The government has no plans to change the rules to allow debt write-offs for beneficiaries struggling to pay back loans to cover basic living costs.
Work and Income offices Photo: RNZ / Rebekah Parsons-King
More than $500 million is owed to the Ministry for Social Development for recoverable hardship assistance and grants - up more than $100 million on what it was four years ago.
The loans are used to cover essentials like school uniforms, power bills and car repairs, but there have been growing calls for the government to reconsider how it treats this debt.
Beneficiary advocates, budget advisors and charities working with struggling families have mooted debt write-offs as a way to ease the financial pressure.
Ronji Tanielu from the Salvation Army said when people come to them for help with food or housing, more often than not, they've got an underlying problem with their finances.
"They turn up saying it's food, but actually when you unpack it, it's finances - it's debt, it's fines, it's overpayments."
He said a good deal of that debt was owed to the government. Figures for the last financial year showed Salvation Army clients owe more to government departments than to finance companies.
Claire Dale from the Child Poverty Action Group said beneficiaries had to turn to loans from MSD because they had no other choice.
"Because they can't save, they can't protect themselves against a crisis," she said.
"We need to increase the benefit levels for a start and if another crisis occurs for a family, Work and Income should have the capacity to forgive impossible debt."
MSD can write off debt in cases where they've made an administrative error or it's deemed uneconomic to recover the debt.
But Social Development Minister Carmel Sepuloni said she's not looking at making changes to make serious financial hardship a ground for debt write-offs.
She said MSD was working with people to make sure they were repaying their loans at a rate they could afford.