QUESTIONS FOR COMMITTEE ON COMPENSATION SCHEME

Press, Volume CIX, Issue 32127, 24 October 1969, Page 12

QUESTIONS FOR COMMITTEE ON COMPENSATION SCHEME

r» The working paper tabled m Parliament yesterday identifies the main issues in the Royal Commission’s report and nominates a number of questions to which the Parliamentary committee will seek answers.

“The triple aim of the commission was the prevention of accidents, rehabilitation, and compensation, in that order of priority,” says the working paper. These aims were to be realised through five principles community responsibility, comprehensive entitlement, complete rehabillation, real compensation, and administrative efficiency. “If the goals are agreed upon, debate can only be about the best methods of achieving the stated goals,” says the paper. A number of alternative courses of action are set out in the working paper. “These alternatives include an extension of the system of compulsory insurance and the modification of the fault system. None would seem fully to satisfy the commission’s five principles,” says the paper. Proposed Rates The commission proposed, for temporary, total incapacity, that an injured person would receive 80 per cent of his previous, tax-paid earnings up to a maximum of $l2O per week, but with a limit of $25 per week for the first four weeks of incapacity lasting less than eight weeks. Compensation for temporary incapacity for those without earnings would be based on the social security sickness benefit for a single person, at present $13.25 per week, but compensation would not be payable for the first 14 days unless the incapacity lasted for at least eight weeks. A person suffering a permanent disability would receive either a lump sum (for less serious disabilities) or periodic payments for life, assessed as a percentage of his previous tax-paid earnings. The non-earner would be assessed on a notional minimum of $2O a week for total incapacity. If the condition of an injured person deteriorated, he should be entitled to have his case reopened; but the converse should not apply.

Age Limit _The commission foresaw differing opinions on the compensation of the elderly and the young. Under its proposals young people who are not workers would not generally receive compensation until they reached 18 years of age. The paper does not set any upper age limit. “There are, nevertheless, problems in this approach which assumes that people do not retire, whereas most usually do about the age of 65,” says the paper.

Among the main issues to be decided are:—

Whether there is any justification for compensating the elderly differently from the rest of the community. The adjustment which should be made in the limits of compensation for the first four weeks or for those on low incomes.

Whether there should be a slight adjustment in the compensation payable to widows. Whether compensation ought to be treated as “income” for taxation. Whether the commission’s preference for periodic payments rather than lump sums for the more serious permanent disabilities is soundly based. Cost Estimate The commission proposed comprehensive compensation for virtually all injuries at an over-all price very similar to the cost of today’s fragmented and selective remedies. It estimated the

annual cost at $3B million. The estimates have been reviewed.

The Government’s advisers accept the new estimate of $43 million to assess the scheme’s cost and financial viability. A figure of $6 million has' been allowed for the possible variations from this estimate. If the scheme had been in use in 1968-69 the outside limits of the variation would have been $37 million and $49 million. It is most unlikely that all the variations would have been in the same direction. The cost should have been close to the “best estimate” erf $43 million. Administration The commission allowed 11 per cent for administration, and no reason has been seen to depart from this, the paper says. The up-dated estimate included several adjustments in the rates of compensation proposed by the commission, e.g., an increase in the maximum for the first four weeks of short-term incapacity from $25 to $29. It is reasonable to allow an additional $1 million to cover a possible further adjustment in compensation rates for short-term incapacities or for those on low incomes. If it is decided to adjust the benefits for widows this might cost an extra $0.5 million. Miscellaneous variations in other compensation provisions would be unlikely to cost more than $0.5 million. Revenue Plan

The estimated income, on 1968-69 statistics, from the premiums and other income recommended by the commission is $46.1 million. On the up-dated estimate of $43 million there would have been a credit in 1968-69 of $3 million. This would cover the possible additional costs. Income is expected to cover outgoings and liabilities, including the setting aside of some $l3 million, on 1968-69 estimates. for continuing longterm liabilities, the paper says.

The paper concludes that the scheme should not be introduced piecemeal. “The commission proposed that its scheme should be financed by a flat 1 per cent levy on salaries, wages and earned income up to a maximum of $BOOO per annum for each person. This would be payable by employers, the Government, and other self insurers, and by the self-employed. Premiums now paid for thirdparty motor-vehicle insurance would go to the authority and there would be a new levy of $1.50 per annum on all drivers," says the paper. The premium might be graduated according to the

risk of accident in each industry as done under the Workers’ Compensation Act. In addition, a higher rate might be struck against employers with bad accident records, or a lower merit rate might be granted to those with good records. The paper concludes there is much to be said for differential industry ratings but not much in favour of merit ratings. Premium penalties in the industrial field could be useful in promoting safety. Only two questions seem to arise on levies, says the working paper: Should a system of differential ratings replace the Commission’s proposed flat premium? Should the authority be empowered to levy penalties for bad accident records?

Prevention of accidents and the promotion of safety was the Commission’s top priority. It recommended the new authority to allocate $400,000 per annum for this purpose.

The paper asks whether the compensation authority should accept primary responsibility for any of the safety functions now carried out by other bodies or whether, as seems preferable, it should co-ordinate them and stimulate action in new areas.

Other matters to be considered if the scheme is adopted are:

The relationship of an independent compensation authority to the Executive and to Parliament. Its relationship to the Social Security Department, which will act as its main servicing agent, and to other departments. The pattern of an appeal mechanism and the extent to which, if at all. there should be a right of appeal to the Supreme Court or the Administrative Division of the Court The extent to which administration should be centralised.