People who own a high-value property or summer residence should have that factored into calculations when they apply for non-contributory social benefits, the National Audit Office has advised. 

While home ownership should not preclude a person from being eligible for benefits, the NAO suggested introducing a cap on the value of homes to be excluded from capital means tests for benefits. 

As things stand, a person can own a house of any value, a second home of any value, one car of any value (and another for their spouse) and up to €14,000 in savings without those counting against them when applying for non-contributory social benefits. There is also no cap on the value of furniture, jewellery or other personal items owned. 

The NAO said the current system allows people with high-value homes to receive social benefits, instead of downsizing their property and using the income to become self-sufficient. 

"More critically, this Office feels that the reasoning behind excluding ownership of a summer residence from the capital means test needs to be revisited, perceiving ownership of such an asset as a significant luxury which, if liquidated or rented out, would surely position its owner above the established thresholds and financial vulnerability altogether," it added.

What is excluded when calculating non-contributory social benefits? Table: NAO

Benefits inspectors interviewed by the NAO said that they sometimes wondered how a benefits recipient could furnish their home with "certain luxuries" or afford "high-end cars" if they were relying on benefits on income. 

But given that such assets are excluded from means testing, inspectors "would not be in a position to act on such observations," the NAO said.  

Non-Contributory Social Benefits cost the government €201 million in 2021. The benefits are intended to assist individuals who cannot work and therefore resort to this safety net to secure an income.

Just three inspectors

Catching benefits cheats is a challenge for authorities, as just three inspectors are deployed at the benefits compliance unit and tasked with investigating potential abuse. 

These inspectors often rely on third-party reports of alleged irregularities and do not carry out "on the ground" inspections unless a red flag is raised. 

Their work is further hindered by a lack of cooperation between government departments, the NAO found: while banks provide the unit with periodic information about beneficiaries' financial situation, government entities such as Transport Malta and the Tax Compliance Unit do not.

"As the situation stands, the department needs to actively ask for information from such stakeholders, rather than such information being periodically received," the report found. 

Rates insufficient for family of four

Despite concerns about the significant potential for abuse, the NAO found that those who genuinely rely on benefits to get by struggle to do so. 

Current benefit rates are insufficient for a four-member family to have an 'absolute minimum' decent standard of living, it found.

"The current non-contributory social benefits system may not be fully fulfilling its primary function toward those who are in genuine need of it," the report, released on Tuesday, said. 

The audit office said it had compiled the essential budget of a household of two adults and two children (also using figures from Caritas) and compared it against the total income received through social benefits. It found that such families would run a deficit and gave the following figures:

The NAO's workings on the minimum income required for a family of four.

The income from non-contributory social benefits by a family of four.

The audit office said people who live off non-contributory benefits would generally have health problems that preclude them from working. Therefore one could need to consider an additional €1,551 in sickness allowance. This would still result in such a family model incurring an annual deficit of €1,155. And this deficit did not factor in additional costs (medical, logistical and social amongst others) which would generally need to be borne by a family who has a severely sick member.  

It recommended that the government commission a study to determine a budget for a minimum standard of decent life, based on realistic current prices and subject to periodic review. 

Read the report in full by clicking the pdf link below.

Ministry: Benefits have been substantially improved

In a reaction to the audit report, the social policy ministry said non-contributory benefits had been improved substantially in the past 10 years but the recommendations made in the report would be considered and changes would be made where required. 

It said that while the benefits safety net had been improved, the government had also introduced initiatives to wean people off dependence on social benefits.

"The ultimate aim of the system of non-contributory benefits, particularly where it is dependant on the means test, is not to provide financial comfort for those who can get a job or who have significant wealth. On the contrary, the system is aimed to support low-income families who, because of life circumstances, have no choice but to depend on social welfare . Therefore in the past 10 years various reforms and measures were introduced to improve the income and services which such people receive." 

The ministry listed the reforms and said that as a result the income of families dependent on benefits had improved significantly.