WORKERS REHABILITATION AND COMPENSATION (SCHEME REVIEW) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 10 April 2008. Page 2423.)

The Hon. R.D. LAWSON (15:37): This ill-starred legislation is the result of the ineptitude of the Labor government, and in particular the ineptitude and incompetence of its minister, the Hon. Michael Wright. It is also the result of the timidity and lack of conviction and strength of Labor members, who have sat silently in their comfortable seats during the passage of this bill. It was only the member for Enfield and the Treasurer who spoke in another place during the debate on this matter.

It is amazing that many of those Labor members, not only in another place but here, have been scurrying around the corridors, telling journalists and anyone else who would listen that they do not support the bill. The irony of it is that these members (most of them) owe their seats to the very workers who will be affected by this bill.

The government should be condemned for its inaction on WorkCover. Ever since the government came to office in 2002, the situation at WorkCover has been known to it and it has been steadily deteriorating. I will come to the financial situation of WorkCover a little later.

This is not some issue that suddenly snuck up upon the government. It is an issue that the government and the minister himself recognised and for months, indeed years, sought to brush it aside by falsely laying the blame for the situation at WorkCover upon the previous government, yet the government did nothing.

The government allowed the scheme to deteriorate and is now, by its own incompetence, forced to downgrade workers' benefits. The excuse one also hears around the corridors (although not in the parliamentary debate) from government members is that the board is responsible for the situation at WorkCover. This, of course, was exactly the same argument that Labor members used in relation to another ill-starred Labor event, namely, the collapse of the State Bank. There, the Labor premier of the day claimed his government had a hands-off approach to the State Bank, and it cost this state and its citizens dearly and is still costing this state and its citizens dearly.

It is only now that the government realises that, as in the case of the State Bank, the situation at WorkCover has the capacity to bring this state to the brink of financial collapse that the government has decided that it must act. The government has decided that the people who will pay the price for the government's incompetence are not the minister, who should have resigned when he introduced this bill, not the government and not those members opposite who sit on their comfortable seats thanks to the efforts and support of workers out in the community: it is those very workers themselves who will be bearing the brunt of the government's solution.

This bill is not designed to save the WorkCover scheme: it is designed to get the government off a political hook. As I said, the government seeks to clamber out of a political hole of its own making on the backs of injured workers. If the government had acted promptly when it became aware of the deteriorating situation in—let us be generous—2003, it would not have been necessary to take the savage action which is now being taken. The debate and the rhetoric about this matter has been over-laden with hypocrisy. When he made a ministerial statement on 26 February this year (at the same time as the Clayton Walsh report was tabled publicly), the Premier said:

The primary focus is on improving the rehabilitation and return-to-work rates of workers and making the system more affordable and efficient.

He went on to say:

The key purpose is to optimise the prospect of a return to work by injured workers.

This legislation says nothing about the rehabilitation and return to work of injured workers. This legislation is all about getting injured workers off the scheme and, as I said, getting the Rann government off a political hook of its own making. The only jobs the government is concerned about are the jobs of Labor members in this parliament and returning them to work at the next election. One does not find in this legislation anything to do with rehabilitation. It is all about getting injured workers off the scheme.

When introducing the bill in another place (indeed, the minister in this place made the same comments when introducing the bill), minister Wright said (and I think it is worth quoting):

...the overall objectives of the bill are simple. There are three:

First, the bill aims to align South Australia's scheme nationally while ensuring the state scheme is fair for injured workers particularly in terms of the critical elements of income maintenance, medical payments and non-economic loss.

Second, the bill amends the scheme in a way that is anticipated to restore its financial health and allow it to go on providing benefits at this level.

Third, it is expected that the improved financial outlook for the scheme will also be able to be used to the benefit of the cost competitiveness of the state's economy.

These are all noble objectives, but they are not the true objectives of this bill. It is not designed, as the minister said, simply to align South Australia's scheme nationally. It is not based upon some uniform principle. It is a ragbag of measures designed to produce a political outcome.

The minister said that the bill aims to restore the financial health of the scheme (and that is certainly something we support)—a scheme that has been allowed to deteriorate to the point where unfunded liabilities exceed $1 billion. We have not seen the latest figures from WorkCover, which will no doubt reflect the worldwide fall in investment returns in the past half year.

The financial health of the scheme certainly needed to be addressed but, as I said in my opening remarks, the financial health has largely been the result of the manner in which the government has overseen (or, more particularly, not overseen) the scheme.

I mentioned the board and, as I say, plenty of Labor members and people in the wider community tend to blame the board for this situation. However, the fact is that the board was selected and appointed by this government. The Under Treasurer has been an observer at board meetings, and I see from the latest annual report that either he or his deputy attend all board meetings of WorkCover, and that is as a result of a ministerial directive that such an officer be present.

So, the minister has been well aware, and we know that from his own public statements. He has not denied it, although he has sought to shift the blame to the board. As the elected representative of the people of South Australia, the government has an overall political responsibility to ensure that all organisations and organs of government are efficiently and effectively conducted. No person yet has paid any political price at all for the shameful provisions of this bill and, more particularly, for steering this state into the situation where this disaster looms before us.

When the minister talks about the improved financial outlook for the scheme that will be used for the benefit of the cost competitiveness of the state's economy, he overlooks the real purpose for the government's adopting this legislative measure. The real purpose, no doubt, is to ensure that the Treasurer will keep his much vaunted AAA rating for this state. It is not something that the minister acknowledged, nor is it something that the few government members who have spoken on this matter to date have mentioned.

We notice that the cat was let out the bag in the report of a meeting of the South Australian branch of the Labor Party addressed by the Premier, when he made it perfectly clear to the delegates that what was at stake here was the AAA rating of the state. Incidentally, despite all his claims, this Treasurer did not obtain that financial rating. He rode into office on the strength of the South Australian economy. His predecessor, the Hon. Rob Lucas, had so managed the state's finances that we were in a position to obtain a AAA rating. Despite all of that, the Treasurer has been loudly proclaiming to all who would listen—and to many who were not interested in listening—that he is responsible for the AAA rating. When that rating is put in jeopardy he decides that the way out for us is to cut workers' entitlements and reduce the unfunded liability of WorkCover. So, this government is entirely hypocritical on this issue. It is digging itself out of a political hole on the back of injured workers.

It is interesting also to note from the second reading contributions in this and another place that the focus (in the minister's words) is on what the board has decided to do: 'the board has sought to address the deterioration in the financial circumstances', 'the board has examined the design of the current scheme', and so on. All the time an attempt is being made to rewrite history, to write the government out of responsibility and to lay the blame on others.

It is interesting also to note from the second reading speeches that the government has decided to adopt the language of 'shifting the culture from injury management and return to work towards the culture of compensation'. So the government has embraced the notion that these measures are necessary to shift the culture. It is clear that the government finds offensive what is described as the creation of a lump sum culture. The minister says:

The net impact of the significant use of redemptions has been the creation of a lump sum culture in which the negotiation and settlement of payouts for claims often replaces the primary focus of return to work outcomes.

Once again in this devious attempt to rewrite history and to explain away this shameful bill the government is seeking to blame workers, because this bill contains nothing at all that will achieve an improvement in the return to work rates. It will achieve exactly what it is designed to achieve, namely, getting injured workers off the scheme.

I mentioned that in another place only the minister, the Treasurer and the member for Enfield spoke. The Treasurer conveniently omitted to mention the fact that this bill was, from his viewpoint, protecting his precious AAA rating, but there is no doubt in the mind of anyone who has had anything to do with this debate at all, and who knows the methodology and motives of this government, that that is what he was seeking to do.

The only Labor backbencher who was prepared to speak in another place on this bill was the member for Enfield. In a rather quixotic contribution he stated that the initial concept of WorkCover was flawed from the beginning and was merely a cost-shifting arrangement whereby the commonwealth government shifted its social security obligations to the state—and he said 'to the states'. I do not think anyone would seriously believe that analysis of the reason for WorkCover.

When you read the original debates in 1888 and 1889 about the introduction of workers compensation legislation in South Australia, you see that the government of Charles Cameron Kingston, which introduced the legislation, was thrown out before it was enacted (it was subsequently enacted in 1900). That government was merely adopting the workers compensation system that had been embraced by legislation in the United Kingdom in 1897. There had been rewrites of the legislation in 1911, 1932 and, more recently, 1986 and during the 1990s. But the point is that this was not a cost-shifting exercise to the state at all: it was designed, and always was designed, to ensure that employers met their responsibilities to their workers who were injured at their workplace doing work for the employer. It is entirely appropriate. This is not a cost-shifting exercise. The scheme has worked reasonably well for 100 years—there are always refinements going on—but it was this government that allowed the scheme to go off the rails and become financially unviable.

We have received, of course, as have all members, a great many representations regarding this legislation and, indeed, the Liberal Party held a special meeting and advertised for submissions, and we are grateful that a number of organisations came forward with their views. We were given the information, data and views of the Printing Industries Association, Business SA, the Australian Lawyers Alliance, the Engineering Employers Association and the Motor Trades Association. There was also a delegation from the Public Service Association and the leader of Unions SA, Ms Janet Giles. We had a presentation from Dr Kevin Purse, an academic who has studied workers compensation schemes. We also heard from the Master Builders Association, from Mr Robin Shaw of the self-insurers association, and from a rehabilitation provider.

The information really fell into two classes. On the one hand, there were the union representatives, who were vehemently opposed to any change to the legislation. They were, because of their political alliances, inclined to blame the board and not the government (I think, an untenable position). It was, to me, rather disappointing that most of the employer associations came along singing from exactly the same hymn sheet—a hymn sheet that had clearly been devised in meetings before the adoption of this legislation and pretty well conducted by Business SA, which has been strongly urging all members to pass the legislation without delay and without amendment.

As a lawyer myself, I was pleased to hear from the Australian Lawyers Alliance. I think it is fair to say that, in much of the discussion and political debate about workers compensation, there is an antipathy towards the views of lawyers, particularly those lawyers who represent injured workers. It is very easy for people who have little understanding of the way in which the scheme works to blame any of its ills upon lawyers and to exaggerate the legal expenses which are incurred in relation to claims.

I have nothing but respect for the lawyers who work for workers in this area and, indeed, for all lawyers which o represent interests in the current scheme. It is not the lawyers' fault that they fearlessly and entirely properly advise their clients to act in their best economic interests. The idea that one should demonise those professionals who are assisting people is lamentable.

One of the weakest features of this current bill is the desire to establish medical panels for the superficially attractive objective of minimising legal disputes. A true dispute under legislation does not disappear because it involves a medical question; it does not disappear if you create a new tribunal and say, 'We are going to keep lawyers out of there.' The dispute will still exist. The dispute will still have to be resolved, and it will have to be resolved in a fair and professional way. The route chosen by the government is the establishment of medical assessment panels, and that is part of the package that is being advanced.

I should say that none of the organisations that supported this bill (that is, the employer organisations) said that this legislation was perfect—I think the best mark any of them was prepared to give it was some seven out of 10; most said 6½ out of 10—but they were all deeply concerned by elements of the current scheme, not only the unfunded liability, which is threatening the very stability of the scheme if not the finances of the state as well, but also the levy rates, which have been higher in this state than in any other state and which are making our already vulnerable economy subject to pressures and, ultimately, the sufferers in relation to those pressures would be workers.

We find that at 3 per cent an average levy, South Australia's employers are paying more in workers compensation than employers in those other jurisdictions with which we are competing. We know that capital is flying from Australia itself and from all Western countries and going to low-cost jurisdictions, and it is also moving in Australia from high cost to lower cost jurisdictions. We have been warned time and again that South Australia has become uncompetitive by reason of its high average levy rates, and it is worth putting on the record precisely what they are. As I have mentioned, our average of 3 per cent has led to the funding ratio of the WorkCover scheme in this state to be 65 per cent. So, the scheme is going backwards.

In New South Wales, the average levy rate is 1.77 per cent, and that scheme is just in positive territory at 103.5 per cent. Victoria, which has a lower average levy (or premium rate) of 1.46 per cent, has a funding ratio of 134 per cent. Queensland does not have a truly comparable scheme, because the benefits are not as generous as those in other jurisdictions, but its average levy rate is 1.15 per cent and going down. The funding ratio of the scheme is at 178 per cent, which is substantially more healthy than South Australia at 65 per cent.

So we do not by any means dismiss the serious concerns of employers in this state. It is not merely for their profitability: it is for their capacity to provide sustained employment for South Australians. Clearly, the government shares that view, and we do not have any dispute with it. As I said, something has to be done.

The objective of this measure is to arrive at an average levy rate of 2.75 per cent by 1 July 2009. The financial projections that have been provided suggest that, with these amendments, that reduction to improve the competitiveness of our state—we will still be way behind the other states—is found in this measure. Short of this measure, we will not achieve that objective.

The latest annual report of WorkCover makes it clear that the scheme is going backwards, not forward. Last year, the loss in WorkCover's operations were $149 million, which is a significant loss given that its levy revenue was $572 million.

One of the most serious aspects of the South Australian scheme is the fact that injured workers in our state—especially those injured long term—have the worst return to work ratios, and that a significant number of persons who get on to the scheme, and have been on the scheme for as long as two years, will remain on the scheme indefinitely under the current arrangements.

Another feature of our scheme which, from the point of view of an employer, is negative is the fact that, under the South Australian scheme, a worker who is injured and remains on the scheme for more than a year will continue to receive 100 per cent income maintenance. The government now—although not initially—proposes that workers will continue to receive 100 per cent for the first 13 weeks, as they do in New South Wales.

In Victoria, there is reduction to 95 per cent. Between 13 and 26 weeks workers here currently receive 100 per cent. They will continue to receive 90 per cent under the current proposals. In Victoria they receive 75 per cent; in Queensland 85 per cent; and in New South Wales 100 per cent. In South Australia, for the second six months, benefits will be reduced to 80 per cent; presently, they receive 100 per cent. That 80 per cent is not as favourable as New South Wales at 90 per cent, but it is superior to Victoria at 75 per cent. Likewise, after 52 weeks South Australian workers currently receiving 100 per cent will receive 80 per cent. It is better than Queensland at 65 per cent for five years. It is superior to Victoria with 75 per cent, but less than the 90 per cent which is received in New South Wales.

In order to strike a balance, the government, pursuing the general recommendations of the Clayton Walsh proposals, has opted for the figures I have mentioned. Nobody welcomes that fact. It should not have come to this if the government had appropriately managed the scheme, but it has come to this. The issue is: what does the parliament do to address it?

In recent days, WorkCover has been in the market publishing newspaper advertisements designed to respond to claims made by similar types of advertisements placed by the unions. Many of the unions' claims have been exaggerated, in my view, but they are legitimate concerns which they had every right to express. It is, however, surprising to me that the defence of the bill has been published by WorkCover, not the government. The government has not had the guts to say, 'This is our measure; this is what we want to do'. It has actually put it to WorkCover to get out there and publicise this matter in the public arena.

The government has been hiding behind the board—as it always has—trying to blame the board. Now, in defending this bill, it is getting WorkCover to do work which it has not had the courage to do itself. WorkCover's material states facts which are incontrovertible. First, the South Australia's scheme has the worst return-to-work rate in Australia. That is, 'fewer injured workers successfully returned to work on our scheme than any other scheme in the country'. That is an incontrovertible fact. The question is—and it is a reasonable question for debate—are the measures that this government has taken in this bill appropriate to address that issue?

As I mentioned at the outset, the bill contains precious little about improving return-to-work rates. The fact that it will be necessary to appoint a return-to-work and rehabilitation coordinator in workplaces where over 30 persons are employed is a move in the right direction if it reduces disputes and improves communication between workers and their employers, but the fact is that, that issue aside, there is nothing in this bill which will improve the return to work rate; in fact, the government has not even sought to improve that. WorkCover claims in its latest publicity, and it has been consistent with this throughout:

The scheme's problems are not new. The key driver of the scheme's poor financial situation over the past 10 years has been the massive increase (up to 150 per cent) in the number of people staying on the scheme for the long term; that is, three years or more.

So, there has been an increase, and it has been of the order of 150 per cent, in the number of persons staying on the scheme for the long term. I would ask the minister in his concluding remarks on the second reading to provide the council with the details of the number of persons staying on the scheme for the long term (three years or more) and the cost of those over each of the past 10 years. Once again, WorkCover states:

Poor return to work outcomes have serious negative implications for injured workers, their families, and society more broadly.

Again, an incontrovertible and true statement of the position. The question is—and it is a reasonable question to ask—is this bill the best way to overcome those poor return to work outcomes? We doubt it.

WorkCover claims that under the so-called reform package contained in this bill: first, seriously injured workers will be better compensated, cared for and supported where needed until retirement age. That is something of a gloss. It is true that workers who are totally incapacitated will continue to receive income maintenance; those who are not catastrophically incapacitated will be off the scheme.

WorkCover next claims that the scheme will be fully funded within six to seven years, eliminating the present $911 million unfunded liability. That remains to be seen. Actuarial evidence which has been presented to us tends to support the claim, but only time will tell. The third point I mention is:

We would achieve better return to work rates which enable the average levy rate for employers to be reduced from 3 per cent (the highest in the nation) to 2.75 per cent at 1 July 2009.

The claim as to whether we will achieve better return to work rates is entirely problematical. We are given that assurance by WorkCover and this government. We are told by this government that the scheme will be the fairest in Australia; a claim which is hotly contested by union representatives. It is a claim that even Business SA does not make in its literature in relation to this. It claims that the scheme will be fair, but it does not go so far as to say that it will be the fairest in Australia. What this scheme will achieve is not, as is suggested, a better return to work rate, but it will attain its true objective of fewer people on the scheme.

This has been a difficult issue for the Liberal Party because many of the individual elements in this program are elements about which we have serious reservations. Some of us have reservations about some matters and others in the Liberal Party have reservations about other aspects of the scheme. What the scheme has put forward is a package.

The government, in presenting it, states that this scheme will achieve these worthy objectives. We might have doubts about whether it will achieve those objectives, but it is not really a scheme from which one can cherry pick and say, 'We will choose this particular aspect but we will not choose that' because, according to those who have devised the scheme (the WorkCover board, the government, the WorkCover Corporation and its advisers), this scheme is a comprehensive package of measures; we cannot pick and choose.

It is for those reasons that the Liberal Party has chosen to support the passage of the bill. We look forward to the committee stage of this bill because there are many aspects of it which need to be teased out. I see that a number of amendments were introduced in another place and we understand that similar amendments will be moved here. I think that in another place those amendments were not comprehensively debated, nor was information provided which justified the government's position.

We look forward to a committee stage where all points of view will be thoroughly examined and the government will have to justify each and every element of this package which is challenged. We look forward to receiving the information which will be sought in committee, and we support the second reading.

Debate adjourned on motion of Hon. J. Gazzola.