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How dental bills factor into problem debt to Government

In brief

  • Beneficiaries needing dentistry no longer have to borrow as much from the Government thanks to a grant expansion.
  • One in six working age Kiwis earn under the living wage and owe Government an average of $6,300.
  • Debt to Government of low income Kiwis has ballooned.

Dental grant to reduce beneficiary debt

On December 1st, 2022 the Special Needs Grant, for citizens earning the minimum wage or less, was expanded to cover dental bills up to $1000 and to include non-emergency work. It was the first increase in 25 years; the average bill is expected to be over $1000 in a few years, so it’s just catching up with years of inflation.

The Green Party and some charities say the Grant is not enough, and that NZ should have free publicly-funded dental care, at an estimated cost of up to $450m a year – but this is likely an underestimate since when things cost less (and especially when they’re free), they’re used more. The Labour Party voted for free dental care at its 2018 annual conference, but hasn’t taken action. ASMS says the proportion of publicly funded dental hospitalisations has risen over the last decade and the dental grant should at least be extended to those earning less than the Living Wage.

The expansion of the Grant is expected to cost $126m over the next four years, similar to the amount loaned for dentistry over the past four years; but it’s only a few percent of the total owed by low-income New Zealanders.

Half a million Kiwis with low income and Government debt

A February 2022 Cabinet paper on problem debt said as of September 2020, over 560,000 New Zealanders earning less than the $45,000 living wage collectively owed the Government $3.5 billion. That’s about one in six working age Kiwis owing an average of $6,300.

Beneficiaries owed $1.7b to the Ministry of Social Development (MSD); $600m was hardship assistance loans. The remaining $1b was overpayments, which happen easily when client circumstances change (or occasionally as a result of fraud); this is exacerbated by the “unmanageably complex” welfare system.

Christians Against Poverty, a charity helping Kiwis struggling with debt, said in 2020 almost three-quarters of their clients owed money to MSD and 40% were in debt for over five years. In 2018 Salvation Army clients owed more to government departments than to finance companies.

40% of low-income debtors were under 35 – not including student loans.

In 2021 MSD debt leapt to $2.1b as lockdowns reduced incomes and the cost of living skyrocketed.

No solution on the table

Some are calling for MSD to wipe all debt. It’s not clear how much can be expected to be repaid in any case. No interest is charged, but MSD works with debtors to try to get loans repaid at a rate the person can handle.

The Cabinet paper, released on behalf of Jacinda Ardern, Minister for Child Poverty Reduction, aims to reduce child poverty by reducing Government debt that families struggle to repay. The paper examines consistency and efficiency, but doesn’t address the causes of poverty.

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