NSW govt errors show more financial capability to help injured workers

8th Nov 2012

A manufactured deficit of $1 billion on NSW Government’s books, which arose because of 37 accounting errors of more than $20 million each, looks like having indirectly played a role in winding back the financial entitlements of injured workers, Australian Lawyers Alliance NSW Committee member, Cliff Baker, writes.

Despite claims at the end of the last financial year that New South Wales was facing the burden of a financial deficit, revision of the accounts has indicated that we are, in truth, in surplus.

A looming deficit, of course, gives credibility to calls for government to cut programs in an era where raising additional revenue has become unacceptable for political reasons.

In June, one of the NSW Government’s terms of reference for holding an inquiry into NSW WorkCover, was “The financial viability of the scheme and its impact on the NSW economy”.

This perceived need to cut spending has no doubt weighed more heavily into an impetus to cut spending in the area of workers compensation, but this may have been unnecessary.

NSW now has the least generous scheme, and the weakest compensation coverage, of any Australian workers compensation system. This was justified on the basis of financial and actuarial reports showing that there was an unfunded liability in the scheme of $4 billion.

The NSW Government fudged the fact that this was a liability estimate only, and claimed that WorkCover was carrying a deficit of this extent. But that figure is clearly in doubt as a result of the Auditor-General’s revelations.

The Australian Lawyers Alliance’s May 2012 submission to the NSW Parliament’s Joint Select Committee points out that major injuries are down, claims are down, medical payments are down, death payments are down and legal costs are also, in fact, down!

These, of course, are the hardest expenses to manage. But there have been increases in claim-handling costs, payments to scheme agents and insurers and particularly an increase in scheme cost per dispute. All of those items should be well within the control of management. And actuarial assumptions have added $1.5bn to the unfunded liability without any change in trends, simply at the stroke of a pen.

Given that the Auditor-General has pointed to “a lack of financial management capability in this state”, there can be little confidence in the policy decisions which have led to workers’ benefits being slashed. It is noteworthy that the state itself saved $200m on workers compensation costs to improve its budgetary outcome.

The figures on which these critical decisions are based have been shown to be extremely rubbery. Meanwhile, nothing is done to rein in the blowout of expenses which should be under the control of NSW Government’s management.

There should be a prompt reconsideration of the O’Farrell Government’s recent workers’ compensation changes based on proper and accurate financial information.

Tags: NSW Workers' rights WorkCover Workers compensation