26 Jan 2021

Estimated $5b in wage subsidies paid out unneccessarily - philanthropist

From Checkpoint, 6:15 pm on 26 January 2021

A former Christchurch businessman turned philanthropist estimates $5 billion has been paid out in wage subsidies to companies that do not necessarily need it.

Grant Nelson and his wife Marilyn run the Gama Foundation, which hands out the money they made after selling their business. It has donated more than $50 million over the years and receives no donations.

Mr Nelson says companies that made more profit last year than they did in 2019 should repay their wage subsidies immediately.

He told Checkpoint reporter Nita Blake-Persen the government needs to take a more proactive approach in encouraging companies to do that.

"Those audits, there haven't actually been that many of them. There were 4,700 complaints from employees about their employers and on top of that there have been some random audits, but not nearly enough, because there were 760,000 recipients of the wage subsidy.

"So, any audits they do really are only reaching a very, very few of those who received the wage subsidy. And that is why I think everyone who receives the wage subsidy should be contacted. If they can prove that they are entitled to it well, they can retain it. Otherwise, they should be repaying it.

"The wage subsidy was paid out in a big rush, and I think it was fair enough to do that. But when I read the rules at the time I could see that it was open to abuse, and that has been the problem, it has been abused by those who didn't really need it.

"Things turned out to be a lot better than was expected, and it is clear that most businesses could have got through that period of lockdown without the wage subsidy. So, yes it did help at the time, but I think now that we can see the big picture of what has happened last year, then businesses who didn't really need the wage subsidy should be repaying it.

"I've taken into account the fact that businesses weren't closed for as long as they were paid out for. I've taken into account all of those various abuses of the wage subsidy which I previously mentioned, and just taking all those things into account. And the fact that, well, most businesses did very well last year. I think that it just does need to be repaid by many of the recipients.

"I think these people should be acting more ethically. If they did make better profits in 2020 than in 2019, then they should be repaying the wage subsidy. Then that money could be used for those who are in greater need.

"Late last year the government was saying that it couldn't afford to increase benefits and the Prime Minister was advised that child poverty would be strongly increasing. So there is a real need for the government to have money to do some of the things that promised to do.

"That is why I'm really calling on the government to write to all recipients of the wage subsidy, and ask them to either repay it or provide evidence that they complied with the rules, and that in the six months to 30 September last year, they either made a loss or had reduced revenue.

"And if that is the case it's fair enough that they retain the wage subsidy. But if they were more profitable for that period, then I think they should be making a payment."