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The Gama Foundation is Right

The Otago Daily Times reports that a charitable trust has applied to Wellington’s High Court for judicial review of the Ministry of Social Development’s failure to prosecute a single case against any recipient of the wage subsidy. “As a result of MSD’s management of the wage subsidy scheme, the Foundation considers there has been a huge transfer of wealth to businesses that did not in the end experience the drop in revenue which might have been anticipated when the subsidy was claimed,” the Gama Foundation said in a statement. Trustee and founder Grant Nelson said he was, “concerned that the failure to recover public money may mean that some important government social and environmental projects will not be able to get under way, and the debt incurred as a result of the wage subsidy will be a burden on current and future generations”.


Grant Nelson is right to do so. The government messed up the design of the wage subsidy scheme - it should never have been rolled out to large highly profitable public companies, for example. Auckland's biggest law firms even put their snouts in the trough. Even though lawyers could work at home throughout last year's lock-downs. And for all we know, their revenues actually increased during those times due to legal disputes that were breaking out between landlords and tenants who couldn't access their premises. Applying for those funds constituted unethical behavior on behalf of those law firms. I challenge them to release their accounts over the past 18 months so we can find out the truth.


The law firms returned the funds, but only after we turned the heat on them by releasing an article which I wrote, together with a former Finance Minister, which questioned why they took the money in the first place.


Labour implemented this loosely worded wage subsidy scheme so to help it win the last election by securing the business vote. As previously noted on this blog, all they had to do was write into the scheme an ex-post claw-back clause along the lines "should the firm receiving this subsidy end up reporting profits to year ended 31 March 2021 that are not lower than previous year's profits then the funds must be returned".


See:


https://www.odt.co.nz/news/national/wage-subsidy-msd-facing-legal-action-over-enforcement