Kaye Nikki: Accident Compensation (Financial Responsibility and Transparency) Amendment Bill — Third ReadingText is incorporated into the Bound VolumeKaye Nikki: Accident Compensation (Financial Responsibility and Transparency) Amendment Bill — Third Reading[Sitting date: 23 September 2015. Volume:709;Page:6944. Text is incorporated into the Bound Volume.]Hon NIKKI KAYE (Minister for ACC): I move That the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill be now read a third time. This bill will amend the Accident Compensation Act 2001 to deliver greater transparency around the ACC levy-setting process and will in my view deliver more stable fairer levies over time. It will also ensure that residual levies are not over-collected. I want to acknowledge the leadership of the board of ACC and also the chief executive Scott Pickering for their work in terms of the performance of the scheme. For the last 7 years the Government has been working hard alongside ACC to improve the scheme’s finances and customer services after inheriting ACC’s accounts with a $4.8 billion deficit. I was very pleased to confirm that earlier this year for the first time in history ACC’s three levied accounts are essentially fully funded. This is a huge step forward for ACC and New Zealand.This bill builds on that achievement by providing the Government with the ability to discontinue the collection of residual levies earlier than the current date of 2019. Yesterday I announced my decision to remove residual levies for all three accounts in 2016. It is my intention in the next couple of days to issue a Gazette notice that will cement this decision in law. My decision to remove residual levies is supported by the most recent evaluation of residual levies and liabilities. Our ability to take this step is dependent on a range of factors. Firstly there has been a significant improvement in ACC’s claims management. Secondly we have seen good regulatory changes reducing the cost of claims. We have also seen changes in discount rates and we have seen continued performance of the ACC investment portfolio.Removing residual levies represents another significant milestone in the history of ACC. The repeal of the residual levy provisions is of great consequence for those businesses that are currently meeting their own workplace injury costs under the Accredited Employers Programme. In return for meeting these costs these businesses pay significantly reduced levies but they must still pay their full share of residual levies. The repeal of this levy will be a significant cost saving for these businesses. The removal will also mean that industries with the greatest injury costs pay their true share of these costs. This will complement the new health and safety legislation to help encourage much safer workplaces. This means much fairer levies for businesses in New Zealand. Removing residual levies will overall have a redistributive effect that will result in a decrease for businesses in some industries particularly for those in the Accredited Employers Programme and some will receive an increase. As we have announced we are fortunate to be able to confirm that it is very likely that some of those businesses will not get an increase due to excellent management and the fact that we are potentially on track for significant work account reductions.This bill will enable successive Governments to have an appropriate range of tools available to better set levies and will smooth out the effects of economic shocks over time. The bill takes the opportunity to make a number of improvements to the approach to funding ACC’s levied accounts. A series of complementary changes will improve the framework for levy setting. To begin with the bill clearly articulates and consolidates the principles that will guide the levy-setting process. I acknowledge that there has been some debate about how those principles work together. These principles will promote levy stability and solvency and will help to ensure the lifetime costs of claims are met for any particular year. The bill also recognises that trade-offs between these principles may be required—for example following a significant change in the economic environment. We know too well the impact of Canterbury in the cost to the scheme. Furthermore new governance arrangements will better reflect the Government’s responsibility for levy setting. These arrangements involve transferring responsibility for the development of the funding policy that guides levy setting from ACC to the Government. This is about responsibility. The bill implements a more robust governance structure where the Government sets the policy that ACC as the responsible Crown agent will implement. Ultimately this will promote a closer match between levies that are consulted on and recommended by ACC and the Government’s decisions.Following the select committee process the bill also now includes a provision requiring the Minister for ACC to undertake targeted consultation on the funding policy statement. I think it will be helpful to relevant stakeholders to present and have their views taken into account at this initial stage of the process. The targeted consultation round will complement the regular comprehensive public consultation on levy rates already undertaken by ACC. ACC has indicated that potential levy reductions next year will be based on a funding target band of between 100 percent and 110 percent of liabilities over a 10-year funding horizon. This is intended to strike a very important balance between levy stability and ensuring that the ACC accounts hold sufficient funds across generations. This is consistent with the funding policy supported by Cabinet which as I confirmed yesterday I intend to consult on as a long-term funding policy for the ACC scheme. To ensure there is adequate time for targeted consultation the bill was amended in the select committee to require the first funding policy statement to be issued within 12 months after the bill comes into force rather than 3 months.Finally the bill enhances the transparency of the levy-setting process by increasing the reporting requirements on ACC. This will ensure that both the Government and levy payers are informed about the downstream consequences of funding decisions. This is very important for transparency. As well as ensuring that levies are set through a robust process the bill introduces the kind of accountability and transparency requirements that already apply to the operations of the Government’s core Budget under the Public Finance Act. The Government is working hard to uphold the financial performance of the scheme and ultimately to deliver better outcomes for New Zealanders. This bill represents an important step towards furthering those objectives. The changes will allow us the benefits of improving the governance and transparency of the funding process and will support greater levy stability for individuals and businesses. This will help to ensure that the ACC scheme is financially sustainable so that future generations can continue to enjoy the benefits of having comprehensive no-fault accident compensation.I want to conclude by thanking all members of the Transport and Industrial Relations Committee particularly the chair Jonathan Young who has done an excellent job for his careful consideration with the committee on the bill. The enhancements made at the select committee—thank you to all of the members for their contribution. I also want to thank the members of the public who contributed to the development of this bill by presenting their views to the committee.The Government has delivered significant improvements to the ACC scheme with more than $1.5 billion in levy reductions and more are planned in the future. The scheme is now in a position where it is essentially fully funded and the changes in this bill will help to maintain the financial performance of the ACC scheme and will deliver better outcomes for some of our most vulnerable New Zealanders. The scheme’s assets have grown from $10 billion to $31 billion in the last few years. The public can be very confident that we will ensure that cover is provided for those who are in need. The passing of this bill completes significant reform in the ACC levy-setting process. The passing of this bill means that on top of the financial achievements—taking the scheme to being essentially fully funded and improving the asset management—we will see much more stable transparent and fair levies for all New Zealanders. I commend this bill to the House.