Social Security (Fraud Measures and Debt Recovery) Amendment Bill

I move, That the Social Security (Fraud Measures and Debt Recovery) Amendment Bill be now read a second time. The bill is about protecting the integrity of the welfare system and it is about ensuring that it is there for those who are genuinely in need. It is just one of the steps the Government is taking to ensure that those who rip off the welfare system are held to account. We know that the overwhelming majority of people receiving welfare assistance genuinely need it. They follow the rules. They are honest with Work and Income and receive the help they need. The bill targets the tiny minority who take money they are not entitled to.

The changes are designed to be sensible, fair, and practical. The premise of the bill is simple. Relationship welfare fraud, claiming a single or sole parent rate of benefit such as sole parent support while being in a relationship, takes two people. The fraud occurs only when a partner is there to create it, yet in most cases only the beneficiary is held to account when a fraud is discovered. Their partner, who has created the fraud, facilitated it, and benefited from it, gets away with it and that is not fair. That is why this bill will hold to account partners who knew of the fraud or who were reckless as to whether there was a fraud. It will allow for the recovery of money from the partners who knew or ought to have known they were part of a fraud. It means that one partner, usually the woman, will no longer have to bear, on her own, the consequences of that offending of two people.

As well as this, the bill makes important changes to ensure the Government’s continued ability to recover fraud money. Taxpayers expect that when money is taken from the Government, it will be recovered, if at all possible, as long as it is in the public interest to do so. This bill will ensure that that occurs, subject to appropriate directions in the way the money is recovered.

As a result of the select committee processes there have been a number of recommended changes to the bill, and I want to acknowledge the work of the Social Services Committee. Although no issue before this House is ever entirely free from politics, I understand that members have engaged on this bill in a frank and constructive manner, and I thank them for that. I want to thank both Government members and members opposite. I also want to thank and acknowledge the individuals and organisations that made submissions on this bill. The feedback from submitters was insightful and helpful. The majority of submissions were supportive of, or recognised the fairness in, what the bill aims to do.

The Social Services Committee has recommended a number of small, sensible improvements to the bill, and one of the recommended changes clarifies the new offence provision. It clarifies that to be liable for prosecution, a partner is not required to know the precise entitlement or the precise nature of the excess amount the beneficiary was receiving.

A small number of amendments were also recommended around the debt recovery provisions. Some submitters voiced concerns that the bill could be read as going against New Zealand’s international human rights obligations. In response to this, the committee recommended a change that ensures that staff take into account all relevant matters when determining the rate and method of recovery, therefore ensuring greater consideration of people’s circumstances. Again, I want to thank the Social Services Committee members for their time and effort.

I would like to take a moment to address some of the concerns raised in the minority report from the select committee. Holding people criminally liable for activities they were reckless to is not new in the law, and I am happy to point members to any number of provisions in the Crimes Act and Summary Offences Act that do this. I also reject the concern raised that we should require a positive action by someone before holding them criminally liable for their fraud. That ignores the nature of such welfare fraud that the partner can deliberately, by omission, create, facilitate, and profit from that fraud.

The concern over changes to allow the Ministry of Social Development to receive information without first seeking it from the beneficiary is misplaced. It ignores that this change was made at the start of 2013, and, even before then, in 95 percent of cases the information had to be sought from other parties only after a month’s delay, because the information was never supplied. To suggest that it might lead to human rights and privacy violations and corrupt practices by officials is a slander to the many dedicated and professional investigators employed by the Ministry of Social Development.

I take offence at the contention that some parties opposite seem happy to repeat, and that is that the Government focuses on welfare fraud and ignores tax fraud. The numbers show this statement to be misleading. The Government spends more than four times as much on tax compliance as it does on chasing welfare fraud and overpayments. This Government has invested almost $200 million of new funding into fighting tax avoidance and evasion yet no new funds for chasing welfare fraud, and in 2011-12 the Inland Revenue Department imposed more than $600 million in penalties and interest for failure to pay tax, compared with only $124,000 in penalties imposed on those who took money from Work and Income that they were not entitled to. It all leaves me wondering why some members of other parties are so reluctant to discuss welfare fraud that they seek to detract from the topic whenever it arises. Is it because they are ashamed of the casual disregard their party showed taxpayers and their money when they were last in Government? Or is it because they cannot bring themselves to admit that this Government has come up with a simple, fair, and sensible solution to ensure that welfare spending goes to people based on need and not greed?

Finally, I would like to touch on other work going on around this bill, which is just one part of our welfare fraud reforms. We have increased information sharing between Government agencies so that fraudsters are picked up early. At last count, this had resulted in over 5,300 illegitimate benefits being cancelled, worth at least $56 million per year. We have set up a team working across social sector Government agencies to take an all-of-Government approach to address and to identify fraud committed against Government agencies, and we are placing those who have previously ripped off the welfare system under greater scrutiny, as the public would expect us to do. These people will have to prove to us that we can trust them before these restrictions are removed. We are ensuring that the ministry can prosecute people who abuse the welfare system, including, through this bill, those who sit back, reap the benefits, and know that their partner is defrauding the welfare system. The changes in this bill are needed and they are fair. I commend the bill to the House.

I am pleased to be able to follow the Associate Minister for Social Development the Hon Chester Borrows and just flesh out some of the accusations—for want of a better word—that were made about members on this side of the House and the way that they have approached the legislation he has brought before us. The take-home message overall from Labour members, obviously, given that we are supporting the Social Security (Fraud Measures and Debt Recovery) Amendment Bill, is that of course no one on this side of the House believes that we should ever condone or facilitate or allow individuals to defraud the welfare State. It is an incredibly important principle for Labour, because we do not want anything to undermine the importance of social security in New Zealand. We established it. We believe in it.

We worry, however, that the language that sits around the welfare State has slowly chipped away at New Zealanders’ notion of what it is and whom it is there to serve. Our concern has been that the continual approach of generally assuming, as the first principle, that most people on social security potentially do not need to be there or are abusing it in some form erodes the very purpose of that safety net in the first place. That is the kind of language we hear from that side of the House all the time. So that is why we generally approach proposals like this with a very sceptical eye. We want to do everything we can to prevent fraud, yes, but will it be the overwhelming way in which we frame and discuss social security? No, because, overwhelmingly, people who access it are not defrauding it. They are in genuine need, but every time—every time—the front agenda about welfare is about fraud or is about the Minister’s social obligations.

If we want to recap, the last changes Minister Bennett, the Minister for Social Development, made to the welfare State said that you can have your benefit docked if you do not enrol your child in school, if you do not have your Well Child checks for your child, if you are running from the law, or if you fail a drug test. Look, in and of their own right, some of those may have some merit to them, but what message does it send New Zealand? What message does it send New Zealand if the only time we hear the Government talking about social security is to say that people who are on it are potentially running from the law, smoking dope, not enrolling their children in school, and, by the way, are probably defrauding it as well? No wonder we are a bit cynical every time the Government raises proposals, because that is the context in which it talks about social security.

So, yes, we want to prevent fraud, but, no, it is not our overwhelming perception that that is the biggest issue facing social security. Yes, we have raised welfare fraud in the context of tax fraud—rightly so. The scale of tax fraud in New Zealand should cause all New Zealanders concern and should be fought with the same vigour as those who defraud the welfare State. But there is a difference. Relationship fraud in New Zealand costs us about $20 million as taxpayers. We should pursue that. Tax fraud, tax discrepancies, amount to $1.2 billion a year—that is an estimate, as close as we can establish. Annual tax fraud, the established tax fraud that we know about, is $141 million at an absolute minimum. Yes, we will call on the Government to do more about tax fraud, because as far as we are concerned, Government members spend far less time in this House talking about what is a much more costly problem. Victoria University has, I think, done us a great favour in raising to the fore that tax evasion is up to 150 times more likely than benefit fraud, and also that the Inland Revenue Department is more likely to write off what could be considered tax fraud or discrepancies than it is for benefit fraud, and yet the dollar values attached to each are often significantly different. A much higher value is often written off in the tax domain.

Yes, we will raise this, and we will keep raising it, because we think it is a valid point. We will raise it in the context of the way that these changes work too, because what the Associate Minister has ultimately done is change the threshold for when a partner can be brought in to relationship fraud. I think it is fair to ask that if we are going to change the threshold of knowledge or even the test for benefit fraud, why do we not change it for tax fraud? Clearly, when tax fraud occurs, it often benefits a spouse. It can certainly raise questions in a household. You could argue that a partner ought to have known that tax fraud was occurring. That is the test we are introducing for welfare fraud. Why are we not introducing it for tax fraud as well? In fact, we sought for this bill to be able to consider that extension for tax fraud all in one go. Unfortunately, my understanding is that it was a request that was turned down.

I think my time is about to expire. I look forward to coming back and sharing my further views in the remainder—

The ASSISTANT SPEAKER (Lindsay Tisch): Keep going.

Oh, you are not going to stand up. I will just keep going. Just to go into a little more detail on the test that the Associate Minister was talking about where he claimed that we were not doing anything particularly new—

Sitting suspended from 6 p.m. to 7.30 p.m.

💬 Mr DEPUTY SPEAKER: The House has resumed. Members, the House, when it rose for the dinner break, was debating the second reading of the Social Security (Fraud Measures and Debt Recovery) Amendment Bill. Jacinda Ardern has the call. She has just over 4 minutes remaining.

I will use my 4 minutes as wisely as I can. Before the House rose, I was beginning to talk about some specific elements of the bill—in particular, the fact that we now have an amendment to the legislation that means that a spouse of someone who is accused of welfare fraud who has not undertaken what could be considered a positive act can be held liable for that fraud also. This is a point that was particularly raised by the Law Society. Its argument, its contention, was that a positive act is normally required in order to establish criminal liability.

Just to be really clear, it is not as if a spouse of someone who commits welfare fraud—in particular, relationship fraud—cannot be held liable currently. I would not want anyone to be left with that impression. In fact, they can if, for instance, it could be established that they agreed with the person who ultimately committed the fraud that that is what they would do and that they would be complicit in it; that they encouraged or assisted them to make false statements in order to commit the fraud to obtain a benefit or a rate of benefit they were not entitled to; that they themselves made false statements by asserting, for instance, that they were not in a relationship when they were; that they omitted to inform the Ministry of Social Development of information when asked; or that they attempted to conceal any particular information. So there are a number of ways that if an individual is committing welfare fraud through relationship fraud, the other spouse can be held liable as well.

What this bill does is say that, actually, if none of those things is present, this spouse can still be found liable if they “ought to have known” that they were in receipt of a benefit fraudulently. That is quite a hard test, and so it was probed to quite a high degree, I understand, by the Social Services Committee. Two of the questions we still came away with were to what degree that test could be applied to other forms of fraud, and whether it should be. If we are going to raise the bar on welfare fraud—and, yes, there may be an argument to do that, or there may not—why are we not raising it on tax fraud? I still maintain that that is an absolutely legitimate question to raise. As I said in my first contribution, of course we are opposed to welfare fraud, because it undermines the social security system as a whole—it adds a negative perception of those who genuinely require the welfare State—but in this House we are constantly debating welfare fraud when tax fraud is of a much higher value to the taxpayer.

One final statement I wish to make is that it has been seen from this side of the House that the Government tends to talk about welfare overpayment as being welfare fraud. It is not the same thing. In fact, a large bulk of the money that the Ministry of Social Development is often trying to recoup is not fraudulently obtained welfare payments; it is payments made in error. It is overpayments because people are in precarious work, and, unfortunately, their hours, which they have to report in weekly, are not always in alignment with the hours that are on their payslip, because they are having to guess before they have a payslip in front of them. That is a flaw of the system, not necessarily of the individual. But I look forward to debating that in greater detail at the next stage of this bill.

Debate interrupted.