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Legislative Council - Fifty-Third Parliament, Second Session (53-2)
2015-06-17 Daily Xml
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Motions

Motor Accident Commission

The Hon. R.L. BROKENSHIRE (15:59): I move:

That the Statutory Authorities Review Committee, as an urgent priority, investigate and examine—

1. The proposal for privatisation of the Motor Accident Commission including, but not limited to, the alternative to privatisation as put forward to the state government by the MAC board;

2. The PricewaterhouseCoopers' economic predictions and the report by Finity Consulting on the MAC board proposal;

3. Treasury involvement in the decision to privatise the MAC;

4. Other states that have privatised and the impact that has had on CTP costs and injury compensation; and

5. Whether the authority and its operations provide the most effective, efficient and economical means for achieving the purposes set out within the act including, but not limited to, whether purposes of the fund noted in section 25 of the Motor Accident Commission Act regarding the Compulsory Third Party Fund are being appropriately administered in accordance with the act.

As colleagues would be aware, yesterday I gave notice of the motion that I am about to speak to, and that motion is to move that the Statutory Authorities Review Committee, as an urgent priority, investigate and examine five key matters with regard to the government's proposal for privatisation of the Motor Accident Commission.

Just to advise colleagues, I did have a discussion with some of my colleagues and after due consideration I strongly believe that the SARC would be the best avenue in which to proceed with this inquiry, because to set up another select committee would take a lot longer and the government are going as fast as they possibly can to effectively dismantle the Motor Accident Commission. I do not believe that we actually have time to go through the processes of a select committee. Also, to be fair to my colleagues, we are all very busy with select committees on top of our standing committees at the moment, and I believe that the SARC would be the competent and correct standing committee to do this investigation.

I have already been criticised by some in government who have said, 'Why would you, someone who is a conservative in business and pro business, not support what the government is wanting to put forward when it comes to the privatisation of the Motor Accident Commission?' I want to put on the public record now for the benefit of colleagues (and I will also email colleagues) as they consider voting on this motion that I would hope to put this motion up for a vote on the next Wednesday of sitting because it is an urgent motion. Colleagues will see even more tomorrow when the budget comes out the reasons why I would like to put it to a vote on the next Wednesday of sitting. If any colleagues would like to come and have a look at my freedom of information documents and discuss the matter with me, I would welcome that opportunity.

The reality is, first and foremost, that you do not actually privatise everything simply because it is allegedly good for the private sector. There are some things that governments should not be in and there are some things that the government needs to be in. If you look at the history of compulsory third party, it used to be in the hands of the private sector and it was because of the unworkable situation of looking after people injured in motor accidents and on our roads and because of the situation with premiums and the like that the parliament in its wisdom at that time decided that compulsory third party would be through, back then, SGIC. It was sold off, but the compulsory third-party sector was kept and became the Motor Accident Commission.

I had someone come and speak to me some time ago saying, 'Robert, I think you should have a look at what the government is proposing with the privatisation of the Motor Accident Commission, because I think it is a slippery slope to what has already occurred in New South Wales, Queensland and Canberra.' You are duty bound as a member of parliament that, when people in the community advise you of their concerns, you need to do some investigation.

I actually thought first and foremost that the government said they would not privatise and, in fact, they made a commitment to the community of South Australia prior to the March 2014 election that there would be no privatisation under a Weatherill government. I took them at their word, because we can recall the former premier, the Hon. Mike Rann, when he put a pledge card up saying that there would be no privatisation under any government that he was premier of with respect to any assets of South Australia. It was clear when people went to the election last time that there would be no privatisation.

I did my FOI research, and it was interesting. It was not necessarily easy to get the documentation, but it was very interesting when I did get it to discover that, prior to the last election when the Premier was also the treasurer of South Australia he, through Treasury, had secretly instructed the Treasury to start to scope the benefits or otherwise of the privatisation of the MAC. It is disappointing that we went to the last election with that work being done behind the scenes, but no public debate on the matter. In fact, the first time the public and the parliament knew about it was when last year's budget, the 2014-15 budget, was introduced to the parliament.

I always understood that this government had promised transparency. I also understood, and strongly believe, that if you are going to privatise assets you do not have a mandate to privatise those simply because you are in government; you have a mandate to privatise them only if, preferably, you have been totally open and honest with the people of South Australia and there is an urgent reason why something needs to be privatised. Then you at least take it through parliament.

It appears—although the advice to me is not totally clear—that the government may technically be able to do the first part of this privatisation without coming through the parliament. However, I understand that even yesterday the Treasurer, in another place, advised parliamentarians in the House of Assembly that at some point in the future there would have to be legislation changes, because after the capping period that the government has promised to put on the CTP until after the next election—so that motorists do not see any further increases until after the next election, to falsely protect the government—they would have to bring a regulator in. When the regulator comes in they would have to have legislation changes.

That immediately says to me, 'That's interesting,' because tomorrow we are going to find out whether we are going to get absolute confirmation of $1.2 billion, which will be the largest asset receipt to the government since the privatisation of ETSA. It is a very large and significant amount of money. I am advised it could be higher; in fact, some indicators suggest that it may be as high as $2 billion tomorrow, but we will have a look at that when the budget papers are available. However, the point is that this is a serious amount of money.

When you look at it, some of that money has already been paid. At the end of the day, whichever way the Treasurer wants to talk about this—he can say it is going into the road fund and is not going into general revenue—the reality is that that money is being taken. It is not even actually taxpayers money per se; it is actually money specifically paid by motorists and businesses with vehicles, by farmers with their tractors, trucks and utes. It is their money, and it is the money of the Motor Accident Commission because of the excellent investment work it has done. It is not even general taxpayers' money, yet this government is going to take it and put it into recurrent funding. It is not even going to go off the core debt.

At this point in time it cannot go through the parliament because they can sneakily do this without going through the parliament—that is what I am told, and that is what I trust that SARC will be able to investigate. It is also not going to go off core debt but is simply going to help add to what will be a false or artificial surplus that I expect will be shown into the forward years prior to the next election, come tomorrow's budget.

I did some research on this and, for members' interest, if you look at the many prior years (not just the last one or two) the average return from investments for the Motor Accident Commission has been 6.25 per cent. What starts to worry me is that not only do I find that the then treasurer was asking for scoping before the last election, but when you look at the freedom of information documents you actually discover that there were confidential agreements that Treasury forced senior officials in the Motor Accident Commission to sign. Whilst I do not see the names of those in the documents, I certainly have a copy of the template for that, and I am told that Treasury has basically taken over control of the Motor Accident Commission. Even worse, I am told that because of these commercial contracts between executive members of the Motor Accident Commission—non-board members, that is—and Treasury, work was being done without the knowledge of the board. We need to establish whether that is true because that is a very serious matter if indeed work was being done and control taken by Treasury.

I am told that what we are going to see tomorrow is a $30 hit to motorists in South Australia. I just want to put on the public record $30. It will show a $7 increase, I am advised. The fact is that, had the government not announced the privatisation, then just as last year when the Motor Accident Commission had a reduction in CTP to motorists, the board was expecting—because of their very strong asset base which is way above what any actuarial has ever indicated they needed to meet their obligations and their unfunded and potential liabilities—a $23 reduction in premiums again this year.

The reality is that it is just not a $7 increase to the motorist, it is actually a $30 hit to every motorist in this state simply because this state government wants to take money from an entity that I do not believe it has a right to. In fact, just on that, I want to put on the public record what a highly respected lawyer, Mr Tony Kerin, said on the Leon Byner program this week. He said that he did not believe you could use that money for road infrastructure. That is another thing that I am asking SARC to have a look at because we need to understand whether or not they are legally allowed to do that.

The bottom line is that motorists will be hit with $30 extra because the government has decided to privatise and put this into general revenue. I understand that, when the MAC board discovered that the Treasurer and the government were intending to privatise the CTP for South Australia and basically make defunct MAC as we know it today, they were horrified. They thought that this was not in the interest of South Australia. This is almost like Gillman all over again when you think about it, because the board of Renewal SA said, 'We need to go out with expressions of interest for Gillman.' The allegations at the moment with Gillman are that the government has undersold it by possibly hundreds of millions of dollars. They ignored the board.

Now we have another situation where a board has said, 'This is wrong.' Not only did they say it was wrong, they said, 'We will give you an alternative that is better than what you are going to do with the privatisation.' That is what the board said to the government. In fact I understand that the board said that they could probably pay up to $1 billion and then give an annual return into the future of up to $150 million. If that is true, we need to urgently and seriously investigate this because short-term political gain is going to cause very long-term pain to 1.5 million South Australians.

Where the modelling has been adopted in places like New South Wales, they have seen an increase in their CTP of 70 per cent in just five years. I have an interesting article in front of me about how the Treasurer of New South Wales was under incredible pressure because the private providers for CTP in that state went to her and said, 'We need another 15 per cent increase.' MPs over there were getting very nervous about all of these increases. There had already been a 70 per cent increase over five years.

But guess what? I understand that the Treasurer approved the 15 per cent increase because the private provider said, 'If we can't get that, then we are going to walk. We don't want the business because we are not going to make a loss on it.' I also advise the house that I am advised that government has a benefit in running a CTP as against the private sector because the government does not have to have all of the offsets and the reporting processes that the private sector does in relation to the underwriting. So, there is an absolute advantage for a start on the government owning this.

If you buy the Premier's argument yesterday, when the Leader of the Opposition, the Premier and myself were on radio debating this, where he said that there was a pretty strong chance that CTP would come down as a result of privatisation, if he is so sure about all that, why does he not adopt the same thing with WorkCover? They will not do it with WorkCover, but with MAC they are prepared to do it. We know the reasons why, but we need the investigation.

I want to put a couple of other things on the public record. I understand that PricewaterhouseCoopers were commissioned by an insurance company (and I will not name the insurance company) to have a look at possible opportunities if there was privatisation. My advice is that this was prior to the announcement that they would be privatising. Somewhere between 6 and 12 months before the budget came out last year, I understand that a national insurance company engaged PricewaterhouseCoopers to actually have a look at what the benefits would be of getting involved in the private market opportunity of privatisation of MAC.

I also want to put on the public record that I am advised that, when the Motor Accident Board put the alternative proposal to the government of being able to provide what is effectively a cash payment of up to $1  billion, a one-off whack of a massive amount of money, and then up to $100 to $150 million a year, they actually got a company called Finity to have a look at the whole thing. They actually got an independent company called Finity and they had a look at it all. I am told that Finity is a company that does all the actuarials and assessments and is regularly used by governments, including the state government.

When MAC put this proposal, rather than the government and Treasury having a look at what they were always in the past happy to look at with what Finity say—and I understand Finity say that the proposal that the MAC Board put forward was actually conservative—guess what? Treasury decided that they would get the same company that the national insurance company got to scope this (PricewaterhouseCoopers) to have a look at what the board had put forward after it had been signed off allegedly by Finity, and then they dismissed it and said it was not possible and was too optimistic.

I think we really need to have a close look at it all. If the government were to come out and actually table all of those documents, the parliament may have a different opinion to what I am putting forward, because I hope that the parliament will support my proposal, but the government are refusing to make those documents available. We cannot get the documentation that MAC provided the Treasurer as the alternative. We cannot even get the PricewaterhouseCoopers document that went to Treasury with respect to the assessment they did on the proposal from the MAC Board.

At the end of the day, this might be good for this government because it will give a false surplus. It adds to the opportunity for a false surplus, just like the $10 million additional hit on the ESL for the Sampson Flat fires has done. This was unprecedented: instead of pulling that money out of contingency money, they have hit everybody that owns property—

The Hon. J.A. Darley: What about $2.7 billion from SA Water?

The Hon. R.L. BROKENSHIRE: And, of course, the $2.7 billion that my colleague, the Hon. John Darley, talks about, which they took from their core debt to give it across to SA Water Corporation so that they had to manage that, and guess what: every South Australian is now paying more for their water.

The point is that, long-term, I am very concerned that this is going to lead to a significant increase in CTP. Given that we already are the highest-taxed state in Australia, given that we have the highest unemployment in Australia, given that we have very significant core debt and we do not have a structure to have genuine, sustainable surpluses, why would you actually sell off the last piece of crystal in the cabinet chest when it can deliver sustainable returns ongoing into the future?

I apologise that that overview has taken a little while, but I wanted to put it all on the public record. I have to act in good faith with what has been put to me from my informants, and I also have to act with the material I have available to me through freedom of information and other material that is available, but I believe that this is such a serious issue, with no mandate from the government to be able to do this, trying to bypass the parliament and leaving our future with increases in CTP that will be out of control, because at the end of the day the shareholders of those insurance companies will demand dividends.

We have a model here that is a tremendous model. The people who have done the investment for the MAC should be congratulated: they should be put in charge of Treasury and not Treasury taking over control of what they are doing, because their returns have been superb. It is diverse, it is in cash, it is in property and it is in shares. It is safe because of the quality of those people. I will leave members with these last remarks.

I am told that the Hon. Mr Jeff Kennett, back in about 2000, had a look at privatising their equivalent of MAC. It is fair to say that the Hon. Jeff Kennett was probably a pro-privatisation premier, but when appropriate. Jeff Kennett had a look at their equivalent of MAC (their MAC is called TAC) and said that in no way would they privatise it. If you look at the budget papers through those years since Jeff Kennett made that decision to stick to a model the same as we have here now, there has been, I am told, several billion dollars returned to the coffers of Victoria.

We already have the second highest CTP charges in Australia, and the only state that has higher charges than us happens to be New South Wales, and that is effectively the model that this government is adopting. By interest, the Western Australian CTP is about 50 per cent of what we pay here in South Australia.

So, this is an important and urgent matter. I thank my colleagues for listening to this debate, and I strongly encourage them to support my motion. I trust that it will be up and approved for the next Wednesday of sitting, and I wish SARC well with its deliberations, because it will be interesting to see what it can factually obtain and report to the parliament.

Debate adjourned on motion of Hon. J.S.L. Dawkins.

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