Sunday, January 06, 2008

Beneficiary debt

Here's something I know a little bit about.

National's Judith Collins is concerned that the Ministry of Social Development has doubled the financial resources in managing debt, but debt is still rising.

Judith Collins notes that the MSD in its 2005/6 financial review said it was creating a debt strategy. In its annual report the following year it said the same thing.

Let me tell you, there is no new "debt strategy" that has been implemented. The current strategy is not even being implemented. the MSD can't work out how much is due to fraud, abuse of the benefit system, or overpayment by MSD staff. Ruth Dyson said in Parliament the strategy to reduce debt is to get beneficiaries into work. Yet those most indebted are domestic purposes beneficiaries and sickness and invalid beneficiaries who are less likely to get work. Invalids beneficiaries aren't even supposed to be able to work.

The growth in benefit debt since Labour took office is staggering. In 1999, DPB recipients owed $90 million. - now $120 million. Sickness beneficiaries owed $20 million - now $49 million. Invalid beneficiaries in 1999 owed $18 million - now $48 million.

Beneficiary debt is rising for three reasons: More people need extra interest free loans, WINZ case managers are making too many overpayments and not recovering debts of beneficiaries quickly enough, and the debt unit is not efficiently recovering debt. Its cost more to employ the staff to recover the debts than the actual amount recovered.

It us inmportant to note that the debt unit doesn't even get involved with debts of beneficiaries - the unit only works with people who are off the benefit or student allowance, but the problem with the MSD is the left hand doesn't know what the right hand is doing. An example.

I am a student and get an abated student allowance. I am also paying off a small debt (well, it was actually an interest free loan). I got a letter from the debt unit stating that I owe them a debt. The amount of the outstanding debt on the letter was incorrect and the debt unit had no idea why. But it was also the point I realised that my student allowance had been incorrectly cancelled, as that debt was being deducted from that allowance. Yet I was incorrectly told by the debt unit that I was getting the student allowance - even after it was cancelled.

So what will National do differently to recover debt? Well, Collins didn't exactly say. But it will get worse unless more people pay more debt more quickly. But why should they?

Perhaps the debt unit should be involved in recovering all beneficiary debt because it is clear that Case Managers are not recovering enough debt. OTOH they may well be recovering more debt than the debt unit. Judith Collins should really be finding out how many former beneficiaries who have a debt are not making regular repayments because the case managers charged with setting cancelled beneficaries debt are not doing so and the debt unit is not following things up quickly enough.

update Even Bill Ralston gets it wrong when he says
Here's a thought - that $761 million, if recovered, would make a nice start in tax cuts for people who work for a living.
This implies that the debt is owed by people that do not work for a living. In many cases that is not the case.




Anonymous Anonymous said...

I like the way you are doing the job ! this is really a spectacular post !
its awesome !

January 6, 2008 at 12:41 AM  
Blogger Chuck Bird said...

Most of the debt is penalties.

January 12, 2008 at 10:14 AM  
Blogger Swimming said...

No it isnt. WINZ dont add on penalties - they dont even add interest. None of the debt is penalties. Also The maximum a beneficiary can pay on WINZ debt is $40.00 unless the beneficary agrees to pay more.

January 12, 2008 at 11:18 AM  

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