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):There is considerable debate in this Committee on the Social Security (Fraud Measures and Debt Recovery) Amendment Bill as to whether or not more resource is applied in the recovery of tax fraud or even debt versus welfare fraud or debt. Of course the scale of one is significant versus the scale of the other. Anyone who is in employment is covered by PAYE. People have more contact with tax requirements than with welfare payments. But even taking that into account scale in and of itself actually justifies why we should be putting significant resource into ensuring that everyone is paying their dues when it comes to tax. The point has even been made by Dr Marriott at Victoria University that “More resources were applied to collecting welfare debt than tax debt”. Here is that statement again. After the comparative work that she has done between the two she says: “More resources were applied to collecting welfare debt than tax debt”. As much as the Government wants to claim that that is not the case that is what was produced by the work of Victoria University. So not only do we know that the scale is larger; we also know that the penalties you are likely to incur are going to be higher.For instance you are more likely to get a custodial sentence if you are convicted of welfare fraud than if you are convicted of tax fraud even though on average tax fraud where a custodial sentence is being applied amounts to roughly $800000 versus $67000 when it comes to welfare. There is inequity in our system right down to the amount of resource applied in recovering debt and we should all be interested and concerned by that. All fraud is wrong. All fraud in some way affects taxpayers because it is all coming from the collective pie. All of it should be pursued. That is what we are highlighting—that it should be that all of it is pursued and with equal vigour. Our point is that it appears that not only is there a disparity but actually the penalties that apply are different. The degree to which you will get some kind of discounting on arrears is likely to be different and none of that strikes us as being fair. We are discussing in Part 2 some of the ways in which the Ministry of Social Development has the ability to recover debt.We know though that a taxpayer can apply for financial relief via the Inland Revenue Department. You will find that that is rarely the case when it comes to welfare. And I want to add overpayment—not just fraud but overpayment—because that is a frequent occurrence in our system. The ability to seek financial relief is somewhat limited. You will be paying down regardless of the amount that you owe. There will be a deduction applied almost always if there is an overpayment directly from the next benefit payment you receive. When your discretionary income is incredibly low that has a significant impact. I am not just talking about fraud here; I am talking about the recovery sometimes of the Ministry of Social Development’s own mistakes. As my colleagues from the Green Party have pointed out overpayment often occurs without any mischievousness on the part of the beneficiary. It occurs simply because of the way our system works.Let me talk to that point briefly. We know that many of the recipients of welfare payments in this country are working but that they simply do not earn enough to survive. They might be in precarious work working a few hours a week which is then topped up by the Ministry of Social Development. They might have a job where one week there is work and another week there is not. Many of us will have seen cases like this before. In those cases an individual is required at the end of the week on a Friday to call Work and Income on the phone line and report in how many hours they have worked. Obviously to anyone who has worked on a payslip system—like when I was back in the old supermarket—there are delays. You would not get your payslip with how many hours you had worked that week and what your pay was until some time after. So we are requiring Work and Income clients to make a best guess of the hours that they perceive that they worked and they call that into Work and Income.That does as you can imagine lead to some potential discrepancy and it was I believe the reason that when the Inland Revenue Department and the Ministry of Social Development recently started sharing information you suddenly saw this increase in what they determined to be discrepancies. “Discrepancies” is a word I want to highlight. It was at that time presented by the Government as the Government having discovered all of this new fraud in the system—not so. Simply what it had discovered was the inefficiency of our own systems. It discovered that someone who calls through and says: “I believe I worked 6 hours.” actually may have worked 7 hours. They may have worked 5 hours but that extra hour was not counted not registered over time. Discrepancies like that are not an uncommon thing. They are not deliberately fraudulent. They are just different errors perhaps even on the part of payrolls. But it all shows up as something that the recipient then needs to be if a calculation is based on those hours either topped up if there was an inaccuracy or something paid back—and it happens. When that however is calculated it gets lumped into overpayment and is then deducted from the beneficiary’s future payment.You can see how this occurs. It all gets lumped in together. When that happens people pay it back. That is how the system works but there is often little relief when through no fault of their own they are having these deductions made from what is a very small discretionary income. If we jump then to their paying it back where it might have been more deliberate there was some discussion at the Social Services Committee as I said earlier over the consideration that the chief executive makes when determining the level at which someone is paying it back or determining whether or not there are any special circumstances involved. They are required to determine the payment rate and whether or not any financial hardship will result but there is still very little leeway there. That is not to say the debt should not be recovered; it is simply that we think common sense should apply and that if someone in the process of paying back their debt is left in a position where they cannot survive well that serves no one at the end of the day.We do have some differences in the level of discretion—the quite liberal way the Inland Revenue Department is able to determine leniency in that regard compared with the much more rigid approach the Ministry of Social Development is required to take. That probably explains why you are seeing a greater write-off of arrears in our Inland Revenue Department system than you are seeing in our Ministry of Social Development system.One last thing that I want to come to and I also want to touch on Part 2 equally and this was pointed out in Victoria University’s research as well is that the Ministry of Social Development can recover debt from delayed redundancy retirement payments compensation and damages—from basically anything. If you get any form of income even if the ministry has to wait a number of years it will then be able to recover the debt from that place. We can debate whether or not that is right or wrong. My question simply is this: does the Inland Revenue Department have that same power? It is a simple question because if we are doing it here it should apply to that system as well.One final point I wish to make. We have not discussed this in great detail but this bill also changes the ability of the Ministry of Social Development in its investigations to conduct a thorough investigation without first informing the accused.That might seem like a strange thing to do. Why would the Ministry of Social Development tell someone they were being investigated? Well for the very simple reason that some people sometimes report beneficiaries for vexatious reasons for mischievous reasons. We know it happens. That probably explains why in 2010 of the 16000 allegations of benefit fraud 2000 resulted in a debt and 14 percent of those were found to have warranted prosecution—quite small proportions when you look at how many allegations are being made. Why would we want to then remove one of our mechanisms to determine whether or not something mischievous is occurring? If you ask the questions of the individuals sometimes there are entirely plausible explanations and that is where it ends. Instead we are allowing resources to go into an investigation that actually may not be required not to mention the privacy issues that come with that and the ability to undermine someone’s employment by going straight to an employer in an investigation rather than to the individual accused.