The number of beneficiaries having their welfare payments cut has plummeted as the Government encourages a less punitive approach by Work and Income.

At the same time, the number of hardship grants has continued to rise, driven by households wanting assistance with buying food.

Figures released today show benefit sanctions fell 21.8 per cent in the last year, from 15,619 to 12,214. The biggest fall was in people being penalised for failing to attend an appointment. The number of people having their payment suspended for failing to prepare or participate in work also fell.

Social Development Minister Carmel Sepuloni has directed Work and Income (WINZ) staff to explore every other option rather than suspension. She introduced new rules last month which said any penalty had to be signed off by a second person.

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"There is no particular target for reducing sanctions," she said. "It's just tightening up on the processes and making sure that the way in which MSD Is working is fair and reasonable and is taking into consideration the implications for the children and their families."

In May, Prime Minister Jacinda Ardern urged WINZ to take a kinder approach to families who were seeking help over the winter months.

"The instruction we have given is, when it comes to special needs grants, be flexible, provide for those in need. That's the kind of culture change we are expecting."

The latest data showed special needs grants had risen from 159,032 to 185,914 in the past year - a 16.3 per cent increase. While that was a large increase by volume, the actual value of the grants being approved only rose by $500,000.

Last year, the National-led Government doubled the spending on special assistance grants from $16.7m to $32.5m. That was mostly driven by families seeking help with housing costs.

The culture change comes as the Labour-led Government begins its review of the welfare system.

As part of its confidence and supply agreement with the Greens, Labour has committed to overhauling welfare and removing "excessive" sanctions. Former Green co-leader Metiria Turei in particular had championed the removal of punitive sanctions before she resigned over a benefit fraud controversy ahead of the general election.

An 11-person advisory group has been appointed for the welfare overhaul. But the Government has already committed to scrapping one of the most controversial welfare sanctions, which reduces benefits for sole parents who refuse to name their children's other parent.

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About 13,000 sole parent households were affected by the penalty a year, which cut $22 from their payments a week and another $6 a week if they refused to name the parent after 13 weeks.

Sepuloni said she expected to scrap the sanction through a law change this parliamentary term.

Overall, there are 277,410 working age New Zealanders on a main benefit, which is more than a year ago but fewer as a proportion of the working age population.