Heath Aston - February 19, 2012
EXCLUSIVE
"Very concerned" ... State Minister for Finance, Greg Pearce. Photo: Andy Zakeli
THE state's workers compensation scheme is lurching towards a $5 billion deficit - more than double the previous worst-case prediction, which could reduce the amount paid to those injured on the job.
The looming crisis for the O'Farrell government has come to light after the resignation of Greg McCarthy, the chairman of WorkCover.
Mr McCarthy told The Sun-Herald yesterday a combination of the global financial crisis hammering the scheme's investments and the ''neglect'' of former Labor finance ministers Joe Tripodi and Michael Daley had left the scheme's finances in a parlous state.
''They just weren't interested and did not listen to my warnings. No one since John Della Bosca has pulled the levers at all,'' Mr McCarthy said.
He warned the Minister for Finance, Greg Pearce, would have to act ''within weeks'' through raising premiums for employers or reduced benefits for injured workers - or a combination of both.
This month, Mr Pearce announced the government would accelerate changes to WorkCover, with a likely merger of WorkCover with four other bodies: the Motor Accidents Authority, Dust and Diseases Tribunal, Sporting Injuries Committee and Lifetime Care and Support Authority.
He has also flagged the likelihood that WorkCover, which is the third-biggest insurer in Australia, could be turned into a state-owned corporation at arm's length to government.
The WorkCover board has a purely advisory role and Mr McCarthy lost patience with having his warnings ignored.
In his resignation letter, he detailed his ''continued frustration'' in getting successive ministers to heed the board's warnings.
''I have been constantly ignored,'' he wrote. ''I continually get frustrated by others being asked to provide advices that have no or little industry knowledge or experience.''
Mr McCarthy told The Sun-Herald governments had been too generous with both cuts to premiums and compensation since the scheme was in surplus by $1.5 billion in 2005. He said WorkCover's executive management had been given no leadership from government over the past few years.
The scheme would be in a $4 billion deficit by the time the December evaluation is finalised in March, Mr McCarthy said, and that could blow out to $5 billion by June.
Mr Pearce said yesterday he was ''very concerned''. "The government has been working tirelessly to address the issue and has been meeting frequently with the WorkCover executive to finalise a solution,'' he said. "In 2005 the scheme briefly was in surplus due to a number of windfall investments, not Labor's attempt at reforming the scheme. The government considers reform of the WorkCover scheme a matter of the highest priority.''
Greens MP David Shoebridge said he expected the deficit to be used by the government as a reason to implement ''drastic cuts''.
''It's likely that any scheme deficit has more to do with reduced returns on investments than the amounts paid to injured workers,'' he said. ''Governments of all political stripes use these temporary dips in financial returns to cut back benefits.''
"Very concerned" ... State Minister for Finance, Greg Pearce. Photo: Andy Zakeli The looming crisis for the O'Farrell government has come to light after the resignation of Greg McCarthy, the chairman of WorkCover.
Mr McCarthy told The Sun-Herald yesterday a combination of the global financial crisis hammering the scheme's investments and the ''neglect'' of former Labor finance ministers Joe Tripodi and Michael Daley had left the scheme's finances in a parlous state.
''They just weren't interested and did not listen to my warnings. No one since John Della Bosca has pulled the levers at all,'' Mr McCarthy said.
He warned the Minister for Finance, Greg Pearce, would have to act ''within weeks'' through raising premiums for employers or reduced benefits for injured workers - or a combination of both.
This month, Mr Pearce announced the government would accelerate changes to WorkCover, with a likely merger of WorkCover with four other bodies: the Motor Accidents Authority, Dust and Diseases Tribunal, Sporting Injuries Committee and Lifetime Care and Support Authority.
He has also flagged the likelihood that WorkCover, which is the third-biggest insurer in Australia, could be turned into a state-owned corporation at arm's length to government.
The WorkCover board has a purely advisory role and Mr McCarthy lost patience with having his warnings ignored.
In his resignation letter, he detailed his ''continued frustration'' in getting successive ministers to heed the board's warnings.
''I have been constantly ignored,'' he wrote. ''I continually get frustrated by others being asked to provide advices that have no or little industry knowledge or experience.''
Mr McCarthy told The Sun-Herald governments had been too generous with both cuts to premiums and compensation since the scheme was in surplus by $1.5 billion in 2005. He said WorkCover's executive management had been given no leadership from government over the past few years.
The scheme would be in a $4 billion deficit by the time the December evaluation is finalised in March, Mr McCarthy said, and that could blow out to $5 billion by June.
Mr Pearce said yesterday he was ''very concerned''. "The government has been working tirelessly to address the issue and has been meeting frequently with the WorkCover executive to finalise a solution,'' he said. "In 2005 the scheme briefly was in surplus due to a number of windfall investments, not Labor's attempt at reforming the scheme. The government considers reform of the WorkCover scheme a matter of the highest priority.''
Greens MP David Shoebridge said he expected the deficit to be used by the government as a reason to implement ''drastic cuts''.
''It's likely that any scheme deficit has more to do with reduced returns on investments than the amounts paid to injured workers,'' he said. ''Governments of all political stripes use these temporary dips in financial returns to cut back benefits.''
Read more: http://www.smh.com.au/nsw/compo-scheme-faces-5b-hole-20120218-1tfqx.html#ixzz1mtMAKGi7
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