Government to rush fix after beneficiaries underpaid

The move follows last year's discovery that since a 1998 law change, Work and Income had been starting benefit payments on the wrong day. Photo / Supplied

The Government is to rush through legislation to retrospectively fix a measure that has meant for the past 17 years it has underpaid many beneficiaries by one day.

The legislation is to go through Parliament under urgency today and will also mean any one who has not already applied for the extra day's benefit will immediately lose the chance as soon as the bill passes.

It follows the discovery last year that since a 1998 law change Work and Income had wrongly been starting benefit payments the day after a stand-down period ended instead of the day it ended.

The Government's fix will change the wording of the law to clarify payments will begin the day after the stand-down period. It will apply retrospectively to 1998, effectively post-validating what is likely to be thousands of underpayments.

Only those who had lodged a review before the law passes would have that review processed. However, there would be a seven-week review period for those whose benefits started after the Social Security Appeal Authority identified the issue in a ruling in May 2014. It was not until September this year that Work and Income started paying the day the stand down ended to ensure it was complying with the law until that law could be changed.

The decision not to allow a grace period for people to apply for the underpayment was criticised by the Green Party. Co-leader Metiria Turei tweeted that the party would help rush in any applications for review before the law passed and the chance was lost.

Labour leader Andrew Little said Labour had argued for a 6-week window for people to apply for the day's underpayment before it was closed off. He said the underpayments had happened under both Labour and National governments. "So this is not about pointing the finger of blame. But it is a government mistake and people are out of pocket as a result of it." He said many people would not bother with such a small sum, but for some people it was significant.

Social Development Minister Anne Tolley said it had always been policy to start paying a benefit paying benefits the day after a two-week stand down period ends, but an "accidental" wording change to the legislation in 1998 meant those payments should have been made on the same day the stand down ended. That was not picked up until two beneficiaries questioned it during social security appeals last year. She said the solution was a "good balance between fairness and addressing unintended policy consequences, and the subsequent cost to the taxpayer."

The exact scope of the problem is unclear. A spokeswoman for Ms Tolley said if the problem was not corrected, it would cost an extra $6 million a year for the extra day's benefit. Since 1998, 2.7 million benefits had been granted but not all went through a stand down period. She said MSD would have to go back through every file to work out how many it affected and the total cost if it was all repaid.