CPAG calls for an independent review of all benefit debts

Urgent changes must be made following the decision by the Ministry of Social Development (MSD) not to appeal the High Court’s ruling that loans are not income for benefit purposes, says Child Poverty Action Group (CPAG).

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.

“Ms F’s courage and strength in continuing to defend herself to the High Court against the $127,000 debts MSD created against her, is rare,” says Associate Professor Susan St John, CPAG’s economics spokesperson.

“Other people who have large debts established against them, whether it be because they borrowed money or were found to be in a relationship in the nature of a marriage, just suck it up. They are too disempowered and don’t have access to a lawyer or advocate. They and their children suffer the debt burden on a day to day basis, making it harder for them to make ends meet,” says St John.

“Under no circumstances are non-beneficiaries scrutinised in such a way that determines them having under-paid tax, or over-paid tax credits. Loans are never considered to be income for non-beneficiaries for the purpose of taxation or receipt of tax credits.”

The MSD’s explanation as to why they set up a $127,000.00 debt against Ms F and pursued it through the Social Security Appeal Authority (SSAA) and High Court, when it knew the money she spent over and above benefit was borrowed money to be repaid, does not make sense.

The decision it wanted from the Court, namely that loans are income, would have impacted every other beneficiary, not just Ms F.  

“When MSD talks about ‘unknown sources’ – it is talking about loans,” says lawyer Frances Joychild QC, who acted for Ms F in the case. Ms F did not declare loans because she was always told by case managers she did not have to declare them.

“When first investigated, Ms F showed the source of all her spending was loans. This was well before the court cases.  In MSD’s language, thousands upon thousands of beneficiaries will have income from ‘unknown sources’ (debts) as the benefit is not enough to live on. For the beneficiaries with homes, as Ms F had, then large mortgages and maintenance costs will increase the size of those loans considerably.  The particular figures quoted are not recognised or understood. This will be taken up with MSD," says Ms Joychild.

“If MSD thought the integrity of the Act was being put at risk by Ms F’s actions then the proper course was to prosecute her. It couldn’t do this as she had been open and transparent with her case managers throughout.”

Ms F has endured over eight years of pursuit by MSD while trying to raise children, after an abusive ex-partner used the tip-off line to maliciously dob her in.

“The resulting case was far from the kind of treatment New Zealanders would want anyone to experience at the hands of a system set up to provide support for low-income families,” says St John.

“Furthermore, New Zealanders would not want hundreds of thousands of dollars spent pursuing low-income parents living honestly while Government Ministries try to uphold their right to treat beneficiaries unfairly.”