If the law was retrospectively passed it would effectively criminalise people who need help, not debt, Willie Jackson says. Photo: RNZ / Samuel Rillstone
The Labour Party has changed its tune on legislation that would allow MSD to legally claw back welfare payments once someone has been backpaid for an ACC claim.
Though it still looks set to pass with all three coalition partners on board.
The Ministry of Social Development (MSD) has been billing people for supplementary support, like the winter energy payment, once they have received a lump sum from the Accident Compensation Corporation.
The High Court ruled this long-standing policy illegal in late 2025.
One week ago, the Minister for Social Development Louise Upston moved a motion of urgency in the House to align the law with this long-standing MSD policy - legislation that would apply retrospectively.
Lawyers and health professionals urged the government to slow down on the change in a shortened Select Committee stage last week, arguing vulnerable people - including state abuse survivors and mothers with birth injuries - would be among those caught up in the change.
Ten experts also went as far as writing to Upston last Friday to warn her "the bill goes significantly further" than the government stated objective required and "risks producing serious inequity and unintended harm".
The group suggested seven targeted amendments to the bill, including a provision where MSD could not claw back payments that were received in good faith, and where they would be inequitable.
Labour 'cannot ignore' concerns raised, suggests changes
At first reading, Labour's Willie Jackson said if his party was in government it would "also be seriously looking" at the law change as "double-dipping" should always be avoided.
On Tuesday, he told the House the feedback he'd heard last week "raised serious concerns we simply cannot ignore".
Jackson said the reality was many MSD clients waiting for an ACC payment were worse off if they had to repay supplementary support they had been forced to take while waiting for ACC support to come through.
"It simply isn't fair that people who have acted in good faith have, for whatever reason, got an injury due to no fault of their own and are left in a worse situation when trying to seek support from MSD and ACC.
"Many sick and injured Kiwis took welfare payments while their ACC claims were being heard, they're also some of the poorest and hardest working members of society."
Jackson said if the law was retrospectively passed it would effectively criminalise people who need help, not debt.
"Many took those welfare payments because they had no other option while waiting for their ACC claim, they didn't know at all that they would face a claw back and took the money in good conscience.
"So we must remember, and sometimes people forget about these people…but these people are not criminals, yet the feeling that we picked up from some of the submitters is that they made to feel like criminals when they're burdened with debt and they really should be supported."
Jackson suggested Labour would only support the bill at third reading if MSD was given clear discretion to not recover payments that would cause further hardship and inequity - and not claw back disability and rehab allowances.
He also said Labour's support required an exemption for victims of abuse in state care.
"That certainly would placate a lot of our people who made submissions...we don't believe that that should be so hard for us as a House to consider."
New Zealand First's Jamie Arbuckle said his party had raised concerns at first reading about unintended consequences and wanted to look at "some of the finer points to make some changes" at the committee of the whole house stage.
The bill has progressed with the support of National, New Zealand First, ACT and Labour, with the Greens, Te Pāti Māori and independent MPs Mariameno Kapa-Kingi and Tākuta Ferris opposed.
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