By Nita Blake-Persen of RNZ
A philanthropic foundation is suing the Ministry for Social Development over its failure to take legal action against a single wage subsidy recipient.
More than $13 billion was paid through the wage subsidy scheme, which was designed to keep people in their jobs during Covid-19 lockdowns.
But since receiving the cash, many companies have gone on to post significant profits – prompting concerns around who really benefited from the billions handed out.
Among those worried were Grant and Marilyn Nelson of the Gama Foundation, which has given away more than $50 million to charity over the past 25 years.
During that time, they said the gap between the rich and the poor had grown – and got much worse since Covid-19.
Grant said while many people had benefited from the wage subsidy, others were struggling to get by while their incomes were cut and their costs increased.
He has been investigating the wage subsidy scheme for more than a year after becoming concerned about the potential for widespread abuse and the billions of dollars of public money involved.
He said now that he had seen the Auditor-General’s report, which criticised inadequate checks of recipients, he was seeking a judicial review.
“What we want is the court to require the Ministry for Social Development to basically do their job properly and to prosecute anyone who has wrongly obtained, or retained, that wage subsidy.”
He said as a result of MSD’s management of the wage subsidy scheme, the Gama Foundation believed there had been a huge transfer of wealth to businesses that did not experience the drop in revenue which might have been anticipated when their subsidy was claimed.
Business defends not repaying subsidy
Figuring out whether companies should retain the cash is not always clear cut.
Skyline Enterprises, which owns Christchurch Casino and runs multiple tourism outfits across the country, received about $8 million in wage subsidies and $500,000 in funding for strategic tourism assets.
It laid off about 500 staff over the past year, but some were later brought back on.
Chief executive Geoff McDonald said they had recorded profits of more than $70m for the year ending March 31, but did not intend to pay back the wage subsidy.
“It was made available by the Government to support us through an incredibly difficult time that is yet to conclude.
“We see that there’s going to be disruption on the horizon. Winter will finish in a month or so and who knows how that will be with the way the bubble’s operating and then we’re going to face lean tough months again so we need this support to survive.”
He said they had met all the criteria to receive the wage subsidy and were grateful for the support but were not convinced they were out of the Covid-19 woods.
“It’s been very valuable to enable us to get from the position we were in with the staffing we had and to grow back and build back.”
Across the country, more than $720m of wage subsidies has been returned to the government – and MSD has resolved nearly 5000 allegations of misuse.
Another 1000 cases have been referred for investigation. MSD is now preparing to take civil proceedings against four employers to recover payments if the Ministry is not satisfied with their response within 20 working days.
Grant Nelson said it was vital they took action and prosecuted businesses like they would any other clients.
In a statement, the ministry says because the matter is before the courts, it will not comment further.
However, it says it’s committed to prosecutions where that’s appropriate. It says investigations are continuing and a number of cases are under active consideration for civil proceedings or criminal prosecutions.
Many investigations, it says, involve complex situations, and by their nature will take time.
Four decisions to take civil proceedings to recover wage subsidy payments have been made so far.
Employers will have up to 20 working days to respond and if MSD isn’t satisfied with the responses, proceedings will be filed in court.
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