The bureaucratic blocks to welfare reform
5 November 2020
Opinion: Susan St John points to the behaviour of MSD bureaucrats in the spousal deduction saga to illustrate how major handbrakes work to block welfare reform.
It is clear that while the Prime Minister needed to free herself from the shackles of Winston Peters, he was not the major handbrake on her government doing good social policy in the last three years. You only have to look at the behaviour of the Ministry of Social Development (MSD) bureaucrats. Their dead hand is nicely illustrated by the saga of the spousal deduction.
Let’s remind ourselves of the issue before it gets lost in the fog of undocumented history. Eight years ago, after fruitless attempts to get justice, three brave superannuitants took the step of last resort of appealing to the judicial system. They had been denied all or part of their NZS because of their partner’s overseas state pension.
They were effectively taking a case on behalf of about 500 affected older people who had found to their horror on application for their pension that they were treated differently to everyone else who was automatically entitled to New Zealand Superannuation as they were citizens and had lived all or most of their lives in New Zealand. The rule was applied even when it might be a third marriage of short duration and the affected spouse has lived all his or her life in New Zealand.
It took five years to get the case to court and astonishingly another nearly three years to get the recent decision from the Human Rights Review Tribunal (HRRT). The tedious seven-day hearing was dominated by MSD officials who pontificated on the merits of the couple-based welfare state in filibuster that was excruciating to sit through. Their patronising exposition of the evolution of the modern welfare state appeared to start in the 16th century and get stuck in the immediate post-war period as if nothing had changed since. The HRRT were swayed by the 67 pages of detailed evidence given by the two MSD officials. This evidence was not moderated by cross examination and clearly forms the entire basis of the HRRT decision.
But, in the interim, the government realised the discrimination could no longer be tolerated and simplification and modernisation were called for. The budget of 2018 announced that the anomalous spousal deduction would be fixed, but not until July 1, 2020 and then only if the legislation was passed in time. Covid-19 was then cited as a reason to delay the legislation further. At long last, this month, from November 9, this festering issue will actually be resolved. But notwithstanding the gruelling and drawn out experiences of the affected spouses, neither compensation, backpay or an apology it seems are on the radar screen of the government.
With this in the pipeline, the decision of the HRRT on October 15 was a shock. The Judge’s ears were certainly not attuned to the Zeitgeist of the 21st century, let alone the mood of the government. The tribunal appeared to have been totally captured by the MSD officials’ view of the couple basis of welfare, despite the individualisation of New Zealand Superannuation:
“Spousal deduction is a necessary extension of the direct deduction policy because it ensures that couples with overseas pensions receive an equivalent amount of state-administered pensions as other couples.
The evidence did canvas the situation where one spouse receives a foreign pension but not NZS. In the interests of brevity we do not address the small number of cases (which do not include any of the plaintiffs) where this circumstance applies. We are satisfied that for the reasons set out in the Ministry’s submissions that the spousal deduction produces an equitable result in the great majority of cases.”
Then, on October 19 the HRRT issued a supplementary decision. Belatedly it seems, the HRRT discovered they had been trumped: the government had already enacted a law that gives the plaintiffs what they sought.
“Following publication of the decision of the Tribunal in McKeogh v Attorney-General  NZHRRT 39 (15 October 2020) the Tribunal received advice from counsel that legislation currently awaiting the Royal assent will amend the Social Security Act 2018, s 189(2) by removing the spousal deduction”
Does the right hand know what the left hand is doing?
“It is a matter of regret this information was not provided to the Tribunal at an earlier date. Be that as it may, as counsel correctly note the amendment will not affect the Tribunal’s decision given on 15 October 2020.”
The Child Poverty Action Group well knows the pain. CPAG spent a bruising 10 years in the courts fighting the unjust discrimination that denies at least 200,000 children their full entitlements to family tax credits to alleviate poverty simply because of the beneficiary status of their parents. The fact that the bureaucrats still defend this policy means they are not advising government to do the right thing even when it is the obvious way to help alleviate child poverty. The question must be asked: does the HRRT process dominated by MSD ‘evidence’ actually work for resolution of social policy issues?
In the spousal deduction case why did the HRRT allow itself to be dominated by the bureaucrats narrow framing of the issue which was so far out of touch with what is fair in today’s society?
Susan St John is Associate Professor of Economics in the Business School and Director of the Retirement Policy and Research Centre.
This article reflects the opinion of the author and not necessarily the views of the University of Auckland.
Used with permission from Newsroom The bureaucratic blocks to welfare reform 5 November 2020.
Alison Sims | Research Communications Editor
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