Coalition Calls for Government to Wipe Debt to MSD

Lifting the Weight, released by the Fairer Future collaboration, reveals the suffering this debt – carried by around 1 in 10 New Zealanders (or more than 461,000 people) – is causing in households around the country. The report includes seven stories from  people struggling with MSD debt and the severe pressure this places on families already living in hardship. The group, made up of New Zealand’s leading frontline service providers and organisations who advocate for children and families, including Auckland Action Against Poverty and Save the Children, is calling for the Government to urgently wipe this debt and raise income levels.  

Those interviewed included people pushed into debt by either seeking support to cover basics – such as rent, dental care or unexpected costs like car repairs – or after a Ministry error or miscommunication led to overpayments, followed by an aggressive debt recovery.  

Stories include deductions to income benefits for whānau already struggling to make ends meet; the pressure of debt alongside supporting children with serious health needs; and the challenges of navigating a complicated and often unfair system.

The stories include Olivia’s:* Olivia was cleared of benefit fraud in court, but has been left with ongoing shame and trauma from the experience, alongside a massive debt that she is paying off week by week. 

“$10 a week might not sound like a lot to pay back,” she says. “But sometimes we need that $10. I know I won’t ever pay back what they say I owe ... I’d never experienced debt like this before. I’d had a mortgage and student loan, but those are different. I’d had a credit card. But you can pay off all those debts. This one feels like it’s never going to go away.

“I can’t tell you what a difference wiping debt to MSD would make. I’d be freer in my own head. It would lift things off my shoulders. But it’s also the stigma that would change. I’d feel less self-doubt about people judging me.” 

In 2020, almost one in 10 people in Aotearoa – or more than 461,000 people – owed debt to the Ministry of Social Development, with an average debt of $3550. This number is likely to have grown considerably following the impact of COVID on low-income families, and other emergencies in recent times. 

“Wiping the debt is a small change that would make a huge difference to the lives of many whānau,” says ActionStation’s Max Harris.  

“With insufficient income support levels forcing people to choose between essentials like healthcare and food, they’re forced into debt to make it through the week. Then debt repayments are deducted from future income week-to-week, creating a cycle of stress and hardship. These conditions make it near impossible to put healthy food on the table, offer the best possible start for children, prepare for and recover from emergencies, and keep a roof overhead.” 

"We can show love and compassion to people and families who are being weighed down by debt and we should by lifting it for them, to ensure that we can all prepare for what's happening in our current climate with increasing costs and changes in our climate and communities,” adds Brooke Stanley Pao, coordinator of Auckland Action Against Poverty.

“The current system that creates unsustainable levels of debt for those who can least afford it needs to change, particularly when we look at the increasing burden of climate emergencies and the financial impact that’s having on New Zealand families,” says Save the Children New Zealand Advocacy Director Jacqui Southey. 

The recent cyclone and flooding across New Zealand are likely to heighten the stress placed on people already in debt, and may put new people into debt as recoverable assistance is sought. 

As the Government makes decisions about its response to events of recent weeks, Fairer Future is asking the Government to take into account the burden caused by debt – and to lift that burden to make life easier for struggling families.