Around 40,000 beneficiaries might have had large debts reviewed by the Ministry of Social Development if the Government had not swiftly moved to reverse a High Court decision.

Community Law Centres Aotearoa, which acted as intervenor on the court case, told the Herald a portion of those affected will be survivors of Abuse in State Care who will now be “worse off” but the Government says the court ruling would have led to some clients being treated more generously than others.

People who face long delays in their ACC claim being accepted may apply for additional living support from MSD, such as the accommodation supplement or winter energy payment. When the claim is accepted, ACC may backpay the person to the date of injury.

In these cases, MSD can require clients who received MSD assistance during the period covered by the ACC back payment to repay that MSD supplement. In some instances, the beneficiary is unable to repay the supplement and is left with large debt.

Recently, the High Court ruled MSD was wrong to do this, but the Government disagrees and has introduced legislation to reverse the court decision.

Shannon Soughtton, MSD’s group general manager of service improvement and delivery, said the Government was updating legislation to bring it in line with current practice and the intention of a longstanding policy.

Officials had briefed political parties on the potential impact of the changes. Soughtton said the 40,000 figure was the most up-to-date available and represented “the number of clients whose debt we would have had to consider retrospectively reviewing if these changes had not been made.”

There was no other impact on their current situation with MSD, she said.

Survivors left “worse off”

Rupert O’Brien, law reform coordinator for Community Law Centres Aotearoa, said a portion of the 40,000 people expected to be impacted were survivors of Abuse in State Care.

In 2024, a landmark Royal Commission inquiry revealed “unimaginable” and widespread abuse in state care and faith-based institutions between 1950 and 2019. Around 200,000 people were abused, and many more were neglected, with Māori disproportionately affected and subjected to overt and targeted racism.

“Survivors will be worse off now and going forward, they have had money taken from them, and debt created unlawfully, and this is being validated by the legislation,” O’Brien said.

Minister of Social Development and Employment Louise Upston said people who received welfare assistance while they waited for ACC to decide on their entitlement and then received an ACC lump sum payment were being “treated more generously” than others.

“They are in effect receiving two forms of income support to address one need.”

Upston said these clients could remain eligible for assistance which only beneficiaries received, such as the Winter Energy Payment.

“This would not result in fair treatment between these groups and isn’t in line with the policy intent.”

Green MP Ricardo Menéndez March urged the Government to honour the court case instead of “moving with urgency to legalise slapping beneficiaries with debt.”

“People on the benefit receiving supplementary assistance are often living in hardship, and if they are waiting for an ACC claim they would have faced an injury or trauma.

“The Government is moving with urgency to legalise slapping beneficiaries with debt because they know what they did was wrong, and are worried tens of thousands of people would be seeking to recover these unlawful debts.”

He said the Greens would campaign in the lead-up to the November general election on introducing a Guaranteed Minimum Income and overhauling ACC.

Julia Gabel is a Wellington-based political reporter. She joined the Herald in 2020 and has most recently focused on data journalism.