Prime Minister Jacinda Ardern says there was no way to design a cost-of-living payment package that was perfect, but the Government stands by its decision to make the payment and revise it.
Auditor-General John Ryan today published a letter to Inland Revenue Commissioner Peter Mersi, voicing concerns that the sloppy rollout of the first payment in early August did not exhibit good stewardship of public money.
The Government was heavily criticised after the broad, automated approach meant many ineligible people overseas reported receiving the first of the payments in error.
The letter came after Revenue Minister David Parker announced changes to the scheme to check eligibility criteria. These include greater use of data to ensure people receiving the payment are actually eligible and in New Zealand.
The $350 cost-of-living payment was set up via the Inland Revenue Department (IRD) to help with the rising costs of inflation, split into three monthly payments of $116.67 starting in early August.
The money is supposed to go to New Zealand tax residents over the age of 18 living in the country, who earned up to $70,000 last financial year and are not entitled to the winter energy payment. People in prison are ineligible.
The first payment was received by many people living overseas, despite those people being officially ineligible.
Newly released figures show 4,912 people have opted out of the scheme, while 418 people have repaid their payments.
The second payment is due to go out this week.
Ardern, speaking today at her post-Cabinet press conference, said the payment was intended to go to 2.1 million people and the IRD was now refining the screening tests of the payment, which was the first of its kind.
She said it was the Government's duty to help people through the cost-of-living crisis. "And we've done that."
Tighter checks were not done earlier because IRD was working on getting the payment through the door, and was now making extra refinements, she said. That meant some people who were eligible would not get it and would have to apply to get it.
"These are all things that will improve it. In a perfect world, would you have had that from the beginning? Yes."
But she said she disagreed with the Auditor-General's assertion that the criteria was not clear, saying it was very clear and the issue was how it was tested.
"Ultimately, we always seek to make sure those who are eligible receive it. The question is how do you best do that."
She said it was their duty to make refinements on that.
The other options were to get people to apply, which she thought would have meant those in most need of it missed out, and tax cuts would not have the desired effect of being temporary relief.
Ardern set out the savings for households from the cost-of-living suite of measures, including the fuel tax cuts, the half-price public transport and the pre-existing measures of the Winter Warmer payment and free school lunches.
New Zealanders who filled up at the pump at least once a week since the 25 cent reduction was introduced in April have saved about $276 for a 40-litre tank, or $414 for a 60-litre tank.
Half-price public transport has saved New Zealanders $200 million a week, she said, with 28 million trips on buses, trains and ferries.
"While times are undoubtedly tough, we are well placed to come through this period."
Asked if the fuel levy reductions could end earlier than January as petrol prices dropped and incomes rose, Ardern said it had been set to that date and there was no undertaking to extend it further.
The Winter Energy Payment has paid $307 million to 971,000 older New Zealanders and people on a benefit, while a million free lunches were being delivered to children at school every week.
Ardern also pointed to the changes to the cost-of-living payment, saying most would receive the payment directly into their bank accounts.
"Economies around the world are experiencing real pressures in the wake of Covid. New Zealand is never immune to these international pressures but as with Covid-19 the Government response is putting us in a better position than many."
New Zealand has a near-record low unemployment at 3.3 percent - below the OECD average of 4.9 percent, she said.
"While globally inflation continues to soar, ours remains within the lower bounds of the OECD at 7.3 percent and with some observers suggesting it may have peaked, compared to the OECD's 10.3 percent average right now."
Ardern said New Zealand has the highest median wage growth on record, and food and fibre exports leapt an extra billion dollars above the $52 billion record expected.
"So while times are undoubtedly tough we are well placed to come through this period."
Revenue Minister David Parker this afternoon announced changes to the cost-of-living payments. Inland Revenue had found about 31,000 of the 1.4 million people who received the first payment had been flagged as possibly being overseas, and would have to provide further information to before receiving further payments.
The further screening tests would ensure, "where we have incomplete information, we reduce the chances the payment reaches those who don't meet the criteria," he said.
"Someone that might have a student loan that records them as being overseas, we will now make the assumption that they are overseas. They won't always be, because in respect for example of that student loan data people are not recorded as being in New Zealand until they've been back for more than six months."
It would include checking data that suggests people may be overseas against other data suggesting they are in New Zealand.
Information prompting additional checks:
• Non-resident individual income tax return filed for the 2021-22 tax year
• A part-year tax return for the 2021-22 tax year, with situation "departing New Zealand"
• A student loan borrower with overseas-based borrower status and a student loan balance above $20
• An overseas IP address used to log into myIR (excluding a VPN)
Information providing more certainty someone is in New Zealand:
• Receiving employment income in the last two months
• Being registered as a principal caregiver or partner for Working for Families tax credits
• Logging on to myIR with a New Zealand IP address (excluding VPN)
Parker said the changes would not be applied to payments already sent out, just to those yet to be made.
"The people who've received it once, unless they've done it fraudulently, they've done nothing wrong. We think that we have got some better data sets to scrub the data that we've already got."
The payments were initially designed to be made by IRD assessing eligibility based on tax information without requiring people to apply for them, to reduce the cost of administration and ensure the payment reached those who needed it.
Parker said most New Zealanders would not need to do anything to receive the second or third payments, and should contact IRD if they had received it in error or believed they should receive it and had not.
"We expect the changes will help ensure only those eligible get the payment. I acknowledge that they will not achieve perfection because IR's data can never be perfect. But this is better than running an application process for two million people, which would cost more than it would save."
Auditor-General criticises 'stewardship of public money'
National Party finance spokesperson Nicola Willis wrote to the Auditor-General raising concerns after the initial payment was made, calling for an investigation.
In response, Auditor-General John Ryan confirmed he had sent letters to Willis and Commissioner of Inland Revenue, Peter Mersi, saying payments made to ineligible people did not constitute unappropriated expenditure, but "in our view, good stewardship of public money required greater care when designing and implementing" the payment.
"Inland Revenue should now consider what steps it can take to identify how many ineligible people have already received payments," he said.
"I encourage Inland Revenue to also focus on future payment tranches to ensure that payments are reaching only the people the Government intended them to go to. I also encourage Inland Revenue to remind ineligible recipients that they are obliged to repay any payment received immediately."
Willis described the auditor-general's investigation as "damning".
"The Auditor-General makes a good point, but one that should have been obvious to any responsible government, in suggesting changes be made to future payments to 'ensure that the payments are reaching only the people the Government intended the payment go to'."
It was clear his investigation had forced the Government into making the changes, she said.
"It's shocking that it took a stern word from the auditor-general for the Government to take taxpayers' money seriously."
In a statement, ACT leader David Seymour questioned why the checks were not included for the first payment, saying it was either that the Government forgot or "did not care and wanted as little resistance to giving out money as possible".
"Of course, the rushed law could have been avoided if only the Government had taken a much simpler approach. Just reduce the amount of tax taken in the first place," he said.
Parker said that if they were to go back and do it again the Government would have used the additional screening from the start, but he stuck by the general approach.
"There were two choices here - you run an application process that is absolutely thorough, or you run it based on data sets. If we'd run an application process it would have cost more money than it saved ... and it would have taken many months to process the millions of people that needed to be processed.
"Had we run an application process, people wouldn't have got the cost of living payment when the pressures are high from the spike in inflation that we've seen."
- NZ Herald and RNZ
