Partner liability in benefit fraud bill queried

Before it becomes law, a bill (or a proposal for a new law) has to go through a few stages.

First it is read to the Parliament and if accepted it goes to a select committee which examines the bill and gets the public to comment on what they think of it. It will then go back to the Parliament with a report from the select committee for further debate.

The National Party recently has put a bill before the Parliament to, in its words, "combat" relationship fraud.

The initiative behind the bill is focusing on obligations of sole parents receiving welfare to not defraud the welfare system.

The Social Security (Fraud Measures and Debt Recovery) Amendment Bill, if enacted, will enable the Ministry of Social Development to recover debt not just from the people who had benefited from welfare fraud, but from their partners as well by making them jointly accountable for repaying the debt and extending criminal liability to these people. There would be a penalty of a maximum of 12 months' imprisonment or a fine not exceeding $5000, or both.

As part of the submissions to the select committee on whether the bill should become law, it was stated that relationship fraud makes up one-third of welfare prosecutions, with an estimated cost last year of $20 million.

The select committee sent the bill back and said that the law did not have to require the partner knew the exact amount of any fraud or even the way that this amount was obtained.

The legislation, if passed, is due to commence on August 31, 2015 or earlier if the IT development necessary (presumably a huge computer system designed to spot anomalies etc), has been completed. It is understood that the cost of this computer system is in the region of $500,000.

The New Zealand Law Society said that absent a positive act, the justification for making partners and spouses criminally liable is not "apparent".

What the Law Society is saying, and what I really agree with, is that it is fundamentally unjust for a beneficiary's partner to be liable for the full excess amount obtained by fraud, rather the amount by which the partner actually benefited, especially the level of criminal sanctions as well.

The Labour Party had "grave reservations" about the bill and said that the National Government was "obsessed" with welfare fraud, while it turns a blind eye to the more costly issue of tax fraud (at 150 times the rate of welfare fraud) without equal focus on the partners of white collar fraudsters.

This makes sense.

An act, when it comes into Parliament, should at least be fair and I do not see the difference between the partners of tax fraudsters and welfare fraudsters.

If anything a court action seeking to recover from tax fraudsters, from a recovery point of view (which is the main aspect of this legislation), is much more likely with a tax fraudster than with welfare fraudster - who are getting by on a couple of hundred dollars a week.

An order to repay money, sometimes thousands of dollars, to someone who is already getting by on a benefit does not make economic sense. Tax fraudsters, who are often getting by on more than a few hundred dollars per week, are more likely to be able to repay any amount ordered by the Government/courts.

This also applies to their partners - indeed handing assets to partners is often a way of getting away with paying your tax in the first place.

My main concern is the possibility of partners being held criminally as well as financially liable. Expecting a partner to know where a new partner gets his or her money strikes me as something that would make starting a relationship more difficult than it otherwise would be.

Will people require approval from Work and Income New Zealand when they are starting a relationship with someone on a benefit? Isn't that a scary road we might be going down? Here's hoping the bill, as drafted, gets some major changes when it goes before Parliament again.

The Timaru Herald