Compensating Factors

Listener: 25 April, 1981.

Keywords: Social Policy;

One of the curiosities of the 1970s is that although it was a period of economic stagnation, a number of important innovations were made in the income maintenance area.

The most radical was the introduction of the Accident Compensation Scheme. but others were National Superannuation, the Statutory Domestic Purposes Benefit, income tax rebates for families, and changes removing some of the discrimination against women, Even curiouser, most of these changes occurred under a National Government, which is not normally thought to be especially concerned with social security.

I tried to explain this in a book Pragmatism and Progress: Social Security in the Seventies to be published soon by the University or Canterbury. As the title suggests, I concluded that the developments were primarily a pragmatic response to social stress in the stagnant ‘70s, but it also reflects a change in the late 1960s by the National Party to a more sympathetic approach to social security.

While preparing the book for publication I was confronted by the 1979 budget changes which cut the level of National Superannuation across the board, reduced the level of the unemployment benefit for those without children, and eliminated .the Additional Benefit as instituted in 1975.

However, at the same time the family benefit was doubled, the child allowances for social security beneficiaries was increased, and the Additional Benefit reconstituted as a supplement for beneficiaries with high housing costs. Thus the 1979 Budget changes are better treated as a redeployment (restructuring) of the limited funds for income maintenance in a stagnant economy – in the budget after the excesses of election year.

The conclusion of my book was that at the end of the 1970s the National Party was faced with a choice between returning to its traditional antagonism towards social security or continuing a sympathetic development limited by the overall economic stagnation. I did not hazard which path it would choose.

Perhaps the Accident Compensation Amendment Bill currently before Parliament gives some indication It is widely accepted that reform of the scheme is needed. The reforms the Bill encompasses include a worthwhile improvement to the situation of the self-employed.

However, most of the proposals have the effect of cutting back the level of compensation available. This includes reducing the lump-sum compensation cutting out some of the compensation for non-pecuniary loss, in some cases making the accident victim pay for the first two visits to the doctor, eliminating compensation for non-work injuries for the first two weeks (instead of one week) and reducing the compensating improvements in the first week for work accidents from 100 percent to 80 percent of earnings.

What I want to draw attention to that white the overall effect of the changes is to contract the scope of the Accident Compensation Scheme. unlike the 1979 budget changes there are no compensating improvements. Thus the Bill as it now stands represents a break from the pattern the National Government set itself in the 1970s.

For instance I am inclined to the I view that it makes sense to reduce the compensation in the first week from 100 per cent to 80 per cent of earnings. However. instead of reducing the costs of the scheme to the firm, who pay first week compensation, the funds could have been used to extend, say, cover for workers who suffer long-term sickness.

If it makes sense to charge the accident victim for the first two visits to the doctor. and I am far from persuaded that it does, then it makes sense to charge the sickness victim for I only his or her first two visits to the doctor and then for the state to pay for subsequent visits.

Not only does the Bill fail to offer any compensations for the reductions, but it fails to tackle the generally acknowledged major deficiencies in the present legislation. Those deficiencies are:

1) Legislation which is overly complex, and the drift to legal adversary procedures in administration.

2) The inadequate’ treatment of non-earners, particularly women and students.

3) The gross inequity between the victims of accidents who get earnings-related benefits and the victims. of sickness who get nat rate benefits. {Given a social goal of ‘equality of opportunity’. the prospects of the children of family men on a long-term sickness benefit are particularly unfair.)

4) Inappropriate financing. We could make greater use of the user group pays principle by, for instance, levying alcohol to cover the costs or alcohol-induced accidents, foreign visitors could pay a levy on arrival to cover their entitlements under the scheme. (I support the government’s proposal to switch over to a pay-as-you-go basis instead of the present funded approach, which adds unnecessary complexity.)

Whether the Accident Compensation Amendment Bill proceeds depends upon the parliamentary and political processes. It seems to me that it would be most unfortunate that it I should, particularly in this International Year for the Disabled, unless the proposed reductions were paralleled by major improvements for those who suffer misfortune.