Editorial: No place in system for benefit rorts

Social Development Minister Paula Bennett at the conference. Photo / Michael Craig

Opinion

In a "workshop" at the National Party conference last weekend Social Development Minister Paula Bennett admitted that it was possible for beneficiaries sharing a house to receive more than one accommodation supplement. She said this was not unlawful and her officials at Work and Income NZ did not consider it fraud but she thought most people would see it as a "rort". She is right. Most people are probably astonished.

How hard could it be to pay the accommodation supplement to a household rather than to individuals? Surely every applicant has to specify the address of the accommodation and its rent. The most primitive database could easily detect more than one claim for the same address.

But it is probably a little more complicated than it first appears. Households of two or more beneficiaries are likely to be transient arrangements. One of the tenants might be nominated to receive the supplement but if that person moved out, or took a job, one of the others would need to apply for the rent subsidy. Often beneficiaries may be flatting with an employed person, how much of the total rent should then be subsidised? It becomes easier to see why supplements, like benefits, are paid to individuals.

Even so, there seems no excuse for the total paid in supplements to individuals to exceed the property's rent, which can happen, according to the minister. If she knows that, her department must record the total rent on the property, which means it could easily stop the rort. It also suggests landlords are not taking advantage of multiple accommodation supplements by raising the rent.

Accommodation grants have long been criticised as a benefit to landlords rather than tenants. It is claimed they do nothing to improve access to housing or contain house prices, and that the money would be better spend building more state rentals.

But Ms Bennett says even adult children of state house tenants can be receiving accommodation supplements for a house let to the main tenant at an income-related rent of $80 a week. She says she and Housing Minister Phil Heatley are working with Inland Revenue on ways to stop this sort of thing. It should not be hard.

One solution would be to pay the supplements in the form of a voucher that landlords could redeem from the department. The Government is considering paying other benefits in kind rather than cash. Ms Bennett said food parcels might be delivered instead of emergency grants for food. Likewise, a rent voucher would ensure the accommodation supplement could not be spent on anything else.

But the fact that the supplement is paid through Inland Revenue may be the crux of the problem. Since it is available to low income earners as well as beneficiaries it is probably more convenient to pay it as a tax credit, but it must be possible for Inland Revenue's systems to check that multiple supplements are not paid for the same address. The tax department's traditional reluctance to disclose its data for other purposes surely does not prevent it being used to check for welfare fraud. Tax and benefits are two sides of the same coin.

Accommodation supplements became a larger part of the welfare system when some basic benefits were cut by up to 25 per cent in the 1991 "mother of all budgets". That reform, making the system more "targeted" to proven needs, has endured for nearly 21 years.

It has played a large part in improving the public finances, balancing the budget for much of that time, and enabling the economy to meet international crises fairly well.

If rorts have developed in supplementary benefits in the meantime, it should be no surprise.

But they must be stopped.