When we started this debate the Minister for ACC, the Hon Nick Smith, set out a number of reasons why we need to pass this bill. He talked about the big increase in levies that would be necessary were it not for the passing of this bill. In particular he referred to the fact that a person on the average income will end up paying a further $300 a year into the earners account, through the earners levy.
He went on to talk about the cost increases that the accident compensation scheme has incurred and the escalating costs of claims. He said the cost of claims had increased by some 57 percent over the last 4 years, from $2.2 billion to $3.5 billion. He talked about the difference in the approach that both Labour and National were taking to full funding of the scheme’s ongoing liability.
It was interesting that immediately following Nick Smith’s speech we heard from the Hon David Parker, who accused the Minister of telling half-truths. In particular he said that the Labour Party’s policy on full funding of the liability to 2019 is well known and well documented. He said that Mr Smith was misrepresenting Labour’s position. He went on to say that it was a consequence of the delay of full funding that enabled those reductions in the levy—that if it were not for the delay in full funding, the levies would have to go up by $300. So he attempted to answer—quite reasonably, I thought—some of the comments made by Mr Smith.
But what was interesting about Mr Parker’s response was that he was absolutely silent on the issue of the increasing cost of claims. Mr Smith said that the cost of claims had gone up by 57 percent in 4 years—five times the rate of inflation. What was Mr Parker’s response to that? He was happy to respond to some of the other claims the Minister made, but he failed to respond to that. I take that deafening silence as an acknowledgment that Mr Parker knows full well that in the last 4 years the cost of claims has gone from $2.2 billion to $3.5 billion—a 57 percent increase.
Mr Smith also said that when the Hon Maryan Street signed off on the accounts to June 2008, she signed off on a loss of $2.4 billion, and I have not heard any denial of that. The Hon Maryan Street, quite reasonably in my opinion, has said that the year to June 2009 was impacted by the effect of the world financial crisis, and I think she has a very valid point. However, I note that the recovery in the world markets has not reversed that $4.5 billion loss. I also note that Mr Smith acknowledged the impact of the global financial crisis, but he also made the point that of the $2.4 billion loss in 2008, only $1 million was a consequence of those financial losses.
Why do we need this legislation? It must be patently obvious to anyone who has listened with an unbiased view to this debate that we need this legislation because the scheme has grown to such an extent that the country can no longer afford it. We cannot continue to live in a fool’s paradise where costs increase year after year by five times the rate of inflation. That model has been followed around the world. We see it in Turkey right now; we see it in Spain. We see developed countries in the Western World facing bankruptcy and not actually being able to go out into the world markets and raise money to pay for the running of those countries. Let us hope that New Zealand never comes to that situation.
What has driven the significant cost increase? There has been an expansion of the scheme, and a significant number of new entitlements. We have talked about suicide. When the accident compensation legislation was first brought into the House there was no provision for suicide. As Mr Smith said, suicide is a tragedy—it is a real tragedy—but it is not an accident. He is absolutely right: it is not an accident, but it is a tragedy.
I come back to a point that the Hon Maryan Street made in her second reading speech, which I have already referred to twice in this debate. She quite rightly said that because of the advances in medical science, people who would have died in an accident 20 or 30 years ago can live today. That is one of the great things about medical science: people who in past circumstances would have died can today live. But there is a cost to that, and the community is prepared to pay that cost because life is precious. People who survive accidents may survive in a paralysed state, or they may be tetraplegics. As the Hon Maryan Street said, the cost of keeping a young person alive in that state for the rest of his or her life may go up to $20 million. I heard her talk to the Committee this morning about that cost.
As a society New Zealanders have been prepared to pay that cost because life is very precious. But we need to recognise that the cost to the country has been an increase in claims of 12 percent per annum—five times the rate of inflation—over the last 4 years. I think that is also important in terms of why we need to fund the costs as they fall. The ACT Party disagrees with the Green Party.
The reality is that when the scheme first came into existence, in 1972, medical science was such that people involved in major, serious accidents were more likely to die than to survive. But as time has gone on the number of survivors of what would otherwise have been fatal accidents has grown and grown. One might start, say, with five tetraplegics, and that number can balloon to 10, 20, 50, 100, or 200. Members can imagine the escalating cost. New Zealand society has been prepared to pay that cost, but it is a cost that falls when the accidents occur.
I note that the Green Party campaigned at the last election with an image of a young girl. Green members talked about her future. They said we had her future in our hands. Well, I ask Mr Hague why he would bequeath to young people the costs of the previous generation. He drew the distinction about fully funding education and health on a “pay as you go” model, but that is not how we fund superannuation, and it is certainly not how Labour would like us to fund superannuation. Labour’s plan, of course, was to have the Cullen fund—the Superannuation Fund. When the Government moved away from that model because it was not prepared to borrow to fund those investments we heard all sorts of criticism from Labour.
I come back to the issue of competition and privatisation. Let us not forget that in 1998 the National Government finally had the courage to open up the earners account to competition. As a consequence of that, premiums dropped by some 30 percent. The tragedy is that the National Government did not make that move 6 years earlier so that the benefits that flowed through from that could be well and truly embedded when Labour came to power in 1999, and so that Labour was not able to dispense with those huge benefits.
Finally, I come to the issue of privatisation. I know Mr Hague criticised privatisation earlier. Let us look at the situation with cataract operations. Life-restoring cataract operations give people the ability to see. The reality is that ophthalmologists working in public hospitals, as Mr Hague will well know, do three or four sight-restoring operations in a morning or an afternoon, whereas the output is eight operations when the same operation is done by the same surgeons in a private hospital. That is the benefit of private medicine. That is the benefit of incentivising a surgeon.
ACT members want to offer competition and choice, so we will be supporting this bill. We do so proudly, but we wish it had not been necessary. If National had had the courage to make the changes that were required in 1992 and 1993, the scheme would not be in the state of financial disrepair it is in today. Thank you