Hodgson Pete: Social Assistance (Debt Prevention and Minimisation) Amendment Bill — First Reading 
Hodgson Pete: Social Assistance (Debt Prevention and Minimisation) Amendment Bill — First Reading 
[Volume:641;Page:10851] 
Hon PETE HODGSON (Minister of Health) 
 on behalf of the 
 Minister for Social Development and Employment 
: I move  
That the Social Assistance (Debt Prevention and Minimisation) Amendment Bill be now read a first time. 
 At the appropriate time I will move that the bill be referred to the Social Services Committee. I also advise the House at this time that I will be proposing that the bill be divided into three separate but related amendment bills at the Committee of the whole House stage. 
The purpose of this bill is to enable the Ministry of Social Development to prevent and recover debts and to detect more readily the misuse of the social security student allowance and student loan systems by broadening data-matching provisions. The bill will make better use of data matches already in place between the ministry and three other Government agencies: the Accident Compensation Corporation (ACC) the New Zealand Customs Service and the Department of Corrections. This enhanced use of information will increase the efficiency and effectiveness of existing processes. The bill will also reduce overpayments that create debt. 
Data matching may not sound like a proactive social assistance policy but the real purpose of this bill is in its title—debt minimisation and prevention. Debt is a two-edged sword. Used correctly and managed well debt can be a useful tool but uncontrolled debt can be a burden that inhibits people’s activities to live and work to their fullest. Of course being over-indebted has financial implications in terms of people’s ability to make ends meet but we also know that it can have negative impacts on people’s health and education and that it can lead to them living in overcrowded cheap housing in order to reduce expenditure or taking part in crime or other socially undesirable behaviour. 
Being over-indebted can also reduce the financial advantages of returning to work and may act as a barrier to employment. We know that when beneficiaries incur debt it can make it very difficult for them to enter the workforce as the level of repayments is often reduced while a person remains on the benefit. Once the debtor is earning an income creditors start seeking high levels of debt repayment. This can substantially reduce the financial gains from work. The sum total of all this simply is that having to meet debt and other repayments can place enormous stress on families and it can act as a barrier to entering and remaining in work. 
As members know the Government is very focused on helping all of those who are able to undertake paid work to successfully enter the workforce. Most people want to work and they see working as being the best way to ensure their own and their family’s futures. The bill that is before the House is part of a programme of welfare reform that aims to truly modernise our benefit system so that it sends the strong message that work is important without undervaluing the caring roles that people have or the importance of caring for children. 
Part of modernisation is making the most efficient use of the tools that are available. This bill makes better use of the existing data that is provided to the Ministry of Social Development and that will increase efficiency. The bill amends legislation that specifies the purpose of information matches between the Ministry of Social Development and three other Government agencies: the Department of Corrections New Zealand Customs Service and the ACC. Currently those three agencies provide data to the ministry to make sure that people get their correct benefit entitlement. 
The data match does not include people who are no longer receiving a benefit but who still have an outstanding debt. To find people who have an outstanding debt the ministry currently issues individual notices to the ACC and the Customs Service. Having a data match against benefit debtors who are no longer receiving a benefit will automate this process. It will speed up the process of clearing debts and it will also mean that people have the opportunity to clear their debts while they are not in need of income support. The Customs Service data match identifies people who are travelling to and from New Zealand. This information is currently used to ensure that benefits are not paid to people who are overseas. 
Being able to match this information against people who are not receiving a benefit but who have a benefit debt will give the ministry the opportunity to contact these people while they are likely to be in a very good position to pay that debt. The bill extends the use of information already transferred to the Ministry of Social Development to improve the efficiency and effectiveness of the data-matching processes. The bill will speed up the process of locating benefit debtors and it will make better use of data that is already supplied to the Ministry of Social Development. 
Of course having debt to repay does not help released prisoners to establish themselves in their community; for example the bill allows the benefit to be stopped as soon as a person enters prison. In 2007 benefit overpayments to people as they went into prison totalled more than $1.4 million. The bill will reduce this amount of debt being created by payments continuing while the processes specified in the Privacy Act are undertaken because it will allow the benefits of prisoners to be stopped immediately. Data matching between the Ministry of Social Development and the Department of Corrections occurs daily. This means that the opportunity to take prompt action to cease benefit payments already exists. The bill allows the ministry to maximise this opportunity. This is an appropriate use of modern technology to help reduce the risk of debt and the amount of debt arising when a person is imprisoned. 
The mechanism in the bill to allow immediate cessation of a benefit payment overrides section 103(1) of the Privacy Act 1993. Members may be concerned about the risk that the wrong person’s debt will be stopped without the additional steps set out in the Privacy Act. My officials have considered this matter carefully because we know how devastating it can be to individuals or families if they are left without income because of a bureaucratic mix-up. The ministry assures me that it has robust processes and procedures in place to ensure that the correct benefit stops. We do not expect the correct benefit to be stopped; it is a fact however that errors sometimes occur despite best efforts. On those rare occasions where a person’s payment is mistakenly stopped Work and Income will reinstate the benefit immediately when alerted and will pay any costs incurred as a result of the error. 
This bill will also identify wrongful claims of benefits student allowances or student loans by people currently in prison. The current data match provides details of people when they first enter prison but it does not give any detail of the length of sentence so the ministry is not alerted when the person is released. Extending the data match to include current prisoners will mean that the ministry will be able to identify when a person in prison applies for a benefit a student allowance or the living costs component of a student loan. It will also allow the ministry to suspend action to recover debt while the person remains in prison. 
The extension of the data match to current prisoners does not mean that any additional detail about the prisoners is provided to the ministry. The same information that is provided when the person enters prison will simply continue to be provided as long as the person remains there. That continuing matching process will reduce fraud and benefit debt. 
Under this Government there has been a drop in the amount of debt being established relative to total benefit expenditure. The establishment of debt has fallen from 1.61 percent of total benefit expenditure in 2001 to 1.29 percent of total expenditure in 2005. I do not think anyone would argue that unnecessary debt should continue to be created when we can prevent it—and this bill will reduce unnecessary debt. To give some idea of the problem I can tell members that the amount of debt recovered by the ministry each year now stands at $261 million. That is a lot of money to families on lower incomes but it is also a lot of money to taxpayers. 
The Ministry of Social Development has been making a concerted effort to ensure that people get their full and correct benefit entitlement. The measures set out in this bill are a further advance in making sure that benefit payments go to people who are entitled and that they do not go to people who do not qualify. 
This Government is committed to reducing debt—both debt to Work and Income and debt to unscrupulous loan sharks who all too often prey on beneficiaries. My colleague the Minister of Consumer Affairs has recently announced new rules requiring all financial service providers to be registered and to belong to a dispute resolution scheme. That work is striking at the heart of the debt problem by dealing with the behaviour of the debt industry. 
 This bill also makes a modest but important contribution to debt reduction for a vulnerable group. This Government will not sit back and let low-income families incur avoidable debts. Debt can be a burden on families for years. The ministry is actively working to assist low-income people and families to meet their financial commitments and to avoid debt. 
Since taking office in 1999 before which there was only darkness this Labour-led Government has reduced unemployment benefit numbers from 160000 to just under 23000. Let me say that again—from around 160000 to just under 23000. Currently unemployment stands at a record low. We have undeniably succeeded in reducing the quantum of unemployment but it is a fact that some of the people who remain unemployed require intensive support. This bill is one way we can provide that support and help people into work. 
The Social Assistance (Debt Prevention and Minimisation) Amendment Bill will help us reduce debt. This will therefore encourage more people to enter work by reducing the problems of debt repayment. The bill will help ensure that money goes to people who need it. By increasing the usefulness of data matches already in place it will ensure that time-consuming manual processes in the Ministry of Social Development and elsewhere are replaced by a small increment in existing data-matching processes. I commend the bill to the House.