It is really important for us to have cross-party work on this because it is such an important scheme for New Zealanders.By way of background in 1999 ACC moved to a system of fully funding the lifetime costs of an injury claim. Before this levies covered only the current costs of a claim—that is the Government looked at the current costs to ACC and set the levy to meet those costs as they currently occurred. What this scheme now offers is the ability to fund a person for the entirety of their claim. There are residual levies that are paid because of those claims that happened prior to 1999. But as those claims are finally paid out there is obviously not a need for those residual levies. What this bill does is enable the timing for the cessation of that to be determined closer to the mark when we come to that point.I have got to say one more thing before I finish my speech. Next month New Zealanders are going to see a significant reduction in the registration costs of their vehicles. I had a look at mine today. I have to say I have the oldest car in my street but it is a good old car—a 2006 Holden Calais. My registration cost is going to reduce by 50 percent. Is it not fantastic that this Government has got ACC under control fully funded strong and stable and that people right across our country are going to receive the benefit of that in their back pocket?I am very happy to commend this bill to the House.SUE MORONEY (Labour):This is a do-nothing bill from a do-nothing Government. It is what we have come to expect from this Government. When it comes to accident compensation there are so many things the Government should be doing that this bill does not do. Andrew Little is absolutely right. There is nothing in this bill that the Government cannot do already or that the Accident Compensation Corporation cannot do already and in fact does not do already. Instead we have got this do-nothing bill from this do-nothing Government.Why does this bill not do something to address the $350 million that that Government is overcharging every worker and every business in New Zealand every single year because of its determination to ignore the recommendations from ACC using exactly the criteria this legislation now codifies? The truth is that ACC already has to have levy stability as one of its criteria. It already has to take account of full funding. It already has to do forecasting to make sure that the levies it recommends to the Government every year do all of those things that the Government is now pretending it is bringing forward for the first time in this bill. Nothing here is new.Mr Young when he spoke talked about the corporation coming before the Transport and Industrial Relations Committee this year. He is absolutely right. When its representatives came before our select committee I asked them whether they already met every single one of the criteria that are outlined in this bill and they said yes. They told the select committee that they had already factored every single one of those things into account in formatting their recommendation which they have given to that Government and which that Government has routinely ignored. The Government has kept the levies artificially high but for what reason?Hon Nikki Kaye: That’s not true.SUE MORONEY: Well Judith Collins told us the reason Minister. Judith Collins said: “We have to get to surplus.” That is the reason that the Government has kept the levies artificially high—we have to get to surplus. Every single New Zealander is scratching their head and saying: “Sorry? We thought the point of ACC levies is to pay for the costs of injuries and accidents not to help that Government to fail again in getting to surplus this year.” which is in fact what has happened.That Minister should be extremely disappointed and angry in fact that her Government has put her in the position where she has had to overcharge every worker and every business in New Zealand their ACC levies in order to try to make Bill English’s surplus look a bit better—the surplus that never was. Even though the Government has trumped up and overinflated the ACC levies for at least 2 years now Bill English still could not get the books to balance. He still could not get the books to balance even though the Government had cards up its sleeve. The cards up the sleeve in that poker game were actually ACC levies being overcharged to every worker and every business in New Zealand to the tune of $350 million every year.Does this bill do anything about that? Does this bill do anything about that sleight of hand with those cards up the sleeve in that poker game? The answer Minister is no. It does nothing to address that issue. In fact all it does is codify the current situation. It does not require the Government to listen to ACC’s recommendations. It can continue to ignore the recommendations from ACC. It can continue to overcharge businesses and workers. It can continue to use this bill for the wrong reasons.For that very reason the Labour Party will be bringing forward a Supplementary Order Paper at the correct time in the passage of this bill to ensure that we do something about the sleight of hand that this Government has put in place. We will be bringing forward a Supplementary Order Paper that absolutely clarifies without anyone being in doubt that the Government cannot use ACC levies for any other purpose but paying for injuries and accidents in New Zealand and injury prevention. That is not what this Government has been using it for. It said that the ACC legislation allows it to use ACC levies for anything it damn well pleases. It said that that is in the public interest. Well we will bring a Supplementary Order Paper forward that ensures that levies can be used only in the public interest with regard to accidents and injuries and not for propping up Bill English’s failed attempt to get to surplus. That by the Government’s own admission is what it had been using it for and it is not what our precious ACC system was set up to do.Another thing this bill could do but does not is restore to injury prevention programmes the funding cuts that that Government has governed over since National came into office. The truth is that the best thing we can do with ACC is actually make sure that no one ever needs to use it because we are managing injury so well. That is my dream. It is my dream that we actually get to a situation where we are working so well with health and safety in our workplaces and we have got this so well under control that actually not many people have accidents and injuries that mean they have to rely on ACC for the rest of their lives. I can tell this House that that is not a very pleasant experience at all. But what did that Government do? It cut ACC funding for injury prevention programmes. How short term is that? It does not want to prevent injuries. It does not want to prevent injuries; it just wants to keep them happening and it has no plans to do anything about that.Chris Bishop: That’s wrong.SUE MORONEY: Well Christopher Bishop does not think that ACC should have anything to do with preventing injuries. He thinks that what his Government has done in cutting the funding for injury prevention programmes is the right thing to do. I can see that Minister Kaye is briefing the next speaker Alastair Scott. The Minister is briefing the next speaker to say: “Actually we’ve started restoring the funding cuts.” The injury prevention programmes are still not up to the level they were in 2008 when Labour left Government. They are still not funded to the level they were in 2008 and that is a disgrace. That is what this bill could be doing—restoring the funding cuts for injury prevention programmes—but it is not doing that. In fact it is not doing anything that cannot already be done.I want to spend a few minutes speaking about the name of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill. In the midst of “flying sheepgate” which we have got happening on that side of the House there are distractions those members are trying to bring about to distract us from “flying sheepgate” like there suddenly being another ghost ship full of refugees on its way to New Zealand waters. The New Zealand flag referendum obviously is not distracting people enough from the issues that matter. This Government is claiming that it is bringing forward a transparency bill with regard to accident compensation. Well I challenge that Government. I will challenge that Government when we bring forward a Supplementary Order Paper that actually does require transparency from that Government to support it.The Minister has finally admitted after two oral questions fudging the issue and two written questions fudging the issue that she did not even seek any Crown Law advice on whether or not the Government had the legal right to overcharge ACC levies to prop up Bill English’s failed surplus. Why would that be? The only reason that a Minister would claim she has the legal right to raise ACC levies to pay for the Government’s failed surplus bid but not even ask Crown Law whether she is right or wrong is if she knows in her heart that what the Government has done is fundamentally wrong and probably without any legal foundation. If the Minister believed it was with legal foundation she would have sought advice from Crown Law and acted on that. But the Minister did not even seek Crown Law advice on an issue that is deeply dodgy and that is the overcharging of ACC levies to every worker and every business in New Zealand.All of those businesses know that if they had had that $350 million or their proportion of it in their businesses that would have grown the economy. They would have used it to create jobs and do research and development. That would have been a better way to grow the economy and get the books truly into surplus.ALASTAIR SCOTT (National—Wairarapa):The last speaker Sue Moroney was obviously a little confused a little bit concerned. She thought that the levies relating to ACC were related to the Budget surplus or deficit or the books. This is exactly why the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill is being put in place—to remove confusion to increase the transparency to increase the governance and to strengthen the framework under which ACC levies are calculated. It is necessary because as an employer myself I get bills from ACC. They are often not explained. It is difficult to work out where they come from and why the increase or the decrease has come about. This bill will increase the transparency and understanding for employers. The bill will improve the governance around the levy structure and this is so that we can continue to have fully funded accounts. Most of the accounts are almost fully funded and that is a good thing because it reduces the volatility in the levy setting when it is year to year. Some of the confusion comes about from a year-to-year levy setting or finalising as we heard in the select committee just recently. There was a strong debate on how the levies were calculated and whether they should be higher or lower. As I say that is a very good reason to bring this legislation through.The Government does not always go with the ACC recommendations. ACC recommended much bigger increases in fact in 2010-11 and again in 2011-12. Had we accepted those increases they would have cost levy payers $630 million more. We chose not to accept those recommendations. Again the reason for this legislation is to make it clear what the parameters are what the levy-setting characteristics or prerequisites have to be before levies can be changed. That again is important for the employer because employers are budgeting for their businesses. They need to know their costs. They need to look ahead and understand what the cost of ACC what the cost of having staff will be and ACC particularly in businesses where there is a higher risk of injury is significant.I am pleased just to clarify that injury prevention investment by ACC has increased by $10 million. That is for some of the stuff that the ACC is doing in injury prevention. There is also legislation that is not so much a parallel piece of legislation but rather health and safety law reform going through the House as we speak. If we can get that right and we encourage people to take greater responsibility for their own health and safety—again we will have fewer injuries fewer long-term injuries and fewer deaths in the workplace. We know that New Zealand does not have a great record when it comes to health and safety. That piece of legislation will aid encourage and support businesses and individuals to protect themselves and their families in the workplace. Again that can only be good for putting more pressure on a lowering of ACC levies simply because there will be fewer injuries in the workplace.There is another piece of this legislation that relates to the residual levies. It is a bit of a tidy-up I guess because at the moment those levies must continue to be collected until 2019. This piece of legislation allows those levies to be cancelled or rescinded or discontinued at an earlier date. When that liability diminishes so the liability to ACC diminishes and that can be terminated prior to the current cut-off date of 2019. That is a good thing.I just want to make a couple of points around the volatility of these funds and why it is important to consider and understand these fully funded assets. The current asset base of the ACC is over $30 billion. That is bigger than the Government’s superannuation fund—or as it is affectionately known the Cullen fund which is around $26 billion - odd. So we are talking big numbers here. That has risen from 2009 when it was $10 billion. That fully funding programme—and we are just about there—has created this nest egg if you like. But the swings and roundabouts of interest rates—with we know and as the Minister for ACC mentioned herself a $3 billion swing on a 1-month interest rate variation—are huge. So you can see the need to think well ahead of just this year to set your levies. You cannot say that we are down 10 percent so we need to increase the levies to recover the $3 billion loss that is just as a result of the interest rate fluctuation. That would be ludicrous. That would be unaccepted by the general public and the ACC levy payers. This governance and this governance framework will ensure that consideration is given to the long-term view the long-term understanding of the marketplace the interest rates and the term structure of interest rates as well as things that are going on in the public arena.I have mentioned health and safety law reform. That is just one thing. We are going to have safer cars for example. Again all these things in the long term will reduce accidents. We continue to invest in speed reduction in drug and drinking and driving programmes. All these things continue to educate the public and continue to reduce the burden that is the responsibility of ACC. That long-term approach is what is required. Currently as we have already heard from the other side there is this debate this argument and misunderstanding of how levies are calculated. That is not good. That is not a good thing and that is why this legislation is here to support the transparency and the strengthening framework of the legislation so that people can plan ahead so that there can be discussion and transparency. That is why I am pleased to support this piece of legislation.We have already heard of the $500 million planned reduction in ACC levies over the next few years and that will continue. We have talked about the reduction in the motor vehicle levy and that is a good thing. We will continue to see improvements in reductions in levies as those assets are managed in a more financially responsible manner. We will have increased transparency so there is less confusion about how the money is raised where the money is spent and where the money is invested and there will not be the confusion that was exhibited from one speaker at least on the other side. I commend this bill to the House.DENISE ROCHE (Green):I rise to take a call on the first reading of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill. We support this bill because while it does not come anywhere near close to the Green Party vision for a fairer more transparent and people-focused ACC it does take a few tiny steps in that direction. I will start by looking at the things that we like—the positive aspects. We like that the bill improves the framework for determining ACC’s levied accounts. The changes provide improvements on the current models ensuring that the levy-setting process is more transparent and reducing the shock caused by sharp fluctuations in levies. We support the provision to adjust the dates to avoid the over-collection of the residual claim levy by removing the fixed state that is in the current legislation.We also support the policy objective of the bill to improve the governance process by setting levies through the requirement on the Government to set a funding policy in line with the statutory principles. As well as supporting improving the transparency of the levy-setting process we also support the objective of the bill to ensure that the public is better informed. Better reporting makes for a better-informed public and policy makers have more information as well.Although we do acknowledge that the bill has some positive changes we regard the funding model of this scheme as fundamentally unfair and flawed. Furthermore we think that this bill is a lost opportunity. We could have been a lot more ambitious.So what would the Greens do? What would our solutions be? As my colleague Kevin Hague has outlined numerous times our vision for ACC is where it continues to be a world-class service and honours the social contract it was founded on. We want an end to the shift towards a profit-driven insurance model a shift that this Government brought in through the abolition of the pay-as-you-go system and when it shifted to this one.In 1974 New Zealand broke new ground with the introduction of the no-fault Accident Compensation Act. It created a social contract embodied in the five Woodhouse commission principles that the scheme was founded on and I remind the House that those five principles were community responsibility comprehensive entitlements complete rehabilitation real compensation and administrative efficiency.In the 41 years since that original legislation was passed we have seen successive Governments tinker with our law. Since its inception in 1974 there have been five substantive legislative changes to the Accident Compensation Act and as a result many of the original principles have been undermined and people’s rights have been eroded.We have seen under this Government a transition away to a profit-driven insurance model away from an ACC that served the public good. There have been countless incidences where the access to ACC has been restricted and these have been well-exposed in the papers over the last few years. In 2012 in what could serve as a warning to the Minister of Health about the social bonds policy that he is introducing my colleague Kevin Hague exposed how ACC managers’ pay was linked to the number of long-term claimants they were able to remove from the corporation’s books.We hear more and more stories from people who should receive compassionate and equitable service from ACC but are wrongly denied compensation. That includes last year when claimants were denied access to the scheme because they refused to sign privacy waiver forms that were eventually found to be illegal by the courts.When the focus is on the bottom line the social-good aspect of ACC is completely ignored and lost for ever. We believe that we could have an ACC scheme that is fair comprehensive efficient transparent and more people-focused. If given the chance we would guarantee that all people who have genuine work-related gradual-process injuries diseases or infections including occupational overuse injuries and chemical poisoning—people like the sawmill workers from Whakatāne who were poisoned over three decades ago and are still having to fight for compensation—could obtain ACC cover. We would ensure access to specialist assessors to ensure that people can receive full entitlements. We would revoke co-payment requirements. We would establish an independent ACC ombudsman to improve accountability against abuses. We would also support specific risk-based levies to encourage injury prevention where appropriate. That would have a huge impact on health and safety in agriculture construction and forestry.We would fund ACC through an equitable mix of levies on employers employees motor vehicle usage and general taxation. We would ensure the maintenance of a rigorous ethical ACC investment policy that would prevent ACC from investing in enterprises that provide products or services that significantly increase rates of injury illness or otherwise significant adverse social or environmental aspects. I think ethical investment is something that we should be looking at a lot more closely.We would also support and strengthen ACC’s focus on injury prevention including integration with broader preventative health programmes and interventions in communities in workplaces in schools and in homes. We would fix ACC by reverting to a pay-as-you-go model. It was a working model that produced a different culture in ACC—one focused on rehabilitation and care. ACC is not an insurance scheme.There are many reasons for going back to a pay-as-you-go system—sound economic reasons outlined specifically by an expert from the University of Auckland business school Michael Littlewood. He suggested and has assured us that the pay-as-you-go model has less volatility on investment returns and has less uncertainty than the current actuarial calculations. He also says that the flawed nature of applying actuarial assumptions is intended for a private market rather than a Government one and a pay-as-you-go system is cheaper to administer—and I guess this Government is all for wanting to reduce the expense of bureaucracy. There is also the increased transparency of a pay-as-you-go system due to the ease of understanding it. Mr Littlewood concludes his research by saying: “A PAYG approach to levy-setting should be simpler more transparent and less risky financially. It would also lower the investment risk for New Zealand.”We support this bill because it is a small improvement to the inadequate status quo but New Zealanders deserve an ACC that tries to maximise the well-being of our people and its clients not one that relentlessly pursues the financial bottom-line.FLETCHER TABUTEAU (NZ First):I do actually stand in support of this piece of legislation. It is the first reading and it is definitely a piece of legislation that needs to go through this stage and into the select committee process because as noted in the stated objectives within the legislation itself we do need a higher level of transparency and accountability. There does seem to be an element of debate—and I would actually agree with my previous colleague’s position—about a level of redundancy in regard to the legislation itself in its entirety. As section 6 of the Accident Compensation Act does point out decisions around these areas can be made already the scheme has to be fully funded and it does give account to the fluctuations already in terms of the levy itself. So I do worry that the bill as insinuated earlier actually kind of gives another level for the Minister to come in with this legislation where it is not necessary and it just adds to the complexity and takes away from that transparency and accountability that we were talking about.However the stated intent of this bill is “to improve the framework for determining how ACC’s levied Accounts are funded so it is clearer more transparent has a longer-term focus and supports more stable levies:” and very important “to ensure that the residual levy is not over-collected.” I stand here on behalf of New Zealand First and say that those goals and those stated aims are to be highly commended. If that is what we are seeking to do with this piece of legislation then New Zealand First could not be more supportive.ACC itself just recently re-evaluated the liability of the three accounts that it manages and so we know that the specified amounts defined by the Acts are actually no longer relevant. New Zealand First believes that the objectives are on track like I have just said. This legislation in its stated aim is doing the right thing. We would insist though that the residual levies on the earners account the motor vehicle account and the work account should be collected only until the costs of shifting to the lifetime cost model are absolutely required and obviously no longer. In undertaking this legislative change ACC and the Minister will be required to be more transparent and consultative in the way the current levy regime is set. New Zealand First suggests that the more the public and those who are involved or affected by ACC can be involved the more seamlessly this process will work.But there are several issues to consider and it has been spoken about tonight already about putting ACC as a whole in context—a recent history if you will. The other is to ensure that going forward this Government actually chooses what we would consider to be the right option and not any option to facilitate these changes. The Government has a very poor record when it comes to ACC. It has abused the ACC system ignoring good advice and subsequently has overtaxed New Zealanders by stealth.The average New Zealander especially small business has borne the brunt of this deliberate inaction. Mr Foss for example has a small-business development group whose purpose is to advise the Government on small-business issues but he has not had the ACC conversation with it. The reality is that the burden that business has had to bear because of this Government’s inaction has been huge. Further he admitted to this House that he has not advocated a reduction in levies with this Government’s Cabinet. Broadly speaking everyone in this House knows—and ACC has stated unequivocally for some time now—that the levies paid by businesses especially the self-employed need to be reduced.It has taken far too long. There is no doubt that reducing red tape and improving cash flows are critical issues for small business. The Government has sat on this opportunity to help small businesses for far too long. That refusal to budge has been costing businesses and individuals thousands a year. The frustration out there is palpable. New Zealand First insists that these changes not only in terms of the general levy but the residual levy are well past due and our New Zealanders have been paying into ACC at too high a level for far too long.Additionally this Government is well aware that over-collection especially in the work account is creating distributional consequences that create constraints on the equity and the incentives for some of our businesses. The Government knows that there is no justification for creating this distortion given that the repayments are actually now well ahead of schedule. The Minister for ACC needs to be reminded that the residual portion of the work account is spread across businesses based on risk relativities that are actually now 10 years old in their calculations.The identified problem is a large one. Given a legislative stop date of 2019 by current rates of collection the Government will have over-collected $852 million from the work account $155 million from the earners account and $468 million from the motor vehicle account. I do not think that anyone in this House would agree that this should be allowed to happen and I acknowledge that that is why we are here today.Let us be very clear: there has been next to no time for this consultative process especially around the residual levy collection. It has been put to this House that the residual levies be discontinued by Order in Council but New Zealand First wants to point out the reality of the Government going down this path—that is if we actually acknowledge that some of the debate tonight has been fair and relevant because it is still in debate whether in fact this legislation is needed in the first place. But that is what consultation is about and I acknowledge that from here we go to a consultative phase.New Zealand First disagrees in principle with these council structures and legislation. I have stood up many times and spoken out against this method of consultation and interference with the process with Government entities State-owned enterprises and the like. It gives too much power to the Minister and his or her chosen few. Give the Minister the power to make this decision and unsurprisingly it has been stated in the consultation that there are concerns around additional risks on transparency and certainty.Putting these calculations and dates into legislation now would actually achieve the goal as set out by this Government which New Zealand First does applaud. Continuing to collect the residual levies given in the legislation cannot be justified because it would be a disincentive to businesses that are working to lower their operational risks. But because the residual levy component is so high as a proportion of the total levy collected any discounts that businesses are entitled to are actually barely noticed when they do their job right. At the moment because the residual levy is such a high proportion of the total levy counted it takes away the incentive to make those changes. The incentives are not there yet. So in bringing the residual collection date forward we actually support and reward businesses for undertaking their business in a safe and professional manner. Making this change in legislation would mean it would be debated in the House and would be offered to a select committee round and therefore the implications would be made clear through the debate and submission process.Business needs certainty to operate. We need to be certain about what it is that this Government is hoping to achieve and New Zealand First puts it to the Minister and to this Government that the best way to do that is actually by legislating the date now. Do not give the power to the Minister to act ad hoc. It is even noted that in doing so the time line may in fact be pushed out. We support this bill through to the select committee. Let us have the debate. Let us see whether this legislation is actually needed and New Zealand First reserves the right to consider the opinion of businesses and New Zealanders from that point. Thank you.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.JAN LOGIE (Green):Indeed that is a hard act to follow but I will do my best. I rise to take a call in this first reading of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill. The Green Party is supporting this bill. It is a short and straightforward bill. Its objectives are to improve the framework for determining how the ACC’s levied accounts are funded so that it is clearer more transparent has a longer-term focus and supports more stable levies which all sounds great.The current legislation requires that the residual claims levy which is the additional levy that is charged towards the full funding of the ACC be collected until 2019. However it appears quite likely that some if not all of the ACC accounts will be fully funded before then. The provision contained in this bill to adjust that date seems quite sensible in that it will ensure that there will not be an over-collection of that residual claims levy resulting in the fixed date in the current legislation.We are of course willing to support these measures because they do make tiny improvements to what we believe sadly is a corrupted system but they are improvements nevertheless. We are deeply disappointed however if not at all surprised that the Government is only tinkering with a system that is so regularly and systematically failing to deliver on its original intent for New Zealanders. This bill tutus with the completely unnecessary and corrupting fully funded ACC system which has seen a multibillion-dollar surplus while everyday New Zealanders are denied compensation denied access to the support they need and as a result in some cases lose almost everything they have and almost everything that they have managed to acquire over a lifetime of working because of that lack of compensation available to them and their inability to keep up with their costs.The Green Party believes a private insurance model is inappropriate for the ACC. We are certainly not alone in this. The fact that the ACC worked very well on a pay-as-you-go basis for over 20 years would I believe tend to support our view of that as a workable system. We do not support the false crisis that was created by this Government as a way of saying that it needed to have all the money there on the books to be able to pay out for any imagined potential liability. We absolutely believe that the ACC needs to cover its costs and have enough in reserves to be able to cope with any unexpected spikes. That has done us well for decades. We did not need this fully funded system. This fully funded system which allowed the Government to increase levies which it is now reducing partially and to reduce services—prevention compensation and rehabilitation—makes future privatisation and competition more viable. We think that is a dangerous thing.The Green Party in Government would listen to the experiences of New Zealanders who have been denied appropriate care because of these changes. We would reassert and restore the social contract envisioned in the five Woodhouse principles that the ACC was founded upon: community responsibility comprehensive entitlements complete rehabilitation real compensation and administrative efficiency. This Government has privileged administrative efficiency almost to the point of exclusion of all other principles. The stories of people with injuries tell us of the harm of that approach. But we will support this bill.PHIL TWYFORD (Labour—Te Atatū):Can I just start off my 5-minute contribution by remembering Sir Owen Woodhouse the architect of accident compensation—a great New Zealander who died this time last year at the age of 97. Sir Owen was the driving force really the intellectual architect behind what I believe is one of those institutions in New Zealand that we should be immensely proud of. I believe that it is one of those things like high quality universal public education and like our public health system that allows everybody to get a decent start in life. It is there to pick you up after an accident after an injury and to ensure that you can get on with your life and get back on your feet and it spares people the huge expense and the lottery of private litigation that is the alternative in so many other countries around the world. For those reasons I think ACC is incredibly important. It is a bedrock part of Labour’s belief in the fair society and in the basic equality that we accord to all individuals living in this society.That is why the debates over ACC get so heated in this House. On this side of the House we stand for that equality we stand for active Government and we stand for all those things that Kiwis can do together to make this society work better. On that side of the House they have over the years systematically undermined and privatised ACC. They do not believe in it because they are fundamentally uncomfortable with social provision. The hallmark of this National Government’s management of ACC is two things: the rorting of the ACC levies in order to prop up the surplus that never ever arrives and secondly it instituted from the day it was elected a culture of disentitlement. Any electorate MPs in this House will know that one person after another has come to electorate offices—that is if they are the kind of MPs who actually have an open door to people in the community who have problems—saying that they have had the door slammed in their face by ACC. The reason is that under this Government everything is a degenerative disorder—including ethics. That is the culture of disentitlement that this Government has introduced into ACC.I want to make two points in my contribution. The first is that this is basically an example and an exercise in political butt-covering. It is a public relations exercise and as with so much of what this Government does the purpose of this bill is simply to convey the impression of the things that it talks about in the title of the bill—about financial responsibility about transparency—but nothing could be further from the truth when it comes to this Government’s management of accident compensation. The second point I want to make is that this bill as Andrew Little said will not stop National’s interference with and manipulation and rorting of ACC and the ACC levy-setting process. So as I said this bill is basically about giving the appearance of propriety and of creating an impression of stability.As previous speakers—my colleagues Sue Moroney and Andrew Little—have pointed out all of the things that this bill talks about can be achieved under the legislation. It is all there. They do not need this bill. The members opposite have not once yet cited something that this bill enables them to do that the legislation otherwise would not do. The Government already has to take account of levy stability as a key criterion—full funding. It has got to forecast levies to ensure that levies meet all the requirements under the Act. The second thing I wanted to say is really to quote Alice in Wonderland Lewis Carroll’s book in which Alice says: “I give myself very good advice but I very seldom follow it.” This bit of legislation is a classic example of that. The bill talks about transparency and yet the deceit of this Government in Nick Smith’s manufactured crisis in 2009 is a classic example—in fact it is a classic example of almost everything that Nick Smith does—and in the cynicism of the way Bill English has rorted the levies to prop up his Government accounts for the last 7 years. National members do not need to give themselves this advice. They just need to change their ways.SARAH DOWIE (National—Invercargill):Thank you very much for the opportunity to speak on this first reading of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill. It is always an honour to follow such an eloquent speech by my colleague Mr Andrew Bayly who has this wonderful knack of being able to expel financial sums and figures and use them in his speech.Hon Member: What about Phil?SARAH DOWIE: Well it still is very nice to follow Mr Twyford and I will probably come to that later but it is also very apt and fitting that I should take this call at this time and I will come back to the reason shortly. This scheme has now turned 40 years old and is a critical and integral part of our society in respect of our social sphere and economic sphere—a no-fault 24/7 coverage scheme for residents and visitors covering injuries whether they be at home with a motor vehicle or at work. I do not consider myself clumsy and I do not consider myself uncoordinated but I am while I take this call injured—injured just on Sunday in fact. I was at a child’s birthday party with my daughter where I lifted her off an extremely heavy solid rimu stool. As I brought her forward to meet me the stool decided to topple over and land on my toe—the very toe that is responsible for my bipedalism—and it was crushed and it was broken. We all know how fortunate it is to be rushed off to the emergency department and seen by some fantastic front-line staff. I give my thanks to the nurses and the X-ray people. I am not sure what the technical term is for X-ray—Clare Curran: Technicians.SARAH DOWIE: X-ray technician—oh that is handy. They were very compassionate and I am very thankful for their expertise. Hopefully I will be covered by ACC in respect of my treatment because I want to get healthy. There is nothing more exhilarating than running down the corridors of Parliament while the bells are ringing to get here to address you Mr Assistant Speaker. So that is my personal story about the ACC compensation scheme.But as we know this bill is about levied accounts. It is about the levied accounts of workers earnings and motor vehicles. If we look at some of the background as we heard in prior speeches in 1999 ACC moved into the premise of fully funding the lifetime costs of an injury claim. Before this only current costs were covered by levies. The legislation as it stands states that ACC must continue to collect residual levies until 2019. That is some 4 years out. What this bill will provide is an updated framework. It will improve it. It will make it more transparent implementing a more comprehensive set of principles for the funding of accounts through levies.No. 1 levies for each account must meet the lifetime costs of claims in relation to injuries that have occurred in that year. No. 2 what the bill will do if an account is in deficit—for example it cannot meet those costs—or alternatively has a surplus is that both must be corrected by the setting of levies at an appropriate rate for subsequent years. Finally large changes—the real peaks and troughs that we have seen in the past—must be avoided and this will provide greater flexibility and stability in levy setting. This bill will provide better guidance in how to manage this while balancing the needs of injury costs with levy collection.It is interesting to note following on from Mr Twyford’s contribution that the 2014 performance improvement framework review of ACC also identified such weaknesses noting that there is no overarching legislative framework that establishes the objectives to be met or principles to guide the annual levy-setting process. This is an issue that the Minister the Hon Nikki Kaye seeks to address in the bill through those three premises. So not only does this bill increase transparency but it makes sense fiscally. We want to make sure the scheme is well funded and can withstand the volatilities of the market place. But we have a duty to ensure that levies are kept as low as possible. So the bill also introduces stronger reporting requirements regarding account solvency and ACC funding and it takes care of the over-collection of levies.This is a Government that is committed to making sure that ACC remains sustainable and effective. In 2008 as we have heard previously this Government inherited a $4.8 billion deficit in ACC accounts. The Government and ACC have worked very hard to dig us out of this hole but not just that—ACC has worked extremely hard on the way it treats the injured and has focused on its clients’ needs. I am fortunate to sit on the Transport and Industrial Relations Committee. We heard from ACC about some of the measures it has put in place to raise the bar in respect of customer services in-house. I commend those officials and case managers for making it a priority to increase their compassion towards the injured in terms of updating some of their systems and making sure that reviews and other administrative processes are carried out in a timely function. That adds to the trust of those clients who deal with ACC.As of March 2015 ACC’s investment portfolio had reached $31.5 billion. Although ACC’s financial performance is still subject to short-term volatilities the performance of ACC as a scheme has definitely improved. This Government’s excellent management has led us out of that $4.8 billion hole that Labour left us in and since 2012 we have made levy reductions. New Zealanders have saved about $1.5 billion benefiting businesses workers and motor vehicle owners. That has saved our families’ money which goes directly back into their savings and obviously they are best to know how to put that money to good use. I also note Business New Zealand’s approval of this bill and the introduction of it. As an electorate MP who has her doors open to her constituents I also note the public’s approval of this bill of our management of the ACC levy and of the reductions that can go back into their back pockets.We are now looking as part of Budget 2015 at an average ACC motor vehicle levy falling from approximately $330 to $195 per year from 1 July and we are looking at an average cut of $75 for vehicles and over 2 years a 20c reduction in the average work account levy and 6c in the earners account levy. So this bill is about fiscal responsibility and transparency. This is a clear results-driven bill and hence I commend this billIAIN LEES-GALLOWAY (Labour—Palmerston North):This bill is an admission by the National Government that it cannot be trusted. All the instruments that this bill introduces are actually available to the Government right now. It could use any of the measures it is legislating for in this bill right now as a Government. What it is doing by bringing this bill in is requiring itself to meet the provisions in this legislation.So Government members know they cannot be trusted to plan ahead to set levies appropriately and to not overcharge people on their ACC levies. They know they cannot be trusted just to do that as a Government as a matter of course so now they are having to legislate to do it. It is no wonder that the public apparently are overjoyed at this. I do not know where the National Party gets its information about the public being overjoyed. I think that the public probably have absolutely no idea that this legislation is going through but certainly Phil O’Reilly has said he is pleased and I bet Phil O’Reilly is pleased because he is probably sick of the organisations the businesses that he represents being overcharged on ACC levies by this Government. So it is an admission by the Government that it cannot be trusted on ACC levies.I have heard a lot about how we need to have a levy-setting process that takes into account the volatility of the market place the volatility that can impact ACC’s investments. That is not an argument to be taken lightly. It is an argument that is valid and worth considering. If our ACC accounts particularly the work account and the earners account were only 100 percent funded then there might be some validity in the argument that the Government is making because we could see those accounts drop below 100 percent and we could see them rise up above 100 percent.The volatility that can occur would certainly be something that we would need to worry about if the accounts were only 100 percent funded. But they are not. These two accounts are more like 140 percent funded. Therefore the volatility that may cause them to go up or down is going to cause them to go down to maybe 120 percent funded or up over 150 percent funded. We are not talking about whether or not we have enough money in the bank to meet the full lifetime costs of the claims we are talking about how overfunded those accounts actually are.I reject the argument from the National Party that this legislation is required or even that that volatility and the long-term viability of the accounts have not been taken into account by ACC. In fact members opposite have told the House that we on the Transport and Industrial Relations Committee have heard from ACC that when it makes its recommendations about where the levies should be set it takes into account the long-term costs and the volatility that can occur over time. That is happening right now.What I find most bizarre is that the Government has been trumpeting the fact that the account that is having its levies reduced the most is the motor vehicle account. That is actually the one account where we do need to increase the reserves because the motor vehicle account is barely fully funded. In fact the volatility that members opposite have talked about has impacted the motor vehicle account and pulled it back down below 100 percent funding at times. In fact it has very rarely been at 100 percent funding. There is more work that needs to be done on the motor vehicle account but bizarrely that is the account where the Government is cutting levies the most. You might wonder why that is. I think there is a pretty straightforward reason—it is just pure politics. There is nothing fiscally responsible about this at all. It is pure politics.The fact is that most people pay their motor vehicle account through their vehicle registration. So they actually have to go along to New Zealand Post and make a payment. They notice that money coming out of their bank account whereas the earners account levy in particular comes out of your account before you even see the money. It comes out of your pay before you even see the money so people do not notice that as readily as they do the motor vehicle account.So this is just pure politics. The Government has cut the levy that people will notice the most even though it is the levy that actually least requires cutting out of all of them. Others probably could be cut a lot more. The work account and the earners account certainly could be cut more. This Government is overcharging workers and employers by $350 million a year yet that is not where it makes the cuts. It makes the cuts where they will have the most political impact not where they actually make the most sensible and responsible impact.We have heard a lot about the supposed $4.8 billion hole that existed in ACC some 6 years ago. Well the fact is that ACC’s reserves are invested and just like every other major investor ACC suffered in the global financial crisis. Yes its accounts fell and the amount that it had in reserves was much less than it required for full funding but actually at that point ACC had never met full funding because the process of achieving full funding was something that was being undertaken by successive Governments and had been under way for about 9 years at that point. It was something that was started in 1999 and was carried on—David Bennett: Your policy was to remove it.IAIN LEES-GALLOWAY: Oh David Bennett says that our policy was to remove it but here are the facts David Bennett. The process towards full funding carried on right through the entire period that the last Labour Government was in Government. That was what occurred.David Bennett: Tell the truth.The ASSISTANT SPEAKER (Hon Trevor Mallard): Order!IAIN LEES-GALLOWAY: David Bennett can say whatever he likes. He just needs to look at the facts—David Bennett: Tell the truth.The ASSISTANT SPEAKER (Hon Trevor Mallard): Order!IAIN LEES-GALLOWAY: —and see that what happened was—[Interruption]David Bennett: Tell the truth.The ASSISTANT SPEAKER (Hon Trevor Mallard): I regret that I have to interrupt the member Iain Lees-Galloway. I did warn Mr Bennett twice—I called him to order twice. He will desist.IAIN LEES-GALLOWAY: The member is encouraging me to tell the truth. I am talking about the facts. I am talking about straight facts. Those might be a foreign concept to the member David Bennett over there but I am talking about the straight facts.In 2009 the Government seized on this supposed hole in the ACC accounts to do what—to push ACC levies up. There was one purpose for that and it was to make the private insurance companies that the Government wanted to use to privatise the work account and other accounts able to compete with ACC because those private insurers simply would not have been able to compete with ACC when its levies were set at a reasonable level.The result of shoving up those levies was twofold. One was that we have reached full funding much faster than was originally envisaged by overcharging New Zealanders. The whole idea of the progress towards full funding was that it would be done in a measured fashion that would not overcharge New Zealanders. We have reached full funding and I note that the removal of the residual levies is one aspect of this legislation because full funding has been reached far earlier than was ever originally envisaged.The other thing of course is that the Government soon realised that this additional income that was coming in was very helpful for it in its attempts to reach a surplus so it maintained its levies at an artificially high level in an effort to reach surplus which it still has not done. It is overcharging New Zealanders by $350 million which is far more than the surplus that is budgeted for in this year’s Budget. So in the absence of that overcharging of levies for ACC there would be no budgeted surplus as unlikely as it is that the Government will hit its budgeted surplus just like it failed to meet it this year.There needs to be some honesty from the Government about the way it has treated ACC and what is behind this legislation. The truth is there is nothing in this bill that the Government cannot do right now. What it is doing with this bill is demonstrating to business that even if it cannot be trusted as a Government to operate ACC appropriately and to set levies appropriately it is going to put it into legislation. But actually really it is smoke and mirrors because even with this legislation in place it will still be able to overcharge on ACC levies.We will support this legislation because it does not appear to do any harm but also because we think that further down the track it is a vehicle through which we can propose amendments that might actually make some real difference. We are looking forward to the select committee process and we are looking forward to the progress of this bill but in its current state it ain’t going to do much.Dr PARMJEET PARMAR (National):Thank you for the opportunity to speak in the first reading of the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill. The aim of this bill is to amend the Accident Compensation Act—the ACC Act—to reform the mechanism of setting levies and to ensure that residual levies are not over-collected. ACC is there to support injured people to get back into work and to get back into their routine lives as soon as possible. ACC also has a role in stopping injuries happening in the first place. ACC is accountable to all New Zealanders. Everyone contributes to ACC and everyone wants value. Until 1999 ACC used to operate on a pay-as-you-go basis which was to collect levies to cover the cost of claims coming in in that particular year but then it changed to a fully funded operating model which means that levies are collected to cover the cost of full lifetime claims coming from injuries happening in that particular year. Sometimes people have to rely on ACC for a very long time in their life. It could be 10 15 20 30 years or even more so significant reserves of funding are required to cover those claims. The money collected is invested and the interest is also used to pay for the cost of claims. This fully funded model of operating is seen as fairer for levy payers because future levy payers do not have to pay for injuries that happened in the past.This bill inserts certain principles for setting ACC levies for the work earners and motor vehicle accounts—the levied accounts. The work account is the one that covers claims for all work-related injuries. As a result of the legislative change in the Accident Compensation Act in 2010 the work account was merged with the residual claims account. The earners account is for levies paid by people who are in the paid workforce. The non-earners account is funded by the Government using money collected from general taxation. The motor vehicle account is funded by a levy that is included in petrol prices and motor vehicle licensing fees. This bill makes provision for setting levies so that levies derived from each account are able to meet the lifetime cost of claims in relation to injuries that occur in that particular year. If an account is accumulating a surplus or if an account is in deficit then in order to meet the cost of claims that surplus or deficit needs to be corrected by setting levies appropriately in subsequent years. At the same time we want to make sure that changes to levies are not drastic. We want to avoid big changes to levies.The ACC scheme is critical to us because it provides 24/7 coverage for motor vehicle work-related and non - work related injuries. Since the National Government got in in 2008 the ACC scheme has been doing much better than before but there is more that needs to be done. Also at the same time we want to make sure that the levies are as low as possible. It is important to have consistency and stability for levy payers because that helps to build public confidence in the ACC scheme. Through the Working Safer package of workplace health and safety reforms our Government is committed to reducing workplace injuries by 25 percent especially serious and fatal injuries by 2020.We also have an interim target of reducing claims by 10 percent for people staying away from work for more than a week.As I mentioned the ACC scheme has been doing much better under this National Government since 2008. That is specifically because from 2004 until 2008 there was a period of significant deterioration of the scheme especially in its financial performance and outcomes. That translated into outstanding claims liabilities. This was because there was no transparency and also levy rates did not increase to keep pace with claims expenses. This led to the situation in 2008 when the National Government got in. What we got was a big hole in the ACC account—a big hole of $4.8 billion. There are various reasons for that big hole in the ACC account but I believe that the main reason was the poor management of the previous Labour Government. [Interruption] Yes it was the poor management of the previous Labour Government. So that is why in 2008 what we inherited was this big hole in the ACC account of $4.8 billion and also a scheme that was heading in the wrong direction because there was this significant funding shortfall and rising claims costs. So this Government and ACC have been working hard for the last 6-plus years to improve the scheme’s finances and also to deliver better outcomes for people who need the ACC scheme.Our focus is to keep improving our ACC scheme so people can get into work as soon as possible and people can get back into their routine life as soon possible and to return claims rates and costs to sustainable levels. The work earners and motor vehicles accounts—the levied accounts—are now at or approaching full funding. Also this National Government has put back $1.5 billion back into New Zealanders’ pockets since 2012. This is through levy reductions as we have heard from my colleagues from this side. This Government is working hard to achieve that appropriate balance between keeping that financial performance of the scheme and also delivering better outcomes for New Zealanders. We want to do more for injured people so that they get appropriate help but at the same time we want the scheme to be transparent. We want to make sure that there is visibility for levy payers. We all have high expectations from the ACC scheme: we want the ACC scheme to provide meaningful injury prevention we want the ACC scheme to provide better and faster dispute resolution we want the ACC scheme to provide consistent service and we want to make sure that complex issues are also resolved as soon as possible. At the same time we want the ACC scheme to be financially responsible. We want the ACC scheme to provide levy reductions that are sustainable and also we want the scheme to be transparent.Continued improvement is important to maintain levy stability and avoid unpredictability. Although the scheme’s overall performance including financial performance is going really well under this National Government there could be some short-term unpredictability for example for reasons like sudden population growth. There is no overarching legislative framework that establishes the objectives to be met or the principles to guide the process of levy setting. That is why this bill is required because it will give us that sound and responsible approach to setting levies. The application of the principles in the bill will see that levies are stable and that they are reflecting underlying costs in the absence of economic shocks or large swings in ACC claims performance. Most important transparency is needed—that is for the Government and also for people who are paying levies and it will also help us calculate downstream consequences of funding decisions.This is about improving accountability of the scheme. As I said the ACC scheme is accountable to all New Zealanders so we want to make this scheme more accountable. This bill will help us achieve a more sustainable and transparent ACC scheme. This is very important for New Zealanders so I support the bill and I commend the bill to the House. Thank you.Bill read a first time.Bill referred to the Transport and Industrial Relations Committee.Hon Peseta SAM LOTU-IIGA (Minister of Corrections) on behalf of the Minister for ACC:I move That the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill be reported to the House by 3 November 2015.Motion agreed to.