“It feels like a broken promise,” says Bella*, a thirtysomething Auckland mother of one for whom this month’s ostensible benefit increases have turned into something quite different – a $75 a week loss of income.
On 1 July, New Zealand’s Labour government lifted weekly benefits by $20 per adult, the first instalment in a $32-55 increase in May’s budget that was the largest since the foundation of the modern welfare state in the 1930s.
But for some, the headline numbers don’t match the reality. The chief culprit is something known as clawback. In addition to their main benefit, many of the country’s 351,000 welfare recipients get supplementary payments that can be reduced (“clawed back”) if that benefit increases.
Most common are the accommodation supplement (AS), which defrays housing costs, and temporary additional support (TAS), originally intended to help beneficiaries with one-off exceptional costs. Both are now embedded as top-ups to what welfare experts describe as “inadequate” main benefits. In June this year, there were 354,000 people receiving AS and 82,000 TAS.
For some beneficiaries, the clawbacks have simply meant they get less than a $20 increase. A survey by Auckland’s St Vincent de Paul budgeting service showed just 12 of 91 beneficiary clients would get the full amount. Most would get $14-$15. (Some, confusingly, would get more.) Similar stories were collated on Twitter, under the tag #clawbacks, by the beneficiary and worker advocate Chloe Ann-King.
These situations can be disappointing enough. But others say they have found themselves in the bizarre scenario of actually being worse off.
‘Can we opt out?’
Bella lives with her partner, who is on Jobseeker Support but with a health certificate owing to a long-term condition. Bella is on the supported living payment as she is caring for a teenage daughter recovering from a serious car accident. Bella had to quit her studies to provide that care, and because she hadn’t completed enough of her course, the Ministry of Social Development (MSD) is requiring her to repay a large amount of her student allowance.
Once those repayments, other MSD debts, rent, and her partner’s child support payments were deducted from their benefits, Bella and her partner were receiving a combined $207 a week before 1 July. (Their daughter also received $99 a fortnight in disability allowance.) They were then horrified to discover that, as a result of the benefit “increase”, their payments had somehow fallen to a combined $132 a week – $75 less than they had been receiving. When she found out their incomes had fallen, Bella says, “I couldn’t believe it … It’s mind-boggling.”
A frontline MSD officer told Bella that, thanks to the benefit increase, they were deemed able to meet their basic living needs and would have their TAS payments reduced accordingly.
Although Bella has been promised a letter explaining the situation, nothing has arrived. She is now in the farcical situation of asking, “Can we opt out of having the ‘extra’ $20 a week? I feel like, thanks but no thanks.”
Fiona Carter-Giddings, MSD’s general manager for welfare systems and income support, says the ministry is “really concerned” to hear Bella’s situation, and has (via the Guardian) offered the family further assistance. But the ministry believes it “likely to be an isolated situation of some kind, or maybe due to an error”. She says that the ministry’s modelling shows that on average those on the main benefit will receive $19 a week more in assistance from the July 1 changes. “We’re not aware of any evidence that there are clients whose incomes have declined as a result of an increase to their benefit on 1 July.”
If there had been widespread reductions in income, the ministry would have expected “an immediate spike in calls and enquiries”, but that has not happened. “From what we’re seeing at our end, the benefit increases have gone smoothly.”
‘Weird dark arts calculations’
Bella is not the only person to report problems, however. In May, a supported living payment recipient, “Alex”, said their income had fallen $37 a week after changes in April designed to increase beneficiary incomes.
The same occurred to Annie Ross. A former Auckland council worker who is medically retired owing to a chronic illness, she has had no formal explanation for the decline, and has had to rely on food grants to make up the $37 shortfall.
The ministry acknowledges such situations can occur – but insists they are rare, and being addressed.
It estimates 125 people were initially worse off. These people normally receive “disability exception”, a special top-up payment to meet above-average disability costs, but an “unintentional anomaly” means the benefit increases pushed them over the income limit to be eligible for that top-up.
The ministry says it has advised those people that they will receive yet another top-up, a transitional assistance payment, to ensure they are at least no worse off.
Ross says the government has partially simplified the system but its “weird dark arts calculations” still make it “a nightmare” to deal with.
‘Something isn’t right’
Even if individual issues can be addressed, welfare experts say the clawbacks demonstrate the need for major reform. Michael Fletcher, a senior associate at Victoria University’s Institute for Governance and Policy Studies, says all targeted welfare systems suffer these problems. But New Zealand has “made ours rather a lot worse” through a long-term decline in the value of main benefits and a reliance on payments like AS and TAS to fill the gap.
This reliance generates enormous complexity for benefit recipients. The official documentation on who is eligible for TAS, for instance, runs to multiple pages and several layers of income and expense calculations.
This complexity also creates ample room for situations like the “unintentional anomalies” in disability payments. “Even if it’s only a small number of people, it says something isn’t right with the system,” Fletcher argues.
“The only solution to that problem is to raise benefit levels themselves so they are adequate for the vast majority of people, and the temporary payments go back to what they are supposed to be for, which is temporary, additional support – as the name suggests!”
Clawbacks also pose a problem for the government’s ambitious child poverty reduction targets, the most recent of which, announced last month, commit ministers to cutting the number of families in poverty by one-third by 2024 and two-thirds by 2028. Pre-Covid, the government was making progress on the existing targets, boosting the incomes of 100,000 families by an average of $175 each. But further benefit increases, widely seen as essential to meeting the new targets, may be blunted if substantial amounts are clawed back.
The government says it will review the way supplementary payments work as part of its ongoing “welfare overhaul”. Ross, meanwhile, just wants a more humane system. “If they [the government] truly cared about wellbeing for families,” she says, “they would move heaven and earth to get rid of whatever system they have in the background that’s doing these really unjust calculations.”
*Pseudonyms have been used to protect individuals’ privacy