Briefing for Incoming Minister
Hon Maryan Street - Minister for ACC
02 November 2007
Released under the Official Information Act
Department of Labour strategic context
The Department of Labour aims to ensure that New Zealand workplaces are productive and that New Zealanders have high quality working lives. We do this by seeking to expand the workforce, increase skill levels, ensure better work and encourage working better. Through this work we make a significant contribution to the government’s economic transformation agenda.
Labour market outcomes are critical for New Zealand, socially and economically. New Zealand’s labour market is tighter than ever before – we have record numbers of people employed, unemployment is lower than most of our trading partners (at 3.6%[1]), and participation is at almost 69%. Work stoppages are down to 42 per annum, with work related injuries falling to 242,600 in 2006. The Department expects these trends to continue in the short term, although we are forecasting a slight easing in employment growth in the medium term.
New Zealand needs to shift to a high wage, high skill, high value economy. The Department, with social partners and other key government agencies, aims to leverage the diversity of our labour market and immigration functions across the portfolios of labour, employment, ACC and immigration to improve labour market outcomes.
We have the following four long-term goals:
- Our place in the world – New Zealand will prosper through its connections with the rest of the world
- Our workplaces – New Zealand workplaces will lead the world in maximising that value of work while providing a high quality working life
- Our workforce – the skills of our workers will ensure New Zealand enterprises are leaders internationally
- Our people – all New Zealanders will be able to grow and develop through access to well-paid and meaningful employment.
These goals and their underpinning medium-term priorities shape our work programmes, and enable us to align the work of the various groups in the Department.
Organisational form
The Department’s delivery and support groups are headed by Deputy Secretaries. Together with the Secretary of Labour, this group of six comprise our Strategic Leadership Team. The work groups are:
- Work Directions – focusing on achieving the best labour market outcomes at the national, regional and sectoral level, through strategic analysis, engagement and comprehensive labour market information and insights
- Workplace – delivers services and policy relating to employment relationships, ACC, workplace practices, workplace health and safety and safe management of hazardous substances to build healthy, productive workplaces
- Workforce – delivers immigration, employment and skills policy to build New Zealand workforce, while managing immigration in New Zealand’s best interests
- Legal and International – provide internal legal advice and support, including Ministerial support for legislative change, and manages our labour-related international engagements. The Group also provides an internally independent home for support staff for immigration appeal bodies and the newly created Immigration Advisers Authority, and houses our Government Executive and Ministerial Services team that provides the practical interface with Ministers’ offices.
- Corporate – provides a range of central shared services, advice and standards across the organisation in relation to human resources, information technology, communications and marketing, financial management, planning and reporting and internal audit.
Ministers
The Minister of Labour is the responsible Minister for the Department of Labour. As with the Ministers for Social Development and Employment, ACC and the Ministers of Labour and Immigration there is also a portfolio role.
Key Departmental Contacts
Workplace Group
Andrew Annakin
Deputy Secretary, Workplace
Craig Armitage
Group Manager, Workplace Policy
Victoria Hinsen
Manager, ACC Policy
Legal and International Group
Graeme Buchanan
Deputy Secretary, Legal
Tracey Conlon
Director Legislation
Legal Responsibilities of the Minister
Portfolio responsibilities
As the Minister for ACC, you have responsibility for the strategic policy framework and the overall performance of both the Accident Compensation Scheme and the Corporation.
The Crown Entities Act sets out your obligations as responsible Minister. You exercise this responsibility through your relationship with the ACC Board and, in particular, the Board Chair. The recently appointed chair is Ross Wilson, who took up this new role on 29 October 2007. The ACC Chief Executive is accountable to the ACC Board for day-to-day management of the scheme and the services that administer and support it.
The Department supports you in exercising this responsibility. It provides independent and strategic policy, purchase and monitoring advice on the ACC Scheme and administers the Injury Prevention, Rehabilitation, and Compensation Act 2001 (the IPRC Act).
As part of an annual accountability cycle, as Minister, you provide strategic input to ACC prior to the commencement of each financial year through a ‘letter of expectations (the LOE)’ to the Chair of the Board outlining your expectations of ACC for the coming year. This is followed through in the negotiation of the Service Agreement and Statement of Intent which, with your agreement, outlines the performance expected of the Corporation.
As Minister, you are also able to convey government policy to ACC via a policy direction that is tabled in the House and published in the Gazette at any time. Any such direction must be consistent with the substantive provisions of the IPRC Act. It is rare for a Minister to issue a policy direction to a Crown Entity; most matters are dealt with through discussion with the Chair.
You have the power to request information from the Corporation, and to initiate reviews of its operations. The previous Minister also chose to meet regularly with the ACC Chief Executive and officials.
The IPRC Act sets out your role in recommending regulations under the Act. Some of these are standing regulations, and some of them require annual reviews.
A key regular duty is the annual setting of the levy for each account (ss.329-331), other than the Non-Earners Account, which is funded by government appropriation. The Department will advise you on these settings. The Corporation will also provide advice to you, as required by the Act.
As Minister for ACC, you also have these specific appointment-related duties, derived from the IPRC:
- to make appointments to the ACC Board (s.267)
- to recommend to Cabinet the appointments of the Ministerial Advisory Panel on Injury Surveillance or ISMAP (s.291). These recommendations are made jointly with the Minister of Statistics.
People with injuries are able to access public and emergency health services before a claim is made with ACC. If the claim is accepted, then ACC makes a payment to the Ministry of Health. You are required to enter into an annual service agreement with the Minister of Health for the purchase of Public Health Acute Services.
The former Minister for ACC was assisted in advice on ACC accountability issues, operational policy and strategic policy matters by an independent group of seven external advisers, called the Ministerial Advisory Group (MAG). The MAG is currently working with the Department on advice for the coming LOE. We will discuss the LOE process, and the MAG’s involvement in that process very soon.
Major Linkages with Other Portfolios
There are major linkages between ACC and the following portfolios:
- New Zealand Injury Prevention Strategy (NZIPS) – a cross-governmenzt strategy encompassing six priority areas for addressing injury prevention in New Zealand. ACC houses an independent Secretariat, which oversees co-ordination and collaboration of injury prevention activity in New Zealand. The Department has a role in monitoring the strategy.
- Labour – the Department has a responsibility to facilitate injury prevention in the workplace. ACC also carries out injury prevention activity with industry. As one of the six priority areas within NZIPS, the Department’s Workplace Health and Safety Strategy provides for injury prevention goals to be coordinated across government and industry.
- Health – ACC has a particular connection with the Ministry of Health as both agencies use health and disability services. The Department has a role in ensuring that the government’s goals for health and disability and ACC’s goals for rehabilitation are aligned.
- Social Development and Employment – any consideration of how non-work injuries are treated compared with other misfortunes, such as illness and unemployment, has links to income support policy. The operation of instruments such as vocational rehabilitation, where that results in people leaving the ACC scheme, also has potential flow-on implications for the provision of income support.
- Transport – motor vehicle injuries are a significant cost to the scheme. The Department works with transport and environmental agencies towards ensuring that the ACC scheme and other government transport policy objectives work well together.
Strategic Priorities
Vote ACC and the Department of Labour
The ACC scheme provides comprehensive, 24-hour, no fault cover and entitlements for all New Zealanders, residents, and temporary visitors to New Zealand.
The scheme aims to prevent injuries, and when injuries occur, restore people’s health and independence to the maximum extent practicable, and provide compensation for injury losses. It contributes to productivity by preventing injury and minimising the impacts of injury, if they occur, on business, individuals and society.
The work the Department undertakes in providing independent and strategic policy, purchase and monitoring advice on the ACC Scheme and administering the IPRC Act contributes significantly to the Government’s priority of ensuring that all families, young and old, have the support and choices they need to be secure and to be able to reach their full potential.
The Government’s objectives for people who are injured, reflected in the Injury Prevention, Rehabilitation, and Compensation Act (Part 1, s3) is “to enhance the public good and reinforce the social contract represented by the first accident compensation scheme by providing for a fair and sustainable scheme for managing personal injury that has, as its overriding goal, minimising both the overall incidence of injury in the community, and the impact of injury in the community (including economic, social, and personal costs)”.
Policy and Legal function
The ACC Scheme is continually reviewed with respect to the scope of cover, and the levels of levies and entitlements. The Department administers the IPRC Act and leads policy on legislative and regulatory change.
We provide independent policy advice on all matters relating to the scheme, including levy setting and funding policy, as well as more generally on the ACC scheme’s regulation, ACC policies and practices.
Our policy role also includes advice on ACC scheme interfaces with the health and welfare systems, the transport system and the workplace health and safety system. The Department and ACC agree on the policy work programme each year with the Minister for ACC.
The Department clearly has a strong interest in preventing workplace injuries and occupational illness through its administration of the HSE Act and its enforcement role under the Hazardous Substances and New Organisms Act, but we have a much wider role in the ACC portfolio as the scheme also covers injuries at home, sport and on the road. This allows the Department to interface and make connections with a wide range of other parts of government, particularly the Ministry of Health, the Ministry of Social Development, and the Ministry of Transport.
The Department works on evaluating the impact of the ACC scheme and the ACC’s activities in meeting the Government’s objectives for injury prevention, rehabilitation and compensation and wider social and economic goals.
Purchase and Monitoring function
The Department provides purchase advice on and monitoring of, the performance of ACC, which is the Crown Entity responsible for delivering the Scheme. This role includes monitoring the ACC scheme operationally and financially, and independently analysing the levy recommended by ACC throughout the annual levy setting process.
The Department’s monitoring role could be strengthened and we are currently building capability in this area. Our current focus is on developing a performance monitoring framework for measuring the ACC Scheme and Corporation performance. The framework is intended to focus the Department’s monitoring activities, key outcomes, and the contribution of Corporation activities to these outcomes. In doing so, it is expected that the framework will provide a more dynamic and fuller picture of ACC performance.
The Department also:
- manages the ACC board appointment process on behalf of the Minister for ACC;
- provides secretariat and advisory support for ministerial advisory committees (e.g., ISMAP and the Ministerial Advisory Group on ACC or MAG, a non-legislative group that provides advice on ACC matters from various stakeholder perspectives), including managing the appointments process; and
- fulfils the residual functions of the Accident Insurance Regulator, following on from the short-lived introduction of the competitive accident insurance market in 1999/2000.
Other significant issues/risks
ACC Performance
In reviewing ACC’s 2006/07 performance, the Department is concerned that certain areas where targets have not been met may be indicative of longer term issues that need to be addressed. These areas include:
- The further decline in 12 month rolling average rehabilitation rates (% who exit the scheme) compared to 2005/06 and the increase in the number of long term compensation claims;
- Revised cost estimates for serious injury claims that have put pressure on the claims valuation at 30 June 2007;
- The absolute and relative growth in claims frequency.
Of concern is that the issues highlighted above reflect ongoing trends in increasing rehabilitation costs, increased average length of stay and increasing claims. Cumulatively, they may have an impact on levies if left unchecked. ACC needs to provide assurance that it is working to improve its case and claims management and get its costs, particularly for serious injury, under control.
Through the coming year the Department, in its monitoring role, will pay particular attention to:
- ACC’s management of all rehabilitation costs, particularly serious injury costs;
- implications of changes to key actuarial parameters (risk margin, prudential margin and discount rate) and assumptions, as these will have a significant impact on the claims liability book value without necessarily addressing the underlying cost drivers;
- ACC’s efforts to improve access of various target groups;
- the implementation and evaluation of ACC’s rehabilitation framework;
- management of higher claims volumes;
- evaluation of current rehabilitation process, particularly vocational rehabilitation.
Physiotherapy Review
New Zealand First requested a review of the way physiotherapists are funded and accredited by ACC through the Supply and Confidence Agreement. The Department hosted a Ministerial Review, which has just been completed by David Goddard, QC. The previous Minister was considering the process for the public release of the final Review (including informing Cabinet of the release) and for associated government decisions on the Review’s recommendations.
The Department is leading the response to the Review.
Compliance with ILO Convention 17
ILO Convention 17, which NZ has ratified, embodies the principle that workers should not bear the costs of workplace injuries. The ACC scheme was recognised as being non-compliant with ILO 17 in 1993; under the scheme at present, workers (and non-workers) often pay part charges, or ‘co-payments’, for some medical treatment. A key issue has been around whether the scheme should address ILO 17 through removing co-payments for work injuries only, or whether it should apply across the whole scheme. The cost of removing co-payments across the whole scheme (work and non-work injuries) is about $167 million per annum.
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Accredited Employer Programme Operational Review
The Department is currently supporting the Corporation to conduct an operational review of the Accredited Employer Programme (AEP). AEP allows employers to undertake self-insurance for their employees’ work injuries within the ACC scheme.
The Department originally proposed an evaluation of the AEP in terms of the extent to which it is meeting its statutory objectives (injury prevention, industry benchmarking, etc.). Both ACC and the government’s social partners indicated a preference for an operational review, largely due to concerns that an evaluation of AEP could include the possibility of its discontinuation.
As a result, the Operational Review is being undertaken using a social dialogue process. Problems, and options for operational improvements, are being identified by social partners and key stakeholders.
Related to this work and in the context of discussions with the previous Minister about the Operational Review, Business New Zealand raised the issue of the potential for AEP to include cover for non-work injuries. The previous Minister agreed that work should be undertaken to explore the issues for AEP cover of non-work injuries. Subsequently, CTU has expressed concern about this work. The Department is planning to meet with both social partners on 6 November to discuss the terms of reference for this work.
Action required pre Christmas
2008/09 Levy Round
ACC makes recommendations annually on levy rates to the Minister for ACC. The Department of Labour is charged with providing independent advice on ACC levy rates. Final ACC Levy rates are set, in regulation each year, by Cabinet; the Department of Labour leads the Cabinet process.
The levy setting process for the 2008/09 levy year is currently underway. ACC has completed public consultation on new rates for the 2008/09 levy year. The ACC Board made their decision on proposed rates on the 26th of October. These were put to the previous Minister in an ACC paper on the 30th of October. The Department also submitted its independent advice to the former Minister on 31st of October setting out our recommendations. The Cabinet paper is due to go to SDC in early December.
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2008 Letter of Expectations (LoE)
In its monitoring role, the Department assists you to develop and convey your expectations for ACC to the Chair of the ACC Board, to inform ACC’s planning for the upcoming financial year. The Ministers of State Services and Finance will be writing to you shortly inviting you to draft the letter for the 2008/09 financial year. The Department will provide you with information for your meeting with the ACC Board on 14 November, which will enable you to provide a strong indication of what is likely to be in the letter of expectations for the coming year.
IPRC Amendment Bill
The IPRC Amendment Bill proposes a number of amendments to the IPRC Act, resulting from some significant policy projects as well as ongoing technical revisions.
The key areas of change in the Bill are:
- changes to cover and entitlements in respect of work-related gradual process, disease, and infection;
- introduction of cover for mental injury caused by exposure to a sudden traumatic event in the course of employment;
- improvements to eligibility and entitlement provisions for weekly compensation; and
- increased access to vocational rehabilitation and independence.
The Bill also makes a number of more minor changes in a variety of areas.
The Bill was considered by Cabinet Legislation committee on 25 October and is likely to be introduced in the week beginning 5 November. The earliest the Bill could have its first reading is 14 November.
ANNEX 1: Departmental Contacts
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