Firm on fraud frees up 1000 houses

Housing New Zealand’s firm line on criminal offending and dishonesty has freed up 1000 houses since the Government changed its policy in 2008, Housing Minister Dr Nick Smith said.

“State houses are heavily subsidised by other taxpayers and tenants abuse this support when they are dishonest about their living situation or income, or use the home for criminal activity like drug manufacturing. We need to take a firm approach to such abuse to be fair to the vast bulk of honest tenants, to ensure public money is supporting improved social outcomes, and to ensure our state houses are available to those most in need of housing support,” Dr Smith says.

“Housing New Zealand expanded its fraud unit and started taking a firm approach on the change of Government in 2008. This has seen the number of tenancies terminated for fraud or criminal offending grow from 42 in 2008/09 to 292 in the year ending of 2012/13. A total of 1001 tenants have been evicted as a result of fraud investigations since the new approach was adopted.

“Housing New Zealand also takes a zero tolerance approach to state houses being used to manufacture and supply drugs. Four houses were used as meth labs in the 2012/13 year, as compared to seven in the previous year. It is an appalling breach of faith for tenants, generously provided with a home by other taxpayers, to then use that home to manufacture and peddle drugs. I am hopeful that the decline in the number of state houses being used as drug houses is a sign that the message of zero tolerance is getting through.

“The work by Housing New Zealand investigators resulted in 129 criminal convictions and the identification of $11 million of rent subsidies tenants were not entitled to.

“While the vast majority of Housing New Zealand’s 62,000 tenancies on income-related rent are in legitimate need of housing, a small minority are rorting the system. I make no apologies for the hard line taken to make sure state housing is freed up for those who actually need it.

“Housing New Zealand investigations for fraud arise from tenancy manager observations, anonymous tip-offs, information from other government agencies and inconsistent information from tenants themselves. 22 per cent of investigations result in no further action because of honest misunderstanding or mistake, insufficient information to prove dishonesty, or other exceptional circumstances that negated what appeared fraudulent.

“Housing support fraud will become more difficult with the Government’s social housing reforms that bring together the administration of financial support for housing and welfare. Many of the people defrauding Housing New Zealand were also committing benefit fraud and it makes sense for both sorts of financial assistance to be considered together.”

A thousand out of 62,000 is not a large number but state houses are supposed to be for those who need them, not those rorting the system or indulging in criminal behaviour.

Last week Victoria University accounting and commercial law associate professor Lisa Marriott said that Inland Revenue was more likely to write off unpaid tax than the Ministry of Social Development  was to write off welfare debts.

MSD would often keep welfare debts on its books, sometimes until people died or retired.

Tax debt totalled nearly $6 billion, while welfare debt was about $1b, she said.

“There appears to be no basis for treating debtors to the two government agencies differently,” Marriott said.

The study indicated tax debtors got off more lightly, she said.

Inland Revenue was more likely to negotiate with debtors and collect core tax, and write off penalties and interest, Marriott said. . .

Associate Social Development Minister Chester Borrows said those claims were misleading.

“The Ministry of Social Development (MSD) has a duty to take care with taxpayer money. When they find evidence someone has fraudulently taken money they are not entitled to, they will prosecute, and make no apologies for that,” says Mr Borrows.

“To describe this as being particularly ‘punitive’ is simply wrong. It implies we should ignore welfare fraud, and shows a basic ignorance of the wide range of support MSD provides to New Zealanders.”

Mr Borrows singled out claims that more is spent chasing welfare fraud than tax fraud as demonstrably false.

“This year IRD has a budget of $142 million to enforce tax obligations. This is more than quadruple MSD’s collections and integrity services budget of $29.8 million.”

He also pointed to the use of penalties and interest to illustrate the different approaches taken by MSD and Inland Revenue.

“To focus on penalties and interest written off by Inland Revenue ignores the very different way IRD and MSD operate. Inland Revenue has a tough regime of penalties and interest, whereas MSD only uses penalties in rare cases where dishonest behaviour needs to be sanctioned by a criminal prosecution is not appropriate.

“The numbers clearly illustrate this. In 2011/12 MSD imposed around $144,000 of sanctions on 164 cases – a stark difference to the more than $600 million of penalties and interest IRD imposed in the same year.” . . .

Revenue Minister Todd McClay says there can be good reasons to write some tax off.

“Businesses that are finding it a little bit difficult to meet their obligations can stay in business and keep employing New Zealanders,” says Mr McClay.The Minister says comparisons between the two Ministries are unhelpful, partly because there are under half a million kiwis on benefits, but more than 7 million tax customers. . .

Fraud is fraud and taking other people’s money is wrong. But simple comparisons between the way the MSD and IRD treat debt is misleading.

The $1b written off by MSD will be a much larger percentage of benefit payments than the $6b written off by IRD is of tax payments.