17 Apr 2020

Covid-19 wage subsidy bill nears $10b, govt starts auditing

From Checkpoint, 5:25 pm on 17 April 2020

Several private schools are among the tens of thousands of businesses receiving the government's wage subsidy, with the total bill now nearing $10 billion.

More than 85,000 businesses have been processed and uploaded to the government's searchable database - 1.6 million people are receiving subsidies worth $9.9b.

Minister of Finance Grant Robertson speaking at the briefing for a Covid-19 daily update on 17 April, 2020.

Finance Minister Grant Robertson. Photo: Pool / NZME

Finance Minister Grant Robertson said that was evidence the wage subsidy was doing what it was supposed to - keeping people in their jobs.

That was in comparison to the rise in people on the job seeker benefit - now 23,000 people.

Businesses receiving the subsidy are searchable using a database on the Ministry for Social Development's website - only five results are displayed at a time but a quick fishing expedition reveals virtually no part of the economy has been untouched.

Air New Zealand has claimed more than $70 million, the Warehouse nearly $52m, Briscoes $6.4m.

The retirement village company Summerset has received $8.8m.

Three of the country's largest law firms are also getting the payment - Bell Gully's getting $1.8m, Minter Ellison $2m and Simpson Grierson on $2.3m.

Business commentator Phil O'Reilly said the wage subsidy was the most important thing the government had done to support business.

"The scale of the spending is really no more than an indication of the scale of the terrible impact this things has had on businesses and communities for the past few weeks and will have for some time."

Even Private Schools are feeling the pinch - Scots College in Wellington has received $1.1m, Chilton Saint James gets nearly $400,000, Iona College in Havelock North $300,000, Ficino School in Auckland around $250,000 and St Bede's in Christchurch $130,000.

Destiny Church is also getting a pay out - several of its branches as well as its school are receiving subsidies.

The Ministry for Social Development said wage subsidies were not available to state sector organisations, but if an independent school or preschool met the eligibility criteria they could apply for the wage subsidy.

MSD General Manager Employment Jayne Russell said, during the initial phase of processing the wage subsidy applications, the focus was on getting subsidies to thousands of employers as quickly  and as efficiently as possible.

But they were retrospectively auditing samples of those who had applied and been paid the subsidy, to help ensure payments were only made in legitimate cases.

Businesses who genuinely applied in error and subsequently refunded all of the subsidy, would have their names removed from the database, once the refund was received).

To put the scheme's cost in context, the $9.9b is more than 10 percent of the total core Crown revenue for the 2018/19 financial year.

Economist Susan St John said the wage subsidy scheme was completely necessary as the brakes went on the economy - but she feared for its future.

"The wage subsidy was important in the first instance to keep employers tied in to their employment - but if that all comes to an end, then we really do have to think very seriously about the inadequacies of what people will be left with."

Susan St John said she wanted to see the wage subsidy scheme become integrated into a new and modernised welfare system to meet the new realities of permanent job losses and redeployment following Covid-19.