Beneficiaries with drug habits that prevent them taking jobs and those on the run from the police will have their benefits cut under the next tranche of welfare reform by National.

Prime Minister John Key yesterday also announced plans to crack down on welfare cheats by setting up a new fraud unit and making it easier to prosecute benefit fraud and recover the money, including by selling the fraudster's assets.

Benefit fraud cost the country $200 million last year and about 25,000 current beneficiaries had either committed fraud in the past or received significant overpayments by not disclosing changes in their circumstances. Mr Key said too many believed welfare was there for a "free ride".

The total owed for benefit fraud was around $900 million.


National's social development spokeswoman, Paula Bennett, said there were currently no consequences for drug-takers who refused to apply for jobs because of drug testing. The issue was a problem in industries such as forestry and in some regions, including Northland.

"In one case we had 74 young people turn up to a seminar and 18 per cent of them said, 'we will not pass a drug test, so there's no point in us going forward'. When we expect New Zealanders who are in work to be drug-free and able to work, it's quite reasonable we expect it of people who should be available for work."

Those who were wanted by police would be given seven days to turn themselves in and prove to Work and Income that they had done so, or they would also have their benefits cut.

Labour leader Phil Goff said the problem of drug abuse had to be addressed through proper treatment.

However, he said most of those on benefits were not addicts and if National was going to insist people went into work, it should focus more on training and ensuring there were jobs for them.

But he was "no defender" of people on the run from the law, and said he had as little pity for benefit fraudsters as he did for tax dodgers.

Mana Party welfare spokeswoman Sue Bradford also backed the stance on benefit fraud, but said cutting the benefits of drug-takers went against advice from the NZ Drug Foundation that such a step would only further impoverish a marginalised group and reduce the chances of rehabilitation.

She said it also risked placing their families under more hardship.


Ms Bennett said a team of eight specialist fraud investigators would be set up and the law changed so it was easier to prosecute benefit fraud. It was estimated that about 10 per cent of those on benefits should not be "so we're getting tougher on that".

She said Work and Income had increased its data matching with other Government agencies, such as Inland Revenue, and found 6 to 12 per cent of people received benefits they were not entitled to.

* Beneficiaries who fail to appear on an arrest warrant have seven days to do so or their benefit will be cancelled. Those with children lose half their benefit.
* New benefit fraud team of eight specialists.
* Expected to save $200 million over four years. Benefit fraud cost $200 million last year.
* Benefit cancelled if a recreational drug user refuses to apply for a job or does not get one because of a failed drug test.
* Law reviewed to clarify when a person on a single-person benefit is considered to be in a relationship in which their partner's income should be taken into account. To help prevent overpayment.