Free lunch may prove costly on reflection

Even in times of chaos, there is no such thing as a free lunch.

The terms of the Government’s wage subsidy scheme — clearly billed as a “high trust” model — may have made it a very easy decision to accept the payment initially.

But such a decision quickly became public. Unlike most other welfare payments, the Ministry of Social Development allows the database of recipients of the subsidy to be searched.

This may have been done to ensure employees could check whether they were being told the truth by their bosses during the lockdown, but it also opened the payments up to another test: Public opinion of worthiness.

NZME, owner of the Herald, has taken the subsidy, amid redundancies and requests for staff to take temporary pay cuts, as ad revenue declined.

Whether it is retirement care companies, airports, private schools, foreign-owned meat companies or big law firms, chatter began about whether the businesses had really seen a drop in demand, or even if they had, whether they needed the money.

The Government should not be blamed for the scramble. As even National Party leader Simon Bridges acknowledges, it was crucial that the scheme created as few hurdles as possible so that the money could be paid out quickly.

By that measure, the scheme is a spectacular success, with more than $10 billion paid out.

But the inevitable result is that people who have little real need for the money will also take it.

Now, employers must decide if they needed the money more than they needed the fact that they had reached for taxpayer aid as part of their brand.

Fonterra chief executive Miles Hurrell summed up the quandary, saying while the dairy co-op may have been able to read its accounts in a way which could justify claiming the subsidy, he wouldn’t want to “look straight down the camera” and explain why.

A day earlier, he’d questioned whether Chinesecontrolled rival Mataura Valley Milk was a worthy recipient, given it was choosing not to process milk Fonterra must supply it at a subsidised price, citing what he believed were false grounds about health.

Fonterra’s decision is more significant than it might appear, given that as a co-op it is far harder for it to raise capital than its privately owned rivals.

Meanwhile, Simpson Grierson and MinterEllisonRuddWatts, two of NZ’s biggest law firms, have repaid more than $2 million each in wage subsidies, saying they had not seen the drop in demand they expected when lockdown began.

We should take them at their word, both that the concerns about revenue and the desire to keep the firm’s workforce employed, was the genuine reason for applying for the money. But the speed with which the firms acted as public unrest about the payments began to build suggests the partners saw considerable risk associated, so soon after a decade of uninterrupted economic growth.

As the country inches towards a move down the Covid-19 alert level, other recipients might review whether justifying the decision to keep the money is more costly than repaying it.