New Zealand's coalition government has introduced legislation to reverse a 2025 High Court ruling that found the Ministry of Social Development had been acting unlawfully — recovering supplementary welfare payments from injured people who later received backdated ACC compensation.
The Social Security (Accident Compensation and Calculation of Weekly Income) Amendment Bill passed its first reading on February 17, introduced under urgency by Social Development Minister Louise Upston at 7:30pm. The bill passed with support from National, Labour, NZ First, and ACT — but was opposed by the Greens and Te Pati Maori.
Here is the situation the bill addresses, and it is worth being precise about it. When a person is injured and files an ACC claim, the process can take months. In the interim, they cannot work. They draw on supplementary welfare — accommodation supplements, winter energy payments — to survive. ACC eventually processes the claim and issues backdated compensation for the period the person was waiting. MSD then moves to recover the welfare payments from that backdated lump sum, on the basis that the person was not entitled to both simultaneously.
Justice Grice ruled in late 2025 that MSD had no legal authority to do this. The High Court found the practice unlawful. The government's response was to introduce legislation the following week to make it lawful.
Upston framed the bill as clarification: the law change "clarifies the law so it aligns with the longstanding intent of policy." Labour's Willie Jackson voted with the government, arguing that allowing people to receive both simultaneously "would undermine people's faith in the system." ACT's Todd Stephenson maintained that "there is no new policy — what MSD had been doing was long-standing practice."
Te Pati Maori's Oriini Kaipara was more direct, saying the bill was "punishing the injured, the poor, whaikaha and Maori once again." The Greens made the constitutional point that MSD's past actions had been found unlawful by the High Court — legislating retroactively to validate them is an unusual use of parliamentary power.
The bill will go to select committee within one week before returning for its remaining readings.
Let us be plain about what is happening here. These are not wealthy benefit cheats gaming two systems simultaneously. They are people who got injured, could not work, used the welfare system as it was designed to function, and waited months for ACC to process their claim. The backdated compensation they ultimately received was not a windfall — it covered the income they lost during that waiting period. MSD then sought to recover the welfare payments from that compensation, leaving the person with less than the sum of either entitlement.
A High Court judge reviewed this and said: you had no authority to do that. The government's response, within days, was to give itself that authority retroactively.
The cross-party dynamics are telling. Labour's Willie Jackson voting with the government on a bill that reverses a High Court ruling protecting injured welfare recipients is not a comfortable position. It reflects a broader Labour strategic decision to avoid being painted as fiscally irresponsible — but it comes at a cost to the people the party has historically positioned itself as defending.
Te Pati Maori's opposition, and their specific identification of Maori as disproportionately affected, is backed by data: Maori have higher ACC claim rates and face longer systemic delays in claim processing. The bill's retrospective application means the clawback debts being validated were accumulated under the very delays the system has failed to address.
RNZ has the full legislative detail. The select committee process begins within days.
