MSD owed billions as families spiral into ‘crippling’ debt to government

Maureen Ward with husband Geoff.
Photo: Supplied

Maureen Ward says debt to the government can become a difficult cycle to break.

She and her husband, Geoff, have combined debt to the Ministry of Social Development of about $12,000.

“Basically, it is bond and moving costs, dentists, glasses, work clothes overpayments,” she said.

“Several times, I completely paid our debt off only to be back in debt again due to overpayment within a couple of weeks.

“We have no other debt apart from a small loan from Crester Credit. It is crippling. We pay it back out of our meagre benefit.”

Her husband receives a pension and she is on JobSeeker for medical reasons.

Previously, they received a supported living allowance (SLA) because he has Parkinson’s disease.

“The SLA needs to be raised so that the disabled can actually live on it comfortably, permanently.

“MSD debt is horrible, you can’t get rid of it. It cuts back an already too low benefit and shows that the benefit and pension is simply not enough to live on.”

She said debt should be wiped if it was for something that was essential.

“My hubby has glaucoma and needs new glasses every year. My eyes need retesting with new glasses, but we can’t afford it without borrowing off Work and Income.

“I desperately need teeth work done, and so does Geoff. We are in our 60s, meaning more and more health costs. Also, grants need to reflect the actual cost, not what the government thinks is okay.”

Ministry of Social Development data shows the amount of debt owed to it has risen from $1.536 billion in the 2018 financial year to $2.61b as of 31 March 2024.

The amount of debt that was due to “recoverable assistance” payments had risen from $557.8 million in 2018 to $1.213b.

MSD client support group general manager George van Ooyen said increasing living costs, particularly housing, had led to a rise in demand for recoverable assistance in recent years.

“Recoverable assistance provides people with interest-free loans to help them meet an immediate need for essential items or services, like paying late utility bills or rent, buying essential household appliances, or meeting other urgent needs.

“Repayment arrangements are agreed with the client at the time recoverable assistance is granted, taking their individual circumstances into account.”

Another $1.261b was due to people having been overpaid.

There were 623,541 individuals with debts.

Van Ooyen said people could also end up owing money because of benefit overpayments or fraud.

“MSD has a legislative duty to undertake all reasonably practicable steps to recover debt, with discretion available only in determining the method and rate of recovery or, in some cases, temporarily deferring recovery.”

He said the amount owing due to fraud had dropped from $210.87m in 2018 to $136.06m in 2024 because the ministry had shifted its focus to prevention and early intervention.

“This has allowed us to work more intensively with a client to assess their situation against their entitlements and adjust their entitlements where necessary. This could mean an overpayment for a client in some situations.”

Debt increasing year-on-year

Fincap, the organisation that supports financial mentors, said the amount of government debt people were carrying when they accessed the services of a mentor was $1619 per household.

The number of debts increased 27.5 percent year-on-year.

Fincap senior policy adviser Jake Lilley said sometimes loans from government departments would help people avoid falling into unaffordable debt from private providers.

Tighter responsible lending rules may have meant it was harder for people to get short-term loans from other lenders and so were turning more often to government options, he said.

But he said some things that were paid as repayable grants should simply be grants. People who had to use a grant to pay the electricity one month were then stuck trying to repay that bill the next month and could then fall behind again.

“They need to get on top of paying today’s power not paying back yesterday’s.”

Kore Hiakai Zero Hunger Collective researcher Jennie Sim said debt was a big factor for some families not able to purchase sufficient food.

“You have to pay your debt first and, particularly for those with debt to government, it can get taken from their benefits before they have even seen it.”

>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : RNZ – https://www.rnz.co.nz/news/national/518101/msd-owed-billions-as-families-spiral-into-crippling-debt-to-government