Date posted: 03/05/2022

Submission on the New Zealand Income Insurance Scheme

The Ministry of Business, Innovation and Employment called for submissions on the proposed Income Insurance Scheme

The Ministry of Business, Innovation and Employment called for submissions on the proposed Income Insurance Scheme (the Scheme).

CA ANZ advocates for the public good on policy matters that affect our members, their clients and communities. Good public policy plays an important role in building a more sustainable, prosperous and resilient future for New Zealand. 

We acknowledge that many OECD countries have income insurance schemes already, however, we note that the Discussion Document provides very little comparative detail about these schemes or the extent to which they are meeting relevant policy objectives. 

If introduced, the Scheme would have wide-ranging ramifications for all New Zealanders. While we appreciate the Scheme will benefit those unable to afford income insurance and those who are more at risk of financial hardship due to redundancy, the costs of the Scheme are also likely to be felt more significantly by these individuals and small businesses.

Given the significant and wide-ranging implications of the proposed Scheme, we engaged directly with our members (chartered accountants) about the proposal through a variety of different channels, which is detailed further on in the submission. From this engagement, it is very clear that the proposed Scheme has polarised our members.

In our view, there are valid arguments both for and against the policy rationale for the Scheme. Regardless of those arguments, we consider that the design of the proposed Scheme needs significant further work. We would expect to see more robust empirical data about the needs the Scheme purports to address and a much more comprehensive analysis of the problems the Scheme is designed to solve and the alternative solutions that have been or could be considered. 

Our comments in response to the specific questions raised in the Discussion Document should be read in the context of the overall tenor of our submission, which is:

  • full consideration must be given to alternatives such as the one we outline in more detail below – mandatory minimum statutory redundancy entitlements and expansion of the Accident Compensation Corporation (ACC) model to include the provision of insurance cover for health events and disabilities. The consideration of alternatives should include comprehensive modelling and full costing, which should be made public, as must the modelling and detailed costing of the current proposed Scheme’s design, and 
  • the timeframe for the introduction of the Scheme (or alternatives) should be sufficient to allow detailed policy design and more widespread consultation on that detailed design. A proposal with such significant implications for all New Zealanders must not be rushed. The rationale for the ultimate policy outcome should be comprehensive and compelling and the chosen ‘solution’ must be fair to all New Zealanders, fully transparent as to cost and compliance burden, and effective in achieving policy outcomes that are supported by affected New Zealanders, including small and large employers. 

We are surprised and disappointed that the economic modelling underpinning the proposed Scheme has not been made public as part of the consultation process. Access to the modelling is critical to allow submitters to provide effective feedback on the reasonableness of the underlying assumptions and is necessary to enable them to answer some of the questions in the Discussion Document. In our view, this lack of transparency is unacceptable for a proposal that will impose significant costs on all New Zealand employers and employees and considerable costs on the public purse. 

Our responses to the specific questions raised in the Discussion Document can be found in the submission below. The submission also includes some examples of feedback we received about the Scheme from members. 

Income Insurance Scheme consultation

Find out more about the consultation here

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