Student Loan Scheme Amendment Bill (No 2)

It is a pleasure to take a call, or—who knows—a couple of calls, on the Student Loan Scheme Amendment Bill (No 2) in its Committee stage, where we are discussing Part 1. I wish to reaffirm that the Labour Opposition will be supporting the bill at this stage, and I would like to acknowledge the work of the Finance and Expenditure Committee and, indeed, the Minister of Revenue, in bringing the bill to the House.

The bill does two relatively straightforward but relatively minor jobs to the student loan scheme. Firstly, it broadens the definition of “income” so that it includes income from trusts, companies, superannuation schemes, and so forth, in calculating eligible student or family income. Secondly, it allows information sharing between the Customs Service and the Inland Revenue Department so that the Inland Revenue Department can track students who are in serious default of their repayments when they go overseas.

The bill, however, is notable not so much for what it does do but for what it does not do. Although it does save the Crown approximately $7.5 million over the next 5 years, it ignores a total of $2.67 billion—that is, $2.67 thousand million of accumulated student debt. There are no solutions for the student loan debt crisis in this bill, nor are there any solutions for the longer-run and just as important issue of the intergenerational unfairness between the generation represented by most, but not quite all, members of this House, which is the baby boom. I do not personally have the pleasure of being part of that generation because I just squeak into Generation X, I am happy to say—

Hon Members: Oh!

Hon DAVID CUNLIFFE: Thank you, members opposite. I know that there is a certain amount of jealousy there from the backbench of the Government benches. I may give Alfred Ngaro the benefit of the doubt, but I most certainly will not be giving that member from Hamilton too much benefit on that call. It is also somewhat interesting—

David Bennett: Are you going to make your speech about what I said 5 years ago?

Hon DAVID CUNLIFFE: That is all right—settle down, gentlemen, settle down. It is also pretty interesting that the Minister in the chair, the Minister of Revenue, has got this bill to the Committee stage today, being the day that the second of his two tax measures, the cellphone tax, has been torpedoed by the Prime Minister, following, as it does, yesterday, when his car-park tax was similarly torpedoed. There is, of course, a common theme between those measures, which the Government is now seeing reason on, and the measures in this bill. The common theme is that this is the “Minister for Small Changes”. The Minister has made small things happen while ignoring much bigger problems. In the tax area, of course, it is the gaping chasm created by a lack of a capital gains tax. We are one of only three countries in the OECD not to have one. Of course we need one, says the IMF, says the OECD, but we do not have that debate today.

Of course we need to have more fairness in the income tax system. Of course we need to fill in major avoidance loopholes. Those are huge jobs; they are just jobs the Government is not tackling.

Here in the student loan scheme there are two principal strategic issues. The first is that the scheme is costing the taxpayer an arm and a leg, and the debt is mounting. That debt is now to the tune of billions—$2.67 billion, according to the latest information—and it is growing. This bill shaves off, over 5 years, perhaps $7.5 million, which is not quite $1.5 million a year of cosmetic trimming to the cost of the scheme, but in the meanwhile it does nothing much to address the inherent unfairnesses.

I see that the member Holly Walker has resumed her seat. She gave a very good speech in the first reading of this bill, where she drew attention to those intergenerational problems and said that the student loan scheme is putting at great risk a generation of students, who are working hard, playing by the rules, and learning as fast as they can, but who are starting their working life with a mortgage even though they have no house.

In my first reading speech I used the example of two hypothetical people, Old Peter and Young Peter—one was hypothetically the age of the current Minister and another was one of today’s students—and compared the situations faced by both of them. The results were based on some pretty straightforward calculations—for example, at a minimum of $172 per week living costs and a study year of a conservative 40 weeks, Young Peter would have racked up $34,500 by graduation. Including fees, his debt would be $64,500 before he starts trying to graduate, get a house, get a mate, or feed a family. That is the burden that today’s young people are growing up with, and what we want them to know from the Labour perspective is that we understand their plight and that we are going to work tirelessly—not just through this bill but through a number of measures that we will be working on and bringing to the public before the election—on that issue of intergenerational fairness.

We think, for example, that a capital gains tax and an active housing policy that provides more affordable homes for young New Zealanders is an important complement to measures like the affordability of tertiary education. We certainly do not like the arbitrary 5-year limit on receiving student loans, which is essentially putting postgraduate study beyond the reach of all but those who were born with the proverbial silver spoon.

It is interesting, is it not, that in the current Government there are one or two poster children for social mobility: the Prime Minister, it is often said—although that is a carefully crafted narrative—and, indeed, the Minister for Social Development. But the difference between this side of the Chamber and that side of the Chamber is that when members on this side see someone climbing the ladder, they want to make sure the ladder is there for the next generation. The difference between us and the Government is that it has made rather a nasty habit out of pulling the ladder up after itself to save money from its own tax bill, and damn the torpedoes of the implications for the next generation. This bill—although we support it because it does nothing wrong and it takes minor steps towards making the scheme slightly fairer—is a bill of two small things, while the elephant in the room is a scheme that is foundering under the weight of debt and foundering under a growing and pressing problem of intergenerational unfairness. It is time that the Minister responsible for the student loan scheme, the Hon Peter Dunne, stood up and took responsibility for those major issues, just as he should stand up and take responsibility for the major issues in the revenue portfolio.

New Zealand does not need just tinkering. We do not need more of the same. We do not need lipstick on the pig that is the New Zealand economy. What we want is a step change. We want vision, we want strategy, we want “go forward”, and we want jobs for hundreds of thousands of New Zealanders currently without work, so that they can get ahead, so that they can make the best—

Mike Sabin: Lipstick on pigs is not something I’d be bringing up.

Hon DAVID CUNLIFFE: —of their potential, and, in this context, Mike Sabin, so that they can pay off their student loans, because if they do not have a job, they cannot pay back their loans. It is well known that we face—

Andrew Little: Step change, not a small change.

Hon DAVID CUNLIFFE: It is a step change, not a small change—well put, Andrew Little. Unfortunately, we have got the “Minister for Small Change, not Step Change” in the chair—the “Minister for Small Change, not Step Change”—and we need a step change. It is well known that in the next few weeks hundreds, or possibly thousands, of workers in one of New Zealand’s largest telecommunications companies—many of them smart, young people on good wages—are going to lose their jobs, and the question is where are the replacement jobs when hundreds of telecommunications company workers hit the streets? What about the jobs for the smart, new graduates from the business school and the engineering school who would like opportunities like that, which will not exist? And what about those like Young Peter, who start work with a mortgage of greater than $60,000 because they are similarly burdened by debt?

Mike Sabin: Where’s that aspirational, positive attitude we’ve come to see?

Hon DAVID CUNLIFFE: Well, the member over there talks about aspiration. I have aspiration for my children, and that is that they can get a good tertiary education, that I can help them and they can pay the balance, and that they will get a job when they finish, and they will maximise their potential and, thereby, their contribution to this country. When we have a small change, not a step change, we are leaving a generation out in the cold. Those people deserve better. They deserve these small changes, but they deserve a whole lot more besides.

I would like to thank the previous speaker, the Hon David Cunliffe, for raising the issue of intergenerational equity in relation to the student loan scheme, because it is, indeed, the elephant in the room when we look at this Student Loan Scheme Amendment Bill (No 2). I am speaking as probably one of the few speaking on this bill who has a current student loan and who is, therefore, qualified to speak about the provisions in this bill, so I would like to thank that member for raising that important issue. Indeed, it is for many people of my generation a significant detriment to starting their lives, to beginning their lives as families, to considering the prospect of homeownership, and to starting their adult lives with the equivalent of a significant mortgage hanging over their heads.

Where I differ from the Hon David Cunliffe is that in the Green Party’s opinion there actually are some things wrong with this bill, and that is why we oppose it and will continue to oppose it. We see this bill as part of the gradual erosion of the fairness of the student support scheme, and I think we have seen under this current Government in the last 5 years or so a very damaging trend of gradual amendments to the student loan scheme that harm students and graduates, disincentivise tertiary students from studying—particularly those from low incomes—and incentivise graduates to move overseas.

In my contribution I would like to look at two elements of Part 1 of the bill that are of concern to the Green Party. The first of these is one of the two major changes that this bill makes, and that is the provisions for greater information-sharing with the Customs Service. The Green Party has no problem per se with encouraging overseas borrowers to keep up with their student loan repayments, but the big problem it has with the provisions in this bill that make it easier for information to be shared with the New Zealand Customs Service and to track down graduates at the border to ensure that they are meeting their repayments is that it comes in the context of the reduction of the repayment holiday from 3 years to 1 year. I note that the Minister of Revenue, who is in the Chair, introduced the 3-year repayment holiday, and it was a very good idea and one that we were very happy to support.

The reason we supported a 3-year repayment holiday is that we think provisions in the student loan scheme need to reflect how young New Zealanders spend time overseas. What we know is that the average young New Zealander who goes on an OE or travels and works overseas for a period of time does so for more than 1 year. That is the typical New Zealand OE experience. While doing that they gain skills and experience, which they bring back to New Zealand when they return. There is a net gain to New Zealand of their return to New Zealand. However, there is a big “if” over that: the “if” is “if indeed they do return to New Zealand”.

Our concern with bringing in these punitive provisions to allow the Customs Service to share information and track graduates down at the border, as this bill does, in the context of only a 1-year repayment holiday is that it makes it significantly more likely that many graduates will be pinged with penalties and interest because they do tend to be overseas for more than 1 year. This creates a real disincentive for them to return to New Zealand. If their student loan bill is racking up penalties and interest, there is a real disincentive for them to return. We know from talking to New Zealanders overseas who are in this position that many worry about the size of their student loan when they return. That is why the 3-year repayment holiday was such a good idea when this Minister introduced it. But now that it has been reduced to only 1 year, we in the Green Party think that it will make it very difficult for graduates to meet their repayment obligations when they are overseas. The Green Party cannot support provisions that make it more punitive and more difficult for graduates and easier to track them down in the context of only a 1-year repayment holiday. It was a very short-sighted decision and for that reason we cannot support those provisions in Part 1 of the bill.

The second part of Part 1 I wish to address in my contribution in this Committee stage is the transitional provisions and regulation-making powers inserted by the Finance and Expenditure Committee. These provisions, added at the select committee, allow the Inland Revenue Department to administer the changes in this Student Loan Scheme Amendment Bill (No 2). But what we have seen—and, as I have mentioned, this bill comes in the context of a trend of small but punitive adjustments to the student loan scheme over a number of years—is that there have now been so many small and complicated changes to the student loan scheme that the Inland Revenue Department’s computer systems and administrative systems are groaning under the weight of them. There is a real question mark about whether those systems are sufficient and are able to actually administer the changes that are being made in this bill. We have seen a similar difficulty recently with the same systems with the changes to child support. Clearly, the IT at the Inland Revenue Department is in urgent need of an upgrade. What we have seen is a student loan scheme that has been tampered with so many times that that system can no longer cope with the complicated array of amendments it is expected to administer.

The Government’s answer to this, and this is the provision that has been inserted by the select committee, is to introduce wide-ranging regulation-making powers to allow for transitional provisions or any changes that need to be made at the Inland Revenue Department to administer these changes to be made by Order in Council . We have a real concern in the Green Party with this model of lawmaking. We think that it represents a trend that we have seen in this House, since the introduction of the Canterbury earthquake recovery legislation, of introducing wide-ranging regulation-making powers under Order in Council. When there are tricky issues for a Government to administer or deal with, instead of bringing them back to the House for the proper parliamentary scrutiny and due process, it is easier just to shove in an Order in Council provision and deal with it that way. That is a real problem. We think the changes in this bill are representative, and these transitional provisions and regulation-making powers in Part 1, inserted by the select committee, are symptomatic of that approach. It is a very concerning approach that we have seen from this Government. I note that the Labour members of the select committee also expressed their reservation about this at the select committee, and I am sure we will hear from them about that. But it seems to me to represent a very concerning model.

Those two changes, the transitional provisions and the information sharing with the Customs Service and tracking down borrowers at the border, are the two parts under Part 1 I wish to address in this contribution. As I said at the outset of my speech, the elephant in the room, of course, is the $12 billion of debt that is now on the backs of the people of my generation who had to pay for our education and take out a student loan. Instead of taking the opportunity to enhance the fairness of the student support system—and there are many ways to do that—this bill contributes to a gradual erosion of the fairness of that scheme and a damaging trend that will harm students and graduates, disincentivise tertiary study, and incentivise those graduates to move overseas, or to stay overseas if they are there already.

Kia ora. I rise on behalf of New Zealand First to speak in support of the Student Loan Scheme Amendment Bill (No 2). But before I begin on the statements I wish to make around the first part of the bill, I just want to pick up on the fact that David Cunliffe mentioned intergenerational fairness and Holly Walker mentioned intergenerational equity. I think, on behalf of New Zealand First, I would like to express our disappointment that we have lost the goal of actually returning to a time when the debt that is recognised by our young people through the provision of education is the debt of their time, their skill, and their commitment to their country, as opposed to a financial debt. I think it is a shame that it appears that Labour and the Greens have decided to move away from that, being a goal that New Zealand First still holds through greater income across the whole of the nation so that we can support our young people more.

With regard to the Student Loan Scheme Amendment Bill (No 2) I would like to spend the moments that I have addressing the Supplementary Order Paper 184 amendments to clause 10 in Part 1, which I have on the Table. I mentioned these at the first and second readings and I apologise for the fact that I was not on the Finance and Expenditure Committee so I was unable to bring this comment to the select committee at the time, but I have now brought the amendments to the Committee.

Supplementary Order Paper 184 in my name seeks to address the concept of fairness. It is a word that is used in the preamble of this bill, and we have already heard it several times this evening. I want to be clear around why the amendments to the two clauses that I have placed on this Supplementary Order Paper should be supported by all members of this Committee, to address the fairness for New Zealand based borrowers. For New Zealanders with student loans who choose to stay at home, who choose not to troop overseas but to remain in the country paying their taxes both direct and indirect and using their skills to benefit the nation, my Supplementary Order Paper seeks to address the fairness of the repayment holiday. Right now there is no recognition that New Zealand - based borrowers can find themselves in circumstances of financial stress.

For example, let us take a hypothetical New Zealand two-parent, two-child family residing in Gisborne. Both of the partners have pursued higher education and they carry student loans. In the last 3 months the company with whom partner A was employed has shifted its production lock, stock, and barrel to Melbourne, Australia. Partner A now, through no fault of their own, has found themselves without income. Obviously under the current legislation partner A is not required to keep up their loan repayments, as their personal income has fallen below the repayment threshold, but what about partner B’s income? This family is now totally dependent upon partner B’s income. This family has been able to go to their bank, the one holding their mortgage, and gain recognition of their financial difficulty and gain a mortgage holiday from that institution. My Supplementary Order Paper would allow this New Zealand family to take the same set of difficult circumstances to their Government via the Commissioner of Inland Revenue and gain a 1-year repayment holiday while they rework their finances. That is the first part of my Supplementary Order Paper 184.

The second part of Supplementary Order Paper 184 is to shift the 1-year repayment holiday limit from the individual to the loan. It is another small yet practical step to address fairness. Let us take the case of a 25-year-old engineering student who has completed her degree and has been lucky enough to find employment in her chosen field. While at university, she met the love of her life and went on to purchase a home here in New Zealand and begin a family. Let us imagine that this young woman is actually partner B in the previous example. If my Supplementary Order Paper passes, the commissioner would quite rightly recognise the financial difficulty that this young family had and would grant this young woman a 1-year repayment holiday from that initial loan. Under current legislation, this would have completely used up this citizen’s repayment holiday entitlement. This young woman goes on to repay her student loan in full after that 1-year repayment break.

Fast-forward 20 years. That young woman is now a confident 45-year-old. Her children have grown and now, as a lifelong learner, she returns to university to upskill to enhance her ability to add value to New Zealand. She needs to avail herself of another student loan to complete that study. Thankfully, she is only 45, not 55, or she would be totally out of luck, but that is another story. Now she completes that study and once again takes up full employment. Within 4 years she and her family suffer the loss of her partner through an accident. This event obviously has a substantial effect on this lady’s life in many ways. One of these ways is her ability to meet the financial commitments they made jointly. My Supplementary Order Paper 184 would recognise that this New Zealand - based borrower has not had a repayment holiday on this particular loan. It would recognise that she met all her previous repayment obligations in respect of her previous loan, and there should be no impediment for this New Zealand - based borrower to gain another 1-year repayment holiday due to hardship.

I believe that cost could be or will be used as an argument to suggest that my Supplementary Order Paper should be voted down. I would argue that, just as the Minister cannot predict how many students with loans will seek a repayment holiday on the basis of travelling overseas in any given financial year, nor can he expect a flurry of applications from New Zealand - based borrowers or predict such a flurry should this Supplementary Order Paper become part of the amendment bill. So I contend that this particular argument should be dismissed, especially considering that the commissioner would have the ability to grant these repayment holidays under a set of criteria, unlike the ability of overseas-based borrowers to leave the country without any required clearance. We come back to fairness, so I ask all the parties in this Chamber to support my Supplementary Order Paper 184 for the fairness of New Zealand - based borrowers. Thank you.

I am very pleased to take a call on this bill, the Student Loan Scheme Amendment Bill (No 2). I was intrigued to hear from the Greens spokesman Holly Walker that, apparently, the Government is being punitive in what it is doing with the student loan bill—punitive—which is amazing to me because the New Zealand student loan scheme is amongst the most generous in the world. If you look at some of the figures here—I have got figures from the latest distribution of public spending on student financial aid—New Zealand spends about 42 percent of its tertiary education budget on student financial aid. That is much higher than any of the other countries here. Australia spends only 32 percent, Canada only 15 percent, the United Kingdom 30 percent, and the United States 20 percent. As a result, as a part of our overall tertiary education budget, we spend very, very heavily on student financial aid, primarily through the student loan scheme.

It has been a very generous scheme, and the previous Government, in my view, was reckless in its approach. It was just one of the many things that that previous Government did that left the country pregnant with financial deficits for the next 10 years, because of all the promises and all the looseness and laxity that it engaged in. So although it might be a seductive notion to be generous with other people’s money, it is not at all a worthwhile thing to leave the country heading on to an endless line of deficits. This Government had to do something about it. It has been working in all sorts of areas of the economy, but the student loan scheme has not been left out. This Government has set about getting some realistic boundaries around the student loan scheme. Previously, we reduced lending to borrowers who are less likely to repay loans. It makes good sense. We have introduced academic performance requirements for borrowers, requiring students to pass 50 percent of their full-time courses over 2 years—again, perfectly good sense. We have stopped lending to students who are in default on previous student loans. My goodness, why would you not do that? We have limited borrowing to 7 full-time studying years. Well, given the fact that every dollar that has been loaned out has been costing everybody else in society around 50c, it is not an unreasonable thing to put some limit around the time.

That has led to some significant progress over the past three Budgets. We have been able to reduce the costs to the Government of student loans from 48c in the dollar to about 39c today, which is a very significant achievement. What that means is that every dollar that we loaned out was immediately written down by 48c in the dollar when we took over, but now it is down to 39c, which is still very significant but at least somewhat more affordable. This is another demonstration of National delivering on one of our key priorities—to responsibly manage the public finances.

What does this bill do? As we have heard in the previous readings, this bill contains three main elements. Firstly, the definition of income has been broadened for student loan repayment purposes to align more closely with the income that we have used for determining Working for Families tax credits. So if you are based on an income, you need to have a realistic view of income, including trusts and so forth. That makes good sense. We have also introduced some information matching between the Inland Revenue Department and the New Zealand Customs Service, and we have heard lots of whining from other parts of the House about that being unreasonable. How can it be unreasonable? If you are living overseas, you are a New Zealander, and you have been in default on your loans—i.e., you have been given money by New Zealanders and you are refusing to pay it back—how can it be regarded as unreasonable for the New Zealand Customs Service to share some basic information when you seek to come back to New Zealand or to renew your passport and so forth? I think that is something that New Zealanders would be shocked to discover we have not been doing. I absolutely agree that we should be doing that in this bill. Thirdly, amendments are being made to revisit aspects of the design of the student loan scheme to ensure that its administration is as efficient as possible.

So, all in all, I think National is making the student loan scheme sustainable into the future. We do believe that it is important to support students, and we do believe that the sooner they pay back their loans the better it is for everybody, not just for the nation, which is lending the money, but also for those students, so that they can get on with their lives and we can prepare students for jobs in the future. We do have one of the most generous schemes in the world.

Just in conclusion, I think the best thing we can do is encourage students to borrow only very carefully and to pay it back very quickly. Thank you.

I want to start with a small correction, if indeed I heard correctly Tracey Martin from New Zealand First—normally an incredibly scrupulous and careful MP—say that both the Greens and Labour were moving away from the goal of collecting moneys from students. I want to say that that is not true. Certainly, in our case, we are supporting the Student Loan Scheme Amendment Bill (No 2).

Tracey Martin: No, that’s not what I said, Mr Clark. I said you’re moving away from a free education for all. You’re moving away from that goal.

Dr DAVID CLARK: “Moving away from the goal of a free education for all.”, says Ms Martin. That I would also dispute. I do not think that is true. Labour certainly wishes to have free education for all, and that is something that we intend to move towards over time, as it is an affordable policy. That is something we certainly will not rescind from.

We have concerns about the bill, although we will be supporting it because we support the effort to collect these moneys that are due to the taxpayer. When money is given in good faith to support an education, it is right that the Government collects it back. That is the principle that we start from.

In one of my previous lives, I had the privilege of being the warden of Selwyn College in Dunedin—

Tim Macindoe: Not a bad college.

Dr DAVID CLARK: —which I am proud to say is regarded by many, and rightly so, as New Zealand’s finest college. The member opposite may beg to differ, but I credit him, certainly, with having attended New Zealand’s second-finest college, and that is saying something. In that role I had the opportunity to see many students who were striving earnestly to study and to make the most of their opportunities. I have to observe that since I was a student myself times have become more difficult. It is a lot harder for students to pay their way through their studies. They now either require a generous benefactor or must work every hour and more of a 40-hour week through the summer holidays beforehand, as well as some time during term time, in order to pay their fees in an establishment that feeds them and provides accommodation. That is not a good state of affairs, because it can distract from the efforts of study. Many students are not reaching their potential at university now, because they are forced to work to supplement their studies to a level that was not the case, certainly, when people of my generation were students. The student support scheme in those days was far more generous. Unfortunately, inflation has eaten that away.

The point that I am wanting to develop through my discussion, as you will hear, is about the sustainability of the scheme, which is a point that goes to the heart of this bill—part of the reason why we support it, and part of the concerns we have with the bill. The preservation of the scheme was touched on also by Mr Goldsmith, who made some claims about it costing 50c in the dollar and patting his Government counterparts on the back for drawing that cost in. I want to point out to the Committee and to those watching at home that much of the so-called reduction in cost is in fact based upon accounting tricks. The fact that moneys are written off and then later re-included is a strange treatment in the student loan scheme that is not seen in other loan schemes, so one must be very careful with the statistics that are used. They are used for convenience, in my observation, by the Government when it wants to make it sound a far more expensive scheme than it actually is, because it is not in favour of this scheme.

We know that National introduced the loan scheme. Labour later followed up with an interest-free scheme because we believed in reducing the costs of education, moving towards that free education system that Ms Martin also spoke of. We took a step in that direction. National, of course, subsequently has introduced interest again on that loan scheme, and that tells you the direction that it wishes to take it. Certainly, Mr Goldsmith is advocating for an understanding of the scheme that it is far more expensive than the reality, and that probably also hints at where he would like to go with the scheme—if one did not get that from his maiden speech in Parliament.

One of the things that is challenging in this bill, certainly for the Government, is the fact that it contains a good deal of U-turns. It is a bill that pulls back from policy previously passed through this House. Mr Dunne in the chair may be becoming more accustomed to U-turns, as recent days would illustrate. However, there is—

One of the themes that has come through from just about everyone, I think, who has spoken in the debate so far has been sustainability, and that is a critically important aspect of all of the changes over a period of time that have been made to the student loan scheme. I want to take just a little bit of time to recount some of the background, and also to deal with one or two of the issues that have arisen in the Committee so far. When I became the Minister in 2005 there was very little control in place on the way in which the scheme was administered, who was eligible, and how repayments were chased. We did not even know at that point how many overseas-based borrowers there were, let alone how many were paying their student loans off and how many had just simply gone into hiding or oblivion. So what we did in 2006-07, during the term of the previous Government, was have a process whereby we sought to identify the numbers overseas as a proportion of total New Zealand borrowers so we could then start the process of tracking those people down and making sure they met their responsibilities. The attraction of the interest-free policy meant that there was more pressure on the scheme even then, and the priority had to be to make sure, in terms of its sustainability, that we sought repayment.

We carried on with that policy once the change of Government occurred, and in 2010 we began the process of chasing defaulting student loan borrowers in Australia, where the bulk of our overseas-based student borrowers are, followed by the United Kingdom and various other parts of the world. What we know from the information is that domestically based borrowers on average repay their loans in around 3 to 5 years, whereas the overseas-based borrowers take three to four times as long. So our focus is very much on those overseas-based borrowers, for two reasons. Firstly, there is a basic fairness issue. I am amazed every time I am interviewed by journalists on this subject, usually young journalists with a student loan, how at a certain point in the interview the journalists will always say: “These people get me angry, because here am I, paying off my loan, and they are getting away scot-free.” It is a real gut reaction from a lot of people in this country who are genuinely seeking to make their repayments. When you see some of the examples from offshore borrowers about their arrogance in assuming that because they are offshore they are out of sight, out of mind, I think it really reinforces from the sustainability perspective the need to put pressure on those borrowers to repay.

That brings me to some of the measures that are contained in this bill, the Student Loan Scheme Amendment Bill (No 2), and it would be wrong to see this bill in isolation from the suite of measures that have been introduced over the last 4 or 5 years, because it is one part of a continuing programme. One of the members spoke about concern about information sharing at the border. The point here is that we need to be able, just as we do with recalcitrant child support payers, to track down people who leave this country with a debt and actually get them to make some commitment towards repayment. That is why we introduced previously the concept of a nominated person, and that is why we have started the campaigns in Australia in particular, and will be extending those more broadly to other countries, to physically contact those people and get repayments from them. The results we are getting so far are quite dramatic. Just recently, we hit $1 million a week in repayments. That is an extraordinary achievement. It is a goal to be proceeded with in the future. I do not share the concerns about information matching, and it is certainly not for any sinister purposes. It is to get a better record of where people go with debt, so we can follow them and make sure they meet their obligations for repayment.

The member Holly Walker also felt that there was some concern about the capacity of the Inland Revenue Department’s technology to cope. The system can cope with these changes. They have been designed in such a way to ensure that that is the case, and the transitional provision that the Finance and Expenditure Committee has prudently inserted, I think, which is in the Supplementary Order Paper, is designed to ensure that we can deal with some cases that have arisen—and there were some a year or so ago—quite swiftly without having to delay the issue of repayment even further.

So I just wanted to take a call at this stage to make the point that there seems to be common ground on sustainability being a critical issue here. There is a conflict, because at one stage members talked about a generous scheme. It would be great to have a generous scheme. We already do by world standards, but that generosity brings you up against the sustainability argument very quickly. What we have to do, in the interests of the current generation of borrowers and future borrowers to come, is ensure that the scheme is sustainable. We do that, firstly, by prudent management of it, and, secondly, by ensuring that people who enter into loan commitments are under some legitimate pressure to make their repayments, because it sends all the wrong signals to simply let them go scot-free. So that is why this bill deliberately focuses—[Bell rung] Mr Chairman, if I can take just another few seconds.

The CHAIRPERSON (Eric Roy): Peter Dunne.

Hon PETER DUNNE: If members will indulge me. I am not going to take a full 5 minutes. That is why this bill really focuses on making changes to ensure that we can track those people more responsibly.

I acknowledge the support of other parties for this legislation. They may dismiss it as a small step. It is one of a series of continuing steps to ensure that our loan scheme remains viable, that our borrowers can continue to take advantage of it, and, equally important, that we expect them to make their repayments when they fall due.

I will not take more than a couple of further calls at this point. With your indulgence, I turn to where I was at when the Minister of Revenue took a call—and I am glad that he did because I have to say it is very good to have a Minister responding from the chair. We do not always get it in this Chamber. When we have questions it is good for the Committee to debate them fully, so I commend the Minister for engaging in the debate.

Where I was getting to before was to point out just how humiliating this bill, the Student Loan Scheme Amendment Bill (No 2), really is for the Government. It does achieve some good things, and we will be supporting it for the fact that it is an attempt to make sure that the collection of student loans is fairer. It is an attempt to make sure that those struggling to pay off their student debt in New Zealand are aware that those overseas are equally obliged to pay off their debt, as Mr Dunne has made clear.

But what the bill also does is smuggle through a range of changes that are actually back-downs on previous policy. This Government deemed that to be policy that was good enough to take up the House’s time, to be debated fully, and then to be implemented. At that point the Government then realised that it was incapable of actually implementing it.

This is a problem that has become a theme at the Inland Revenue Department. We know that the computer system there is over 20 years old. The computer system at the department existed well before Facebook—10 years before Facebook came into existence—and well before Google. In fact, it existed well before the internet as we know it today. This Government has failed to upgrade that system. The current Minister of Revenue has been the Minister in that role for, I think, more than 7 years and we have a computer system that is not up to the task of delivering the policy that this Government would want to implement to make sure the student loan scheme was fairer, and that is a disgrace—that is a disgrace.

Part of what we have to debate here today is withdrawing things that this Government has deemed would make the scheme fairer, peeling back those steps forward. It is using the Committee’s time to debate those issues again and to try to argue that they are no longer as important as they once were, now we have realised just how ruined—I was going to use another, less polite word—the Inland Revenue Department’s scheme is.

We know, for example, that that is illustrated in the 70,000 phone calls that went unanswered in the GST filing period in July last year. That shows a department under stress. There are over 1 million unprocessed returns. There is over $7 billion in outstanding tax to be collected. We know that the Inland Revenue Department is a department under pressure. We know that the computer system is struggling, and yet we have seen no credible plan from this Government to address that issue. We have seen no credible timeline, no credible plan for building a replacement system. It has spent tens of millions of dollars on consultants—Capgemini lead amongst them—and this means that we should expect to wait to be able to implement this legislation.

I have grave concerns that the data matching as outlined in this bill will not be able to be implemented by this Government. I have serious concerns. Perhaps the Minister in the chair may take another call to outline a credible plan for making sure this happens. The Government has, I have to say, put a little clause in there, which we have opposed, that would give it free rein to withdraw any further things and to change the details of how things are implemented or the time frames. It has put in what is commonly known as a “Henry VIII clause”. This is cover for future humiliating back-downs, and it may be the case that everything we are debating here today is unable to be implemented by this Government. That is a ridiculous position to be in.

Hon Trevor Mallard: What’s Parliament for?

Dr DAVID CLARK: We wonder what Parliament is for, at that point, if it is not to debate the changes that are going to be made to all of our public services over time. We are here debating these, but we have no idea whether they can be implemented, and the historical evidence is that in the past they have not been able to be implemented.

So I would like the Minister in the chair in a future call to stand up and to explain a credible time line for repairing the tax system. We know that the tax take dropped 4 percent during the previous terms of this Government—only 1.5 percent of that was estimated to be from the global financial crisis, and a great chunk of it was from policy changes by this Government, the tax cuts for the wealthy—and since then the Government has been revising down its tax forecasts. It has a problem. It has a tax hole problem—

Thank you, Mr Chair—

Hon Trevor Mallard: Did you call?

RAYMOND HUO: Yes, I did—

The CHAIRPERSON (Eric Roy): Raymond Huo has the call.

RAYMOND HUO: —I did. You made the right observation during question time, because I watched the tape again and it proved Mr Trevor Mallard was correct and the Speaker was wrong, but that is a different matter.

The Minister of Revenue talked about sustainability, but from a historical perspective the Student Loan Scheme Amendment Bill (No 2) is not a good example of sustainability. Instead, the Government is tinkering to fix its previous tinkering attempts, which have gone wrong.

My colleague Dr David Clark has just covered the issue regarding the “Henry VIII” clause, and I apologise for interrupting his good speech. Although Labour supports the overall intent of this bill, we are opposed to clause 39(4), which inserts an unnecessary regulation-making power. There is a very good opinion article by Professor John Burrows regarding this particular issue. I reckon that all the members should have a good look at this article to appreciate the nature and scope of this regulation-making power, because any unnecessary regulation-making powers should be approached with caution.

I also note the Finance and Expenditure Committee’s view that the changes the bill would make to the 2011 Act are complex. They involve amendments to previous amendments that have not yet come into force, the repeal of provisions that were to come into force in the future, and interrelationships between provisions that would be amended or appealed at different points in time. There is also the challenge of ensuring that the Inland Revenue Department’s computer system implements the amendments accurately. There is a relatively high risk that unforeseen issues or unintended consequences may emerge in the transition to this legislation, creating a need for regulations. I am very pleased to hear the Minister just confirm that in terms of technology the department could cope with those issues. But this seems to confirm what the Hon David Cunliffe just said in his previous speech, which is that this bill was introduced by the “Minister of Small Changes”.

Some of the other select committee recommendations focus on inserting new provisions to correct errors made in previous student loan scheme legislation passed by National. Not only is the Government tinkering around the edges of the major student loan issues with this bill but now it is using tinkering to fix its previous tinkering attempts that have gone wrong. For example, under the Student Loan Scheme Act 1992, repayment obligations under $20 were not collected and were written off. The 2011 Act changed this so that small amounts remain part of a borrower’s loan balance for future collection. However, because the department has not been able to update its computer system, chasing such small loans would actually end up costing it more than it would save. The select committee, therefore, recommended amending clause 22 of this bill to reinstate the old provision. This bill was introduced not only by the “Minister of Small Changes” but also by the “Minister of Tinkering”.

I move, That the question be now put.

I would just like to back up what many of my colleagues have said in the Chamber tonight on the Student Loan Scheme Amendment Bill (No 2)—that Labour is supporting this bill because we think that the changes will make the repayments of student loans fairer. But I would like to also underscore the point that my colleagues have made that this is a bill that does not do very much. It tinkers around the edges and it does not address the fundamental problems of what the student loan scheme is meant to do.

The student loan scheme is about access to education. When we put allowances and loans together, it is about how it is that ordinary New Zealanders access tertiary education in this country. What we have is a Government that is really moving the balance between loans and allowances and shifting this. We have seen an attack on both of these by the present Government. We have seen that postgraduate students are being denied access to student loans and we have heard members opposite during their calls tonight—I believe it was Mr Goldsmith—saying that what National was doing was limiting it to 7 years of study. Well, this is not the full story, because it is not just about limiting the student loan access to 7 years. The changes that National brought in, in its last Budget, explicitly excluded postgraduate study: Master’s degree and PhD. So any postgraduate study beyond the Bachelor’s degree with Honours level has been explicitly excluded. This is a very worrying trend in our education system in this country. It is yet another example that this is a Government that talks big on the rhetoric of innovation. It talks big on the need for us to have an innovation-led economy. Well, these things do not happen by magic. They require really skilled New Zealanders and really educated New Zealanders in there. Limiting the access of people to do postgraduate research is just counter to that.

Paul Goldsmith: Let’s not waste money. You’re leaving it overseas. Let’s not waste it overseas and not get it paid back.

Dr MEGAN WOODS: This pretty much sums it up—we have Mr Goldsmith over the opposite way calling this a waste of money. That is the difference between Labour and National. Labour believes that postgraduate education is to the betterment of New Zealand—that this is the way that we will get ahead. That is the kind of thing that this Student Loan Scheme Amendment Bill (No 2) does nothing to address. Postgraduate education—my colleague David Cunliffe is quite right—is an investment. It is an investment in our country and it is an investment in our future.

What we have seen also is a tightening up of access to loans for various people by this Government over the last 4 years. We have those over 55 now being denied access to the student loan scheme. This is something that we view with a great deal of concern. We put this in the context of the economy that we currently live in, and we see that there are a number of people who are losing their jobs yet still have a number of years in which they need to earn an income, and, actually, some retraining would be the best way for them to go about that. So we do not think it is particularly fair, what this Government has done in terms of limiting access to this.

What are the other things in terms of access? We have to remember that when Steven Joyce did take the reins as Minister for Tertiary Education 2 years ago it was made very apparent that National was going to introduce a series of cuts to student support in the area of both loans and allowances in an effort to do what it called “dampen demand” for tertiary education. So we see in Budget 2010 that part-time students can no longer borrow from the student loan scheme for course-related costs. This has real ramifications. My colleague Dr David Clark talked about being a warden at Otago University and seeing the change from when he was a student to when he had responsibility for caring for students in that environment. I also observed that change in my time from being a student to teaching at the University of Canterbury. By the time that I finished teaching at Canterbury it was not unusual for undergraduate students to be working 30 hours a week.

This is simply not the way that you get a university education. University education is about immersion in learning. It is about being able to devote yourself full time to that, and about having the time, the energy, and the focus to devote yourself to that. What we are seeing this Government introduce in terms of access arrangements is really damaging to the experience and the benefit that students can get from the scheme. I guess there is a number—and a growing number—of us now in this Parliament who stand here with student loans being not just a theoretical issue—

I move, That the question be now put.

I raise a point of order, Mr Chairman. I would like to draw to your attention a matter that relates to the judgment as to whether or not a closure motion should be taken. I know that it is a matter entirely for your discretion, but I would want to point out that this bill, the Student Loan Scheme Amendment Bill (No 2), is actually a significant piece of legislation, that Part 1 was a very big part, and that we had less than an hour’s debate on it. I just want to say to you, Mr Chairman, that it is the view of Opposition members—a number of whom, including the deputy leader of the Labour Party, had just come down to speak on it—that we were very much short-changed.

I note the member’s comments, and I do not think that I could be accused generally of curtailing speaking in the Chamber.

Hon Trevor Mallard: No, no, you’re generally pretty good.

The CHAIRPERSON (Eric Roy): I am. At the time I took the closure every single person who was seeking the call had spoken—every single person had. I measure very carefully what has been said. I think the member knows that I am on the case.

Part 2 Amendments to principal Act that apply for 2013-2014 and later tax years