Editorial: Covid 19 coronavirus - will the wage subsidy turn out to be a costly free lunch?

Editorial

Even in times of chaos, there is no such thing as a free lunch.

The terms of the Government's wage subsidy scheme - clearly billed as a "high trust" model - may have made it a very easy decision to accept the payment initially.

But such a decision quickly became public. Unlike most other welfare payments, the Ministry of Social Development allows the database of recipients of the subsidy to be searched.

This may have been done to ensure employees could check whether they were being told the truth by their bosses during the lockdown, but it also opened the payments up to another test: public opinion of worthiness.

NZME, owner of the Herald, has taken the subsidy, amid redundancies and requests for staff to take temporary pay cuts, as advertising revenue declined.

Whether it is retirement care companies, airports, private schools, foreign-owned meat companies or major corporate law firms, chatter began about whether the companies had really seen a drop in demand, or even if they had, whether they needed the money.

The Government should not be blamed for the scramble.

As even National leader Simon Bridges acknowledges, it was crucial that the scheme created as few hurdles as possible so that the money could be paid out quickly, with many employers desperate.

By that measure, the scheme is a spectacular success, with more than $10 billion paid out.

But the inevitable consequence is that people who have little real need for the money will also take it.

Now, employers must decide whether they needed the money more than they needed the fact that they had reached out for help from taxpayers as part of their brand.

Fonterra chief executive Miles Hurrell summed the quandary up when he appeared on The Country on Wednesday. While the co-operative may have been able to read its financial accounts in a way which could justify claiming the subsidy, he would not want to "look straight down the camera" and explain why it did so.

A day earlier, Hurrell fumed on Twitter, questioning whether Chinese-controlled rival, Mataura Valley Milk was a worthy recipient given it was choosing not to process milk Fonterra is required by law to supply it at a subsidised price, citing what he believed were false grounds about health.

Fonterra's decision is more significant than it might appear, given that as a co-operative it is far harder for it to raise capital than its privately-owned rivals.

Meanwhile, this week saw two of New Zealand's largest law firms, Simpson Grierson and MinterEllisonRuddWatts, repay more than $2 million each in wage subsidies, saying they had not seen the drop in demand they expected when the country went into lockdown.

We should take them at their word, both that the concerns about revenue and the desire to keep the firm's workforce employed, was the genuine reason for applying for the money.

But the speed with which the firms acted as public unrest about the payments began to build suggests the partners saw considerable risk associated, so soon after a decade of uninterrupted economic growth during which profits were presumably healthy.

As the dust settles and the country inches towards a move down the Covid-19 alert level, other recipients might review whether justifying the decision to keep the money is more costly than repaying it.