The Finance Minister, Grant Robertson, has been “talking” to some of the country’s largest companies about whether they will apply for the wage subsidy.
Beehive sources say he spent considerable time over the weekend talking to the companies.
That sounds like he was putting the heat on some large employers not to apply for funding after the situation last year where companies like Briscoes and got the subsidy and then reported good profits.
They refunded their subsidies, as did other major companies, including the Warehouse and Ryman Healthcare.
The news about Robertson’s calls comes as a Parliamentary Committee has recommended that the Ministry of Social Development use the police to help prosecute companies which try to rort the subsidy.
As of 5 March 2021, $703 million had been voluntarily paid back and $23 million compulsorily recovered from businesses that were ultimately ineligible for the subsidy out of the $14 billion-plus that had been paid out.
Robertson revealed yesterday in Parliament that he has $8.1 billion in his Covid Response and Recovery Fund available to fund the current wage subsidy.
$5.1 billion of that was left in the fund at the end of the last fiscal year, and another $3 billion comes from a revised estimate of money unspent by Inland Revenue on its business support measures.
The Opposition, though, remains convinced that Robertson will have to seek authority from Parliament for more.
This is being debated in highly technical terms between Robertson and National’s Finance spokesperson, Michael Woodhouse.
Woodhouse claims that Robertson will have to return to Parliament to ask for more funding when the House debates the second Imprest Supply Bill, which it must do before the next Budget.
The Bill provides interim parliamentary authority for expenditure decisions made or to be made by the Government through to April 2022 that are additional to the amounts in the 2021 – 22 Estimates.
Because of Covid last year, this was a larger than normal amount.
Robertson says he has enough funding available.
He told the House that current spending on the wage subsidy scheme was tracking below the $2 billion a fortnight that had been forecast; so far, it had paid out $876.3 million while the business resurgence support payment had paid out $378 million.
“There is still sufficient room in the COVID-19 Response and Recovery Fund (CRRF) to support our ongoing response to the Delta variant,” he said.
“But he said the Covid response and recovery Fund not the only funding source to help deal with the ongoing response.
“Agencies are also looking to use their existing baselines, and, in addition to that, if there is a need to top up the CRRF, we can do that without going above forecast net debt figures due to the exceptional performance of the New Zealand economy, providing significant fiscal headroom to do so,” he said.
(That is a reference to what appears to be a higher than expected tax take this financial year.)
The Opposition – National and ACT have been trying both at the Finance and Expenditure Select Committee and at Question Time in Parliament yesterday to get Robertson to admit the reason he may not have enough money left in the Covid Response and Recovery Fund is because he has spent large sums on matters other than the wage subsidy and business assistance.
In his May Budget, Robertson said it provided funding from the fund for border services, immigration services, and key arts and cultural entities while revenue levels were affected by lower international travel rates.
It has also allocated funding of $4.7 billion for housing and other sums (at least $1 billion each) to tertiary education, building and construction, transport, education and business science and innovation.
So Woodhouse asked Robertson yesterday why had he “spent so much of the $50 billion COVID-19 Response and Recovery Fund (CRRF) on non-COVID – related projects rather than actual COVID costs?”
Robertson said the vast bulk of the fund ($21.2 billion) had gone on social development, which was largely the wage subsidy scheme.
“I’ve already said in this House a number of times: there are two Rs in the CRRF —”response” and “recovery”—and we’re supporting both,” said Robertson.
But Woodhouse was on shaky ground because almost exactly a year ago, during the election campaign National Leader Judith Collins unveiled a proposal for $4.7 billion of income tax cuts which she proposed to fund by using the same $5.1 billion in the CRRF that is now funding the wage subsidy.
This left Robertson ending the exchange with Woodhouse by saying: “What I won’t do is what the member’s party committed to do, which is spend up to $8 billion worth of the CRRF on tax cuts and his pet transport projects.”
But there was a warning to the Government yesterday about the wage subsidy scheme from the Finance and Expenditure Committee, which has been considering a report on it from the Auditor General, John Ryan.
Ryan defined the scheme as “high trust” and recommended the Government crackdown on businesses trying to rort it.
It should establish robust post-payment verification measures, including risk-based audits “to mitigate the risks of using a high-trust approach.”, he said.
The Auditor-General said that Initially, the Ministry of Social development was incorrectly describing its post-payment reviews as “audits”.
The Committee’s report said that he pointed out in his report that the work being done by MSD did not reach the level of assurance that could be expected of an audit.
“MSD has since changed its terminology to describe its post-payment assurance work as “reviews”, or integrity checks,” the report said.
The Committee was also told by MSD that it had refined its integrity approach over time, carrying out more targeted integrity checks and investigations rather than randomly across all subsidy recipients.
“Most of the post-payment reviews involved phone conversations with people who received the subsidy payment,” the report said.
“The OAG identified that those conversations might not accurately reflect the recipient’s actual situation—for example, as recorded in business accounts.
“In our view, the reliability of those reviews should be tested against additional evidence.”
As a consequence of the Auditor General’s report, MSD is now bringing in the Police to help prosecute companies ripping it off.
“We heard that before a prosecution can occur, MSD must first conduct a full investigation,” the report said.
“It is continuing to work with the Police to gather evidence to support wage subsidy investigations.
“As of 2 July 2021, 1,046 cases had been referred to investigation, of which 520 had been resolved.
“Seven decisions to take civil recovery action had so far been made. MSD expects to continue its investigation work for the next 12 to 15 months.”
In short, between the Finance Minister’s “talking” to big companies and the Ministry of Social Development’s more aggressive approach to prosecutions, the wage subsidy is being tightened up.
The only question now is whether, despite that, Robertson will still need more money to fund it if the Covid lockdown extends for any protracted period of time.