WORKCOVER CORPORATION

Adjourned debate on motion of Hon. D.W. Ridgway:

1. That pursuant to section 16(1)(a) of the Parliamentary Committees Act 1991, the Statutory Authorities Review Committee inquire into and report on the WorkCover Corporation of South Australia (WorkCover), having regard to the extraordinary blow-out in the unfunded liability of WorkCover from $86 million in 2002 to $843 million in 2007, the failure of the Government to properly and adequately monitor and manage the unfunded liability of WorkCover, and the claim by WorkCover in January 2006 that the sole claims manager would achieve necessary liability reduction to deliver a fully funded scheme by 2012-13, with particular regard to—

(a) the deteriorating financial position of WorkCover;

(b) the effectiveness of outsourcing the claims management to a sole claims manager;

(c) the tender process and the probity of that process, leading to the appointment of the sole claims manager;

(d) the exposure of WorkCover to the subprime financial market;

(e) the 2007 actuarial report submitted to the WorkCover Board in September 2007; and

(f) any other matters.

2. And that WorkCover provides copies of the following documents by 21 November 2007:

(a) any material provided to WorkCover by WorkCover’s Claims Management Agent of—

i. organisational charts;

ii. resources of the agent which are applied in the performance of the agent’s functions, including employee resource plans;

iii. resources provided by any other organisation or entity to the agent in or in connection with the performance of the agent’s functions; and

iv. commercial arrangements for the supply of the resources referred to in (ii) including details of any charges which the agent is obliged to pay in respect of the supply of those resources, as required by clause 4.5 of the Claims Management Agreement (the Agreement), dated 26 February 2007;

(b) organisational charts provided to WorkCover of all significant positions within the Claims Management Agent’s personnel, as required by clause 4.6 of the Agreement;

(c) any documents and correspondence relating to WorkCover’s approval of persons to occupy the positions to be designated to be held by key agent personnel, as required by clause 4.6 of the Agreement;

(d) the Agent Performance Evaluation Program and any documents promulgated pursuant to clause 7.1 of WorkCover’s Claims Management Agreement;

(e) any reports provided to WorkCover by the Claims Management Agent, outlining the outcomes of its internal audit and quality assurance programs, as required by clause 7.4 of the Agreement;

(f) any reports relating to general or selective audits of the Claims Management Agent, undertaken by WorkCover, as required by clause 7.5 of the Agreement;

(g) a list of all unauthorised payments or any documents evidencing unauthorised payments made by the Claims Management Agent, as required by clause 9.3 of the Agreement;

(h) the ‘Certificate of Readiness’ of the Claims Management Agent, as required by clause 13.2 of the Agreement;

(i) the transition-in plan of the Claims Management Agent, as required by clause 13.3 of the Agreement;

(j) a copy of the complete and current WorkCover Claims Management Agreement, including all schedules annexed thereto;

(k) all tender documents relating to the outsourcing of WorkCover SA’s claims management, for the period 28 February 2005 to 30 February 2006;

(l) all recommendations made to the WorkCover Board, concerning assessment of all tenders for the outsourcing of the WorkCover claims management;

(m) the WorkCover actuarial report for the financial year ending 30 June 2006;

(n) the WorkCover actuarial report for the financial year ending 30 June 2007; and

(o) correspondence (including emails) between the WorkCover actuary and the WorkCover Board, for the period 30 June 2006 to 30 June 2007.

(Continued from 17 October 2007. Page 959.)

The Hon. R. WORTLEY (16:19): The Hon. Mr Ridgway proposes establishing an inquiry into WorkCover by the Statutory Authorities Review Committee. The inquiry would focus on, amongst other things, the scheme's funding position and the engagement of Employers Mutual as WorkCover's claims agent. On 29 June 2007, the shadow minister said, 'WorkCover has already had more reviews than Dame Edna'. So, why does the opposition believe that this inquiry would add anything further? The government recognises that there are important issues to be addressed in relation to WorkCover and it has undertaken a range of actions to address these issues. I will outline those important actions shortly.

Before I do that, I need to clarify a critical point that the opposition appears to have missed. The financial position of the scheme is an important concern. It is true, however, that there is a near universal agreement that the problem with the scheme in South Australia is that not enough injured workers are returning to work. In fact, South Australia has the lowest return to work rates of all Australian states. Until return to work outcomes improve, we cannot expect to see a sustainable improvement in the scheme's funding position or a significant reduction in levy rates. There is nothing in the terms of reference for the proposed inquiry that seeks to address the key issue for the WorkCover scheme of poor return to work rates. Unlike the opposition, the government recognises the importance of improving return to work in the South Australian scheme for the economic and, more importantly, social wellbeing of the state.

It is important for the Hon. Mr Ridgway to understand the extensive work that has been undertaken by this government to address the scheme's issues. The government, in 2003, appointed a new board, with instructions to resolve the management and administrative issues of the scheme, before looking to other opportunities to improve return to work outcomes. The board has appointed a new management team, which I am advised has reviewed the internal workings of the scheme. The redesign of the claims management contract and—

Members interjecting:

The Hon. R. WORTLEY: We have forgotten more about WorkCover than you know, so just listen to what I have to say. You may learn something.

Members interjecting:

The Hon. R. WORTLEY: Just be quiet and let me speak. You may learn something. The redesign of the claims management contract and engagement of Employers Mutual—through an extensive selection process, overseen by an independent probity auditor—was a vital step to ensure that the scheme is optimally placed to enable return to work.

It is also worth recalling that, as required by the legislation under which WorkCover is established, the parliament scrutinised the regulation which sets out the basis of the contract that was ultimately entered into with Employers Mutual. The WorkCover Board Chair, Chief Executive Officer and legal counsel appeared before a parliamentary committee at the time the regulation was under consideration and explained in detail the contractual arrangements and provided assurances to the committee regarding the robust nature of the probity arrangements in place. After scrutiny and due consideration, the parliament ultimately elected to allow the regulation and, in doing so, supported the nature of the contract that WorkCover later executed with Employers Mutual.

In addition, WorkCover has established new contracts with rehabilitation providers, improved working relationships with medical and allied health providers, set up new strategies to reduce disputation and worked to improve service delivery to better respond to stakeholder needs. The next step must now be taken. As members would be aware, the Minister for Industrial Relations announced on 29 March an independent review of the WorkCover scheme. The first objective of that review is that injured workers should receive fair financial and other support that should be delivered efficiently to enable the earliest possible return to work.

Earliest possible return to work is a key part of WorkCover's and Employers Mutual's claims management strategy for fixing the scheme. That is one of the reasons why WorkCover engaged Employers Mutual to operate in South Australia. In New South Wales Employers Mutual's performance as an agent has outstripped performance by other agents in the New South Wales scheme by more than 20 per cent. WorkCover's claims management contract with Employers Mutual is focused on achieving good return to work outcomes, and the regulation enabling the contract established by this government has set that in place.

Employers Mutual has now been working in the South Australian scheme for a little over a year. Since its establishment Employers Mutual has introduced a new case management model, based on the model proven successful in New South Wales but tailored to the local environment, recognising the challenges particular to South Australia in getting people back to safe work. When they were engaged they promised to employ 275 staff in South Australia, and they now have about 350, including a 25 per cent increase in the number of case managers since transition from the old agents. They have delivered over 8,000 hours of training to their staff—no small investment—and there has been an increased focus and spend on retraining initiatives for injured workers, spending a record $1.1 million on these services in 2006-07.

We knew the task of improving return to work rates in South Australia, especially long-term claims, would not be an easy or quick one. I suggest that members give it time to get on with the job of getting injured workers back to work. The proposed inquiry will add nothing to this important work but will be more likely to detract from it, averting much needed focus and effort on turning the scheme around.

The last time the Statutory Authorities Review Committee inquired into WorkCover a few years ago, it took almost two and a half years to present its report. While I do not wish to reflect on those conducting that inquiry, surely members would agree that the important issues facing the scheme cannot wait that long. The independent review announced by the Minister for Industrial Relations in March is due to report in just over a month. That review is being conducted by two of Australia's leading workers compensation experts, Alan Clayton and John Walsh. Surely the parliament will be better placed to consider the report of two independent experts when it considers legislation relating to the WorkCover scheme next year, as the minister has indicated will occur, than to conduct a witch-hunt, as seems to be the aim of this inquiry.

Members will know from WorkCover's annual report released last week that the recent increase in its unfunded liability has been significantly driven by the scheme's actuary reassessing the cost of claims that have been on the scheme for more than 10 years. These claimants began their life on the scheme long before Employers Mutual came into the picture. The purpose of the Hon. Mr Ridgway's proposed inquiry is, among other things, to examine why the unfunded liability has increased to its current amount and to find some evidence to support his allegation of government inaction. Clearly there is no question, no lack of transparency, about why WorkCover's funding position is as it is. The WorkCover Board, supported by the audit findings of two leading audit firms—KPMG and Ernst & Young—and the independent actuary to the scheme, has provided no shortage of information about why the scheme's unfunded liability continues to rise, nor could it be reasonably stated that the government has been immobile on this matter, as I have outlined above.

The opposition is behind the times and off target in its demand for an inquiry. The government has already engaged the best experts available to conduct an independent review of the scheme, with a focus on the critical issue of improving return to work outcomes. It is surely not too much to ask that the current review should be allowed to reach its conclusions before launching into another inquiry.

The Hon. R.I. LUCAS (16:28): I rise to speak briefly in support of my colleague the Hon. Mr Ridgway's motion and will speak in reply in a moment. I move:

Paragraph 2—Insert the words 'to the Statutory Authorities Review Committee' after the word 'documents' in the first line.

The line currently reads 'And that WorkCover provides copies of the following documents by 21 November 2007'. The intention was that it would provide it to the Statutory Authorities Review Committee, but out of an excess of caution I have moved to include the words 'to the Statutory Authorities Review Committee' after the word 'documents'. I do not need to provide any further explanation.

The contribution from my colleague the Hon. Mr Ridgway and the drafting of the motion always made clear that it was intended that the documents be provided to the committee, but, out of an excess of caution, this amendment will make absolutely clear that those documents need to be provided to that committee. I indicate my support for the motion.

The Hon. B.V. FINNIGAN (16:29): I thought I would make a contribution on this matter, given that I am the Presiding Member of the Statutory Authorities Review Committee. Fortunately this motion again demonstrates the contemptuous attitude of the opposition to the committees and committee system we have in this parliament. As Presiding Member of the Statutory Authorities Review Committee, I will accept the will of the council. As a former presiding member yourself, Mr President, you would know that the committee can examine references from the Governor, by its own motion or from the council.

Currently, the committee has before it an inquiry into the Independent Gambling Authority (and the committee is in the process of finalising the report on that matter) and an inquiry into the Land Management Corporation, which has been quite extensive and on which a lot of evidence has been heard. This week the Housing Trust returned to report back to the committee. Mr President, you would know that the committee examined WorkCover some years ago. The committee has kept an eye on the accounts of WorkCover and talked about the matter a number of times, but there has not been any motion or raising of the issue in the committee for some time.

What we see in this motion is the opposition playing politics with a statutory authority, but also with the parliament and its committee system. A few weeks ago a select committee was established by this council to inquire into SA Water. At the time a number of members said that, because the Statutory Authorities Review Committee is set up under the Parliamentary Committees Act to review statutory authorities, why do we not refer it to that committee? At that time it suited members of the opposition and the cross benches to have a select committee so that everyone could get a guernsey. They did not want to send it to the Statutory Authorities Review Committee but, rather, to a select committee.

On this occasion the opposition is not moving to establish a select committee because it suits its members—for some purpose—to send it to the Statutory Authorities Review Committee. The only reason I see that being the case is that it is an initiative of the Hon. Mr Lucas. We know that the Hon. Mr Lucas is still the de facto leader of the opposition in this place; and he may be the de facto leader of the opposition in the state. Certainly, in this council he calls the shots within the opposition, rather than the Hons Mr Ridgway or Ms Lensink.

I assume the fact that the Hon Mr Lucas is on the Statutory Authorities Review Committee is the reason that this inquiry is being sent to that committee. I think we have confirmation of that with the fact that he is the one who has amended the motion today. This motion is simply not about inquiring into WorkCover or the welfare of injured workers. I am sure all members are concerned about injured workers and want to ensure that the WorkCover system works adequately.

As a former union official—of which I am quite proud, not ashamed (as the Prime Minister would have me be)—I am more than aware of the tragic circumstances of workplace injuries and the burden that many injured workers carry. I am sure we all are united in wanting to ensure that the WorkCover system works effectively to address the concerns of injured workers and that people are able to return to work.

This motion is a fishing expedition that would ensure media opportunities for the opposition to talk about WorkCover. As far the opposition is concerned, that is all the committee system is about. We have seen the establishment of the all-powerful (as the Hon. Mr Lucas likes to describe it) Budget and Finance Committee. It is a committee of the council, and it was supposed to enable any member to attend at any time if they were interested in any particular issue. As far as I am aware, before I was a member of that committee, I am the only member who turned up to that committee; no other members have attended.

The Budget and Finance Committee is simply a play thing for the Hon. Mr Lucas to produce media opportunities and questions for him in question time. It takes the Hon. Mr Lucas a couple of months before he asks a question in the council about it. He tries to pretend it is some great revelation when, in fact, the issue has been canvassed at a committee meeting some months before; for example, the disgraceful attack on the grant to the Greek Orthodox Archdiocese in Salisbury.

I will correct the record while I am on my feet in relation to the interjection I made during the Hon. Mr Lucas's contribution during Matters of Interest. My interjection was clearly aimed at the Liberal Party when I said, 'Beware of Greeks seeking grants'. Certainly, it is not my view, and the Premier and the Minister for Multicultural Affairs have more than adequately put on record the government's absolute disgust with the anti-Greek attitudes the opposition has been taking.

I return to the matter at hand. This motion is about providing media opportunities for the opposition. It is not about genuinely inquiring into WorkCover. It is not about trying to discover what we can do to improve the lot of injured workers or the operation of the system. There is no greater proof of that than in the estimates committee after the budget. As I recall it, very few questions were asked in the estimates committee by the member for MacKillop regarding WorkCover. It is not an issue that the opposition has been talking about.

Members interjecting:

The PRESIDENT: Order!

The Hon. B.V. FINNIGAN: Here they are today moving a motion to provide more media opportunities for the Hon. Mr Lucas to promote himself as the true voice of the opposition in this place. Members only have to look at the wording of the motion. It is a disgrace. It states:

...[to] report on the WorkCover Corporation...having regard to the extraordinary blow-out in the unfunded liability...the failure of the government to properly and adequately monitor and manage the unfunded liability...

Already, in the wording of the motion, the opposition has condemned the WorkCover Corporation and the government. This proves that the motion is a fishing expedition and an opportunity for the opposition to preen in the media on the issue of WorkCover, not to try to do anything to improve the effective operation of the scheme and to ensure its ongoing viability or to care for the welfare of injured workers. The wording of the motion itself—as is the wording for all their select committee inquiries—is to hang, draw and quarter whatever it is that the inquiry is about.

Here is a classic example. It is clear that those members of the opposition supporting this proposition have made a judgment already and are already condemning the WorkCover Corporation and the government for their handling of WorkCover. That is clearly demonstrated by the wording of the motion which makes conclusions. I do not know why the Hon. Mr Lucas does not table the report right now. He probably already has whatever it is he wants to say. All he wants to do with this motion is to allow media opportunities in order for him to try to get more publicity for himself so he can re-establish himself as the true leader of the opposition in this place.

Of course, government members are concerned about injured workers, and they are concerned about the ongoing viability and effectiveness of the WorkCover scheme. My colleague the Hon. Mr Wortley has set out what this government has done, and that is to lead the way in trying to ensure that WorkCover can operate the best that it can, including the review which is currently under way and which will be reporting to the government very shortly.

I cannot see what this motion can possibly contribute to the effective operation of WorkCover or the welfare of injured workers. I appeal to those members of the cross-benches who are supporting this motion and say that, if you want the Legislative Council to be taken seriously and if you want our processes in terms of committees, inquiries, select committees and standing committees to be effective and proper and to make a contribution to the good governance of this state, you will oppose motions like this, which clearly have the conclusions already in the terms of reference.

It is merely a massive opportunity for the opposition to try to grandstand. I am sure that opposition members have very little interest in the actual outcome. I confidently predict now that the inquiry will drag on for a long time and that it will probably be me as chairman who has to try to drag the thing to a conclusion because the opposition would have lost interest. We have only to look at how many times opposition members have supported the establishment of select committees and have then lost interest once their media stunts or media opportunities, which is the reason they establish the select committee or inquiry in the first place, are out of the way and they have had their couple of stories, sound bites or pieces appear in The Advertiser. That is all they care about, and they then move on.

Members of the opposition are rarely interested in the actual report and in seeing an inquiry through to its conclusion, because that is not in their interests. They have got what they want—they have got their sound bite, they have raised their profile, and they have contributed to their position within the internal machinations of the Liberal Party, which are ongoing. That is what this motion is all about, and that is what so many of the things the opposition puts forward are about.

If we are serious about WorkCover and we are serious about injured workers, we will cooperate and work with the process the government has put in place, that is, to have an independent review, on which we will be reporting shortly. What this motion will do is bring further discredit to the Legislative Council and discredit to our processes. It is a kangaroo court that makes the conclusions before the inquiry is even established. I particularly appeal to those members of the cross-benches who want this institution to be taken seriously and who are trying to convince the public of South Australia that the government is wrong in wanting to see this institution abolished: the best way to go about that is to make it a serious institution which carries out serious inquiries that are in the interests of the good governance of this state.

This inquiry would simply feed into the normal desire of opposition members to create some media opportunities for themselves and to try to advance their position within the Liberal Party. It will do nothing to improve the effectiveness of the operation of WorkCover, and it will do nothing to improve the welfare of injured workers. I therefore urge members to oppose the motion.

The Hon. D.W. RIDGWAY (Leader of the Opposition) (16:41): I thank members for their contribution. I want to respond to a couple of the points made by members opposite. The first issue I want to respond to is the claim that this motion was promulgated by the Hon. Mr Lucas. I put on the record that this was a matter that I personally took to our party shadow cabinet, in isolation from Mr Lucas. I asked him to move the amendment because he was speaking before me, and I thought it was appropriate that he move the amendment so that members were aware there had been a slight typographical error.

I would like to respond to some of the comments other members have made. It is interesting that the Hon. Russell Wortley talked about the new board that was appointed in 2003. As I highlighted in my contribution last week, the current minister and this government have continually blamed everyone but themselves for the problems that face WorkCover. They have blamed the former minister; they have blamed the former board and established a new board; then it was the claims manager; and then they said it was a single claims manager. Now, as I said last week, it looks like it will be the poor old injured workers who will be the ones who will pay the price for this government's inaction.

Another contributor to the debate claimed that the government and WorkCover have introduced a range of initiatives over the past five years. However, the situation continues to deteriorate. The Hon. Mr Finnigan talked about having a serious inquiry. If an $843 million deficit in the unfunded liability is not a serious issue, I do not know what is. It really beggars belief that the Hon. Mr Finnigan and this government do not think this is a serious issue. Again, we hear claims, 'We're having an inquiry, and we're going to report in a month'. That has now been delayed until after the federal election. Again, this shows that this government is not able to cope and does not want to be exposed for its inaction during a federal election campaign.

It might be worth while looking at what happened in New South Wales. An article in today's Financial Review provides an interesting contrast between the disgraceful performance of this government and what is happening in New South Wales. Under the headline 'NSW WorkCover premium cuts save business $110m', the article states:

Premier Morris Iemma will today announce a 5 per cent cut to workers compensation premiums after the state's WorkCover scheme increased its surplus to $812 million.

So, New South Wales has a surplus of $800 million and this lot has a deficit of nearly $850 million. The article goes on to state:

In a move likely to be welcomed by business, Mr Iemma said the strong financial performance of the scheme for compensating injured workers, coupled with the lowest injury rates in 20 years, had enabled the government to announce a fifth consecutive reduction in premiums.

So, you can see the contrast there between the two states. This is the worst performing state in the nation for return to work by injured workers, and it is the worst performing WorkCover scheme in relation to its unfunded liability, which threatens this state's AAA credit rating. Even though the government claims that its great contribution to the state achieved the AAA credit rating, we all know—and it has been reported in a number of forums and in the media—that it was actually the hard work of the former Liberal government that laid the foundations for that AAA credit rating—and this government is on the cusp of losing it.

I do not want to go on for much longer, other than to thank honourable members for their contributions, and the indication that it appears I will have support for this inquiry. I thank the members who will support the inquiry and I look forward to the documents being provided to the secretary of the Statutory Authorities Review Committee prior to or on 21 November. I assume that the secretary will be writing to WorkCover demanding those documents in the near future. I look forward to the support of members.

Amendment carried; motion as amended carried.