On 27th February a coalition of anti-poverty groups called for Government to wipe debt to the Ministry of Social Development (MSD) to lift the weight off families & whānau. The Methodist Alliance is one of the groups in the Fairer Futures coalition that produced the report on debt owed to MSD. You can read the report here - https://fairerfuture.org.nz/lifting-the-weight which includes seven stories from people struggling with MSD debt which illustrates the severe pressure this places on whānau and individuals who are already living in hardship. The stories include people pushed into debt by either seeking support to cover basics, like rent, dental care or unexpected costs like car repairs; or after a Ministry error or miscommunication that led to overpayments, followed by an aggressive debt recovery from MSD.
The stories include Olivia’s[1] who was cleared of benefit fraud in court, but has been left with ongoing shame and trauma from the experience, alongside a massive debt that she is paying off week by week.
“$10 a week might not sound like a lot to pay back,” she says. “But sometimes we need that $10. I know I won’t ever pay back what they say I owe ... I’d never experienced debt like this before. I’d had a mortgage and student loan, but those are different. I’d had a credit card. But you can pay off all those debts. This one feels like it’s never going to go away.
I can’t tell you what a difference wiping debt to MSD would make. I’d be freer in my own head. It would lift things off my shoulders. But it’s also the stigma that would change. I’d feel less self-doubt about people judging me.”
In 2020, almost 1 in 10 people in Aotearoa, which is more than 461,000 people, are in debt to MSD with an average debt of $3,550 per person. This heavy burden of debt adds to the economic pressures of our most vulnerable individuals and whānau. The impacts of the high cost of living, the ongoing effects of the pandemic, and now recovering from climate disaster, are multiplying pressure on low income families and whānau who were already struggling.
The report outlines how the Government can make a small, effective change that would make a huge difference to the lives of many whānau by wiping debt to MSD.
The report explains that people on income support are being pushed into debt most often in two ways:
When they seek support to cover the basics - like dental care, rent, and unexpected costs like car repairs; or
When they’re unfairly pushed into debt when the Ministry makes overpayments - often due to MSD’s own mistakes, delays, miscommunication, or complexity within the system, and commonly without people even knowing they’ve been overpaid.
Strong public services for low-income families, like the welfare system, are essential to enabling people to live with dignity, stay connected, and participate in community life. However, research from Fairer Future released in 2022 showed that income support levels are $300 short of what is needed to meet core costs to participate in society.
Currently, income support levels force people to choose between essentials like healthcare and food, or they are forced into debt just to make it through the week. Then MSD debt repayments are deducted from future weekly income, creating an impossible cycle of stress and hardship. These conditions make it almost impossible to put healthy food on the table, offer the best possible start for children, prepare for and recover from emergencies, and keep a roof overhead.
We applaud the Government’s recent increases to Superannuation, main benefits and student supports that will come into effect on 1 April. However, in reality, this is only about 1% better than the proposed adjustment on 1 April. With food prices increasing at almost 11%, this increase is hardly a windfall. The real issue of debt owed to Government still remains and it would not occur in the first place if benefit levels were adequate. So it is good the Government is currently consulting on a proposed framework to prevent and manage debt that people owe to government.
With an election coming up in October, we have the opportunity to talk with electoral candidates, examine political manifestos to see how they propose to provide a more equitable social security system which provides a better chance for everyone.
The Methodist Alliance working group campaigning to increase benefit levels and abatement rates will be producing resources for Parishes to facilitate robust discussions on wealth distribution and to use in discussion with local candidates and key Ministers leading up to the election.
8Speak out for those who cannot speak for themselves, for the rights of all the destitute. 9Speak up and judge fairly, defend the rights of the poor and needy.
Proverbs 31: 8-9 NIV
Carol Barron, National Coordinator
03 375 0512 | 027 561 9164 | Carol@MethodistAlliance.org.nz
[1] Name changed to protect identity.