Date posted: 06/05/2022

Proposed income insurance scheme lacking detail

Chartered Accountants Australia and New Zealand says the proposed income insurance scheme could offer benefits to NZ inc, but that detail is lacking and the proposed implementation timeframe is too short.

The peak accounting body said while the government should be commended for considering reform to better protect workers – there were several issues with the proposed Scheme – and determining the best approach would require more detailed information.

CA ANZ New Zealand Country Head Peter Vial FCA said its members were polarised on the Scheme with an almost even split of members in support of and against the proposals.

Members said the scheme could help people in sectors where redundancies are not paid out and bring New Zealand closer to the OECD standard of income insurance.

They also said the scheme could improve labour reallocation, by allowing income insurance recipients time to find the most suitable and productive employment after being made unemployed, rather than being under pressure to take the first, less suitable job they could get.

However, members also had major concerns about the proposed timeframes, the cost, its impact on low-income families, small businesses, possible wage suppression effects, and the potential for gaming the system.

“Many of our 31,000 Kiwi members have significant reservations about whether the Scheme should go ahead, regardless of whether they support the policy rationale in principle,” Mr Vial said.

“The toughest aspect is the inability to review any of the detailed data and modelling for the scheme or how it is to be funded.

“That’s a pretty concerning lack of transparency for a scheme that will impose significant costs on all New Zealand employers and employees – and considerable cost to the public purse.”

The government says more than 100,000 New Zealanders are made redundant, laid off, or have to stop working because of a health condition or disability every year.

Mr Vial said CA ANZ believed there were alternative means which did not raise the potential concerns or cost imposts attached to the government’s proposal.

This could include expanding the scope of the Accident Compensation Act 2001 to include insurance cover for health events and disabilities and implementing ‘Australian-style’ minimum statutory mandatory redundancy entitlements.

“There are valid arguments both for and against the policy rationale, but the design of the proposed Scheme needs significant further work and the Discussion Document is not fully transparent about the proposed funding model,” Mr Vial said.

“If the government does introduce a scheme, it needs to be as fair and efficient as possible, and economically viable, and must be careful that the proposal does not act as a disincentive for people to go back to work.

“Current plans also propose to rush the scheme in by late-2023. This is incredibly ambitious, leaves inadequate time for consultation and occurs precisely while Kiwis are facing severe economic headwinds.”

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