Test case on benefits and loans
A solo mother who borrowed money to support her family while on a benefit has found herself in legal trouble because she didn’t declare the loans as income.
In a test case, the Ministry of Social Development (MSD) has demanded she pay back more than $120,000 in benefit payments that it said she should not have received.
At an appeal hearing at the High Court in Auckland on Friday morning, lawyers for MSD also argued beneficiaries who borrowed money from relatives for household expenses would not be entitled to government assistance. They said the provision of benefits was to ‘‘alleviate hardship’’ - and the woman’s level of spending suggested she did not require income assistance. Justice Paul Davison questioned the argument, and pointed out beneficiaries could not necessarily rely on financial support from their relatives. Frances Joychild QC, representing the woman, argued it was a ‘‘radical undermining’’ of New Zealand’s social legislation if loans to beneficiaries were considered income.
‘‘Her borrowed money was simply for the purposes of supporting her and her children while living on a benefit,’’ Joychild said.
‘‘With respect, I think the founders of our social security legislation would turn in their graves if they could see what it is now being used for.’’
She said it was ‘‘ludicrous’’ and ‘‘repugnant’’ that loans were considered an alternative to benefits, given that people who borrowed money were generally expected to pay it back.
Joychild added that placing such restrictions on beneficiaries would have the effect of ‘‘cursing people to poverty indefinitely’’.
MSD launched legal action against the mother, whose name is suppressed, after her former partner tipped her off to authorities, according to a blog post by barrister
"Her borrowed money was simply for the purposes of supporting her and her children." Frances Joychild QC
Catriona MacLennan.
MacLennan described how the woman was on a domestic purposes benefit between 2005 and
2010, and borrowed money because her benefit did not provide enough income to keep her family afloat. At various times she had also received the accommodation supplement, special benefit, temporary additional support and a special needs grant, according to MacLennan.
MSD argued loans taken out by beneficiaries comprised income and therefore disqualified them from benefit support. It ruled the mother was in breach of her benefit conditions and said she had to repay $120,398.38.
MacLennan said that was despite the woman being specifically told by her Work and Income case managers that she did not have to declare any loans, regardless of whether they were from banks, credit cards or family members. ‘‘The Social Security Appeal Authority ruled that two bank loans should not have been treated as income but held that other loans were income and that Ms X should be required to repay
$109,852.91. The authority also said that the forms used by Work and Income were clearly inadequate to notify beneficiaries of the information MSD alleged they needed to provide.’’
MSD appealed the authority’s decision on the grounds that the bank loans should have been treated as income. The mother also appealed the original decision, on the grounds that her other loans should not have been treated as income. Justice Davison reserved his decision.