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House of Assembly - Fifty-Second Parliament, Second Session (52-2)
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WORKCOVER CORPORATION (GOVERNANCE) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 11 September 2013.)

Mr WILLIAMS (MacKillop) (15:54): We are back talking about WorkCover. I indicate to the house that I will be the lead speaker on behalf of the opposition. I recall that, when this government first took over the Treasury benches, on a very regular basis, at least quarterly, WorkCover put out a detailed statement on how the scheme was performing, and then over the years the detail was changed. Instead of raw figures we got meaningless statements using words to say that they were performing well or not quite so well, or not performing very well at all, rather than numbers.

I ceased having responsibility on behalf of the opposition for WorkCover some years ago, some time early in 2008, and more recently have come back to that responsibility, and I see that is virtually no information is published about the performance of WorkCover at all now. Even the very wordy and somewhat meaningless statements which came out quarterly for a while seem to have disappeared. From what I have been able to ascertain in the last few months, about the only real information we get about WorkCover is the annual report.

If my memory serves me correctly, the annual report is due to be handed to the relevant minister by 30 September and would be tabled in the house shortly thereafter, so I expect we will get the annual report sometime in the next few sitting weeks, giving us the latest figures up until the end of June this year. In fact, I suspect it will be the next sitting week.

So, we are reliant on the last annual report, which came out almost 12 months ago, which gave us the figures to the end of June 2012, so the only information the opposition and the people of South Australia really have about the way the WorkCover scheme is performing is very old and very dated.

The only other point where we can access relevant information is through the estimates process. You may recall, sir, because you were the chairman of the estimates committee this year, that I was asking the minister a series of questions. I went back through the Hansard only this morning and on several occasions you asked me to state which budget line I was referring to. From memory, the word 'WorkCover' appeared in the budget on two different pages and that is about the only information that appeared in the budget about WorkCover—just the fact that WorkCover was a part of the government.

So, the amount of information that is available to the public and to parliamentarians is very scant indeed. But I have to tell the house that we know that the WorkCover scheme is still not performing. How do we know that? We know that because we get a consistent flow of complaints from employers about the impact on their business of the way WorkCover is being managed.

I am going to refer to a letter that I got quite recently from one of my constituents who is operating a transport business in my electorate. The business owner in this letter says to me that he left school in 1972 and started operating a trucking company. He has been operating it ever since and, as far as he is concerned, he has operated it fairly successfully, but WorkCover is doing its level best to put him out of business. That is his experience, and I will come back to that in a moment.

Before I do that, I just want to again refer to the estimates committee of this year because I asked the minister a series of questions about different aspects of WorkCover, and I will quote some of his responses from the Hansard. Referring to the WorkCover improvement project, he said:

...that I expect will shortly be the subject of public discussion. When that occurs—which I expect to be in the not-too-distant future—there will be an opportunity perhaps to canvass some of the matters of detail and a little more.

He went on in that same vein a number of times. He said:

I have been looking at the 2010 amendments—amongst others, I might add—quite carefully over the last few months. I have formed some views about a number of provisions of the legislation which I will be making public very shortly after I have had the opportunity of discussing [them] with my colleagues.

He went on to say:

...there is no doubt in my mind, having had a look at the scheme, that it should and must improve.

The minister also said:

...I am at a point where I hope to be able to have a very detailed conversation with all of my parliamentary colleagues who are interested in discussing this matter about what is going on as far as the government is concerned. I have been doing a lot of work in this space in the few months that I have been in this role.

That was back in June—in fact, it was on my birthday. I have been looking forward since the end of June to this point in time where the minister was going to have an open conversation, not only with his colleagues in parliament but with the people of South Australia, about the conclusion that he has come to through the WorkCover Improvement Project, and how he sees that he is going to resolve the issue of the scheme which is, without doubt, the worst scheme in Australia.

It is the worst as far as its level of funding goes—another way of expressing it is that it has the worst unfunded liability of any scheme in Australia. It has the worst return-to-work rate of any scheme in Australia. It is demonstrably failing injured workers and demonstrably failing employers. It is incredibly costly and it is a burden on employment, business and economic activity in this state.

I must say that I am looking forward to the conversation that the minister and I are going to have over the next little while, particularly during the committee stage where I hope that the minister will be able to give us some explanation as to how he sees these changes flowing through to improve the scheme.

What we have seen from this government over the last 12 years, as I alluded to a few moments ago, is a significant reduction in the amount of information published about the way the scheme is operating. That has basically meant that people, whether they be employers, injured workers, general members of the public, business associations or members of this parliament, find it incredibly difficult to raise matters of concern because so little information is in the public arena. I think that is one of the very first things that the minister should be changing.

He should be ensuring that we go back to what occurred 12 years ago when this government came to the Treasury benches, where WorkCover was obliged to report on a very regular basis—as I said, in those days it produced a quarterly report on the way the scheme was performing and giving information about a range of things that were happening regarding the scheme. As they say, the more openness you can have the more accountable those who are managing the scheme are to the stakeholders, and generally the better the quality of their decision-making will become. Unfortunately, we have seen the opposite.

The other thing that characterises the way that this government has managed WorkCover over the last 12 years is that we have seen a number of major amendments to the legislation, all of which, it seems, have failed spectacularly. We saw very significant amendments to the legislation back in 2008 and we have seen the scheme, if anything, deteriorate even more rapidly than it was doing prior to those amendments.

The amendments, passed in 2008, we were assured by the then premier and the then minister and the then treasurer, were going to turn the scheme around. We were assured so much so that we were told that the average levy rate would be reduced—and lo and behold it has been reduced, from 3 per cent to 2.75 per cent, and it has been held at that rate ever since by the board.

Interestingly, though, WorkCover's actuaries, when they give a report to the WorkCover board—I think it is handed to the WorkCover Board in December of each year—hands down its decision about what the next annual average premium rate will be in March of the year leading into the next financial year. The actuaries (I think it was Finity) last year told the board, through its report, that the average levy rate should indeed be 3.37 per cent for the scheme to be fully funded in what is now the current year.

And this fascinates me. Through its wisdom, the board left the average premium rate at 2.75 per cent. That was the figure that the then minister argued back in 2008 (and I think the treasurer and the premier at the time) that that is where the changes would get the levy rate down to. It would decrease from that point and head down towards 2 per cent in the direction towards the average levy rate in other jurisdictions.

For the information of the house, the levy rate in other jurisdictions is about half or less than what it is in South Australia and the return-to-work rate in other jurisdictions is obviously much higher. So not only are we failing injured workers but we are certainly failing business and we are putting a cost impost on doing business in South Australia which is not shared by our competitors in the other states. That is one of the disasters of this WorkCover scheme as managed under this government. There are a whole range of causes, and I might get the chance to canvass some of those.

Let me come back to the letter that I received from my constituent only in the last week. He rang me about a fortnight ago and then sent me some information. Two years ago, this particular constituent was paying an annual premium of $54,000. In the last financial year that jumped to $82,000—and I am rounding the figures off. He informs me that it is his understanding that next year that will jump to $106,000. So in two years he has gone from paying a premium rate of $54,000 to $106,000. Anybody would be questioning why on earth that is happening.

We have a system called experience rating. This particular businessman had a worker injure himself. As I said earlier, he runs a trucking company and the worker ran off the road in one of his trucks. It happened at about 6 o'clock in the evening and the worker had driven about 300 kilometres. He had been at work for four or five hours. It was not as though he had been driving for 20 or 30 hours as some people allege from time to time truck drivers do and are deprived of sleep. That was not the case here.

The case was that he ran off the road, hit a tree and he injured himself. He had bruising and broke his big toe. One of the reasons he was injured was that he was not wearing a seatbelt. I am wondering if a worker is disobeying one of the basic rules of the road by not wearing a seatbelt and injures himself at work, whether we should say that that is a WorkCover responsibility. How on earth can the employer be responsible for that sort of eventuality when a driver will not even put on his seatbelt? He suffered a broken big toe and slight bruising. That accident has cost WorkCover $96,000 and it is still ongoing.

So the poor, hapless employer, as a result of that through the experience rating process, has seen his premium go from $54,000 to $82,000 to $106,000 over the space of three premium years. He has put in his letter to me that he is very seriously considering shutting down his business, and if he does do that, nine jobs will be lost in a town in my electorate purely because this government has failed to manage WorkCover.

We can observe that, in every other state, we have work injury insurance schemes managed by the states—there are plenty of them around—and they all seem to be able to get them to work, but for some reason, in South Australia, we cannot. I am arguing that that is the way the government manages it; that is the way the government allows it to be managed or, I think it is probably more accurate to say, mismanaged.

When we come to this piece of legislation, as a result of his WorkCover improvement project, I was expecting the minister to give us something a little bit more substantial, but what we have here is a bill that basically does two of three things. It basically changes the way the board is appointed; that is the major thrust of the bill. I happen to agree that the way the board is to be appointed needs to be changed. This is just one of the things that needs to be changed in WorkCover. We need to have a commercial board. We need to get rid of this notion that we have a board full of mates. That has been shown to have been a disaster.

For example, you may remember, sir, in the estimates committee this year when we were asking about rehabilitation and that WorkCover is changing the way that it is funding rehabilitation providers, I asked a question about that. The CEO of WorkCover said that there is a serious problem with the costs associated with rehabilitation services being provided to WorkCover in South Australia. He said, on a percentage basis, it is costing our scheme three times more than what it is the average across the rest of Australia—three times more.

My colleague, the member for Davenport, asked a series of questions including, 'Was this because we have had for a long period of time (not the case currently, but previously) one of the key providers of rehabilitation services in South Australia as a member of the WorkCover board?' The minister obviously did not accept that there was a connection between those two facts—and we did not expect him to—but I think it does demonstrate that there is a significant problem with the way the board is established and that we are not getting the skill set on the board that we need.

I can tell the house the opposition certainly supports the principle of having a commercial board. The other point I want to revisit is one I talked a few minutes ago, that is, the board's decision to set the average levy rate at 2.75 per cent, whereas the actuaries' advice was that it should be at least 3.37 per cent. Not only did the actuaries tell the board that last December, but the actuaries also said, 'We've back calculated in hindsight what's happened in previous years, so not only are we looking forward and trying to estimate what the average premium rate needs to be in the next year, the out year, but we have actually gone back and redone the actual figures, with the experience of what has actually happened in the previous years.'

They said to the board that, in each of at least the last three years (it might have even been more), the average premium rate should have been over 3 per cent, yet the board persisted in keeping the average premium rate at 2.75 per cent. Again, to me, that points to an absolute failure of the board to carry out its fundamental duty.

The excuse is that the board is implementing other measures, which it argues would bring down the cost to the scheme. After 12 years of fiddling with other measures, it has been demonstrated that the board and management at WorkCover have failed every time to bring down the costs of managing and running the scheme.

It has been failure after failure after failure and then, on top of all of that, the board would have us believe that all of a sudden it is going to get something right, and therefore we are within our rights to set the premium rate well below where the actuarial advice tells us it should be. Again, it is high time we had a commercial board—that we had people sitting at the board table who actually knew what they were doing.

The Hon. I.F. Evans: Another innovation from the opposition!

The Hon. J.R. Rau: That's what the bill says, by the way.

Mr WILLIAMS: The minister says, 'That's what the bill says.' I am going to make a statement in a moment which I have made plenty of times and I which think just about everybody who has ever stood in this position in this house has made on a regular basis. The concern I have with this clause in the bill is that, in establishing a commercial board, the minister of the day must appoint to the board people who:

(a) must have such qualifications, skills, knowledge or experience as are, in the Minister's opinion, relevant to ensuring that the board carries out its functions effectively; and

(b) must at all times act professionally and in accordance with recognised principles of good corporate governance.

Mr Deputy Speaker, what is regularly said from this position is: that may be well and good; this may well be a very good minister who may get that all right, but who is to say who is going to be sitting in that minister's chair next week, next year, in two years' time, or in 10 years' time? It could be anyone. I think to give such an open-ended power to the minister of the day does not guarantee that we are going to get the sort of board that we need.

The Hon. J.R. Rau: You can't be heartbroken, Mitch; you can't be heartbroken.

Mr WILLIAMS: Well, I think that we could certainly argue—and certainly, the stakeholders that have been lobbying me, minister, have argued, that they would like to see some criteria in there. They would like to see some criteria; they would like to know that the board consists of the people with professional experience relevant to the job at hand.

There are a number of professional experiences, certainly in the insurance industry pertaining to injury compensation, high-level accounting experience, and high-level business management experience. Under the proposal that we have before us today, there is no guarantee that a minister—and I am not suggesting this minister—at some time in the future could not load up the board with anybody as long as that minister was convinced, in their own mind, that they were the right people for the job; that is the criterion.

The Hon. J.R. Rau: And pay the political consequence.

Mr WILLIAMS: The minister says, 'And pay the political consequence.' The people who are paying the consequences of what we have had to date from this government are the businesses of South Australia, like the one I just talked about in my electorate that is being driven to the wall. That is the consequence of the mess that we have had in WorkCover. I also have some concerns about giving the minister even broader power to be able to remove somebody from the board. I can imagine that as a minister that would be a great power to have. If you didn't like what somebody was doing, you would get rid of them. To be quite frank, I suspect that is what happens in a lot of businesses, and probably a lot of successful businesses, who knows? It is a very rare clause.

The Hon. I.F. Evans: It is sort of WorkCover WorkChoices.

Mr WILLIAMS: Yes. My colleague the member for Davenport suggests that this is WorkChoices for WorkCover. Very droll! Be that as it may, the bit I find fascinating—

The Hon. J.R. Rau interjecting:

Mr WILLIAMS: I saw what you did, minister. The bit I find fascinating in the bill before us is clause 11 which amends section 21 which would make life almost untenable under certain circumstances for the CEO of WorkCover because it creates two masters. It reads that the corporation must ensure that the CEO is reasonably available to the minister in order to assist the minister in the administration of this act, and it goes on to mention assisting the minister in the administration of the Workers Rehabilitation and Compensation Act. The CEO must comply with any reasonable request by the minister to provide information about the operation and the administration of this act.

The minister did not explain in his second reading contribution what is driving him on that particular clause. There must be something which has upset the minister because the earlier clause in the act invokes within the WorkCover Corporation Act sections 7 and 8 of the Public Corporations Act which already empower the minister to receive any information that he might require from the CEO of WorkCover by virtue of clause 7 of the Public Corporations Act.

The minister wants the same power twice, but it goes even further. The minister wants the same power three times because at the same time that the bill was tabled in the house, the minister and the Premier signed off on a new charter for WorkCover. Let me read from the new charter which is dated August 2013, so it is only a few weeks old:

9. Provision of Information Directly to the Minister

9.1 WorkCover will ensure that the Chief Executive of WorkCover shall provide such information concerning the operations of WorkCover as the Minister may request from time to time within the period specified by the Minister.

Clause 11 of the WorkCover Corporation Charter states:

This Charter comes into operation, and is binding on WorkCover, upon signing by the Minister and the Treasurer.

In three instances the minister is demanding that he have his way with the CEO of WorkCover. I am looking forward to the minister explaining to the house why he needs that power in no less than three different ways because notwithstanding what the minister told the estimates committee earlier this year about having a public debate about a large range of matters concerning WorkCover we have not as yet seen much explanation of what the minister is endeavouring to achieve here and what ills he is trying to right by this piece of legislation.

I want to let the house know that the opposition will not be opposing the bill in this place but we reserve our right. We are still consulting with some of the stakeholders. We may be moving some amendments to put some of these things into the bill. I guess I have expressed my concerns, particularly about the open-endedness of the clause which I believe would allow a minister to put anybody on the board. The minister says that a minister would pay the political consequences, but in the past that has not prevented ministers from doing very silly things.

The Hon. J.R. Rau interjecting:

Mr WILLIAMS: I am just saying it has not prevented ministers in the past from doing very serious things, but the reality is that the cost is paid by both injured workers and employers, in the case of WorkCover. That is my personal belief and, as I said, I am still in discussions with some of the stakeholders. Those discussions will be ongoing over the next couple of weeks and we may come to the conclusion that we will move amendments in the other place, so I am foreshadowing that to the house.

I am looking forward to the minister being much more forthcoming in his summing up as to what he is seeking to do both through this piece of legislation, the new charter which was recently signed and the WorkCover annual performance statement, or we can have that discussion in committee. I am looking forward to the house getting much more information about how the minister sees this mess that we all know is within WorkCover currently and how he envisages fixing that up.

The Hon. I.F. EVANS (Davenport) (16:11): I am not going to hold the house long because my colleague the member for MacKillop has very persuasively covered the issues that this bill raises in relation to WorkCover. I will make some observations about WorkCover and where South Australia finds itself after 11 years of this government trying to manage and reform WorkCover.

The reality is that the facts speak for themselves. The South Australian WorkCover scheme is widely regarded as the worst performing scheme in Australia. The minister nods. The reason it is considered the worst performing scheme in Australia is that, firstly, it has the highest levy rate in Australia. The scheme is that badly managed that we understand that the actuarial advice to WorkCover is that, had they set the levy rate to essentially cover the cost of the scheme, it would actually be higher than the rate that is currently set. So, if they were setting the rate at the level the actuarial advice suggested then the rate would be higher and it would be a worse and more expensive scheme. Let's not kid ourselves: this scheme is not performing well.

Of course, the workers compensation scheme's primary role is to assist injured workers. That is what it is there for. On that key measure, this scheme has the worst return-to-work rate in Australia. That is confirmed. So, the businesses in South Australia are paying the highest levy rate in Australia to get the worst return-to-work rate for their employees. The employers are getting belted at one end and the poor old employees, when they get injured, take longer to get back to work than anywhere else in Australia.

When you go to the financial performance of the scheme, even though they are charging the highest levy rate in Australia, its funding ratio is about 65 per cent in round figures—approximately, give or take a per cent. Other schemes are 100 per cent funded. If you look at the unfunded liability of WorkCover, it is $1.4 billion or $1,400 million. That is nearly three Adelaide Oval projects in unfunded liability if you want a mental picture of how much the cost is.

'On what performance measure is this scheme performing well,' I ask the house rhetorically. This scheme is the worst performing scheme in Australia. If you go to the estimates committees hearing this year, just to give you one example, after 11 years of management by this government, you have the chief executive saying that, in regard to rehabilitation expenditure, the South Australian scheme spends three times the proportion of money on rehabilitation as the Australian average. So, I asked for clarification, and he gave the example. I said, 'So, three times the proportion?' He said, 'Yes.' So, if it was 3 per cent, for example, in New South Wales and Victoria, it would be something like 9 per cent here.

This is not something that has happened today, this is not something that happened last week: this is something that has built up over 11 years—11 years of mismanagement. The impact of this is both financial and human. The financial element is to those small businesses that are suffering the highest WorkCover costs in Australia. The human cost is for those workers who are injured and, despite their having three times the amount of money spent on them with rehabilitation, they take the longest to get back to work.

How does that happen, you would have to ask. This scheme is the worst scheme in Australia. That is why the opposition, in principle, supports the concept of bringing in a totally commercial board because you would have to ask the question: could it go any worse? Could it go any worse becomes the issue.

We have some comparisons in South Australia. Some people who wish to run around and defend WorkCover will say, 'Well, there's a different scheme in Queensland, there's a different scheme in Victoria.' But there are other entities in South Australia that are running their workers compensation scheme under the same scheme as small business, and they are called the self-insured. There is the local government Workers Compensation Scheme; they are outside the formal WorkCover SA. They run a self-insured scheme, but they are still obligated to meet the obligations of the act, and their levy rates are almost half the levy rates of the workers compensation scheme.

So, some businesses, entities, workplaces and employers in South Australia are running their businesses under exactly the same scheme for a cheaper rate and getting their workers back to work quicker. So, you have to ask the question: if they can do it, why isn't the main scheme doing it? My view on this is pretty simple: I think the WorkCover scheme has suffered neglect by the government. Every time the scheme has got into trouble, the government has announced some form of review or appointment or new strategy, and it really has not addressed the key elements of the scheme.

If you look at what has happened over 11 years, this scheme has had more ministers than the Catholic Church, it has had more reviews than Michael Jackson, more positions than the Karma Sutra, and they have wrapped it up in a titanic strategy which was going to be the best in the world and which, of course, sank without trace. They played hokey-pokey with redemptions: they put redemptions in, they take redemptions out, they put redemptions in. They have no idea what they are doing. Even when we asked in the estimates committees about redemptions, they said, 'Oh no, redemptions are still allowed.' We asked, 'How many redemptions have been paid in the last 12 months?' and I cannot remember the answer, but it was three or four.

Mr Griffiths: It was three.

The Hon. I.F. EVANS: It was three. Three redemptions in the last 12 months. Well, let's not process them too quickly! The reality is that the government strategy on WorkCover has been all over the place for 11 years. They have a tiger by the tail and they just do not know what to do with it. Part of their problem, of course, is that their support base, the union in particular, is very concerned about any changes to WorkCover. It does not matter, it appears, that the business community is paying more in levies, which the union movement should work out actually means less for wages.

Every cent that goes to WorkCover, every dollar that goes to WorkCover is a dollar that they cannot offer a worker or, indeed, offer a new worker. Why the union movement is silent on that issue is bizarre. It has the worst return-to-work rate, and there is silence out there from the workers' representatives about why it is that the people who they represent are going back to work at such a slow rate in South Australia.

The reason I support the principle of a commercial board is simply that this matter has to be addressed. It is costing the state too much at the employment level. It is costing the state too much at the small business level. It is costing the state too much at the human cost level. So, we welcome the concept of a commercial board. The member for MacKillop has outlined that there maybe some amendments following consultation in the other place but, after 11 years of what has been an absolute debacle of a story of management of WorkCover, you would have to ask, could it get any worse?

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Planning, Minister for Industrial Relations, Minister for Business Services and Consumers) (16:22): This is a very important piece of legislation and I do want to spend a bit of time on it so that we do not have to consume a lot of time in committee. The situation basically is this: I became Minister for Industrial Relations in January/February or something like that and, obviously, something very high on my priority list was to look at WorkCover. I indicated publicly at that time that it was my aspiration that there might be an attempt to find some, what I call, easy wins, which were things which were more or less universally agreed around the table that we could move forward quickly in the parliament, get those wins done, and then do the more difficult second phase of the project a little later.

As I progressed with that, I was progressing with three pieces of work. The first piece of work was an amendment to the WorkCover Corporation legislation which is ultimately the product we are dealing with here today. The second piece of work was a change to the WorkCover charter, which is, if you like, a set of directions and performance criteria which are issued by the Treasurer and the minister of the day by which the board and the corporation are required to calibrate their performance. The third thing was to be a piece of work involving amendments to the Workers Rehabilitation and Compensation Act, which I wanted to rename the 'return to work and recovery act'.

Anyway, as luck would have it, every time I thought I had found a solution to a problem, it raised yet another problem as part of the solution to the problem I thought I had just solved. So, I got to the point where it appeared clear to me that I could proceed with the bill we have in front of us; I could proceed with the charter; and I had to put on my thinking cap about the other project, and I will come back to that in a moment. The charter, as the member for MacKillop has observed, was put into place in August. That is now the guiding principle for WorkCover. WorkCover has also, within the last 12 months, acquired a new chief executive, Mr McCarthy, who has completely refreshed the senior management team at WorkCover.

I think at the time the charter was put in and at the time I gave notice that I would introduce this bill, I said that my aspiration for the combination of the charter, this bill and the new management team was that it would stabilise the scheme. The scheme would not deteriorate. The unfunded liability would not deteriorate, and when I say 'not deteriorate', I mean not deteriorate by reason of the money coming into the scheme versus the money going out.

Obviously none of us can control interest rates, the performance of stock markets and all that sort of stuff—and if we could, why would we be in here doing this? We would be living in the Bahamas or something; clearly none of us know how to work that one out. The scheme would be stable. It might even start a slight downward trend but 'might' and 'slight' are the two words that I underline in that comment.

If you want me to characterise what we have done so far, the corporation bill and the charter represent a tourniquet. We stop the bleeding, and I am confident that we will stop the bleeding. I am confident that we are going to stop the scheme deteriorating, but I have never said that this is the magic bullet, that all the problems will be solved and that the scheme will be fixed, because that is simply not true.

The charter is already in and I can tell you that, if you look at the charter and think about that, a lot of it is actually a direction to the board about how they manage what they have, and that is all directed. I would invite the member for MacKillop and other people to look not just at the charter but at the performance criteria and targets that are set in the document called the WorkCover Performance Statement which is annexed to the charter. That actually does give them some pretty hard targets. They are not unrealistically hard. They are not fantasy targets, but nonetheless, they are pretty rigorous targets that they have to pursue. That bit is squared away; that bit is operational.

The second piece is the question about the WorkCover Corporation. I formed the view that one of the inherent problems in the WorkCover system—and by no means the only one; I am not trying to overcook this—is the representative board concept. I fundamentally disagree with it. If you are going to have a public corporation operating in a way that is going to deliver the best outcome for the taxpayer, it must be a commercial operation.

It should, as much as possible, mimic the structure of a board that you might have for the ANZ bank or some other outfit out there somewhere. That is why—and I have to say, with some difficulty from my point of view, because I had to persuade some of my colleagues and people on my side of the house about this—we removed any reference to the butcher, the baker and the candlestick maker from the board criteria. There are no formal criteria at all.

I caution the member for MacKillop: if he starts reading some of the correspondence that has been coming here from the business lobby which says, 'One of them has got to be a certified practising accountant; everybody has to have the company director's piece of paper; one of them has to be a member of Mensa,' and all this sort of stuff, if that is what they want written into the act, I guarantee you that everybody on this side of the house, and those who are trusting the people on this side of the house to be fair, will say, 'Well, hang on, if the company directors get a guernsey and Mensa gets a guernsey and the chartered accountants get a guernsey, why not the butcher, the baker and the candlestick maker?' We will be right back where we started—perhaps even worse.

I was reminded a minute ago, by the people here with me—who have a much better education than me, who have had an education from an established school—of these words, 'O Master, make me chaste and celibate—but not yet.' That is exactly what the member for MacKillop is on about. 'Yes, we love commercial boards; they are fantastic, but just put some of our people on there.' You can't have a bob each way. You are either in for a commercial board or you are not. It is one of those things where you have to do something or get off the pot. We have decided we are going to do something.

If the opposition in another place wants to miss a once-in-a-generation opportunity I say this: if this window here about a commercial board closes, do not expect it to re-open any time soon. That is about the commercial board. Yes, it should be a commercial board. I can tell the member for MacKillop that it is my intention that that board will be a board whereby everyone in this place will say, 'They are solid citizens. They will know what they're doing. None of these people are stooges for anybody else. These people are going to have a very clear business priority, and they will have the capability of delivering that.'

It is my intention—and I will be perfectly frank with the house—to move very quickly to appoint the board, because the tenure of the existing board expires on the 31st of next month. I do not have a lot of time to muck around. I intend to go ahead and put a commercial board in here. I ask the opposition to please support this opportunity, because I promise you that, if in the other place you amend it to start putting Mensa candidates and other people in the formal criteria in the act, what you will get is an equal and opposite reaction. It has taken me a long time to get to the point where I can offer this to the parliament. You will unpick it in one fell swoop if you start doing that, I promise you. It probably will not worry you, but it will also make me look silly.

The other thing is in relation to the capacity of the minister of the day to give directions. I am open to talking about that topic with the member for MacKillop and the member for Davenport, but can I say to just remember this: if we do have a commercial board and you want to follow the analogy through with a publicly-listed company, who are the shareholders? The answer is that the shareholders have one share, which is held in trust by the minister of the day on behalf of the people.

As I understand company law, an extraordinary general meeting can be called by the shareholders of a public company at any time, provided they sustain a sufficiently high volume. I cannot remember the percentage you need to bring on one of these extraordinary general meetings—whether it is one-third or 25 per cent or whatever it might be—but, given a substantial vote, the shareholders of a public company can convene an extraordinary general meeting at any time to discuss any matter of which notice is given to the shareholders.

All I have sought to do in the final version of this is to say that the minister of the day, in effect, as the trustee for the people of South Australia, should have the capacity to do what a majority of the shareholders in a public company can do. If there is some technical objection to the formal mechanism by which the minister of the day communicates with the chief executive or so on, I am happy to have that conversation.

Again, I offer a word of caution, and this is not because of bad experience on my part: I want to make it very clear that, in the time that I have been the minister, Mr Bentley and Mr McCarthy have been exceptional, as has the board. I have had no problem with them at all; nor have I had any problem with any member of the board at all. I have no grievance about this; none at all.

But can I say this: there may be circumstances where the board became feral (for want of a better description) and, if the chief executive wanted to somehow blow the whistle, there should be the capacity with the chief executive to be able to communicate with the minister of the day. That does not mean that the minister of the day should ever be involved in the day-to-day management of the corporation. I do not see that as being the minister's role.

The minister could potentially be blinded because of resolutions of the board. If the minister is not getting information from the board, the only other place the minister can get it from is the chief executive, and should not have the capacity only to communicate with one of those entities. I accept that what I am saying contemplates a circumstance in which clearly there is a problem. I have not yet experienced that and I hope never to, but the reason for some of these provisions is the contemplation that, if something did go seriously wrong, the minister, as the trustee for the people of South Australia, should have the capacity to demand that information be provided.

That is the rationale for it. I am happy to engage in a conversation about the detail of that between the houses. Can I say in regard to the business about the commercial board: please; I implore members of the opposition do not disturb that water, because if that water is disturbed I am not going to be able to stop what the reaction will be. The window of opportunity for this particular type of reform does not open very often. It is open; for God's sake jump through it.

There is the question of what happens if the minister puts all of his silly mates on there and that, theoretically, if my amendments get up—and right now, quite frankly, all the minister has to do is consult with people—it would be easy for me, without consulting with anyone, to put a bunch of my silly mates up there. Actually, I do not have silly mates; they are all pretty good people, but they may not be qualified for this sort of job. If I did that, any opposition worth tuppence would tear me to shreds, and quite correctly. What an appalling abuse of position that would be!

Mr Williams: You guys put Mia Handshin on the EPA board.

Mrs Redmond: Jeremy Moore; what about all of those appointments?

The DEPUTY SPEAKER: Order!

Mrs Redmond: No answer.

The Hon. J.R. RAU: You can go on with those things if you want to.

Mrs Redmond: What about Nick Alexandrides on the bench?

The DEPUTY SPEAKER: Order!

The Hon. J.R. RAU: I actually think that is a very offensive remark, member for Heysen, even though you are not in your seat.

Mrs Redmond: It was intended to be; he does not deserve to be on the bench.

The DEPUTY SPEAKER: Order!

The Hon. J.R. RAU: The member for Heysen is out of her seat and interjecting; doubly disorderly.

The DEPUTY SPEAKER: She should not be interjecting.

The Hon. J.R. RAU: Absolutely offensive! We are here to debate something, not be obnoxious. The next point is: where are we going from here? Where we are going from here is basically this. Both the member for MacKillop and the member for Davenport have made some trenchant criticisms of the WorkCover scheme. Since I have had the opportunity to examine the scheme carefully over the last eight to 10 months, I have come to roughly an identical conclusion.

It does not make employers happy; it does not make employees happy; it does not have a good record in terms of its unfunded liability; and it does not have a good record in terms of return to work. The question is, are we going to tinker or are we going to actually confront that serious issue head on? It is my intention and the intention of the government that the time for tinkering has passed, and more tinkering will produce the same as the tinkering in the past has produced. We are now at a point in time where what we really need to do is confront the reality of the fact that the scheme needs to be basically reconceived.

So, what we have in front of us now is something which will maintain the current arrangements in stasis, in the sense that there will be no deterioration. There may be some improvement, but I do not expect it to be dramatic. I imagine the board will explain for itself why it came to the conclusion it did about the levy rate, but I can tell the member for MacKillop that the board was very well aware of what I was doing and what the government was doing, and the board has expressed to me that they have confidence that the measures that have been taken, in particular the charter, will actually have a positive effect.

What I am asking the parliament to do is this: understand that the charter is in, and that is already operational; understand that there is a new management team with new leadership, and that is already operational; understand that this piece of legislation is the first part of a project that will see the board operate as a commercial board, not as a representative board; and understand that the next phase of this will be a root-and-branch reconsideration of the scheme, which will be something that we will be able to have a conversation about.

If it was easy, it would have been done a long time ago. If it was just a bit hard, it might have been the project that we had been working on together here since February. It might have actually manifested itself in two bills: this one and another bill to amend the Workers Rehabilitation and Compensation Act, which would have been called the return to work and recovery act. But that is just not the case, and to pretend otherwise is just to ignore reality.

So, this is phase one. I am not pumping this up as being the solution to all the problems. It is not, but it does improve one really critical element of this, which is the corporate governance of the corporation, something which has never been looked at properly before, ever.

We do have the charter in place, and if you look through the history of the charter, this is the first time the charter has been so particular and had those sorts of performance criteria attached to it. There is a very serious effort being made, both by the policy advisers who have been working with me and by Mr McCarthy and his team and Mr Bentley and the board, to actually make substantial improvement. I am relatively confident that, towards the end of the year, we may even see some evidence of that, but it would only be evidence. Given the time we have been talking about, obviously no meaningful trend could be identified and explained.

That is basically it. I hope that goes some way to answering the questions that the member for MacKillop and the member for Davenport raised, but to come back to this commercial board point, I really do implore the opposition. This is not an easy position for the government to come to, and if the response of the opposition in the Legislative Council is to introduce restrictions on the minister's discretion, such as membership of Mensa or membership of a CPA or having completed the Company Directors Course or having served on the board of a top 150 company for a period of time, as sure as night follows day I guarantee you that you will get a whole bunch of other amendments and this opportunity will be completely lost. So, please have a think about that. I think that's basically it from me.

Bill read a second time.

Committee Stage

In committee.

Clauses 1 to 3 passed.

Clause 4.

Mr WILLIAMS: Minister, I raise the issue about having three different goes at ensuring that the CEO answers your questions; I just think it is a bit over the top. According to the explanation of clauses attached to your second reading speech, by making the corporation subject specifically to sections 7 and 8 of the Public Corporations Act:

...Under section 7, a public corporation must, at the request of the relevant Minister, furnish the Minister with such information or records in its possession or control as the Minister may from time to time require...

You have that there; you have put it in the new charter as an obligation on WorkCover to ensure that the CEO furnishes you with the information that you require from time to time. My question is: why do you need to have three goes at that one?

The Hon. J.R. RAU: Well, I suppose you can never be too careful, can you? I think the answer, in short, is that the particular provisions to which you have referred are reactive provisions, in the sense that the minister, having had his or her attention drawn to a matter, might say, 'Please tell me about this; tell me about that.' That is not quite the same as the minister being able to sit down and have a conversation, or be cold-canvassed, if you like, by somebody.

Let us say, hypothetically, that somebody came to know there was something improper going on somewhere inside WorkCover. The minister may have no idea about this, or probably would not have any idea about this. If the only power the minister has is to say, 'Provide me with information about a particular thing,' and the minister does not know there is a thing to ask about, then clearly the minister will not ask.

Mr Williams: The unknown unknowns.

The Hon. J.R. RAU: The unknown unknowns—the Donald Rumsfeld problem.

Mr WILLIAMS: I only raise this, minister—and I may well be wrong here—my concern is actually about clause 11; that is the one that is concerning me. I will explain why I am concerned, and then we can move on. From my experience, once we put into a piece of legislation a particular clause, it sets a precedence, and then there is an expectation that the parliament, having set that precedent, will quite readily agree to doing that time and time again in other legislation. These things have a way of growing like a cancer, and I am just trying to satisfy myself that indeed you need your clause 11, because I believe you have the ability here and in the charter. The reason I say that is that you already have the power to direct the board of WorkCover but in doing so you are obliged to table that direction in this parliament; that is the accountability.

In clause 11 you are going to give yourself (or the minister of the day) a power which I do not believe is common in our statutes; I may be wrong. I suspect this might be unique. As I said, you are establishing a precedent. My concern is that it may well give a vehicle to circumvent that accountability clause which says that if you direct the board, you have to then table that direction in parliament. Suddenly you have given yourself the ability to sit down with the CEO and have a conversation, as you have said. That may result in your not having to issue a directive; you have achieved your end by another vehicle. I am wondering whether the parliament is ready to accept that, particularly as a precedent which will flow on into other boards.

The Hon. J.R. RAU: As to the question about whether this is a common provision elsewhere, I don't know. I gather perhaps not, but then again how many public corporations are there that the government and the taxpayer are in the game for about $1.2 billion? Not that many I suspect. It might be a reason. In New South Wales I understand the chief executive officer of WorkCover is a member of the Safety, Return to Work and Support Board and is subject to ministerial control and direction. The chief executive officer of the Victorian WorkCover Authority is supported by the government as a full-time director of the board.

In South Australia I think the true characterisation of it is that at the present time the chief executive is technically entirely accountable to the board, not to anybody else. Were the chief executive to communicate with the minister of the day—and I am being very black letter law about this—without the explicit approval of the board, it may well be that the chief executive is in fundamental breach of his or her contract of employment to the board. The idea that the chief executive might technically have to formally seek a resolution of the board before the chief executive can speak with the minister about anything, or at least have some standing resolution of the board permitting that conversation to occur, is I guess the point to which that was directed.

Mr WILLIAMS: You have it in the clause by virtue of section 7 of the Public—

The Hon. J.R. RAU: The earlier clause is about the minister being able to ask for information, and I acknowledge that the minister can ask for information. My point is this: if there is something going badly wrong in the corporation and the minister finds out about it, the minister can use that clause 4 thing that you pointed to originally and say, 'Right, give me all the information about this and that,' and ask for it to be given, and it must be given. But if the minister hasn't got a clue—and bear in mind that WorkCover and the minister are not in the same building. They are running their own business. The minister has no day-to-day contact with WorkCover at all.

If the chief executive discovered, for example, that somebody in charge of the investment portfolio has been going to the Casino with WorkCover money—okay, I know that is a bit weird—it might be they can go to the Office of Public Integrity and it might be that they could cloak themselves in whistleblower protection and do various things. Even if it was a chief executive, it is arguable that they couldn't go to the minister and say, 'Look, minister, I am concerned about this because I have discovered X, Y and Z,' because it might be something that the board would shut them down over.

None of these provisions are there for the day-to-day running of this thing. They are not designed to enable the minister basically to run this show. Any minister who wanted to would be nuts. It is so that in extreme or unlikely or really difficult circumstances the minister is not blinded and powerless to deal with trouble within the board; that is the rationale. You and I might disagree about that, but that is why.

Mr WILLIAMS: Minister, I accept everything you say. I accept all of it, but the parliament needs to understand that we are heading down a new path, a path that we have not been on before. I think your advice was that this is unique to this particular bill and will be unique to this piece of legislation in the first instance. That is where my concern lies and it does muddy the area of the path of responsibility from the CEO, through the board to the minister. It allows the minister to go in the back door and talk directly to the CEO in a casual or a formal way, and circumvent the board.

It raises a question about that relationship between the minister, the board, the CEO and the pathway of responsibility and accountability. That is why I raise the concern. I will think more on it. I will muse over your comments over the next few weeks and we might come back to it, but we can move on. My colleague the member for Davenport I thought made a very good comment about the hokey-pokey and the redemptions.

The Hon. J.R. Rau: It was one of his best.

Mr WILLIAMS: Yes, I thought it was good. I see in the charter that you seem to be embracing redemptions again. Can you explain that?

The Hon. J.R. RAU: Certainly. I did like the hokey-pokey thing: you do the hokey-pokey and you turn around; you put the left foot out, you put the right foot in. That was very good. Redemptions are an interesting creature. There is no doubt that, if you set up a scheme which is capable of being characterised as predominantly a pension scheme and you stick a pot of gold at the end of the rainbow, then people hang out for the pot of gold. Indeed, they might even find themselves wandering down the rainbow looking for the pot of gold.

Whilst redeeming people has a short-term positive impact on the unfunded liability—one-off, short-term impact—so the story goes, it creates a very unhealthy psychology within the system, because it acts as a lure for other people to wander down the yellow brick road and get the pot of gold. So, a few years ago we had a management there who decided they were going to clear the books, for whatever reason, and you basically could not go to your letterbox without being offered a redemption. It was like a Christmas sale: get there before 25 January and you will get a redemption. 'Come and get it.' Then all of a sudden there was a change in thinking and redemptions were evil: 'We are going to break the psychology of redemption. We are going to break the psychology of the pot of gold.' So, nobody gets redeemed.

Ms Chapman interjecting:

The Hon. J.R. RAU: Back to the story. You are out of your seat; you shouldn't be interjecting. You are doubly disorderly.

The CHAIR: Order!

The Hon. J.R. RAU: Every person who got back to me in the context of the conversations I have had in the last few months—whether it was unions, self-insured people, anybody in the game—all said, 'Look, this mandatory thing of no redemptions'—it is not quite no redemptions. There have been two in the last year.

Mr Williams: Three.

The Hon. J.R. RAU: Three. That sort of scheme is completely ridiculous for the other reason, because you have people who transparently are not going to return to work, are cluttering up the scheme and need to be removed. It is better for the scheme and it is better for them. Basically, what the charter is trying to say to the board is: 'Don't have this sort of dogmatic no redemptions, come what may. If it is in the financial interest of the scheme, considered both from the perspective of the individual concerned and the risk that that redemption will start the redemption culture flourishing again—having regard to those things, if you reckon it's worth redeeming them, okay; redeem them.' My expectation is that there will be a modest increase in the number of redemptions, and a few of the absolute—

Mr Williams interjecting:

The Hon. J.R. RAU: No, no. I suspect that the scheme has a number of screamers sitting there now which need to be redeemed, but it is not back to the old, 'Redeem before the end of June or wait for the next sale.' That is not what we are talking about. It is a very, very targeted redemption policy we are hoping that that charter will generate.

Clause passed.

Remaining clauses (5 to 12), schedule and title passed.

Bill reported without amendment.

Third Reading

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Planning, Minister for Industrial Relations, Minister for Business Services and Consumers) (17:01): I move:

That this bill be now read a third time.

I thank everybody for their contribution to the debate.

Bill read a third time and passed.


[Sitting extended beyond 17:00 on motion of Hon. J.R. Rau]


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