Student Loan Scheme Amendment Bill

Clauses 1 and 2 are the title and commencement date, which normally would be a short debate, but there are some issues when we come to the commencement clause that I think are worthy of focusing on. But in this call I want to focus on the title of the bill.

The title of the bill is innocuous—the Student Loan Scheme Amendment Bill. In fact, the bill could be better termed the “Student Loan Scheme (Ending the OE) Bill”, because that is, in effect, what this will do for some New Zealanders. What this bill is saying to New Zealanders who want to go away on a normal length OE to the UK of 2 years is that it is not the pragmatic solution that Peter Dunne put forward in 2007, and that he articulately very well in Parliament in 2007. That pragmatic solution was struck to ensure that somebody had a provision to undertake their OE. It was not that they were getting off scot-free—they are still paying interest when they are overseas—but they got some recognition of the fact that we support New Zealanders to do this and encourage them to return.

We have heard already in this debate that, in fact, the evidence that Treasury and the Ministry of Education have provided to the Government is that there is a likelihood that this may discourage people from returning from overseas and therefore increase the annual student loans impairment. So we could easily call the bill the “Student Loan Scheme (Ending the OE) Bill”.

Certainly, a title that it could not be called is the “Student Loan Scheme (Pragmatic) Amendment Bill”, because it loses the pragmatism that formerly was in the legislation. During the earlier debate, Peter Dunne mounted an argument for why the loan repayment holiday should be taken down from 3 years to 1 year. The problem with that argument was that if you followed it all the way to its logical conclusion there should not be a loan repayment holiday. Mr Dunne’s argument was that all borrowers needed to be treated the same, essentially, whether they were in New Zealand or whether they were overseas. Well, if that is the logic, get rid of the loan repayment holiday altogether.

Hon David Parker: And the interest.

GRANT ROBERTSON: That is right—and the interest as well, because borrowers in New Zealand are not paying the interest. So Mr Dunne’s logic has fallen from him here, because he has taken it from 3 years to 1 year, but it does not make any sense in terms of the argument he made. The title of the bill certainly would not be able to be the “Student Loan Scheme (Pragmatic) Amendment Bill”, and it would not be able to be the “Student Loan Scheme (Logical) Amendment Bill”, because it fails both of those tests. The loan repayment holiday was put in place as a pragmatic solution to the fact that we do not want New Zealanders who go overseas for a short period to have things put in front of them that will make it less likely that they will return to New Zealand.

During the dinner break I had a tweet—

Simon Bridges: Sausage roll.

GRANT ROBERTSON: I did not have a sausage roll, actually. I had a very healthy dinner, Mr Bridges: salad, ham, and a roll, just so you know. Mr Bridges, on the other hand, was once again wallowing in his Chinese takeaway from down the road, which we see him have most dinner times.

But what this person told me in the dinner break was that they had worked overseas as a volunteer for a number of years on the basis of the loan repayment holiday. They were actually able to spend 3 years working overseas, paying interest—not actually abdicating their responsibilities; knowing that interest would be accruing on the loan—doing volunteer work, and have the loan repayment holiday for 3 years.

The repayment holiday would be down to 1 year now, under this scheme. That would be good and that would be useful, but it does not support New Zealanders in what has been their traditional activity of going on an OE, knowing that at the end of those 2 years, or possibly 3 years if they got an extension on their visa, they would be able to come back to New Zealand, and they would not have had to make those loan repayments in that time. This is pragmatism, and I do think that if the Student Loan Scheme Amendment Bill was to be titled any other way, it would be around a reference to what now happens for New Zealand graduates who go away on their OE.

On this side of the Chamber we want to make absolutely clear that we want people to pay their loans back. Whatever concerns we might have about student loans and the size of student debt, we want everyone who is in this scheme to feel that people are making their repayments, and that people are doing what they need to do. But when there is an opportunity for people to go overseas and do what New Zealanders have done for decades and for generations, it seems very unfortunate that the Government is not prepared to take up the pragmatic solution it was offered.

Thank you very much, Mr Chair, for giving me the opportunity to speak to the title and commencement of the Student Loan Scheme Amendment Bill. A number of suggestions were put forward by Grant Robertson as to a better title for this bill, but I would like to suggest that we call it the “Student Loan Scheme (Second Wave Attack by National) Amendment Bill”. We saw the first wave attack come in its first term of Government, when it restricted the access of older New Zealanders to a student loan. So what we have got in front of us today is the second wave attack from National. Really, it is not much of an attack, because this bill does not achieve what it sets out to achieve. We have already heard that this bill will bring in only another $14 million of revenue by bringing in these provisions around the repayment holiday.

In terms of the second wave attack, it builds up a narrative about National and its commitment to student loans. It does not believe in them, at all. We have already heard from John Key that he thinks it is economic madness to keep interest-free student loans—

The CHAIRPERSON (Eric Roy): Order! Title and commencement.

KRIS FAAFOI: OK. We have already heard my suggestion that the bill should be called the “Student Loan Scheme (Second Wave Attack by a National Government) Amendment Bill”. Why do we think it should be called that? Because of the lack of commitment by National to the student loan scheme. We have already heard from the Prime Minister a rather large missile thrown, in terms of the second wave attack that I am talking about, around his commitment to the student loan scheme. He says it is economic madness to continue the interest-free part of the student loan scheme. In fact, he says that if it was not for the politics of it, he would not keep it. In terms of calling this bill the second wave attack bill, we really do think that National is struggling to continue its commitment to what Labour brought in in 2005 to ensure that there were no barriers to New Zealanders entering tertiary education. We believe that if National actually brought in the bill it wanted to, it would be the “Student Loan Scheme (Interest-free Loan Aspect Repeal) Bill”, because we do not believe that the National Party is committed to interest-free student loans, at all.

In terms of the second wave attack that I have talked about around the title of the bill, we have already heard about the lack of extra revenue that it brings in—

The CHAIRPERSON (Eric Roy): If the member is not going to talk about the title and commencement, I will terminate his speech.

KRIS FAAFOI: Thank you very much, Mr Chair, for that clarification. In terms of the title, I think this bill should be called the “Student Loan Scheme (Second Wave Attack by National) Amendment Bill”. We have already seen—

Simon Bridges: I want to help you get to 5 minutes. Give us some other titles.

KRIS FAAFOI: Sorry, a slight interruption. Well, maybe we should call it the “Student Loan Scheme (Simon Bridges is Getting His Student Loan Interest-free) Bill”. Maybe we should call it that. But the one that I wanted to bring to the Committee today was the “Student Loan (National’s Second Wave Attack on Student Loans) Amendment Bill. [Interruption] It is a good name—thank you very much, Ruth Dyson, and welcome to the Chamber. We do not believe there is a commitment from National to making sure that the student loan scheme stays interest-free. We do not believe that. We believe that it has launched the second wave attack, because of what it did in the first wave by reducing the access—

The CHAIRPERSON (Eric Roy): Right, the speech is terminated.

Thank you for the opportunity to take a short call on the title and commencement of the Student Loan Scheme Amendment Bill. I would like to do two things, and the first is to make a suggestion for an alternative title of the bill, which is the “Student Loan Scheme (Reining Student Loans In) Amendment Bill”. That, of course, is what John Key said recently to an audience of property developers in Auckland he wanted to do with the student loan scheme. Of course, as we all know, John Key would really like to get rid of interest-free student loans, but as he outlined to that audience, he does not see that as politically feasible, and—

The CHAIRPERSON (Eric Roy): Order! The same rules apply: title and commencement. That is the subject of this debate.

HOLLY WALKER: Thank you, Mr Chair. That is why I am suggesting that the title of this bill should be the “Student Loan Scheme (Reining Student Loans In) Amendment Bill”, because it is the only way that National can find to rein in student loans, in the absence of doing what it really wants to do.

I want to move to a more substantive point, which is about the commencement. I note that there is a Supplementary Order Paper on the Table from the Minister of Revenue relating to clause 2(4). That clause states: “The rest of the Act comes into force on 1 April 2012.” The Supplementary Order Paper replaces that word “comes” into force with “is deemed to have come” into force. I want to raise a serious concern about this, because what this essentially does is make the bill retrospective, and I would submit to the Committee that this is bad practice and bad lawmaking. We should not be in the practice of making retrospective law in this Chamber. If the bill cannot be passed in time to meet the commencement date set out in the commencement clause, then that date should be extended. We should not be retrospectively applying this bill. So I want to raise a serious concern about that and invite the Minister in the chair, the Minister for Courts, to take a call to explain to us why it is so important that we need to enact retrospective legislation in this Committee in order for this bill to come into force. I suggest that a far more transparent and democratic approach would be to extend the time of commencement, and I will invite the Minister to take a call to explain that.

To respond to Holly Walker’s comment, I do not think the Minister in the chair, the Minister for Courts, is going to respond. He is tied up with a glossy magazine over there; I am not entirely sure what is in it. I also want to talk about the commencement clause, which means new clause 30D is coming into effect retrospectively. It will come into force on 1 January. What is new clause 30D? We have to turn to new clause 30D to find that it amends schedule 5 of the principal Act—

Simon Bridges: “Shedule”, not “skedule”.

CHRIS HIPKINS: “Shedule”, “skedule”, “schmedule”—whatever. It amends it by repealing clause 2 of that schedule. What is clause 2 of that schedule that this is going to be imposing retrospectively? It says that no interest is to be charged by the loan manager, and then the commencement clause is repealing it retrospectively. National is the party that promised us it was not going to reintroduce interest in any form on student loans, yet it is repealing retrospectively, in the commencement clause of this bill, a clause in the schedule of the principal Act that says no interest shall be charged by the loan manager.

We should rename this bill. It should be the “Another Broken Promise by the National Party Bill”. Not only is National going to break the promise but it is going to do it retrospectively. Under the commencement clause of this bill, it imposes that retrospectively. The clause in schedule 5 of the principal Act that says that no interest shall be charged by the loan manager is gone—gone under this Government—and it is doing it retrospectively. It is imposing it from 1 January this year. That would make it a new record for a broken promise by the National Government. Less than 2 months, effectively, after an election, it is doing away with an election promise. Even though it is now 4 or 5 months after the election, National is going to break its promise retrospectively, by repealing this clause in schedule 5 that says that no interest shall be charged by the loan manager. National is repealing it retrospectively.

This has now actually become one of the major clauses. This commencement clause, which imposes this change retrospectively, is now one of the major clauses in this bill, because it is a broken promise by the National Government. It is trying to sneak it through retrospectively in this commencement clause, under clause 2(1A), which says “Section 30D is deemed to have come into force on 1 January 2012.” The clause that says no interest is to be charged by the loan manager is being repealed retrospectively. It is being repealed retrospectively.

For a starter, that is just bad law. It is simply bad law for the Government to be forcing through the Parliament any provisions that apply retrospectively. But this is a provision that breaks a fundamental promise of National’s of not having interest on student loans, albeit in what is potentially quite a minor way. I have not had a chance to review the entirety of the Act, in terms of how that fits into it, but it is pretty clear. I will read out the clause: “The loan manager must not charge interest in relation to any loan advance made by the loan manager in accordance with this schedule.” That is pretty fundamental. It says that the loan manager cannot charge interest, and the Government is repealing it retrospectively. It is doing away with that element of the interest-free student loan scheme retrospectively. Going back to the beginning of the year, that commencement clause will take effect.

That is a broken promise by this National Government. It is no wonder its members did not want to debate this part of the bill. It is no wonder nobody in the National Government is willing to leap up and take a call. It is no wonder the Minister is not willing to take a call, and say why it is that this needs to apply retrospectively. Regardless of whether it breaks the promise—and I think it is outrageous that National is breaking that promise—any clause in a bill that applies retrospectively needs to be explained and needs to be justified. That is what the Committee stage of the House is all about. It is where we go through bills brought before the House clause by clause, and we are now on to the commencement clause. The Minister in the chair needs to stand up and explain why this clause needs to apply retrospectively—this clause that effectively removes the restriction on the loan manager from charging interest on any loan advance made by the loan manager in accordance with that schedule—that “shedule”—of the Act.

David Bennett: Schedule.

CHRIS HIPKINS: That schedule of the Act. I will help old “Cue Ball” over there. He is getting a bit uptight about the pronunciation of the word.

My colleague Mr Hipkins has raised what is a serious issue, because the commencement clause of the Student Loan Scheme Amendment Bill does bring in a retrospective date for commencement. I think that in principle that is something we should be very careful about in this House—to have legislation having a provision that is retrospectively coming into force. I think it really does require a Minister to stand up and take a call and explain to this Committee, firstly, why it would be that we even have a retrospective commencement date, and, secondly, why on an issue such as this that is deemed to be something that is OK.

For clarification for members, what subclause (1) of clause 2 in schedule 5, which is being removed, says—and as my colleague has said, the clause is entitled “No interest charged by loan manager”—is that “The loan manager must not charge interest in relation to any loan advance made by the loan manager in accordance with this schedule.” We will come back to some of the earlier elements of the schedule in a moment. But to clarify for members of the Committee what a loan advance is, a loan advance means, according to the interpretation section of the Student Loan Scheme Act: “all—(a) money that is advanced by the loan manager to a borrower under the student loan scheme; and (b) student loan establishment fees charged by the loan manager to the borrower under section 14;”—which is what National introduced last year—“and (c) student loan establishment fees and any other type of fee charged by the loan manager to the borrower in accordance with a loan contract.”

That is basically everything. A loan advance is pretty much everything that is provided to borrowers under the scheme. So this clause retrospectively coming into force repeals retrospectively the provision that the loan manager must not charge interest in relation to any loan advance. That is what is now being removed. So this is an interesting change.

The Student Loan Scheme Act is a complicated Act. There may well be an innocent explanation for this, but we do not know. That is the problem with this being done through the commencement clause, rather than through a process that is more open to the Committee, because, as we know, the subject of interest and whether interest is charged or not is obviously at the heart of the debate over the student loan scheme. We have heard already tonight that the Prime Minister and the current Minister for Tertiary Education, Skills and Employment have concerns about whether or not they think the student loan scheme is economically sound. They think it is politically sound, but they do not believe it is economically sound. So that is why we become worried when we see clauses such as this included in the bill.

Essentially it is removing one clause within schedule 5 of the principal Act, and that is the clause that says no interest shall be charged. What this is referring to is actually people who took out loans in a certain period. It refers to people who took out loans between 31 December 2011 and 1 April 2012, so we are in that period now. It is affecting people right now, today, who under this provision in schedule 5 of the Act, passed last year in this House, were to be charged no interest, because that is the situation for every borrower in the student loan scheme at the moment.

So really we do need someone on the other side of the Chamber to take a call to explain what this means, to explain why, for borrowers in the current period we are in now, who had a piece of legislation that told them that no interest would be charged by the loan manager on their loan advances, that has now been taken away. If there is an innocent explanation I am quite sure members opposite are capable of getting up and telling this Committee why that is the case, and then we can get on with the rest of the debate around the title and commencement clauses.

But it is very different to see a commencement clause with a retrospective date in it. We have now been able to identify what that is, and it is a serious matter. There is not much more serious with the student loan scheme than the issue of whether interest should be charged or not. The whole schedule is one that obviously relates to a specific period in time with the loan scheme, but it does raise concerns on this side of the Chamber. If there is an explanation for it we would like to hear it, but in the absence of an explanation we simply are left with the impression that for some borrowers the requirement not to be charged interest has been removed.

We have heard a lot tonight from Government members of the House wanting to see borrowers treated the same, wanting to make sure that people who have borrowed money are treated the same. Well, at the moment, if you are resident in New Zealand there is no interest being charged. Does this clause somehow only apply to people who are overseas? There is nothing in the schedule that I can read here in front of me that indicates that. I think it really highlights the dangers of passing something like this under a commencement clause, rather than doing it in a more open way. This is a serious matter, and I would expect someone from the Government to reply.

When my colleague Chris Hipkins announced that the commencement clause would repeal the interest-free aspects of the Student Loan Scheme Amendment Bill, I noticed that the other members on the other side of the Chamber seemed surprised. It seemed like this was a revelation to them. I notice also that the Minister in the chair, the Minister of Immigration, did not appear to be all that confident about what my colleague has revealed. I am going to echo the call that both Mr Hipkins and Mr Robertson have asked for, and that is to ask the Minister in the chair or even the chair of the Finance and Expenditure Committee whether they would stand and explain why it is that such an important aspect of this bill—an aspect that will have ramifications and dire consequences for thousands of students the length and breadth of New Zealand—is hidden inside this commencement part of the bill. I would have thought that such an important aspect, which is going to affect the future generations of this country, would have been revealed for the entire Committee to see, that it would have been pointed out directly for all to see, and that a significant part of the report be paid to it—but as it is, it is not. So we have had to find out through our research that that particular part of the commencement does repeal the interest-free aspects of the bill, which, again, changes the debate around the title of this bill.

What we are now seeing is that this does not reveal the complete truth about what students should be aware of when it comes to student loans. In fact, the title of this whole bill is wrong. We should not even be calling it the Student Loan Scheme Amendment Bill, because that itself does not reveal this key aspect. It certainly does not reveal that this Government is repealing the interest-free loans for students, and it certainly does not reveal the fact that we are doing away with the 3-year repayment holiday period and diminishing that to 1 year. If you consider the whole environment currently, where there is massive unemployment and people are struggling to find jobs, and this bill is suggesting that we cut the holiday from 3 years to 1 year, how on earth are we expecting these young people, new graduates from university, to be able to repay? I have to ask again, will the Minister sitting next to you, Mr Chairman, please take a call and explain for the benefit of the Committee as to why the repeal of interest-free loans has not been highlighted for the Committee to note. It is hidden in this commencement part here, and it does change the whole aspect of this entire debate.

Yesterday I would have supported this bill. Today, because of the Trojan Horse nature of this Government and the way that this Government is not revealing for all students to know the entire truth about this, I am not going to be supporting it. I know my colleagues stand united in saying that this is the wrong thing to do for students, and it is the wrong thing to do for New Zealand. I say to you again, I ask that Minister to please take a call and respond. There are hundreds—thousands, even—of students listening to this debate, and they would want for this Government to be open and transparent by revealing why it has hidden this particular aspect, which is a very important aspect of the bill, and why it has not even made mention of it in any part of the reports that I have seen. The Government has a lot of explaining to do. I think you owe it to this Committee to demand, in fact, Minister, or even of the chair of the select committee, to explain—

The CHAIRPERSON (Eric Roy): Order! The member cannot bring the Chair into the debate in the manner in which he is.

SU’A WILLIAM SIO: I apologise. I simply was asking by way of the speech that I think we need to compel that Minister and even the chair of the select committee to explain. I do not know whether it is deliberate or not, but I suspect that people listening to the debate will make their own judgment and will suspect that there has been a deliberate attempt by this Government to not reveal that it is repealing the interest-free aspect of this bill. It is the wrong title. In fact, the Government should just call it the “Repeal of Interest-free Loans Bill”, or it could call this bill the “Broken Promises Bill”, because, as I understand it, this Prime Minister—

I move, That the question be now put.