WorkCoverSA, a multi-billion dollar State Government corporation, is a basket case and beyond redemption, a senior Minister has admitted.

Attorney-General and Industrial Relations Minister John Rau confirmed today that WorkCover would be decommissioned.

“It’s buggered,” Rau told InDaily.

“We’ll decommission the scheme and start again.

“It’s been amended, patched over and fiddled with for years and in the process has become so disliked, the only thing to do is to rub it out and start again.”

WorkCover administers workers’ compensation for more than 430,000 employees of almost 50,000 businesses.

Last year it managed 16,774 claims, collected $667 million in employer levies and paid out more than $809 million in cliams.

The gap between income and expenditure is mostly covered by a massive $2.25 billion investment fund; its holdings in shares, property and cash delivered investment returns of $253 million.

Even with the investment income, WorkCover’s projected gap between estimated claims and estimated income leaves it with an unfunded liability of $1.366 billion.

Rau, who took over responsibility for WorkCover early this year, has been doing an internal review of the organisation, and doesn’t like what he sees.

He expects to name seven new members of its board by the end of this month, along with a new chairman.

Current chairman, Philip Bentley, retires on 31 October.

“The scheme has been poorly administered,” Rau said.

“People have been left sitting on the scheme; there’s been a glaring failure to address early intervention and early action to return to work.”

Rau, however, had little detail of WorkCover’s replacement.

“I hope to have a basic set of policy principles in place by the end of December; certainly in time for the March State election.”

For the 300 staff  at WorkCover’s head office in King William Street, the future is clouded after Rau’s stinging attack on the organisation.

“The culture at WorkCover, the structure within the corporation; it’s just not working.”

There have been major changes in recent months with the new appointments at senior executive level since its latest chief executive officer Greg McCarthy took the job when his predecessor Rob Thompson left unexpectedly last year.

As recently as last week, McCarthy had an optimistic view of initiatives he hoped would turn around the scheme’s performance.

“2013-14 will see us roll out these initiatives,” McCarthy said in the Corporation’s annual report, released last Wednesday.

“For example we will shortly roll out our early intervention model that will, with the claims agents, see workplace consultants visiting the workplaces of small business to assist workers and employers in the return to work process.

“I look forward to continuing to work with the entire team at WorkCoverSA, the claims agents and Scheme stakeholders to ensure we deliver improved return to work outcomes for all South Australians which, in-turn, should see a further improvement in our Scheme’s financial performance.”

WorkCover’s continuing increase in future debt was meant to be fixed by extensive reforms in April 2008, that came into force in July that year.

When the new laws were in place the unfunded liability had reached $984 million.

The reforms sparked angry protests from unions, not convinced they would do anything other than marginalise injured workers.

Employers were hoping improved scheme performance would deliver lower levies.

The liability went down slightly for two years to $982 million in 2009-10 and $952 million in 2010-11.

In 2011-12 it took another major leap as WorkCover Corporation posted a $1.389 billion in 2011-12.

History shows that despite a succession of further changes to claims management, legal services, redemptions and executive staffing, WorkCover’s promised improvements have failed to eventuate.

The model of a State-owned Corporation administering workers compensation was the social democracy dream of the Bannon Labor Government’s industrial relations Minister Jack Wright.

Responsibility for compensation was taken from the private sector insurance companies and a structure set up to ensure  all employers carried the responsibility of paying premiums.

It has now evolved into a Corporation where responsibility for the mangement of worker’s claim is outsourced to private sector agents Employers Mutual SA and Gallagher Bassett.

Its legal advice and representation services are outsourced to Adelaide law firms Minter Ellison and Sparke Helmore.

Rehabilitation services are provided by a raft of suppliers.

Rau now accepts that the SA model is the “worst” of Australia’s 11 workers’ compensation systems.

Right now, he doesn’t have the answer, but promises it won’t be a return to the pre-1986 model.

State Liberal Leader Steven Marshall agreed with the Rau assessment, but scoffed at the proposed timing for a replacement.

“Yes, I agree; it’s buggered,” Marshall told InDaily.

“But it’s a bit rich for the Minister to say ‘we’ve failed for 12 years but I’m not bringing a new idea to parliament’.

“He’s not even game to have it tested, rather he wants to say ‘trust me’.

“History suggests that’s not a good idea.”