1 Jul 2020

Average debt to MSD doubles in five years

10:39 am on 1 July 2020

The average amount people owe to the Ministry of Social Development after getting grants or advances to cover basic living costs has doubled in the last five years.

Fridge interior almost empty due to economic crisis

Special needs grants are one-off payments for essential or emergency costs, like food. Photo: 123rf

Figures released under the Official Information Act to Auckland Action Against Poverty also show, on average, women owe more than men.

Special needs grants are one-off payments available to anyone on a low income to pay essential or emergency costs, like food and medical or dental treatment.

Most grants don't have to be paid back, but some do.

People on the benefit can also get an advance payment to cover costs such as car repairs, clothing, school costs, and power bills.

As at the end of last year, about 225,000 people owed the ministry more than $307 million for special needs grants and benefit advances.

Five years ago, about 170,000 people owed the ministry $116m.

Alongside that increase, the average amount people owe the ministry has jumped.

In December 2014, the average amount owed was just over $680. By December 2019, that had doubled to almost $1370.

Child Poverty Action Group spokesperson Janet McAllister said with benefit levels still too low, and the rising cost of living, a loan may be the only option left for some people.

"Possibly because people have used up all other avenues of potential income, or they've been relying on family and friends perhaps to top them up and that's just no longer there - the cupboard is bare."

For men, the average debt jumped from about $585 to just over $1000.

But women owe more, going up from about $730 to over $1500.

McAllister suspected that was because women made up the vast majority of those on sole parent support.

"Sole parents are bearing the brunt [of the debt] by borrowing for their children, as well as themselves, without a partner to share the debt."

While the average weekly repayment for benefit advances is only about $8, Brooke Fiafia from Auckland Action Against Poverty said some people can be paying a lot more.

"A lot of the people and families who we work with are paying back $20 a week and for someone who's receiving a benefit, that's a huge proportion of what they receive."

Unlike other government agencies, the Ministry of Social Development can't write off someone's debt if they're struggling to pay it back.

Fiafia said that wasn't fair.

"If [Inland Revenue] can write debt off for people and MSD - who looks after low-income communities in Aotearoa - can't, then I think that plays into this whole idea that people on low incomes need to work harder and don't deserve to be taken care of."

In a statement, Ministry of Social Development group general manager of client service delivery George van Ooyen said the increase in debt was largely as a result of the rising cost of living and people's ongoing struggle to pay for housing.

"While case managers have limited discretion in some instances, the rationale for deciding whether grants should be recoverable or non-recoverable is set down by legislation. When deciding on whether the money should be recoverable we work with client to understand their individual circumstances and the affect repayments could have on them and their family," he said.

"Providing advances on benefits enables people to avoid high-interest loan sharks and provide a no interest option to help meet essential costs not covered by non-recoverable grants."

Van Ooyen said when it comes to determining the rate of debt repayments, the ministry looks at the ability of the person to repay debt and set repayments at a rate they can afford.

Repayment levels can be adjusted if someone's circumstances change.

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