Economist warns profitable firms against taking COVID-19 wage subsidy as audit reveals extent of abuse

An economist is warning profitable companies against taking the wage subsidy scheme as the Government revealed almost $17 million has been requested in refunds. 

The Ministry of Social Development, which has handled the subsidy scheme, revealed that as of April 21, 1281 applicants wanted to refund their subsidy, leading to $16.2 million being requested by the Government. 

So far, $6.9 million has been refunded, and a further $1.25 million has been requested from 56 applicants following a Government audit, and $168,000 of that has been paid back to date. 

From the beginning, applicants were told they would have to repay the subsidy if they provided false or misleading information in their applications. Business owners had to demonstrate how COVID-19 had caused 30 percent loss. 

Applicants were also told they may be subject to civil proceedings for the recovery of any amount received that they were not entitled to, or even be prosecuted under the Crimes Act. 

Economist Cameron Bagrie told The AM Show businesses still making a profit during the lockdown should be careful about taking up the subsidy because they could end up on the news. 

Using meat companies as an example, he said: "As a purchaser, a buyer of land, who would I want to support going forward in the supermarkets? Those firms that haven't taken the subsidy as opposed to the ones that have.

"A lot of firms can probably demonstrate that their revenue is down 30 percent - they've taken a bit of a hit. But I sit back and think about this from a practical perspective."

He said the companies that don't need it will be exposed by audits, and "probably more troubling for a lot of firms is that they're going to get exposed in the media". 

Finance Minister Grant Robertson has often noted that the scheme is a high-trust model. 

"We're relying on people to do the right thing," Bagrie said. "But is everybody going to do the right thing? The answer is no."

Robertson said the Government knew the vast majority of New Zealand business owners would access the scheme as intended, to protect jobs, support workers' wages and stay connected during the lockdown. 

"It's great to see these business owners doing right by their workers."

But he said the Government also has a duty to all New Zealanders to ensure taxpayer money is going where it is intended to support the economy.

Assurance and audit processes put in place by the Ministry of Social Development are overseen by a team of 104 fraud experts and investigators. 

So far, 2435 random and targeted audits have been completed, with 2252 resolved and an additional review of 183 cases currently being undertaken. 

The Government received 292 allegations, with 88 of them resolved, and the balance is still being worked on. As of April 20, 1170 complaints and allegations had been received. 

Bagrie said there are different sorts of firms to consider. 

There are those that genuinely needed the subsidy, those that were unsure if they needed it and were prepared to pay it back, those that saw it as an opportunity, and those who were entitled but didn't take it. 

"The big thing here for a lot of firms is they'll realise that if you've taken this thing, and there might be question marks over the appropriateness, well you're going to make the newspaper, you're going to get free advertising."

The scheme has so far paid out $10.4 billion to protect jobs and support the incomes of more than 1.6 million New Zealanders to help businesses stay afloat during the lockdown, which will shift to alert level 3 next week. 

Social Development Minister Carmel Sepuloni said any business providing false or misleading information and knowingly committing a crime will be held to account. 

"That's a given."