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CPAG calls for an Inquiry to review the debts of MSD current and former clients

Child Poverty Action Group (CPAG) applauds the Social Security Appeal Authority’s decision to have the Ministry of Social Development (MSD) wipe the debt of a seriously ill and frequently homeless beneficiary.

"We are delighted with this decision and congratulate the Auckland Action Against Poverty (AAAP) advocates who supported the man to have his case reviewed," says Associate Professor Susan St John, CPAG Economics spokesperson.

"It shows that compassion can still be found in the Social Security and Welfare systems in New Zealand. If it exists for one case, then all other cases that have caused hardship must be reviewed," says St John.

"It makes no sense to recover housing grants from people who simply are unable to afford to house themselves.

"Adding debt essentially compounds the injury of being deprived of a basic right."

CPAG supports the call by Ricardo Menendez March of AAAP for the MSD to wipe the debt of all people who have been put in an emergency housing situation.

In July 2018, CPAG called for an independent review of all benefit debts after the High Court’s ruling in the case of Ms F that loans are not income for benefit purposes,

In 2014 CPAG documented Kathryn’s story to highlight the unfairness of debts established by so called relationship fraud.

In 2001, and after suffering the tragic loss of a child at the hands of an ex-partner, another ex of Kathryn’s dobbed her in to the MSD saying she was receiving a sole parent benefit while living with him. He did so in retaliation against an accusation that he had molested one of Kathryn’s children. The court found Kathryn guilty and not only sent her to prison for six months (when she had a four-year-old child) but then MSD sought recovery of over $100,000 which it determined she owed - as if a prison sentence wasn’t enough punishment. Despite 17 years fighting this in the courts, the debt is still outstanding.

"Kathryn has always maintained her innocence of this so-called crime. She is now in her sixties, ill and on a supported living benefit, and there’s no way she can afford debt repayments even at $20 a week," says St John.

"What is the sense in dragging people through the court system for recovery of money they cannot pay, for a non-crime based on archaic policy, incurring far greater cost in the process.

"It is belligerent example-setting that does nothing but foster a culture of fear and mistrust, not one that supports and encourages."

CPAG says that an independent review is needed of the legitimacy of beneficiary debt, the operation of the investigation and prosecution unit of MSD and decision making within it and law change is needed to the review and appeal structures.

Frances Joychild QC, who represented Ms F., says that most beneficiary debt should be waived on policy grounds, for example debt accrued through no fault of the beneficiary, or debt that creates poverty and suffering and impacts negatively on child poverty.

"You have to wonder about the society we have created when the intolerable debt burden of so many poor people in this country is to the very government agency that has as its purpose the provision of support to people with no other means of supporting themselves," says Ms Joychild.

"These ‘clients ‘of MSD and their children, typically lack adequate food, other necessities and often shelter. The debt they are burdened with has been created because benefit levels have been set far too low; there aren’t enough houses; tax credit and benefit design systems are so bad they create debt that beneficiaries had no intention of incurring. Many others are created by so called ‘relationship fraud’.

"A couple of years ago MSD deliberately stopped itself being able to use its discretion in a reasonable, fair and compassionate manner to waive debt by passing legislation to remove the discretion. It left in its place a provision to only be able to pause debt repayments.

"It is high time that an Inquiry was set up to review the debt burden on MSD current and former clients which MSD itself has created over the two or so past decades and look at a principled means of reviewing it further to human rights principles."

Visit CPAG's campaign page Welfare Fit for Families to find out more about what can be done to improve welfare so that it has children at the heart of all policies.