The Minister for Financial Services and Regulation
21 October 1998 - 26 November 2001
5 June 2001
SUBJECT: HIH Hardship Payments
Following the information provided to us by the provisional liquidator the Government is now in a position to announce that we will be spending $640 million over the next four years to assist those people in hardship as a result of the collapse of HIH. I will be introducing an appropriations bill as soon as possible to allocate those sums. In the interim, we are from this Friday going to start to sending cheques out to people on salary continuance and disability support payments. They are the people in most drastic need of support and we are sending those funds directly out to them to assist them through these difficult times.
The Government is also pleased to announce that Dick Warburton will be the chairman of the HIH Claims Support company, which has been set up by the insurance industry. Dallas Booth will be the chief executive. We have also set up an appeals mechanism, which will be attached to the Commonwealth Treasury. That is to be headed up by Bill McLennan, who is the former head of the Australian Bureau of Statistics. We have received to day 5200 to the policyholders support phone number and that is giving us an indication of just how many people out there are enduring quite severe hardship as a result of the collapse of HIH.
REPORTER: How many people will be helped by this money?
MINISTER: This very large and very generous and very compassionate package is going to help the vast number of people who have felt extreme hardship as a result of the collapse of HIH. There will be some people who may not deem themselves to be suffering extreme hardship, who will receive some support. However, in order to get to those who are enduring the most hardship we have had to define it down to categories. This is the act of a compassionate community. It is not the act of a Government alone. It is not the act of any political expediency. This generous package is the act of a generous community to others in the Australian community who have suffered as a result of the collapse of HIH.
REPORTER: How can you give an estimate of how many people will be helped if you know that $640 million after four years.
MINISTER: We would expect that there will be in excess of 30,000 people who will be supported because of this package. The flow-on effects in the economy will obviously be significant as well, because there will be a large number of small businesses who will assisted by this package. Any small businesses with 50 employees or less will qualify for this package and the 90c in the dollar offer. Again, this is the act of a compassionate community. It is why it is taxpayers' money here. It is an act of compassion from the Australian community to others in the Australian community who may have suffered as a result of the collapse of HIH.
REPORTER: What is the latest estimate on the liabilities of HIH.
MINISTER: As the provisional liquidator indicated a couple of weeks ago it is looking to be $3-4 billion. Of that $3-4 billion, $1.5 billion is offshore. The Australian taxpayer is not providing any support to people located offshore, or to any people who are not Australian citizens or permanent residents. About $1.5 billion is associated with State Government insurance schemes. The State Governments are putting in place support for their insurance schemes where appropriate. We are concerned that the State Government support scheme in NSW is not getting out to the builders who need that support. I will be communicating to the NSW Government to find out just why there are a whole lot of builders that still have no insurance under the State Government scheme. And of the remaining $1000 million, the Commonwealth is allocating $640 million over the next four which will substantially cover all of those people who may not be covered in another measure.
REPORTER: .$640 million .. is that all that Commonwealth has to pay?
MINISTER: At this stage, and on best estimates, that is the total allocation. There will be some money coming back to the Commonwealth. We will today become the largest creditor to the HIH group. And we will use our position as the largest creditor, not only to pursue those people responsible for the collapse, but also to receive any money that may be left in the company, as may be our appropriate legal opportunity.
REPORTER: Will it be spread evenly over the next four years?
MINISTER: The appropriation bill will indicate that, but yes, it is allocated on the best estimates and it is fully funded from the Budget, and it has been fully contemplated in the Budget. So it was within our estimations prior to the Budget papers being delivered.
REPORTER: How many people will miss out on the support?
MINISTER: Very few. The people that are not covered by this package are people who are not permanent residents of citizens of Australia. And I am sorry to those people in North America and Europe and every where else who may have had HIH policies, but the Australian taxpayer is not covering you. And it would be inappropriate. This package is about helping other Australians. It is about compassion. It is about being a caring community. That is why are focusing on Australian citizens and permanent residents of Australia. There have been some terrible cases, some terrible cases where HIH has walked away from providing support because of its collapse. If there is any measure of us as a community it is that we have to go in and help those people.
I can just add that this is not a precedent for any other corporate collapse. It is not a precedent for any other financial services group going under. This is a hardship package to support those people who have been badly hit by the collapse of HIH and this is the act of a compassionate community.
REPORTER: Is the Government any closer to drafting terms of reference or appointing a Royal Commissioner?
MINISTER: The Prime Minister, under legislation, is responsible for the terms of reference and the appointment of a Royal Commissioner, and you would need to direct your question to him.
REPORTER: Have you discussed it with him?
MINISTER: I have discussed it at length with the Prime Minister as I have with the Attorney General and everyone else who is having an input.
REPORTER: When might we be expecting it?
MINISTER: Well, you need to ask the Prime Minister.
REPORTER: On the issue of One.Tel - Jodee Rich is going to hand back four of the $7 million. He has paid the rest in tax. Will the Federal Government hand back that $3 million in tax so you can pass it on .?
MINISTER: Well, when it comes to tax you need to direct your question to the person responsible for tax and I am not going to give a running commentary on One.Tel or Jodee Rich or Brad Keeling or anyone else who may be involved. I am focussing on how we can get hardship support to those most in need in relation to HIH. We have effectively rebuilt the infrastructure for the second-largest general insurance company in Australia, within four weeks. This has never happened before. Never happened before. When the State Bank of Victoria fell over it took the Keating Government 12 months to move and they had the Commonwealth available. We had no insurance company in the basement of Parliament House that we could roll out to process very complicated claims from tens of thousands of people in the community. This has been a massive exercise. A huge logistical exercise. I am very grateful for the support from a range of people including people in the insurance industry, some business leaders like Dick Warburton and Bill McLennan who have come to support it. And it has also been vital to have the support, the compassionate support of my colleagues in the Parliament.
MINISTER: Dick Warburton will be paid. Of course he will be paid. The company is being set up by the insurance industry. The remuneration arrangements will be determined by the insurance industry with the directors of the board. It is heavy duty and they will have some massive work to do over the next few weeks and months in order to put in put in place the infrastructure to process tens of thousands of claims.
REPORTER: On One.Tel, you must be pleased that Jodee Rich and Brad Keeling have done this given that the Prime Minister and the Treasurer both did comment and suggested they should pay they money back?
MINISTER: As is clear, the bonuses paid to Rich and Keeling were by any judgment quite outrageous when the company had never made a profit and when it was a performance-based bonus. And I think the community has applied very good pressure. I think commonsense has prevailed at the end of day and so it should. I mean, there are certain community standards that we all have to adhere to and that we should adhere to. It was clearly out of line to pay enormous performance bonuses when the company had never made a profit and was not in the process of making a profit.