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Legislative Council - Fifty-First Parliament, Second Session (51-2)
2008-06-04 Daily Xml
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WORKCOVER CORPORATION (GOVERNANCE REVIEW) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 29 April 2008. Page 2481.)

The Hon. R.D. LAWSON (16:52): This bill, which I will refer to as the governance bill, is the second element of the government's solution to the WorkCover crisis, a crisis of the government's own making. I will refer to the other bill as the scheme bill. The essential features of this governance bill are: first, to impose upon the WorkCover Corporation some of the provisions of the Public Corporations Act; and, secondly, to require the Auditor-General to audit WorkCover's accounts.

This bill illustrates even more starkly than the scheme bill the incompetence and dilatoriness of this government in relation to workers compensation. The incompetence of the minister who introduced this bill in another place and the incompetence of the government are truly shameful.

Minister Wright introduced a bill with a similar name and in virtually the same terms as early as May 2003; five years ago. That bill was never progressed. The same bill has been introduced again on several other occasions. It was never opposed—indeed, there was bipartisan support for it. The fact is that this government elected not to push ahead with a series of governance bills, all in largely the same terms, for political reasons. The government's dilatoriness on this issue is truly staggering, and I have not previously experienced such an incident. The tragedy is that it is injured workers who will pay the price for this government's dilatoriness.

The WorkCover governance saga began in 2002, within a couple of months of the Rann-Lewis government's coming into office. It is important that details of this saga be placed on the public record. I hasten to add that this is not merely a recital of dates upon which the Liberal opposition and others raised the issue of the skyrocketing liabilities of WorkCover. That has been done in another place more than once in relation to the scheme bill. The material that I am about to recite relates to the governance issues that are the subject of this bill.

In June 2002, the government asked the Department of Treasury and Finance to produce a report on WorkCover. The first section of that report dealt with financial risks and government arrangements and was dated November 2002. The second part was finished in February 2003, and it dealt specifically with governance arrangements.

The February 2003 report of Treasury and Finance identified the weaknesses in the governance arrangements, which are only now being addressed. The report specifically identified as key reform options the application to WorkCover of all or part of the provisions of the Public Corporations Act. Treasury noted that the Public Corporations Act applied to other South Australian state corporations such as SA Water, specifically in relation to directions of the minister (that is, the power of the minister to give directions to the corporation), a charter of performance and also audit by the Auditor-General.

On 24 March 2003, minister Wright made a ministerial statement in another place. He said that he wished to advise the house of a matter of great concern, and he stated, 'Last Friday, the levy rate rose to 3 per cent, and an unfunded liability of $350 million as at December 2002.' He described it as 'an appalling state of affairs'. He said, 'The Labor government will fix it' by, amongst other things, 'changing the culture of WorkCover management and improvements in the governance structure of WorkCover Corporation'. So, here we are in March 2003 with minister Wright describing an appalling state of affairs and saying that the government is about to fix it.

In the ensuing weeks, as a result of the revelations about the financial state of WorkCover, the minister was under some political pressure and, in order to forestall questions, he made a ministerial statement on 12 May. He made a number of fatuous remarks about the previous government and blamed it—wrongly—for the situation, but he gave notice that on the following day he would introduce the governance bill. He said, 'The Bill will change the governance of the...Corporation, making it more accountable...and [ensure] that its financial arrangements are more vigorously scrutinised...' He made the claim, fatuous once again, 'This government is getting on with the job...' How hollow that claim now sounds. The government did not get on with the job. It was five years before it did anything about the governance of WorkCover.

Following that ministerial statement, the minister introduced the Statutes Amendment (WorkCover Governance Reform) Bill. In his second reading explanation on that day, the minister made yet another hollow claim: 'The Rann Labor government is getting on with the job of fixing the problems left by the previous Liberal government.'

This bill that the minister introduced on that day applied some of the provisions of the Public Corporations Act to the WorkCover Corporation, as does the bill that we are today debating. The bill at that time had some other incidental provisions, such as the appointment of specialist advisers to advise the corporation on occupational health, safety and rehabilitation, and it also provided that the chief executive officer would be appointed by the government rather than the board. At that same time some amendments were made to the scheme act relating to the establishment of a WorkCover average levy rate committee. However, the essential governance provisions of that bill, introduced on 13 May 2003, were the same as in this bill.

In July 2003 the parliament was prorogued and, as a consequence, the bill that the minister had introduced lapsed. In August of that year, the government referred the bill to the Parliamentary Committee on Occupational Safety, Rehabilitation and Compensation. So, the bill had lapsed but it had been referred to the occupational health and safety committee. The new session of parliament began on 15 September 2003, and the bill was subsequently reintroduced in identical terms.

By way of an aside from the actual strict legislative chronology relating to governance, it ought to be mentioned that on 19 September 2003 minister Wright wrote to the occ health and safety parliamentary committee. I think it is worth quoting this letter because I am not sure that it has been quoted elsewhere. Once again, it demonstrates the reasons why the government has acted, or not acted, in relation to WorkCover. The letter states:

The WorkCover Corporation was originally treated as an uncontrolled entity. As such, WorkCover had no effect on the government's accounts or balance sheets. However, this treatment was not endorsed by the Auditor-General or the Australian Bureau of Statistics. Accordingly, in the 2003-04 budget WorkCover was classified as a public financial corporation controlled by the government and requiring its net assets or liabilities to be recorded as part of general government net assets. This resulted in the general government balance sheet recognising the value of its holdings in WorkCover in terms of its net asset position. WorkCover presently has a negative asset position as a result of unfunded liabilities.

The letter from the minister to the committee continued:

The recognition of WorkCover's liabilities in the general government balance sheet ensures that the proper accounting treatment is applied under both the Australian Accounting Standard 31 [that is AAS31] and the government finance statistics standards.

That letter was subsequently quoted in the sixth report of the occ health and safety parliamentary committee. It confirms the assertion made by myself and others that the real reason that has motivated the Rann government's insistence that the scheme and the governance bill now be passed is not to achieve a fairer system for workers or employers; it is designed to preserve the state's AAA credit rating, irrespective of the rights of injured workers.

The minister let the cat out of the bag. The government's concern is not about injured workers; the government's concern—and I suspect it is principally the Treasurer's concern—is to preserve the AAA rating that he claims he achieved although, as everybody in South Australia knows, it was achieved before he came into office.

I will continue now with the chronology, after that aside. On 22 October 2003, the governance bill was introduced in another place. In November, the occ health and safety committee tabled an interim report. It contained quite a lot of evidence that it had already obtained in relation to the governance bill and the cognate bill. That report (as I will come to later) was supportive of the immediate passage of the governance bill. It should be remembered that this was in October 2003.

Shortly afterwards, in November, minister Wright made a ministerial statement which I think ought to be put on the record. He said, as follows:

Both the actuary and the new board determined to adopt significantly more accounting practices than were used in the past. These practices will provide far greater certainty that appropriate provision is made for future liabilities.

He went on, in another quote, to state:

The new board has put more prudent practices in place and that has affected the headline number. At the very first opportunity allowable under the legislation the government has put an entirely new and first-class board in place. The new board has demonstrated that it can make the hard decisions and it has the government's complete support.

In another quote, he stated:

The board has said that it does not expect that levy rates will have to be increased. The board has also said that there is no need for a bailout. The board has said that WorkCover has more than adequate cash flow to meet its obligations.

Finally, he said:

We have bills before the parliament to improve workplace safety and WorkCover's transparency and accountability. The government will work to fix the Liberal mess.

What a lot of nonsense. Here we see a transparently political speech in which the minister was talking about the new board. 'The new board is going to do this.' He did not actually criticise the old board, in direct terms, but the implication was clear: here is this governance; the new broom has swept through; the problems have been solved—this was in November 2003; and the bills are before parliament to improve workplace safety, transparency and accountability. However, nothing was done.

In May 2004, the occ health and safety committee tabled its sixth report. It unanimously recommended that the Public Corporations Act should be applied to WorkCover. This was a comprehensive 77-page report, after the committee had heard evidence from minister Wright and a large number of other witnesses.

Committee members from this council included the Hon. John Gazzola, the Hon. Ian Gilfillan and the Hon, Angus Redford. It was chaired by the member for Colton, Mr Paul Caica, and also included the member for Mitchell, Mr Kris Hanna, and the member for Heysen, Isobel Redmond. There was unanimity on many points. There were some differences but not on major issues. For example, the committee did not support the provision in the bill that the WorkCover Chief Executive Officer be appointed by the minister. However, it did unanimously support the proposition that the Public Corporations Act should apply to the WorkCover Corporation. The government responded, later in September 2004, to that report and it noted that the principal recommendation in the report—namely, the Public Corporations Act—was consistent with the bill it had already introduced. What happened? Nothing.

We have to go forward 13 months before there is another landmark in this unhappy catalogue of inactivity. In October 2005, the Auditor-General released his report for the year ended 30 June 2005, and in that report he referred to 'contingent liabilities of government arising under the implied government guarantee'. He said:

WorkCover is a statutory authority. Further, notwithstanding the fact that there is no formal government guarantee, on the basis of governmental involvement in the operations of WorkCover, as illustrated in the Under Treasurer's letter and on the basis of views expressed by the former solicitor-general Brad Selway QC, there is an 'implied guarantee' that would necessitate governmental action to arise.

The Auditor-General continued:

This could be achieved by way of premium increases, benefit reductions or injection of funds from the Consolidated Account. The inclusion of the WorkCover liabilities in the whole-of-government accounts clearly indicates that the government accepts this position.

He went on ominously:

Having regard to the experience of the State Bank, it is, in my opinion, imperative, notwithstanding the different nature and immediacy of the liabilities of WorkCover and the State Bank, that WorkCover be subject to the same standard of audit assurance as are public authorities.

It was an alarming report to be received by the government. It was not actually alarming to the government because it knew this already. The government knew this, as minister Wright clearly indicated in his letter of September 2003 to the Occupational Health and Safety Committee, but it was sitting on its hands. Once again, it did nothing. The governance bill was sitting on the Notice Paper ready to be debated. It had been supported by bipartisan committees. In the meantime—and you will remember this well, Mr President—the Statutory Authorities Review Committee, under your chairmanship, was conducting an inquiry into WorkCover. The committee tabled a 160-page report in November 2005, in which it made a large number of recommendations.

As the presiding member, Mr President, you referred to a 'long and arduous' inquiry in your foreword. The body of the report actually contained 25 recommendations, but only one of those recommendations was mentioned in your foreword; namely, that 'the committee recommends that WorkCover be subject to the Public Corporations Act'. This was hardly rocket science. The minister said that he was going to be doing this in 2003. Committee reports had recommended it, and the government acknowledged it. He had a bill on the table, yet he did not bring it forward.

We have to go forward yet another year or more to November 2006, to a function organised by the Motor Accident Commission where Treasurer Foley (the minister responsible for that particular body) referred to WorkCover in disparaging terms when compared to the Motor Accident Commission. The Hon. Nick Xenophon referred to those comments publicly and introduced the WorkCover Corporation (Auditor-General) Amendment Bill to address the very issue to which the Auditor-General and Treasurer Foley had been referring, namely, that the government had notice of this matter and a bill was on the record to have the Auditor-General audit the books of WorkCover, but it had never brought it forward.

The Hon. Nick Xenophon's bill gave specific power to the Auditor-General to audit the books of the WorkCover Corporation. He said quite correctly that the passage of the bill was a matter of 'considerable urgency'. At about the same time, the Hon. Rob Lucas in this council moved a motion calling on the Treasurer to request the Auditor-General to report on WorkCover under section 32 of the Public Finance and Audit Act. The opposition was pursuing a slightly different avenue, but one entirely consistent with what the government had proposed in its bill but had never done, namely, to allow the Auditor-General to have access to the books of WorkCover.

My colleague the Hon. Mr Lucas quite wisely made the point that really the problem with WorkCover was not the audit or the accounts. There was nothing wrong with the accounts; they did not need another audit. What was wrong was what those accounts revealed and the shocking state of WorkCover's financial position.

In February 2007, the government, using the voice of the Hon. Ian Hunter, told this council that the Hon. Mr Xenophon's bill was opposed. I should indicate that the Liberal opposition's point of view was that, notwithstanding that a section 32 order may have been appropriate, we were supporting the second reading of that bill. At that stage, the Hon. Mr Xenophon said that he was 'absolutely gobsmacked' by the government's refusal to support the bill. Here is this government always proposing that the Auditor-General have an involvement in the governance of WorkCover, yet it had not progressed its bill at all. I think it is appropriate to quote the Hon. Nick Xenophon's words on 21 February 2007, as follows:

The fact that the government is opposing this legislation begs a number of serious questions. We have not seen the end of this WorkCover saga yet, and I fear that those who will suffer the most will be the injured workers in this state.

He went on:

The government needs to explain to the people of this state why it no longer wants the Auditor-General to have these powers. What does it have to hide?

It is clear that all along the government was hiding. It knew the serious state in which WorkCover was and it knew that there would be a political price to pay. It started by adopting a tactic of blaming the previous government entirely falsely. When that would not wear, it went on delaying month after month, bringing forward the opportunity for some independent examination of WorkCover. It feared that the truth would get out and that the public would know that this government was sitting on its hands whilst a time bomb developed.

It was not until February 2008 that finally the WorkCover governance bill was introduced by the government. Even this year the government has been slow to bring it forward, then all of a rush with 30 June coming up—new accounts for WorkCover soon to be prepared and presented—the government decided it must act. As I said at the outset of these remarks, this is a shameful catalogue of incompetence. This is a government that is more interested in protecting its political skin than providing appropriate compensation for workers.

I deal now specifically with a couple of the provisions of the bill which are worthy of mention. The bill will introduce a new section 14A which will make the WorkCover Corporation subject to the control and direction of the minister. The government has lifted section 6 of the Public Corporations Act almost in its entirety, excepting that it has a special provision, and I ask the minister to note this and in his response provide a reason why this provision is inserted in lieu of that which appears in the Public Corporations Act.

Proposed section 14A(5)(d) provides that a direction given by the minister to the WorkCover board does not have to be published if it:

might detrimentally affect the performance of a statutory function,

If it might detrimentally affect the performance of a statutory corporation—that is new to WorkCover. That does not apply in relation to general public corporations like SA Water. There is no out for tabling and making public a direction of the minister, and I ask the minister to indicate why it was felt appropriate to insert this provision.

Just as the Public Corporations Act provides for a charter and performance statement so too does this governance bill; in fact, it picks up in proposed section 17A the provisions of section 12 of the Public Corporations Act almost word for word but with one significant difference. Once again, I ask the minister to explain either in his response or during the committee stage of this bill why this appears.

The proposed section 17A provides that a charter must be prepared for the corporation by the minister after consultation with the corporation. It contains a number of provisions about the charter and it provides that the minister must, after consultation with the corporation, review the charter at the end of each financial year. The minister, after consultation with the corporation, may amend the charter.

The Public Corporations Act contains a slightly different provision. It provides that, in relation to every other public corporation, the minister and the Treasurer must review the charter at the end of each financial year. You would have thought that it is an important issue for any public corporation: that not only the minister but also the Treasurer ought be involved in the review or amendment of the charter.

Similarly, in section 17B dealing with performance statements, it provides in relation to all public corporations that the minister and the Treasurer when preparing a charter for the corporation must prepare this performance statement which is to be reviewed, etc. once again by the minister and the Treasurer. Here again, there is an exception for the WorkCover Corporation. Here the Treasurer appears to be washing his hands of the WorkCover Corporation by removing any involvement in the performance statement. I ask the minister to indicate why it is that every other public corporation has both ministerial and treasury involvement in these matters but for WorkCover it is not deemed appropriate. The opposition will be supporting the passage of this bill. What we lament is the appalling delay in its being brought forward.

Debate adjourned on motion of Hon. J.M. Gazzola.

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