15 August 2011

The great big benefit fraud

At the National Party Conference last weekend, the PM focused on youth benefits (16-17 year-olds) as the leading issue for forthcoming welfare reforms. Young people not in education, employment or training no doubt call for attention, and especially those who lack a supportive family - but is it merely a coincidence that the leading issue announced at the Conference happens to focus on an age-group most of which will be ineligible to vote on 26 November?

Putting it into perspective, according to MSD (Ministry of Social Development) statistics, only about 1.3% of young people aged 16 or 17 are receiving the independent youth benefit, the purpose of which is to support young people who, for some serious reason, cannot live with their parents and cannot get financial support from their parents or anyone else. Why such big publicity about a relatively small-scale (albeit genuine) problem?

National have also indicated an intention of making benefit fraud into a major election-manifesto issue. But, again, this issue looms larger in the popular imagination than it does in reality.

MSD statistics show that the numbers of overpayments established each year has declined dramatically in the last 6 years, and the best interpretation of that trend is that they are doing well at preventing and detecting problems as they arise. But the Minister, Paula Bennett, did some artful dodging when a journalist pointed out to her that reported benefit-fraud debt equates to only 0.1% of MSD’s budget (Focus on Politics, Radio NZ National, 12 August). She didn’t dispute that figure (and that figure is recorded in MSD documents), but tried to distract attention by talking about ‘grey areas’ around, in particular, ‘relationship fraud’ (when does a boyfriend become a de facto husband?) and the path from over-payments to fraud.

But MSD already does a lot to prevent and prosecute fraud, so how many more teeth do they really need?

Will benefit fraud (although serious enough in its own right, when it actually happens) become a dog-whistle issue for the forthcoming campaign? Are relatively small-scale problems being highlighted to create a smoke-screen for more profound reforms, or is this simply the best that they can come up with?

What would National do anyway, if re-elected, to tackle benefit fraud? What laws are lacking to deal with it now? Well, the Minister basically told us: she wants to tighten the noose on beneficiaries who are in new relationships. Most other eligibility criteria for benefits are fairly clearly defined, and MSD have all the legal muscle they need to investigate and prosecute, so de facto relationships appear to be the target.

Now there’s history behind this, as it’s an old favourite of National governments. Muldoon saw to it that DPB recipients were hassled at home in the 1980s – along with the infamous dawn raids to search for overstayers. But it must be the ‘million-dollar club’ of the 1990s that takes the cake.

It all goes back to a decision of the Court of Appeal in 1996 (Ruka v Department of Social Welfare). This decision significantly altered the test to determine if a beneficiary is in a de-facto marriage, or ‘relationship in the nature of a marriage.’ This affected principally women on the DPB who were allegedly in a de-facto relationship, and who were thus in jeopardy of debts to the Department for benefit over-payment, or even criminal prosecution for fraud. In Ruka, it was established that it is not sufficient to find that a de-facto relationship exists purely on the basis of a ‘checklist’ of relevant potential factors; but, instead, there must exist, as essential qualities of the relationship, evidence of financial interdependence and an emotional commitment. Financial interdependence means not merely the sharing of resources, but either actual support, or a willingness to support in times of need. Furthermore, the Court found that the fact that Ms Ruka was the victim of a violent domestic relationship had to be taken into account. A more holistic evaluation of the relationship was thus required.

Due, however, to an expectation that the Shipley government was going to legislate retrospectively to over-ride the Ruka test, the new legal tests had not been properly applied. The proposed Bill lapsed, but not before the Department had established an in-house ‘million-dollar club’ to reward investigators who annually established over-payments totaling above that sum.

The subsequent Labour-led government commissioned a report on the matter by barrister Frances Joychild who found, for instance, that investigators would rely upon an admission of a de-facto relationship from the beneficiary, in return for a promise not to prosecute, rather than applying, and seeking evidence for, the objective legal test established by the Court of Appeal. Basically, the Department had not been applying the law. This led to a recommendation by Joychild to review all decisions made by the Department between 1996 and 2000 that established over-payment debts against beneficiaries on the grounds that they were living in a de-facto relationship. This involved, according to one report, 5,700 applications for review, among which it was found that in 63 per cent of cases the legally correct test of conjugal status had not been applied. The advice that WINZ now gives about relationships and income assistance is in line with the Court of Appeal’s Ruka test.

But, if legislators don’t approve of judge-made law, they can amend the law. So, I wonder if the expedient and politically popular (that is, popular with conservative middle-class voters) policy will turn out to be legislation that over-rides the Ruka test and makes it easier to exclude from eligibility a whole range of beneficiaries in less-committed relationships.

A more positive approach might be to assist newly-formed couples with a payment to help them to establish a common household, allowing them to come forward without fear of prosecution – rather than a punitive approach based on the Minister’s ideas about ‘relationship fraud’. National Party instincts would lead them down the punitive pathway, given their history. But, if we were serious about forming, or re-forming, secure family units, then surely the better pathway is to encourage new relationships, especially for single parents, rather than create fear of punishment.


At 10:32 PM, Blogger Ross Calverley said...

A benefit fraud you did not mention, was the use of trusts and businesses by wealthier people to get benefits they are not entitled to (eg. lower tax rates, Working for Families subsidies, student allowances for children, etcetera.)


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