An amnesty for beneficiaries who break the law is needed so they are not threatened with more poverty if they reveal their circumstances, Green Party co-leader Metiria Turei says.
Earlier this month, Mrs Turei revealed that as a young solo mother she did not tell Work and Income how many flatmates were living with her because her benefit would be cut.
She said that since speaking out, she had learned of others in the same situation.
In Parliament yesterday, Mrs Turei asked the government to offer an amnesty to every current beneficiary so they could talk to Work and Income about their full entitlements without risking investigation or financial punishment.
The idea found no favour with Social Development Minister Anne Tolley, who told Parliament that record numbers were coming off the benefit.
She said it was a huge success that 60,000 children in New Zealand no longer lived in households dependent on a benefit.
When Mrs Turei was asked by Morning Report if she was aware the Department of Social Welfare had instituted a penalty-free benefit amnesty in the 1990s, she said she was not.
"We would need to make sure if we had another amnesty now, perhaps because we've cracked open the conversation, that every single beneficiary is aware of it."
She was unsure whether the amnesty would have been in force at the point when she was not telling Work and Income about her extra flatmates, and she might not have needed an amnesty at that time.
But if she had, she would have used one. "What they may have been able to tell me, for example, is that, apparently, you can have boarders when you are on the DPB, so I didn't know that either."
She had offered to meet with Work and Income and would then be able to check details in her file.
"It was 25 years ago, but what I do know now is that people in the same situation will not go to WINZ if they fear they will be punished financially for saying what their circumstances are."
She said constituents had told her they were having take on cash jobs to keep their head above water, and were fearful of the consequences from Work and Income if they confessed.
"It is absolutely unacceptable that people are forced into that kind of abject poverty."
The first step was to ensure benefit levels were high enough so people were not forced to break the rules to survive.
"As long as we know that people are getting sufficient to pay the rent, put food on the table and have decent lives ... then if there are cases of serious fraud after that you can deal with those."