Reports obtained through the Official Information Act revealed that as of March 2018, half a million people are in debt with the Ministry of Social Development, with the total debt being $1.5 billion. Most of the debt comes from overpayments and recoverable advances for basic necessities such as clothing, furniture and petrol. Weekly repayments are set by MSD, with some low-income people expected to pay up to $80 a week which comes out of their benefit. Auckland Action Against Poverty condemns the Ministry of Social Development’s crippling loan practices and calls on the Government to wipe people’s debt with the Ministry.
“The Ministry of Social Development’s loan practices are responsible for forcing people into extreme hardship and pushing them to loan sharks because they simply can’t afford food and other weekly expenses”, says Ricardo Menendez March, Auckland Action Against Poverty Coordinator.
“The Government’s review of loan shark’s interest and fees caps will fail to protect people from crushing debt if they don’t address their own loan practises. Low benefit levels and wages, coupled with high costs of living and debt repayment rates to MSD, leaves people vulnerable to predatory lenders.
“The Ministry of Social Development is creating a poverty cycle, by lowering people’s benefits through weekly repayments when they need assistance, which in turn deprives them of income that could go towards their essential expenses. This in itself creates further need for more advance payments from Work and Income, since they will have less money each week for basic necessities such as clothes, petrol, or health costs including dental treatment. All this does is create further debt and trapping people on the benefit in a lifetime of loans with the Government.
“The Labour-led Government needs to wipe the debt our most vulnerable have with MSD and put an end to recoverable assistance, instead making all assistance from Work and Income non-recoverable. While the Government parades its record surplus and debt repayments, it is burdening individuals with record levels of debt. This is neither fiscally nor socially responsible.
“The Minister of Social Development Carmel Sepuloni, does not need to wait for the Welfare Expert Advisory Group recommendations to realize that trapping people in weakening debt only makes matters worse for New Zealand’s poorest. Wiping the debt from MSD and ending recoverable assistance are changes that could be implemented while a wider review of the welfare system happens. Maintaining a system that takes away weekly income from people requiring support is cruel and not fitting for a Government that speaks of compassion and kindness on a regular basis”.