Labour asks Govt to exempt abuse in care survivors, people in hardship from MSD debt law change

The Labour Party's Chris Hipkins, Carmel Sepuloni and Willie Jackson, who say they will only continue to back a Government bill to make a law change if alterations are made. Photo / Jason Dorday

Labour is asking Social Development Minister Louise Upston to make abuse in care survivors and those in financial hardship exempt from a law change that could lump people with large debts.

The Government is changing the law to ensure people who received Ministry of Social Development (MSD) assistance while waiting for an ACC claim to be accepted, and were then back paid by ACC if the claim was successful, are not double-dipping.

People in these situations would have to repay the MSD supplementary assistance they received during the period covered by any ACC back payment. For those who could not immediately make such repayments, a debt would be established.

About 40,000 people are estimated to be impacted by the law change, which was prompted by a recent High Court decision that ruled the MSD was wrong to lump people with these debts. But Upston said the court’s decision created inequities between welfare recipients and led to some people being treated more generously than others.

A bill to change the rules passed its second reading at Parliament today with support from Labour. But the Opposition party said it would only continue supporting the bill if alterations were made, including exempting abuse in care survivors and giving the MSD discretion to not reclaim debts from people in hardship.

The legal reforms are not connected with the compensation payments that abuse in care survivors will receive as a result of what they experienced in state or faith-based care.

Labour is set to have a meeting with Upston tonight to discuss the changes. Speaking to reporters at Parliament on Tuesday, Upston said she was “open to looking at what changes they [Labour] would like to see”.

Labour’s social development spokesman Willie Jackson said people who could pay the welfare assistance back should do so, “but it should not be at the expense of the people who need that support the most and are put in a worse situation when faced with huge debt”.

“We can’t pass policy [that] actively hurts people all because ACC are too slow to process claims,” he said during the bill’s second reading.

“We acknowledge a loophole needs to be closed. Labour is prepared to work with National on this.

“How is a solo mum with three kids on welfare while waiting for an ACC [claim to be accepted] going to pay back this new debt? This is how bad it could get – we don’t want MSD sending in debt collectors to hound that whānau. We need to be supportive of that whānau and we need to show some humanity here.”

Jackson said Labour “could only continue to support this bill” if changes were made giving the MSD “clear discretion not to recover payments when that would cause more hardship and further inequity”, or not to claw back debts related to disability allowances, or from beneficiaries and ACC clients who were abuse in care survivors.

On those survivors, Jackson said: “Why make that trauma worse with a new debt?”

In her speech during the bill’s second reading, Upston said it had always been the welfare system’s long-standing principle that welfare support targeted those who needed it and whose needs were not able to be met by other means, such as ACC.

In a previous statement, Upston said there were two main cohorts of ACC recipients in the welfare system: people who received ACC and welfare assistance at the same time, and people who received welfare assistance while they waited for ACC to decide on their entitlement.

“Under the current situation, as interpreted by the courts, the latter group, who receive lump sum payments, are treated more generously than the former,” she said.

That’s because the first group’s entitlements to welfare assistance would have been shaped by the ACC payments they were also receiving at the time, whereas the second group was “in effect receiving two forms of income support to address one need”.

“This would not result in fair treatment between these groups and isn’t in line with the policy intent. The Government has a duty to fix this situation and clarify the law, so it aligns with the longstanding intent of policy.”

Act and NZ First also voted in favour of the bill. The Greens, Te Pāti Māori and independent MPs Mariameno Kapa Kingi and Tākuta Ferris voted against it.

Julia Gabel is a Wellington-based political reporter. She joined the Herald in 2020 and has most recently focused on data journalism.