What's going on with the benefit suspension mess at MSD

Social Development Minister Louise Upston avoided reporters by using a side corridor to enter Parliament's debating chamber on Friday, 28 August.

Reporters were waiting to question her about benefit payments that were wrongly suspended — meaning people's payments were stopped when they should not have been.

It was the end of a week where Upston's story about the problem kept changing in Parliament, and Prime Minister Christopher Luxon had to apologise for the second time in two weeks over a failure at MSD, the government agency that handles benefits and support payments.

MSD told Upston on 13 August that it had found a problem with benefits being wrongly suspended, according to RNZ. The suspensions started because of a law change rushed through Parliament last year. That law change required some beneficiaries to re-confirm their circumstances — basically check in and prove they still qualify for support — at least once every 52 weeks. MSD said a lot of people confirming their circumstances caused delays, and paperwork was not checked in time. That triggered an automated system to stop people's payments. MSD said it could not say how many people were affected or for how long, but confirmed all affected payments had resumed and been backdated, and that it had apologised.

In Parliament on Tuesday, Upston was asked whether beneficiaries had payments suspended due to the delay. She said "no." After more questions, she corrected herself to say it had "possibly" happened. RNZ then asked Upston's office to clarify what she meant, but was told she would not comment further because MSD was reviewing the matter. Upston told RNZ she was disappointed and expected MSD to manage its workloads.

Luxon told Parliament the week before that he was confident wrongful suspensions had not happened. On Friday he said he would not correct that statement because it was true at the time, but he apologised to affected beneficiaries. The apology came a week after he apologised for a separate problem: 15,000 pensioners missed their Winter Energy Payment — a payment to help with heating costs — after another rushed law change, as reported by The Post.

RNZ has seen a copy of an MSD letter stating that an automated process stopped a beneficiary's assistance because they had not completed their "Confirming your Circumstances" check. Auckland Action Against Poverty volunteer Pip Colgan said she first became aware of the problem in May. A client had contacted her after getting a letter saying her benefit would be suspended the next day for failing to confirm her circumstances — which she had done. Colgan said the advocacy group had clients she believed were affected by the delays, and she placed blame with ministers rather than officials.

A beneficiary advocate quoted by RNZ said the government was "playing with their lives" over the wrongly suspended payments.

The Greens and Labour both called on Upston to front up. Green MP Ricardo Menéndez March said she was hiding from accountability. Labour's Willow-Jean Prime said Upston was throwing her officials under the bus.

RNZ and the New Zealand Herald reported the wrongly suspended payments as a "second MSD error." The Spinoff reported that all affected payments have since resumed and been backdated.

The bigger picture here is that both of these problems — the benefit suspensions and the missed Winter Energy Payments — happened because laws were rushed through Parliament. When laws are passed quickly, there is less time to work out how they will work in practice. In both cases, the problems only came to light after affected people started contacting advocacy groups or getting suspension letters. The Post reported that Upston will have to go back to Parliament to fix the Winter Energy Payment error with a new law.

MSD's own documents show they expected some wrong suspensions. A 2018 MSD publication said that if incorrect suspensions happened, the rate would be lower than 1%. A 2022 briefing note for ministers noted that suspending or changing benefits had previously led to recording errors.

The gap between what ministers told Parliament and what MSD had already told the minister is likely to get more attention. Upston was told about the problem on 13 August, but told Parliament the following Tuesday that suspensions had not happened — before changing her answer. Luxon's claim that his earlier confidence was "true at the time" raises a question about what he knew and when, and whether ministers will be held accountable for problems caused by rushing laws through Parliament.