Can Government make businesses pay back wage subsidy?

Author
Newstalk ZB / NZ Herald,
Publish Date
Thu, 1 Oct 2020, 5:06PM
Judith Collins says she will door-knock big business to get wage subsidy back. (Photo / NZ Herald)
Judith Collins says she will door-knock big business to get wage subsidy back. (Photo / NZ Herald)

Can Government make businesses pay back wage subsidy?

Author
Newstalk ZB / NZ Herald,
Publish Date
Thu, 1 Oct 2020, 5:06PM

Labour has warned that Judith Collins' talk about changing the law to claw back the wage subsidy from some big companies will "inject an enormous amount of uncertainty into businesses at a time when they are craving certainty".

However, Collins wasn't backing away from the comments today - even joking that she could play the role of debt collector to door-knock those companies that took taxpayer money, and then laid off staff while making big profits.

"Sometimes you get people - particularly in big business - behaving better when they know there is a possibility of somebody coming down very hard on them," the National leader told media during a tour of Northland.
During last night's Newshub leaders' debate, host Patrick Gower asked Jacinda Ardern and Collins about cases of big companies that took the wage subsidy, then laid off workers and are now posting large profits. Would they seek to get that money back?

"I will, actually," Collins said. "We may have to change a law, I would have thought we would have a lot of support in Parliament to do that."

Ardern condemned such companies, but wouldn't commit to changing the law to get money back. "But, we are also pursuing those who may have acted outside the law. It's a moral issue - some of these companies followed the rules, they just didn't follow the spirit of fairness."

Today, Collins said her answer was somewhat on the hoof, but reiterated her view that legislation could be needed.

She mentioned the Warehouse as one example that caused her concern (Ardern in June said she was "angry", after the retailer announced store closures and job losses, soon after taking tens of millions in the wage subsidy).

"It's just not fair for wage and salary earners to have to go and pay more taxes for longer, because of people actually, frankly, rorting the system. And so we need to find a way of dealing with that," Collins said.

"Well, number one, they'd probably get a visit from me - that might help - with media, you will come with me - we'll sort that out.

"And otherwise we would have to look at how we would do that legislatively-wise. It's pretty hard to do something like that retrospectively. But, you know, sometimes you have just got to think about how you can do it."

University of Auckland business Professor Robert MacCulloch told Heather du Plessis-Allan Treasury could've avoided this situation by adding a couple of lines in the original framework.

"That in the fullness of time, should the companies declare big profits at the end of the financial year, the Government reserves the right to take back the money."

He said it is more likely big business will willingly pay wage subsidy money back, rather than the government introducing a windfall tax, but technically they'be abided by the law.

"Those companies may end up giving in, may weigh up that the damage to their reputation so much that it will be better if they did return it."

BusinessNZ has reacted to Collins' comments by warning any retrospective change would create a large amount of uncertainty for businesses dealing with a recession and global pandemic, and those comments were echoed by Finance Minister Grant Robertson, who was in Nelson today with Ardern.

"What Judith Collins is proposing would inject an enormous amount of uncertainty into businesses at a time when they are craving certainty," Robertson said.

"And for someone who represents a party that purports to understand business, to inject that lack of confidence, I think is extraordinary."

The Ministry of Social Development has the power to demand repayment if audits showed businesses didn't meet the criteria for the subsidy, and Robertson said nearly $450m had been repaid, including by businesses who ended up being in a better position than anticipated and voluntarily gave money back.

"It is important that people take a look and decide whether or not they really did need it, and make that call. But what Judith Collins is proposing - I think - is that there would be a law change, that people who had legitimately received the wage subsidy, would somehow need to pay it back. Governments can't work that way with business. We have got to have a relationship of trust.

"Looking at this with 20-20 hindsight might be easy in Opposition, but we stand by our decision to protect jobs and cushion the blow. There is no way Labour would go back on the agreements we had with those private businesses who used the wage subsidy legitimately."

However, Collins said the situation reflected the lax way the system had been set up - and most New Zealanders would support her hardline approach to those who made a "shedload" of money and, despite this, sacked staff.

"I don't think most New Zealanders would think that was a fair deal."

- text by Nicholas Jones, NZ Herald

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