Ardern Jacinda: Social Security (Fraud Measures and Debt Recovery) Amendment Bill — In CommitteeText is incorporated into the Bound VolumeArdern Jacinda: Social Security (Fraud Measures and Debt Recovery) Amendment Bill — In Committee[Sitting date: 08 April 2014. Volume:697;Page:16951. Text is incorporated into the Bound Volume.]JACINDA ARDERN (Labour):It is my pleasure to give a contribution on the Social Security (Fraud Measures and Debt Recovery) Amendment Bill. I really concur with the preliminary statements that were made by my colleague Sue Moroney expressing our reservations over this bill generally. I do recall though from the last debate having some discussions with people who heard our contributions and absolutely agreed with the position we had come to but then wanted us to elaborate in a little more detail what elements of this bill did persuade us.There is one in particular that I want to highlight that really does come under Part 1 of this bill. As my colleague Sue Moroney has already articulated currently when we are talking about relationship fraud in particular the status quo means that if that fraud is detected the burden of debt recovery often sits almost entirely—because of the way the law is drafted—on the woman in the relationship. That is where it almost entirely sits and that is due to the fact that often a relationship fraud case involves a couple claiming what was a domestic purposes benefit or a sole parent payment when they were not sole parents but were in a relationship of some description. That is often the basis of that form of fraud and it is most often the woman who is then bearing the burden of paying that fraud debt back when as my colleague has said there are situations—and they were raised with us at the Social Services Committee and also in meetings with groups like even Women’s Refuge if I recall—where those women had often been in violent manipulative situations where a lot of pressure is being placed on them to commit that fraud and then they are left essentially carrying the can. That is something where we are quite happy to see measures introduced that allow that to be apportioned more fairly when another individual has not only been implicit but actually has taken on a role much more overt and put pressure on that individual to be complicit in that fraud. So that is a particular element of the bill that we do see as being not only reasonable but helpful.Having said that our major issue remains the lack of equity in the way that we continue to treat welfare fraud versus tax fraud. We have already tracked and discussed the fact that we are talking relative to one another about roughly $20 million a year for some major aspects of welfare fraud versus fraud within our tax system—tax discrepancies that are up to $1.2 billion a year and annual tax fraud of $141 million as an absolute minimum. So if we are debating measures that are as broad as these—and some of them we were absolutely uncomfortable with in terms of the level of broadness—and if we are discussing them here why are we not currently at the same time discussing similar measures through a bill under the name of the Minister of Revenue for instance? In fact Labour even tried to extend via as I recall the Business Committee the scope of the committee to be able to consider whether these measures should be fairly applied when tax fraud debt is being recovered where an individual or a spouse ought to have known that tax fraud was being committed within their relationship and whether or not their partner was engaged in a business enterprise or what have you. Where tax fraud was being committed and they ought to have known why are these rules not being applied to them? It is a question we will continue to raise. I know that the Minister in the chair the Associate Minister for Social Development Chester Borrows has particular views on it. I would love to hear his contribution.But coming to Part 1 and extending this debate out a little bit on our belief that it is the inequity of the way we are treating fraud that is a major sticking point for us we know that for instance the penalties in this bill will not be evenly applied. How do I know that? We have the research that tells us that. Dr Marriott at Victoria University has done extremely important work in highlighting the inequity of our system. Between 2008 and 2011 for instance 22 percent of tax fraud resulted in custodial sentences. This is relevant because this bill of course talks in Part 1 about extending penalties and the ability to prosecute. So 22 percent of tax fraud resulted in a custodial sentence versus 60 percent of benefit fraud. Sixty percent of benefit fraud cases resulted in an individual landing in prison. You might say that the value of that fraud may have been higher. Not so. The research tells us again that the average value of tax fraud where a custodial sentence was used was $800000; the average for benefit fraud where a custodial sentence was applied was $67000. So if we know that there is an established inequity that is something that I would have thought the Minister would be interested in keeping an overview of because so much of this bill and so many of the rules in this bill leading up to the point where the rules are applied in court and a sentence is handed down are actually handed down at the discretion of the chief executive and it is whether or not discretion is being used fairly across our system as well particularly when it comes to recovery of debt.Recovery of debt is covered in clause 9 which amends section 86. It says that it is the “Chief executive’s duty to recover debt in section 85A”. We had a discussion at the select committee—when I was there in the very very beginning before I unfortunately then left—about how it is up to the discretion of the chief executive as to what level of debt is pursued and whether or not that was reasonable. I have seen letters from Work and Income seeking repayment of a cent—of a cent. So in the suggestion for instance in a case where there might be some rational rhyme or reason or some error that has occurred but it might be determined to be fraud on behalf of Work and Income what we are now being told is that there is a duty for the chief executive to pursue it unless they use their discretion not to. My concern is that I do not believe that discretion has been appropriately applied in the past. Again there is some research to back this up.From a 1-year period from 1 July 2011 to June 2012 for instance if we look at the Inland Revenue Department we see that it wrote off 50 percent of interest penalties and penalties due to overdue tax amounting to $374 million for 1 year. It wrote off 50 percent. It wrote off $435 million in core debt. That represented 11 percent of the entire collected amounts owing. The Ministry of Social Development in contrast wrote off $8 million. That represents 2 percent of its collected debt. So we see a real disparity there again in the use of the discretion of those two departments. I would be extremely interested to know—in fact I asked—whether we could have a comparison of the two obviously different sets of criteria applied by these two departments as to how they make a decision to write off debt penalties and arrears. How do they make that decision? What discretion is used? Is there greater discretion for the Inland Revenue Department than there is for the Ministry of Social Development? No one on this side of the Chamber is denying that when fraud is committed it should be pursued and debts should be paid. But we are also saying that should apply to tax. If there is going to be some discretion in the system let us make damn well sure that it is applied fairly. Time and time again we have seen on this side of the Chamber that that has not occurred when it comes to who are sometimes our most vulnerable members of society. So yes of course fraud is wrong. Of course it should be pursued. We are simply seeking equity in our system and we know from the evidence that has been prepared that it does not exist currently.Whenever you build discretion into your system you are going to have further issues. Currently this bill under Part 1 does include significant amounts of discretion. Sometimes that is very useful. If you do not want to collect that 1c of debt yes you want to use your discretion to make sure that is not happening. But currently it seems that the discretion is not being used in a common-sense way and that is what members on this side of the Chamber are seeking.