Cabinet decisions and advice to ministers

The following are from the Cabinet Minutes on decisions made on 16 March 2020. (CAB-20-MIN-0108)

COVID-19 Overview of the Government’s Response Economic Package

(Refer to covid19.govt.nz for Cabinet papers)

9. Noted that the estimated cost of the business and worker support package could be around $8 billion over the next five years.

On 9 March 2020, Cabinet directed officials to develop further targeted firm support options for cabinet decisions with priority on: a wage subsidy scheme for workers in the most adversely affected sectors (including possible financial support for leave requested by employees as a result of public health directions) (CAB-20-MIN-90).

Cabinet agreed to implement a temporary COVID-19 wage subsidy scheme.

19. Agree that the purpose of the scheme is to help affected employees and businesses to adjust to the impact of COVID-19, not to support businesses for the duration of that impact.

20. Agreed that the COVID-19 wage subsidy will be for 12 weeks per employee.

21. Agreed to a maximum2 payment of $150,000 per employer.

22. Agreed that any qualifying subsidy will be paid as a lump sum. Noted that depending on uptake this package could inject approximately $5.1 billion into the economy over the next two months.

23.  Agreed that the COVID-19 wage subsidy will apply to employers that have suffered revenue loss of at least 30 percent, and that revenue loss is attributable to the COVID-19 outbreak.

24. Noted that revenue loss assessment will be based on a period of at least one month, and the loss of revenue will be at least 30 percent lower than the equivalent period one year ago (i.e. February 2020 income is 30 percent lower than February 2019).

43. Agreed that the COVID-19 wage subsidy will only be payable to employers who have taken active steps to mitigate the impact of COVID-19 on their business activities (such as engaged with their bank, Chamber of Commerce, industry association or the Regional Business Partner programme).

44. Noted that MSD with support from Inland Revenue may develop more detailed criteria to determine the potential revenue loss.

45. Agreed that employers will need to make a declaration setting out their commitment, on best endeavours, to retain employees identified in the declaration as subject to the targeted wage subsidy in employment on at least 80 percent of their regular income for the period of the subsidy:

46. The Employer will repay any amount which they are not entitled to

47.3 MSD will not verify information in the application before paying but will have the ability to later audit the application, verify information with other agencies and refer possible instances of fraud for investigation.

48. Noted that standard justice processes are available to respond to any cases of fraudulent declarations that may be identified.

49. Agreed that case-by-case discussions can take place with large employers, and any support be negotiated in partnership with banks.

51. Noted the Ministry of Social Development will need additional operating funding to administer this scheme.

53. Delegated authority to the Minister of Finance, the Minister for Economic Development, and the Minister for Social Development to increase funding for the COVID-19 wage subsidy scheme if required.

54. Delegated authority to the Minister of Finance, the Minister for Economic Development and the Minister for Social Development to make technical design changes and minor policy decisions about the wage subsidy scheme;

Cabinet noted that MSD intends to administer the scheme in the following way:

23.1 Employers will make applications in relation to affected employees

23.2 Employers will have to declare that:

  1. they meet all of the eligibility criteria;
  2. they have discussed the application with named employees, who consent sharing information in the application and for the purposes of verification;
  3. the employer consents to the details in the application may be verified with other agencies, and that this information may be published;
  4. the employer is aware that they may be audited and prosecuted for fraud if they have provided false information;
  5. the employer will notify the Ministry of Social Development if circumstances change that affect their eligibility;
  6. the employer will repay any amount which they are not entitled to.

The Auditor-General’s report on management of the wage subsidy noted:

2.12 However, officials did identify risks with a high-trust approach. We were told about discussions with Ministers and saw written advice about these risks. The advice identified risks of fraud or error with approaches that were poorly targeted or that involved limited entry barriers and quick payment.

COMMENT: Cabinet originally agreed to support workers in the most adversely affected sectors. It wanted to help workers and businesses adjust to the impact of Covid-19 but not to support businesses for the duration of that impact.

Employers must have gone to their bank, Chamber of Commerce for assistance. They must have got the consent of employees and if circumstances change repay what they were not entitled to.

Ministers were advised that fraud would be prosecuted but this did not happen.

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