Student Loan Scheme Amendment Bill

Kia ora tātou, nō reira e te Whare, e ngā iwi, e ngā reo, e ngā hau e whā. Tēnā koutou, tēnā koutou, tēnā koutou katoa. Good afternoon, honourable members. The House is in Committee on the Student Loan Scheme Amendment Bill. The question is that Part 1 stand part. It is the debate on Part 1, clauses 3 through to 33. I recognise the honourable member Grant Robertson.

And I recognise the Chair, too. I have seen him somewhere before. Thank you very, very much for giving me the call on this bill. Part 1 of this bill is, in fact, pretty much all of the bill. It is all of the substantive clauses of the bill. In this first call I am going to make some general remarks around what is contained in the bill and where it is going, then perhaps move on to some more specific issues coming up that I have concerns about.

The first thing to note about this bill is that there are a large number of mainly technical amendments contained within the bill that are essentially around tidying up matters to do with the student loan scheme. The student loan scheme frequently needs legislation like this, because it is a complex beast. The interaction between the tertiary institutions, StudyLink, the Inland Revenue Department, and StudyLink’s predecessors have always caused some difficulties and issues, and from time to time things happen like the Inland Revenue Department deciding to change its computer system, and that means the law has to change. I sometimes think we have got things a little bit wrong in the student loan scheme when that is the case, but there are some matters in here that are of very limited controversy, and we do sometimes wonder whether they really need legislative change and whether there is not some other mechanism that could be used to advance the changes that are in here. Those issues are not going to get a lot of attention. They are to do with things such as changes in the names of the repayment codes and the way in which certain types of earnings are treated.

The issues that are going to get more attention, I suspect, in this debate are around the issues to do with the changes to the repayment holiday. Before I come to those, one major issue that has been picked up in this bill is the question of a contact person for a borrower who is overseas. When we look at the student loan scheme and the interest-free element of it, the key element that the interest-free loan scheme has had is that if somebody remains in New Zealand, they will not be charged interest; if they go away overseas, they will be. But we have had, from the beginning of the loan scheme, the issue of what happens when borrowers go overseas. I am actually, in principle, no great fan of the student loan scheme, but since it exists we do need to make sure that there are robust processes in place to ensure that people are making the repayment that they are obliged to do.

There have been examples of people travelling overseas and not making the loan repayments that we would expect them to make, and that is unfair on other borrowers. So no matter what someone like me or anyone else might think of the student loan scheme in principle, we need to ensure that borrowers who are making repayments do not look at other people, see them, and say “Why is that person not making a repayment just because they have gone overseas?”. If a borrower is overseas I think it is a reasonable expectation that they will make arrangements to make payments. There will be many parents around New Zealand who, no doubt, will be glued to their crystal sets right now, listening to this debate. They will be saying “Yes, I am familiar with that.” I know that my own mother, for many years, received the student loan information relating to my brother, who had long since left New Zealand—he was making repayments, I hasten to add. But parents all around New Zealand will be familiar with the fact that they have remained the contact point, effectively, for their children when they have gone overseas. Many of them are very diligent in making sure that payments are made and that information is kept up to date.

However, what this bill does is ensure that it elevates, essentially, the role of a contact person, and I do think there are some questions about that. I certainly believe that some people, when they see the changes that have been made to the role of a contact person, will start to think “Do I want to be that contact person?”, because this means that they will have regular communication. There will be communication right at the beginning about what their roles and responsibilities are. I do not think the reality is that it is greatly different from the situation now, but I do think it will elevate what that person’s role is. It does beg the question as to whether, over time, there may be some intent to have some liability for that person, but that is not, I suspect, the intent at this time. But I do think it is worth the Committee taking just a little bit of time to consider what it means now for somebody to be listed as a contact point. It will not, as I say, greatly change that role, but it does mean that the person will be contacted regardless of whether the borrower has defaulted on their payments. At the moment that would be pretty much the only situation in which a contact person would be contacted. Now they will be contacted as a matter of course, once the person is listed. A person has to be listed, so therefore it does increase the attention that a contact person will get.

I just think the Committee does need to reflect on that. We do not want to set up a situation where, for instance, parents feel that they do not want to be a contact person for their children, because it is going to lead to some kind of increased scrutiny on them. I do not have a problem in principle with having to supply some kind of contact details and contact information, but I do think there are some matters here to consider in that regard.

I want to move now to the question of the repayment period changes that are listed in this particular bill. On the Table are amendments of a remarkably similar nature from the Green MP Holly Walker and me, thinking alike here about the change the Government has made. To clarify this for those watching, the Government is proposing to reduce the repayment holiday, which currently stands at 3 years, to 1 year. The repayment holiday comes into force when someone goes overseas, typically a young New Zealander on their OE. They go overseas and they are not obliged under the repayment holiday provisions to make repayments on their loans. They are accruing interest, because the term of the interest-free student loan scheme is that if you are overseas, you will accrue interest. So they are not getting a free ride; they are actually accruing interest. What the repayment holiday has acknowledged is that New Zealanders have a long tradition of going away overseas, often shortly after they graduate, taking some time to experience the world, and then coming back to New Zealand.

The Minister in the chair, the Hon Peter Dunne, understood this in 2007, when as a Minister in a Labour Government, he oversaw the repayment holiday period going to 3 years. I want to quote the Minister, because I do think what he said here is important. He was talking about graduates overseas, and he said: “The reality they all faced was a very massive debt upon their return to New Zealand, which in some cases would be enough for them to make the decision not to come home at all, and our country would be the loser. We needed to take a pragmatic way through this,”—this is the Minister in the chair—“and, being someone who places great virtue on pragmatism,”—I do not think there is any doubt about that—“it struck me that the logical course of action was to derive the solution that we have: to extend the holiday period for 3 years, recognising the fact that young New Zealanders take that extended period overseas;”. I could not agree more with the Minister. It is a pragmatic response to do that.

Hon Peter Dunne: Five years ago.

GRANT ROBERTSON: Five years ago—it has all changed in the 5 years for the Minister.

Unfortunately, it was 5 years ago, and now the pattern of movement of young graduates going overseas is actually exactly the same. The country that many New Zealanders go to for their overseas experience is the UK, and the UK allows for 2 years there.

Andrew Williams: And Finland.

GRANT ROBERTSON: And Finland—that is good, Mr Williams. We do have a working holiday visa exchange with Finland.

Hon Clayton Cosgrove: We used to.

GRANT ROBERTSON: We may not any more, after this week, but we did have it. But typically, most graduates would find their way to the UK, and they will spend that 2-year period, and possibly a little longer; most people know that it is possible to get extensions on those visas when you are away. It seems to me that this change that is being proposed by the Government actually flies in the face of what is the typical behaviour of graduates overseas. That is what makes it wrong.

But it has also been pointed out to the Government that it actually is not going to achieve the things that the Government wants it to do. Treasury told the Government in the Budget documents that there is little evidence that this change will improve repayments. It is actually likely to increase the debt held by overseas borrowers, discouraging them from returning, and therefore increase the annual student loan impairment. That is the very point, and Mr Dunne noted that the pragmatic way through this, the thing to do to actually encourage people to come back to New Zealand, was to leave a period of either 3 years or—and I have got two amendments. One is for 3 years, but we could compromise, Mr Dunne, between 1 year and 3 years, and go for 2 years.

Dr David Clark: That’s pragmatic.

GRANT ROBERTSON: That is pragmatic. There is also that amendment on the Table, because I think that is more realistic.

Moana Mackey: Common sense.

GRANT ROBERTSON: It is more common sense, Moana Mackey—that is right—to actually fit it around what graduates actually do. But we have to bear in mind that Treasury is pointing out that what this is likely to do is increase debt, and therefore discourage people from coming back to New Zealand.

So the two things that we would have thought the Government wanted to do in a bill like this—reduce the debt, and get the New Zealanders who are overseas back home—are both worked against. It was not just Treasury; it was also the Ministry of Education, which said “This can be expected to have a negative impact at the margin on borrowers’ decisions regarding whether to return to New Zealand.” Simply, this bill is wrong, both in terms of the fact that it does not make common sense and it is also not going to achieve the goals.

I thought I should take a call at this point, because I am the one common link in the chain that the member opposite has referred to. I want to go back to the 2007 situation, because he made some comments early in his contribution that really go to the core of what the issue is. Consequent upon the then Labour Government’s decision to introduce interest-free student loan repayments for domestic borrowers after the 2005 election and to retain an interest component for those who were overseas, we had the immediate challenge of locating who the overseas borrowers were, and where they were. The member may recall that we had a de facto amnesty at that point, whereby we allowed borrowers to come forward and identify where they were, so we could actually get them into the system, because frankly a flat in Dunedin is not actually a good address for a lot of people in northern Europe, and we had many, many people in that case. What we discovered was that although a substantial number did come forward—around 14,000 or 15,000, from memory—there was a large group that we had not got. We still do not know where they are, yet they still have a student loan responsibility.

I guess the starting point that we would all agree on around this Chamber tonight is that people who take out a loan have a responsibility to repay it. I do not think there is any debate about that point. But it is not fair, and I think we would agree on this, to have a situation where some people are being forced to repay and others are not. So you start to move up the scale. What we did in 2007 was to say: “Well, look, there is a trade-off here. If the borrowers will effectively identify themselves as being absent from New Zealand before they leave, we will give them a period of time where they are not required to make repayments.”

I remember the quotation that has been attributed to me. It is dead right. It is utterly accurate. And it was a pragmatic solution, because frankly Dr Cullen and I at that point did not have a clear sense of what a reasonable period of time was. We thought that 3 years seemed reasonable. We thought that was a good test of the New Zealand OE. But looking at subsequent experience—and one ought to be guided by experience; I have always found it to be quite a useful concept to value—what we have found is that most people who go overseas who are notified to us are overseas for less than 3 years. Most are actually overseas for less than 2 years. We also found that the time frame of the length of the holiday had little impact on people’s decision about when they repaid.

So when you start to think about that; you start to think about the signals you want to send, in terms of people overseas having a responsibility to repay; you bear in mind the fact that already their rate of repayment is about three times slower than that of domestically based borrowers, and that they are our real problem; and when you look at the work we have been doing in Australia to track down recalcitrant borrowers, to make them make payments, and, in some cases, to take them to the court to achieve those objectives, then you have to question the validity of retaining the 3-year holiday period. The conclusion that we reached in the context of the framing of this legislation was that for all those reasons, 5 years down the track a 1-year limit was now more reasonable.

I want to make some comments about the nominated person, because these things go hand in hand. As I said earlier, one of the problems we had was that for a large number of borrowers who had fled our shores, with their last-known address a flat in Dunedin or somewhere, there was no effective way of making contact with them. Parents were not all that inclined, for obvious reasons, to want to dob in their recalcitrant borrowing children. Various other people were not particularly inclined to give us information. So what we are saying effectively is that to be part of the scheme you need to nominate a person who will be a contact point. I agree with Mr Grant Robertson, actually. I have heard many, many stories and seen many, many instances of the papers piling up and being ignored. That is pointless. The nominated person is designed to be a point of contact, so that at least the Inland Revenue Department can go to them and say: “Who is responsible? Where is this person? How can we make contact with them?”. What we have also discovered over the last 5 years is that an increasing number—in fact, a significant number—of our borrowers are in contact through various web pages, the internet, and various news sites, etc., so a lot more focus is going in on that point as well. So I say to Mr Robertson and to others that the argument that we are somehow shifting the goalposts by changing the repayment period from 3 years to 1 year does not fit the current reality, in terms of what people are doing overseas. It actually has no impact, based on our experience to date, on their ability and the timing of their willingness to repay.

Thirdly, one factor that is becoming increasingly obvious subsequently is that we are not operating here in a vacuum. The United Kingdom has just made significant changes to its rules regarding residency for people coming from offshore, so many of the people who go over for their OE will not be in the United Kingdom for 3 years, anyway. They will not be able to stay there. So the point of giving them a holiday that they cannot fully access seems to me to be a little beside the point.

What we are seeking to do in this bill is to send the very clear signal that there is a responsibility to repay an outstanding loan—to send the very clear signal that it is not a game of how far you get away from New Zealand means the way in which your responsibilities reduce. I do not think it is at all acceptable that we have a really good rate of repayment for domestic borrowers and a very poor rate for overseas borrowers. The argument that it is difficult for them to make contact or that they are a long way away or that they feel out of touch with New Zealand these days—all these things that I have heard in the last few years—I think is utterly unacceptable. The basic commitment is if you have got a loan, you are expected to repay it. What this bill does is seek to reinforce that basic precept.

So the shift from 3 years to 1 year is, in fact, a recognition of reality. It is not going to deter people from having their time overseas. Coupled with the introduction of the contact person, it makes it better for us and easier for the Inland Revenue Department to keep track of where they are. We will see over time a better rate of repayment. What that does is send a signal to those people who have repaid their loans on time, conscientiously, over the years, that actually their sacrifice has not been in vain. It is simply not fair for some people to get away with paying little or nothing, while others diligently, at a time in their lives when they might well want to be doing something else, are meeting their loan repayments. This bill is a—if I can use the member’s term—pragmatic response to the current situation. It is a common-sense solution, and it will work. It goes without saying, as I conclude, that the amendments that he and the Greens have proposed will not be supported by this side of the House.

I rise to take a call in the Committee stage of the Student Loan Scheme Amendment Bill. Labour supports efforts, of course, to make the student loan scheme more efficient and to improve repayment rates. The Hon Peter Dunne has talked about a pragmatic approach to this. We believe that there is a pragmatic approach to this, and we want to talk in further detail about the repayment holiday changes that are proposed, as they appear in clauses 4(b) and 17 of the bill. We have our own proposed amendment.

The changes to the scheme must be aligned, in our view, to the basic principles of fairness and opportunity—principles that National has ignored in dealing with the student loan scheme, in our view, in respect of this particular aspect. Fairness and opportunity must always be kept in mind in respect of this legislation, but we are particularly concerned about clause 17, as I said, which slashes the repayment holiday period for overseas borrowers from 3 years to 1 year. That is a significant reduction of 2 years, and we are proposing that it be put back to 3 years or, indeed, to 2 years if that is a more pragmatic solution that can be agreed across the House. The OE is a rite of passage for young Kiwis, and it is important that those young Kiwis gather the skills they need to return and be successful in New Zealand. They give back to our country when they return, they develop useful contacts, and they mature—all things that benefit us as a country in the longer term. Cutting that repayment holiday from 3 years to 1 year places in jeopardy the ability of young New Zealanders to go on an OE, and, worse, it risks forcing them not to come back.

I think the evidence presented to us in the Finance and Expenditure Committee by the Inland Revenue Department drew attention to the dodgy nature, if I can use that colloquial term, of the department’s guess about what would happen in terms of repayment. It admitted it was a guess of sorts, and that is not good enough. Both Treasury and the Ministry of Education have indicated that, in their view, this change will in fact increase obligations on people, as they will decide to stay overseas. Part of the evidence the Inland Revenue Department presented to us was that it had done a survey through the Kiwi Expat Association, the KEA network, that suggested most young Kiwis stay overseas on their OE for about 3 to 5 years, but also that it takes between 12 and 18 months to secure meaningful employment.

A lot of Kiwis go overseas and they will work bar jobs, they will do what it takes to make ends meet, but when they are looking for a professional career or they are looking for the kind of work that they want to be based in long term, it takes them a little bit longer to get there. I submit that cutting them off from their OE, from their repayment holiday, before they have secured that meaningful work will force many of them to stay in those jobs, which are not the jobs that they want to contribute to long term. It will cut them short from developing the contacts and other experiences that they need to contribute as much as they can to the New Zealand economy in the years that follow their return. Worst of all, it does risk forcing them not to come back. If they then find that their debt mounts because they have not yet secured that most meaningful employment, they are more likely not to come back, and that is in line with the broad opinion expressed by Treasury and by the Ministry of Education.

I want to come back to what these student loans are here for. Presumably, their purpose is to provide access to tertiary education, not to provide barriers. That context is important, because the clause in the bill that takes their repayment holiday from 3 years to 1 year is in fact presenting another cost barrier as those costs mount. I had the privilege to work in Treasury a number of years ago on a study that looked at the returns on education, and one of the important conclusions of that relates directly to this. It relates to the barriers to access to tertiary education. There are studies overseas, and there have been significant studies, that show that those from lower socio-economic backgrounds overestimate the costs of education by many more times than those from more privileged backgrounds. I will give the exact numbers—no, I do not have them with me, but the order of magnitude is about right. Those from wealthier backgrounds overestimate the costs by about three times and underestimate the returns by about 10 times. That is because people do not generally understand the nature of compounding interest. Those from less privileged backgrounds actually overestimate the costs by something like 10 times and they underestimate the returns by something like 30 times, so it is a much more significant problem. This has a further implication. When we add this already existing problem of perception of the costs of, and barriers to, access to tertiary education to the Government’s proposal to reduce the repayment holiday, we have one further barrier in the way of those who would undertake tertiary education for their own good, for their own betterment, for the betterment of the lot of their family, and, ultimately, for the good of our country.

The project at Treasury covered a number of other things that also bear direct interest to this particular clause. We were asked to spend the $10 billion metaphorically that was attributed to tertiary education at that time as best we could, and lay out what that might involve. That involved looking at governance arrangements, whether the returns on degrees were better than those on diplomas, and whether the institutions we have currently serve us well. What we found, theoretically at least, was that the returns on a degree are phenomenal for our country. So those people who undertake tertiary study benefit our broader well-being as a country. They bring revenue to our country. They are likely to operate in a way that means they will be good taxpayers in the future. If we present barriers to people getting degrees, we are foolish. So those who are from lower socio-economic backgrounds who would find a barrier in the student loan legislation and, indeed, in taking on a student loan should be encouraged. There is Nobel Prize - winning work on this. They should be encouraged to undertake tertiary research, even if that means that the State pays for all of their education, not just the loan but for all of their education.

So this move to reduce the repayment holiday moves in exactly the wrong direction for us as a country. We want to make tertiary education more accessible, not less. What this bill does and what Treasury effectively says is that it puts one more barrier in place for people who want to undertake tertiary education. It is working for those who are privileged, who will be able to undertake tertiary education anyway, but it works against those who perceive a barrier to getting into the tertiary sector. To finish, I want to suggest that we should amend clause 4(b) and the enactment clause, clause 17, to enable that repayment holiday to stay at 3 years, for the good of all of us in our country. Thank you.

It is a privilege to speak on the Student Loan Scheme Amendment Bill. Can I discuss in this Committee the issue of fairness and opportunity raised by the previous speaker, Dr David Clark. Here are some small facts. When we are considering the clauses of this bill, we need to keep in mind that the Government lent $1.6 billion last year; it had $690 million paid back. The current value of new lending is 54c, and the Government writes down 45c of every dollar lent.

As of June last year overseas borrowers of these student loans, which I absolutely support, represented 15 percent of all of those students in New Zealand who took out student loans. Fifty percent of that 15 percent were in default, and those who were in default owed 70 percent of the money that was overdue. That is why this bill has been put in place, and I commend the Minister of Revenue for doing so. When we think about the fairness, which the previous speaker spoke of, it is worth keeping in mind that the median repayment time for overseas-based borrowers is 14.1 years.

Hon Member: How long?

JOHN HAYES: It is 14.1 years—compare that with borrowers here in New Zealand, and you are talking 5.2 years. If you are going to borrow somebody’s money and you are thinking about fairness, keep in mind that that money came from a taxpayer’s pocket. Many of them are not wealthy. Many of them are genuine, hard-working people. If you are going to borrow somebody’s money, you have got two choices: one is you pay the money back; the other is you default. It is not acceptable for a borrower to think that they can hide overseas. If I took the money it is not acceptable that I should think that I should be able to go overseas, completely disappear, and have no obligation to pay it back.

Chris Auchinvole: You wouldn’t do that.

JOHN HAYES: Not that I would do that, and I am sure Chris Auchinvole would not do that—although he does try to hide on the West Coast.

It is really important to think about this issue of fairness. If you are going to take money, it does not grow on trees. It comes out of other people’s pockets, and it needs to be repaid. As a community, we are giving a good opportunity to young people to educate themselves, and what I can say to this Committee is that that money has to be paid back, and if they do not pay it back it is unfair. If the borrowers do not pay it back, if they disappear off and they think they can have an extended 15-year payment holiday, then you have got to think about whether that is fair and reasonable to the person they borrowed it from. I do not believe it is. That is why I absolutely support this bill, and that is why I support clauses 1 to 33. Thank you.

I am pleased to take a call in this Committee stage of the Student Loan Scheme Amendment Bill, and I am proud to move an amendment to this bill via my first Supplementary Order Paper in this House. I spoke yesterday in the second reading debate about the Green Party’s concerns about this bill, particularly our concern about reducing the duration of the repayment holiday for overseas borrowers from 3 years to 1 year. So I am very pleased to move an amendment today to retain the maximum duration of the repayment holiday at 3 years.

I am also pleased to see that great minds think alike and that Labour has also moved substantively similar amendments. I hope that Labour will be supporting mine. I also challenge the Labour Party, if these amendments that we have both proposed are defeated in this Committee stage tonight, to vote against the bill when it comes up for the third reading.

I would like to revisit why we have a 3-year repayment holiday in the first place. A repayment holiday is an automatic suspension from the repayment obligations of your student loan while you are living overseas. A borrower still accrues interest but is not required to make repayments and, therefore, cannot fall into arrears. This is important, because, as was noted in the Finance and Expenditure Committee’s report, a typical borrower overseas may face interest and arrears obligations after a repayment holiday that amount to two to three times the original value of their loan, and that could militate against the likelihood of their ever returning to New Zealand or repaying their loan. It is very important that we get policy settings right—policy settings that incentivise people to, firstly, pay off their loans and, secondly, return to New Zealand.

It has been quoted extensively in the debate on this bill, but I think it is worth repeating once again. The reasons that Minister Dunne had for introducing the 3-year repayment holiday in 2007 are no less relevant in 2012, and those reasons are to help remove a potential disincentive to skilled New Zealanders from returning home. We have heard the quote: “The reality they all faced was a very massive debt upon their return to New Zealand, which in some cases would be enough for them to make the decision not to come home at all, and our country would be the loser.” That is still the case.

I want to address the Minister’s contribution earlier. He said that 5 years is a long time, that things have changed since then, and that it is a recognition of reality. Well, I sat in on the select committee while it was hearing evidence on this bill, and we heard from officials that very little research has been done on the impact of having a 3-year repayment holiday. It has been only 5 years since it was introduced, so there has been only one full 3-year period for people within that 5 years to take a repayment holiday. There has been very little research to address what impact it actually has on borrowers’ behaviour. I will quote again from the select committee report: “there was not enough empirical evidence to evaluate the effect of the three-year repayment holiday introduced in 2007, and that limited modelling has been done on the likely effect of curtailing the holiday, as borrowers’ response to the change is uncertain.”

It just seems like bad lawmaking to me to be making this change in a vacuum of knowledge. It seems to be based solely on ideology and—if I may borrow the phrase that has been used earlier—it is completely the opposite of a pragmatic approach. The Government, we know, is looking for ways to rein in student loans without touching interest-free student loans, and this just seems to me to be its attempt to do that.

My Supplementary Order Paper 16 aims to prevent this bad lawmaking by retaining the maximum duration of the repayment holiday at 3 years. I invite members to support it and, as I mentioned before, I challenge the Labour Party that if these amendments do not pass and if Labour really believes that the repayment holiday should be kept at 3 years, then it should not be supporting this bill through the rest of its stages through this House. The reasons given in 2007 from the Minister are no less relevant now, and the fact is that we could be creating policy settings that will make it less likely for people to return to New Zealand and pay off their loans.

I would like to note that one thing that has changed since 2007 is that even more New Zealanders are moving permanently overseas, and we know that the figures for this in this year are the highest they have ever been. So, in that context, it seems very important that we make careful law that is based on evidence, that does not fly in the face of advice that has been received, and that has actual empirical backing behind it. We just have not had the chance since 2007, when this was introduced, for that to be the case. It is irresponsible to be reducing it down to 1 year. So I invite the House to support my amendments. Thank you.

I want to concentrate on two clauses in this very worthy bill, the Student Loan Scheme Amendment Bill, which I support wholeheartedly. One is new section 88A in clause 14, which is focused on the area of adjusted net income being a means of calculating the borrower’s income in accordance with a formula. The idea there is to maximise repayments from New Zealand - based borrowers. The bill makes amendments to exclude losses such as rental losses from the calculation of net income. I think this is very worthwhile.

Ultimately, what we are trying to achieve here is a higher rate of repayment. There is a very, very large liability here on the part of the taxpayers as part of a very expensive scheme, and the fact is that repayments are slow. We are writing it down to 54c for every dollar that we have lent. So any means that can increase the repayments I think are worthwhile. This new section 88A, which excludes such things as being able to offset losses generated from rental properties, is just one way to draw back to people their responsibilities for repaying these loans.

The other area that I want to focus on is new section 107A in clause 17, which, again, is this issue of the contact person to be nominated. Here in subsection (3) it talks about specifying the details of the name of an individual, a New Zealand postal address, an electronic address if the individual has one—and we all do these days—and a New Zealand telephone number. Again, this is very basic stuff in response to the reality that we have lost track of many of these people with student loans.

Sitting suspended from 6 p.m. to 7.30 p.m.

PAUL GOLDSMITH: As we were having our dinner break it gave me pause for thought to think about why this bill is particularly important. It is not so much a huge amount of money, although it is not irrelevant; we are looking at potential increased repayments of around $14 million. I think that is a very conservative figure, and that will reduce the need for further borrowing on the part of the Government—$14 million is probably an increase of 2 or 3 percent in the repayments, and we are hoping for more.

But that is not the key ingredient. The key ingredient is that it sends a clear message that when you do borrow money, you should pay it back. This bill is all about just turning the knob a little in the direction of encouraging people and making it clearer that we need people to think about paying back those student loans sooner rather than later. I commend this bill to the Committee on that score. Thank you.

Kia ora, Mr Chairperson. I rise on behalf of New Zealand First to again state that we will be providing our conditional support for the Student Loan Scheme Amendment Bill to go to the third reading stage. New Zealand First supports the New Zealand - based contact person, although we again reiterate that there is no indication in the papers that we have been able to access as to what will happen should that person choose not to provide subsequent contact details of the borrower. New Zealand First supports the exclusion of investment and business losses from the calculation of net income when accessing loan repayments.

We take no issue with the reduction from a 3-year to a 1-year loan repayment holiday. I note that the Minister of Revenue explained to the Committee that one of the reasons why the 3-year term was incorporated originally was due to the lack of experience or reference points that would have factored into the best period of time for such a repayment holiday when this legislation was originally drafted. I would respectfully suggest that those involved should have actually gone and found themselves a debt collector or taken advice from a credit controller. It is a known reality that the longer debt is unpaid, the less likely it is that it will be repaid. It is a known reality of those in those quoted professions that after 3 years, you are exceptionally lucky to be able to track down that debtor. In the credit control world, 6 months is about as far as you ever want to allow a debt to be neglected. But, as I say, New Zealand First will be supporting the 1-year repayment holiday amendment.

I note the number of times my Labour and Green colleagues have used the example of New Zealanders not returning to this nation with their skills due to the shortening of the repayment holiday. Can I be so bold as to suggest that in some cases it might just have the opposite effect: if individuals have not found the job of their dreams overseas within a 12-month period, then it may well be time to bring their skills back to New Zealand—to enter a no-interest environment and contribute to the nation that assisted them to obtain those skills in the first instance. But this bill is not about finding the job of individuals’ dreams; this bill is about debt reduction. Again, from personal experience, the sooner debtors address their debt, the greater the likelihood that that debt will be repaid, and the sooner the stress—and it is stressful to know that one has a debt—is removed.

I want to take particular note of the words “fair” and “fairness” in discussion around this particular clause, clause 17. If this bill is about being fair to New Zealand students with a student loan, then why is it only those who leave our country who have an established recognition that sometimes life, either through accident or design, just does not go as planned, and that people may need to take a break from those repayments? I gave an example yesterday of how that might manifest itself in the lives of women, whether they are overseas or whether they are here in New Zealand.

No bill works in isolation. This bill should not be just about debt reduction, and, obviously, if the Minister is using words like “fair” and “fairness”, it is not. But there is a bigger picture that this amendment could have brought to the issue of debt reduction. Couple that with the issue of skill retention, and then we have a bill that really works for New Zealand, if this bill extended itself to alternative debt reduction ideas, such as New Zealand First’s dollar for dollar student loan reduction policy for those students who recognise that New Zealand assisted them to gain these qualifications by paying that forward through their skills by staying in New Zealand. That commitment should also be acknowledged.

I need to close by saying that a $12 billion debt is not an asset; it is dead money, and a contributor to our skills shortage. And although we support this bill going forward to its third reading, we are disappointed with its lack of vision. Thank you.

Following on from that particular contribution from Tracy Martin, I want to pick up on the last point first, and that is whether, in the interests of fairness, the holiday period should be applied to domestic student loan borrowers. I would say that if that member does believe that this is an opportunity to convince the Government that applying the same measure to domestic borrowers is something that should be considered, then we would welcome the opportunity to see what her amendment to the Student Loan Scheme Amendment Bill might look like in that regard.

On the second issue, in terms of young people going overseas, I think there has been quite an extensive contribution from across the Chamber on the benefits of young people going on working holidays. I would certainly be of the mind-set, in respect of young people who have gone straight from school, perhaps, to get their qualification and have then wanted to have that experience overseas, that we are certainly richer for it, because we are from a small coastal nation. It is a long way away to get over to what is often the most common destination, which is somewhere in Europe—often the UK—and once you are in the UK you can travel throughout the whole of Europe. That experience, in itself, I think adds value to the skill set that a person has got once they have gained their qualifications. I think you appreciate the context with which you can bring those skills back into the New Zealand working environment. I appreciate that experience. I think that if more New Zealand young people—and more New Zealanders—had the opportunity to travel, we would see our own country through very different eyes. In fact, we would appreciate far more not only the opportunities and experiences we have here but also our ability to really contribute to this country in some very positive ways.

On the period of debt reduction from 3 years to 1 year, I made the point in a previous contribution that it would seem to me just a common-sense approach to align the debt reduction period to what is commonly associated with a working holiday period, which is 2 years, and some of our bilateral agreements with other countries are for the 2-year period. So I was pleased to see that Grant Robertson had introduced an amendment for members to consider and support, which either retained the 3-year period or, in the interests of compromise, set a 2-year period. I think it is worth considering that this matter—and the point was well made—was not well reviewed. In fact, advice was given to the Finance and Expenditure Committee that there was no strong rationale for 3 years and that members should be urged again to consider the time period. But I would go so far as to say that this is probably a part of the bill that should be reviewed so that members actually understand what the effects are of a holiday period for loan repayments on recouping student loans. I want to confirm, certainly in terms of Labour’s position, that we too believe that having a good track record and paying back debt is something that people should be inspired to participate in, if this bill is sending the right signals.

The next point I want to move to is this issue around identifying a contact person. I would like the Minister to take a call on this and, in the interests of clarification, maybe answer these questions. When a contact person is nominated by the borrower in the first instance, does the contact person have the opportunity to opt out? I ask that because implicit in the bill is that the borrower has asked the contact person whether they can pass on those details, and in the frame of thinking of young borrowers, they could be putting their parents’ details there and they might not have asked their parents. That is probably the most relevant example in this situation. For whatever reason, the contact person may choose not to be identified as the person who is to keep track of the borrower, but it is not entirely clear in the bill whether there is an opt-out provision, in the first instance, for the contact person to turn down the opportunity to be named.

In the second instance, it seems to me that the intention of identifying a contact person is so that the Inland Revenue Department can keep tabs on the borrower for communication purposes. I understand that, and I understand the importance of that, but it seems to me that, for example, with regard to the need for the Inland Revenue Department to capture more data or information on that borrower, the contact person has to weigh up and say: “Well, I am not sure whether I have full consent to give more information or not.” And how would they be treated if they do not give over more requirements of information? I take you to the part of the bill that actually says that under the regulations, the loan manager can require—that is, in new section 16A(1)(e) in clause 7—“any further information specified in regulations.” So it appears to me that although there is specific information outlined in the bill that must be required, if there is any further information and the contact person is not sure whether they have the right, or whether there are privacy issues entailed, it is not clear whether they should be, in fact, giving this information. I think it is important for the Minister to clarify that particular issue.

The other part that I would like to point to is that if this is intended to give confidence to borrowers that by identifying a contact person this will ease for administrative purposes the repayment of loans or the capturing of data so that loans could be repaid, then the Inland Revenue Department or the loan manager should be required to review the effectiveness of this particular clause and report on it in some shape or form. I raise that as an issue for the Minister to consider, and I ask whether that has been considered or whether he received advice on it. So he could clarify whether, by reviewing the effectiveness and efficiency of this clause, that could continue to give confidence to people who want to repay loans—confidence in the mechanism used to have a contact person identified and therefore make contact with the borrower.

By and large, there are a number of other aspects to this bill that I think have been well traversed, but, in the first instance, I really think that it is important for the Minister to respond to some of those key points, because we still have not had a satisfactory response to the setting of the period by which loans should be repaid and the reducing of the period of repayment for loans from 3 years to 1 year. That, in itself, is something that would be required, I think, for the benefit of the Committee—to clarify why the Minister of Revenue, who initially supported 3 years, is now proposing 1 year.

There is a simple amendment on the Table from Grant Robertson that could be considered by members in the Committee. I think it is a common-sense proposal—

Dr David Clark: Pragmatic.

Hon NANAIA MAHUTA: —and very pragmatic, and it does align the repayment holiday period with the working holiday period that young people go overseas for. Kia ora.

Thank you very much, Mr Chair—oh, my goodness, that is loud! And it is not even me, this time. I am very happy to take a call on the Student Loan Scheme Amendment Bill, and I want to begin perhaps just by canvassing a few of the principles behind the student loan scheme. The Labour Party is very proud of the track record we have when it comes to the student loan scheme. The student loan scheme was put in place to ensure that financial barriers do not prevent people from participating in tertiary education. That is one of the reasons why Labour took a number of steps during the term that we were in Government to make student loan scheme repayments faster, which is one of the things this bill purports to want to do. Whether or not it is going to do that is the subject of some comments that I am going to make shortly. But we wanted graduates to get through their debts faster to be able to get on with their lives, and that is one of the reasons why we made student loans interest-free. From memory the average—

Hon Anne Tolley: No, it helps to win an election.

CHRIS HIPKINS: No, actually—oh, so it is to win an election? Well, this just highlights the National Party’s stance on interest-free loans, does it not? One moment John Key said he was going to fight interest-free student loans with every bone in his body; the next minute he said that it was shonky economics. Was that what it was—it was shonky economics?

Dr David Clark: But it was good politics.

CHRIS HIPKINS: But it was good politics. So now it is good politics for National members to support it, but in their heart of hearts, they do not believe in interest-free student loans. They do not believe in the policy that has seen the average repayment times for student loans more or less halved. So here they are bringing this bill to the House today, which they claim is going to result in faster repayment times for student loans—faster repayment times for student loans; that is what they say this bill is going to do—yet they are opposed to the very policy—the very policy—that resulted in much, much faster repayments of student loans. That was interest-free student loans.

But coming back to the bill—I am not going to be distracted by that unruly lot over there. As the wheels start spinning off the Government, you can see the desperation in those members’ eyes, but I will not be distracted by that, because on this side of the Chamber we do believe in faster repayment times for student loans. That is one of the reasons why the amendment put forward by Grant Robertson is a very sensible one. The advice that the Government has received is that by reducing the repayment holiday from 3 years to 1 year, it will actually increase the amount of debt. It will increase the amount of debt.

Now, of course, that is something this Government is quite happy with. It does not really mind about debt—debt on any number of levels. Whether it is student loan debt, current account debt, or Government debt, this Government is happy to see it all increase. It wants to borrow. More borrowing—that is what this Government is all for. It does not matter who is doing the borrowing—whether it is people with student loans, whether it is the Crown, or whether it is households—borrow, borrow, borrow is the message that we get from this Government. Borrow, borrow, borrow. We are not going to borrow our way out of recession, but that is what this Government seems to think. That is what this Government seems to think, because this amendment that the Government is proposing to make in this bill will increase the amount of debt. That is not my view; that is what Treasury is telling the Government. Treasury is telling it that this is going to result in more debt—more debt—and yet it is going to go ahead. Let us be clear about what this is. This is all about the National Government looking like it is doing something. Actually, this bill is not really going to make a huge amount of difference other than the fact that it is going to result in more debt.

So to move to the amendment put forward by my colleague Grant Robertson—which I fully support—to restore the repayment holiday back to 3 years, I believe that this is a very pragmatic decision. I am looking forward—I am really looking forward—to the contribution from Peter Dunne on this. I suspect it is going to be the defining part of this debate. It will be the contribution from Peter Dunne, because he was very clear in 2007 that he thought that extending the repayment holiday from 1 year to 3 years was very sensible. It was pragmatic. That is what Peter Dunne was saying at the time. He seems to have changed his tune.

I will be very interested to see how Peter Dunne votes on Grant Robertson’s amendment. If Peter Dunne votes against the amendment put forward by Grant Robertson, that will simply confirm what everybody suspects—that Peter Dunne’s view of pragmatism is whatever it will take to keep his ministerial warrant. That is Peter Dunne’s view of pragmatism. I am looking forward to him proving us wrong—to Peter Dunne coming into the Chamber and voting in favour of Grant Robertson’s amendment. If he does do that, and if that amendment passes, Labour will vote for the rest of the bill, because we actually do not have a problem with the rest of the bill. But we do have a problem with this provision in the bill that reduces the repayment holiday—the amount of time someone can spend overseas without having to worry about repayments—from 3 years to 1 year, because we do not think it is going to work.

John Key stood in the Westpac Stadium in Wellington and lamented the fact that 30,000 New Zealanders left every year. Of course, we have got more New Zealanders leaving New Zealand every year now than that. In fact, we are at record levels of people leaving New Zealand, and some of the people leaving New Zealand are recent graduates. They are recent graduates going off to do their OE—it is a bit of a rite of passage for New Zealanders. That is something we encourage; we just want them to come back. It is good to do an OE, because you get a whole lot of experience that you might not get in New Zealand. If you are a medical graduate, for example, working for a few years in an overseas hospital is going to give you exposure to a whole lot of different things and experience that you might not get in New Zealand.

Maggie Barry: But why should we pay for it?

CHRIS HIPKINS: We should pay for it, Maggie Barry, because they will be better doctors when they come back to New Zealand. They will be better doctors when they come back to New Zealand. But this Government does not care about getting them back to New Zealand. It is quite happy to say “stay there”. After training them, after spending all that money to train them, this Government would rather have them stay overseas than come back to New Zealand. We in the Labour Party want them to come back to New Zealand. We do not want to see the trend continue as it has under this National Government, under John Key’s Government, for more and more New Zealanders every year to leave the country and not come back. They are not coming back, because this Government is not giving them any hope that the future is going to be better for them when they do come back.

This repayment holiday may seem like only a small thing, but if you have got graduates overseas seeing penalties starting to rack up while they are away, that will act as a major disincentive for them returning to New Zealand, and that is the very last thing we should be doing. For a lot of our graduates, 1 year is simply not enough in terms of the time. They might want to do a bit of work, they might want to have a bit of holiday, they might want to visit a couple of different countries, and 1 year is not probably enough; 3 years is adequate time. After that time I think it is fair for New Zealanders to say: “Hey, you’ve had your university education or tertiary education”—whatever variety it is—“you’ve had your OE, you have had your overseas experience, we now want you to come back and contribute back to New Zealand, and if you don’t do that, we expect you to start making repayments from wherever you are to get your loan balance back under control, to start paying off your student loan.”

That is very reasonable, very fair. The Labour Party supports that. But requiring people to do that after 1 year is going to lead to more graduates in default, more graduates clocking up debts and clocking up penalties, and that is going to act as a disincentive to them coming home. That is one of the reasons why the amendment put forward by Grant Robertson is a very, very sensible amendment—a pragmatic decision recognising that many young New Zealanders take that extended period overseas. That is what Peter Dunne said when he supported the 3-year repayment holiday, before he went back to supporting the 1-year repayment holiday in the space of 3 or 4 years—but that is OK; that is Peter Dunne. As I said, Peter Dunne’s view of pragmatism is whatever keeps his job.

But I am looking forward to his proving us wrong. I am looking forward to the significant contributions from the Māori Party. I notice that we do not seem to hear so much from the Māori Party these days. It could have something to do with the fact that those members are not allowed to read their speeches any more. They have been kind of unplugged, so to speak, and so we do not tend to hear quite so much from the Māori Party. I am looking forward to the contributions of Mr Banks. The ACT Party’s Mr Banks will, I am sure, argue that we should do away with student loans altogether and that it should be the ACT Party’s view of Darwinism: survival of the fittest, and whoever has got the most money should get the tertiary education; everyone else should just join the line.

Moving on to some of the further substance of the bill, I must admit I was intrigued by Minister Peter Dunne’s amendment. Actually it is the commencement clause that I was about to talk about, so I will talk about that when we get to that part of the debate. But I am interested in the fact that one of these provisions comes into effect retrospectively. That is pretty unusual and I will be interested to hear the justification as to why we are imposing a retrospective clause in this bill. I will get to that when we come to that part of the debate.

Just moving back to the points of principle that I was raising at the very beginning, the Labour Party of course supports efforts to make the student loan scheme more efficient. We think that the student loan scheme is a very important way that we can ensure that everybody can participate in tertiary education and make a brighter future for themselves. Graduates should not be shirking their responsibilities to make repayments, but the quid pro quo from that arrangement is that we have to make sure those repayment arrangements are fair. Removing the interest was fair; this is not fair.

I move, That the question be now put.

I want to deal with the issue as to what it is that is standing between borrowers and repayments. I was on the Finance and Expenditure Committee that heard submissions on the Student Loan Scheme Amendment Bill and we heard from a former official of the Inland Revenue Department who, when she was with the department, had responsibilities that included the recovery of student loans. She informed the committee that although it is appropriate that we have a contact person for a student loan other than the borrower—normally the parents; I do not think anyone in the Chamber disagrees with that being a sensible thing to do—in her opinion she did not think this was going to make much difference to repayments, because the reality is that the vast majority of the outstanding balance of overseas-based student loan borrowers relates to interest and penalties. Once interest and penalties reach a certain point and interest compounds every interest period, the amount that is accruing due to the Crown grows at such a rate that the borrower feels helpless and hopeless. They think that this has become such an insurmountable problem they choose to ignore it, because they do not see any meaningful way that they can get their loan under control.

So her evidence to the select committee was that this problem of outstanding overseas student loan amounts is not going to be properly dealt with until we come to some way of dealing with some of these very significant arrears that we have on some of these older balances. This was also the experience that we had for New Zealand - based student loan borrowers, where New Zealanders were borrowing and paying interest whilst they were at university and then paying interest during the period of repayment. We had quite a number of borrowers who became so behind that they just gave up and they did not even make an attempt to repay the principal or the interest because they could just not get ahead. That is the problem that we have here.

So I would invite the Minister in the chair, Chester Borrows, to take a call and to respond to this issue as to whether that, in fact, is the case. I would suggest it is, because of the evidence that we had from the department on the effect of these measures on student loan repayments—and Dr Clark might be able to help me with supplying a figure here. The amount that this is anticipated reducing overseas student loans is—

Dr David Clark: Apparently the repayment holiday’s $5 million out of $12 billion.

Hon DAVID PARKER: So $12 billion owed in total on student loans and the proportion of those who are overseas is substantial. This legislation improves collections by decreasing the holiday period from 3 years to 1 year and it increases collections by an estimated $5 million.

Dr David Clark: Treasury and the Ministry of Education think it will actually have the opposite effect.

Hon DAVID PARKER: So Treasury—

Hon Member: It’s just a guess.

Hon DAVID PARKER: No, it is a good point. David Clark was on the committee as well and he interjects by making the fair point that indeed the Ministry of Education thinks that rather than encouraging more repayments, this is going to make it worse, because more student borrowers will be getting into trouble earlier. I am not sure that I am completely convinced by that argument, because I do think that if you have a lengthy holiday period, then you are more likely to get used to not repaying. I think there is some benefit in letting people know what the real event is slightly earlier. But I do not think it is going to collect old debts from debtors who are not paying, because their interest bills and their penalties have become so high, and they compound every interest period, that they just cannot get on top of the problem.

So for the Government to present this as a substantial cure to outstanding indebtedness on loans to borrowers overseas, its own analysis shows that that is not true, and therefore this is but tinkering at the edges. Until the Government is willing to grasp the nettle and actually do something with these long-outstanding balances and the accrued interest and penalties that are the major part of the debt now, it is not going to get on top of the problem. To the extent that the Government includes these receivables in its financial statements at probably a higher value than is truly recoverable, then it is misrepresenting the position to itself. I know that it makes an allowance for uncollectable debt, but I suspect that in respect of these international debts that allowance for uncollectable debts is too low. So I would ask the Minister to respond as to whether the underlying problem is, for a lot of these old debtors, the fact that interest is accruing.

I move, That the question be now put.

Thank you very much, Mr Chairman, for allowing me a call on Part 1 of the Student Loan Scheme Amendment Bill. I would just like to touch on a point that Mr Parker made around the sums that are involved in actually taking these measures, and whether or not this is just tinkering at the edges in terms of National’s commitment to student loans. I understand that by taking the measures in this bill—and the member for Dunedin North did point this out in the last call—we are looking at bringing in about $14 million—

Dr David Clark: In total.

KRIS FAAFOI: —in total, more revenue as part of the measures that are being taken in this bill. To put that in—

Dr David Clark: A best guess.

KRIS FAAFOI: That is a best guess—

Dr David Clark: The IRD.

KRIS FAAFOI: —from the Inland Revenue Department. But to put that in perspective, a total of $12 billion is owed by New Zealanders who have taken out a student loan. To put that in a context of those who are now overseas, $2.5 billion is owed in terms of student loans by Kiwis who have now studied, have taken out a loan, and have gone overseas. I understand in the nominal sense that that is 0.12 percent. In terms of what this bill is going to do in terms of taking action against those who have gone overseas and maybe are shirking their responsibilities in terms of paying their student loan back, we do not think on this side of the Chamber that this will make much of a difference.

One of the aspects of that—and there is an amendment on the Table under the name of Grant Robertson pertaining to new section 107B in clause 17—is around the repayment holiday, which will be reduced from 3 years down to 1 year. As someone who has gone overseas for roughly 2 years on an overseas experience, this is something that I would have been caught in if this law had been in place in roughly 2006 and 2007. This would have meant that I would have had only a 1-year repayment holiday, which means that I would have come back to somewhere in the vicinity—and maybe my colleague over here will be able to correct me if I am wrong—of a debt of around $1,000 or $3,000 if I had not repaid my loan while I was away. As I was away for 2 years, the law as it is proposed in the bill at the moment would have meant that I would be a year out, and if I had not repaid, then I would have returned to New Zealand with a considerable debt.

We do think that the Committee should consider the amendment that is on the Table under the name of Grant Robertson, making sure that this bill keeps the repayment holiday period at 3 years. We think it is a good solution. Given the amount of time that Kiwis usually head away overseas to take their OE, we do also note—and it has been mentioned on a number of occasions—that the Minister of Revenue, Peter Dunne, in 2007 did state that a 3-year working holiday period would be a pragmatic approach to making sure that we can get back the revenue that we can get back, and it would suit better the purposes of those students who had taken out a loan and had gone overseas. We also understand that Treasury itself has said that making this change from a 3-year period to a 1-year period may, in fact, mean that less money comes in, in terms of revenue from those who have gone overseas.

In terms of this bill, we have already stated that we are looking forward to the contribution from Peter Dunne. We ask that he return to his position in 2007 where he quite clearly stated that a 3-year holiday period was much more preferred in terms of that holiday than a 1-year period. We also look forward to maybe seeing members on the opposite side of the Chamber who may think that this is a good move supporting the amendment of Grant Robertson. The student loan bill at $12 billion is a significant amount of money. We want to make sure that the students who have taken out a student loan do get into the habit of paying it back, and if they can pay it back, they do. But with $2.5 billion being owed by students who are overseas, we think that much better measures can be taken in this bill in terms of what is in this now, to make sure that we can get some of that $2.5 billion back. It is a significant amount of money.

It is a concern that we had a significant interjection, or a contribution, from Maggie Barry across the Chamber while Chris Hipkins was speaking. We do want to try to draw some of best and brightest back, and maybe taking a load off them in terms of their student loans is a way to do that, but to hear Ms Barry say that we will never get them back is a concern. We want to make sure we get our best and brightest back. As Chris Hipkins said, it was pointed out by John Key ahead of the 2008 election just how many Kiwis are going overseas, and we want to make sure they are coming back.

I move, That the question be now put.

The principal point about this legislation is that nobody objects to improving the administrative requirements of the student loan scheme under the Student Loan Scheme Amendment Bill. But the point is that the requirements set out in this bill—which Mr Simon O’Connor, my friend opposite, finds so entertaining—is that it simply will not make a material difference to the Crown’s balance sheet and to the efficacy of this scheme.

For a scheme that presently has an outstanding balance of $14 billion, of which $2.5 billion is for overseas students, the value of that $2.5 billion is increasing mainly because of those who are subject to compounding interest. A scheme that is going to net the Government an extra $14 million a year can be described only as creating a drop in the ocean. That is all it is going to do. With all of the other challenges before this Government and before us all, there are different ways not only of skinning this cat but also of achieving a much more material effect that will improve the Crown’s balance sheet and the income and expenditure statement.

The real question is why go to these lengths. Why shorten the repayment holiday when it is simply not going to have a significant effect? The message that it is sending young people who complete their studies is that we will just make it harder. You will not get your 3-year holiday; you will get a 1-year holiday. The signal that it sends, however much that may be psychological or not, is that we are going to take something off you and we are going to make it harder—and all for the benefit of $14 million.

In fact, it is not even that; it is actually $5 million, because $9 million of the $14 million benefit relates to excluding business losses in the calculation of repayments in the particular year. So in reality this is a $5 million gain against a $14 billion problem. It is laughable. It is risible. The real question is why we are going to these lengths for this purpose.

The other point, too, is the contact person requirement. Having to provide a contact person, on paper—and let us face it, it is on paper—might sound like a sensible idea, but the truth is that the way this clause is drafted, it is actually meaningless. It could be anybody whose name is put down as a New Zealand contact person when a person takes their holiday. It might sensibly be the parent, but it may not.

And even if it is the parent, what will be the material effect of that provision? There is no suggestion that the parent will be chased for any outstanding payments or the outstanding loan, nor your best buddy, whose name you might provide, or some name that you made up—because that is not unknown. That is not unknown in this country. It is not unknown for New Zealand citizens to make up names on forms. It is not unknown for New Zealand citizens to apply for passports in names that have been made up, and, indeed, for MPs to behave in that sort of way. Fortunately, they are former MPs now, so we do not have to dwell too much on that.

When it comes to efficacy—not only the efficacy of this bill but also the efficacy of this Parliament—and the time we spend on things, creating a $5 million solution to a $14 billion problem hardly measures up. We have to do more and we have to do better. We all know, and there is a wide consensus, that we want to maximise access to tertiary education for the nation’s young people. At a time of great economic change there is one thing we must do, and that is invest in our young people and invest in their skills and skills formation and their training. That is why the scheme plays a crucial and important role in the life of New Zealand and our young people in our tertiary education system. We do want a more effective repayment regime, but a regime that simply improves the collection in any one year by $5 million when there is so much outstanding is hardly worth the many pieces of paper it is written on. So even with that, even with reducing the repayment holiday, even with that marginal improvement, there is very little else in it.

I move, That the question be now put.

The first Grant Robertson amendment is essentially the same, so it is now ruled out of order as being inconsistent with the previous decision.

The question was put that the following amendments in the name of Grant Robertson to Part 1 be agreed to:

to replace in clause 4 “365 days” with “2 years”; and

to replace section 107B(3) in clause 17 with:

(3) For the purposes of this subpart, a borrower reaches the borrower’s limit if—

(a) the borrower has had 1 or more repayment holidays, granted under this Act, for a period of 2 years or for periods that total 2 years; or

(b) the borrower has had 1 or more repayment holidays under Part 3 of the Student Loan Scheme Act 1992 for a period of 3 years or for periods that total 3 years; or

(c) the borrower has had—

(i) 1 or more repayment holidays under Part 3 of the Student Loan Scheme Act 1992 for a period of less than 3 years or for periods less than 3 years; and

(ii) 1 or more repayment holidays, granted under this Act, for a period that equals, or for periods that in total equal, the lesser of—

(A) 2 years; and

(B) the remainder of the period of the repayment holiday to which the borrower would have been entitled under Part 3 of the Student Loan Scheme Act 1992 if that Act had been repealed; or

(d) the borrower has had his or her repayment holiday under Part 3 of the Student Loan Scheme Act 1992 continued under section 108A(2) for the maximum period prescribed for that continuation; and

to replace in new section 108A(2)(a) in clause 17 “365 days” with “2 years”.

I have a typescript amendment in the name of the Hon Nanaia Mahuta, but it is not signed, so it is out of order.