High court rules loans are not income for welfare beneficiaries

In a breakthrough decision released today the High Court has said that loans are not income for social security purposes and Child Poverty Action Group (CPAG) is calling on the Minister of Social Development to immediately remove all debts, cases and prosecutions against beneficiaries where loans have been counted as income.

The Ministry of Social Development (MSD) argued before the High Court that a sole mother who took out loans in the form bank loans, credit cards and family loans to pay for needed home repairs and to support herself and her children should have to repay more than $120,000 of her benefit. She explained that she needed to borrow because she could not pay her bills while living on the benefit. The loaned money was all repaid but it was called ‘overpayments’ by MSD.

Today the High Court acknowledged her plight and that of many others with its ruling that loans cannot be counted as income for social security purposes. This includes bank loans, credit cards and any other loaned money where there is an obligation to repay the money given.

"This decision will bring a collective sigh of relief to thousands of beneficiaries who have had to borrow to make ends meet," says Frances Joychild QC, who acted for the beneficiary in the case concerned.

"It is extraordinary that the Ministry ever countenanced counting a loan as income, when it was well aware that the level of benefits kept beneficiaries below the poverty line. By denying them a benefit if they borrowed money it was locking them into the multiple deprivations that income tested beneficiaries experience," says Ms Joychild.

"We are overjoyed by this result and commend the sole parent who fought this case - her courage and passion for justice will have enormous benefits for others like her struggling in an unjust system," says Associate Professor Susan St John, CPAG Economics spokesperson.

"While it is obvious to most people that loans are not income, and should never be treated as income, it has taken eight years of intensive effort including expensive court time to get this decision," says St John.

"The wider family should be encouraged to help beneficiaries where appropriate, without penalty, and without fear of infringing petty rules."

The inadequacies of the welfare system are currently under review. CPAG is looking forward to seeing many more changes that will remove discrimination against, and prevent imposing greater hardship on, beneficiary families. Families in Aotearoa-New Zealand need a system that provides compassion and understanding when they are faced with their greatest need.

ENDS

© Scoop Media