Secret review reveals $1.3bn bailout of WorkSafe

The Andrews government hid details of WorkSafe’s financial chaos and only made it public on New Year’s Eve after a Freedom of Information request.

Victorian taxpayers have spent more than $1bn bailing out WorkSafe. Picture: Alan Barber

Victorian taxpayers forked out $1.3bn over the past two years to bail out WorkSafe after the Andrews government was secretly warned about the agency’s dire financial position.

A 2020 financial sustainability review, which had been kept hidden from the public until after the November election, reveals WorkSafe’s balance sheet has a $600m deficit.

“WorkSafe is now at a tipping point in its history and is facing both internal and external threats to its financial sustainability,” the review, dated December 2020, stated.

Despite having sat on the partly redacted report for two years, the government only decided to make it public on New Year’s Eve after a Freedom of Information request.

The review, conducted by Finity Consulting, says a combination of internal and external changes has “created an environment where the drivers of this long-term success are under threat”.

“WorkSafe is currently facing claims-management pressures essentially across the board – growth in claim numbers, worsening claim durations, less-effective termination provisions and an increasing risk of common-law pressures in the next two to three years,” it states.

WorkSafe Minister Danny Pearson. Picture: Andrew Henshaw

The review also notes that soaring mental health injury claims are “unsustainable” and have been a key driver of growing costs.

As well, mental health-related claims had increased year-on-year but surged by 25 per cent in 2018-19.

The review said this was likely due to changes in societal attitudes towards how mental health was viewed, including “changes in the way people communicate, particularly by using social media, which can result in significant pressure being applied to both companies and individuals through online campaigns or attacks”.

WorkSafe’s capacity test had also failed, which resulted in materially more claimants gaining access to long-term benefits, the review said.

On top of this, people weren’t heading back to work in a timely manner, with return-to-work rates continuing to deteriorate. While the review also acknowledged Covid-19 “no doubt” had a marked effect on WorkSafe, it wasn’t the “root cause” of the deteriorating experience of making claims.

Over the past two years, the government splashed $1.3bn at WorkSafe to support the scheme’s ongoing operations.

The WorkSafe average premium rate of 1.272 per cent has remain unchanged since 2014-15.

WorkSafe Minister Danny Pearson said the government planned to establish engagement rounds with key stakeholders in the new year.

“We will consult with unions, employers and legal experts so the scheme continues to be contemporary, fit-for- purpose and best serves the needs of workers,” he said.

“Workers’ compensation schemes are facing challenges in many jurisdictions and Victoria is no different.

“Our priority needs to be helping people get back to work after an injury, and ensuring every Victorian has the opportunity to return to the workforce after an injury will be front and centre in these consultations.”