Student Loan Scheme Amendment Bill (No 2)

I move, That the Student Loan Scheme Amendment Bill (No 2) be now read a second time. The changes that are contained in this bill build upon earlier legislation aimed at bringing greater value, efficiency, and fairness to the student loan scheme. Along with a number of administrative measures that are being undertaken, the changes in this bill are a reflection of the Government’s continued commitment to the proper governance of what is a major Crown asset.

The first of the measures contained in the bill proposes to broaden the definition of the term “income” that is used to determine the loan amount that a New Zealand based borrower has to repay each year. Under the proposed changes, the definition of income that will be used for student loans will be broadly in line with that used for the purposes of Working for Families tax credits and for other social policy programmes, so we are bringing a measure of consistency into this area. The effect of the change will be both greater fairness and greater transparency across the student loan scheme by ensuring that the repayment obligations of New Zealand based borrowers are determined on an equitable basis, irrespective of the type of income they earn. In particular, these changes will ensure that income that currently lies outside the current definition of income, such as income from trusts, as an example, will now be taken into account when determining a borrower’s repayment levels.

The second important change contained in the bill proposes an information match with the New Zealand Customs Service to identify borrowers at the border who are in serious default on their loan repayments. Customs will then be able to forward the current contact details of those borrowers to the Inland Revenue Department, so that it can, in turn, discuss with them, by following up with them, their particular situation. I should point out that there is a vast gulf between the repayment activity of domestically based borrowers and that of overseas-based borrowers. Typically, our overseas-based borrowers take about three or four times as long to pay back their student loans as our domestic borrowers do. In many senses, our domestic borrowers proceed relatively quickly and effectively to repay their loans. Our major problem with defaulters is with our overseas-based borrowers, and the measures regarding data matching are an important way of ensuring that we can track them and start to ensure that they meet their obligations.

The bill contains a number of other measures. They are largely administrative in nature, and they are designed really to correct inconsistencies or to improve the operation of the current legislation. These changes include clarifying the repayment obligation rules for new borrowers in the first year of borrowing, confirming the current late-payment interest rules, and repealing changes from earlier legislation that are no longer needed following some changes that the Inland Revenue Department has made to the way it administers the scheme. I would also like to make members aware that I intend to introduce a Supplementary Order Paper at the Committee of the whole House stage. The amendments in this bill are very complex. As a result, a number of drafting oversights and errors have been identified, and the Supplementary Order Paper will correct these so that the legislation operates as intended.

When I bring this bill to the House, I acknowledge and thank the Finance and Expenditure Committee for the pragmatic way in which it dealt with the technical detail of the bill, and for the recommendations it has made to ease the transitional and administrative processes involved in bringing the proposed changes in the bill into operation. I think the select committee has done a good job, and I acknowledge the work of all members of that committee as they considered this bill. On that note, I commend the bill to the House for its second reading.

Two bills in 2 days from the Minister of Revenue, the “Minister for Small Things”, the “Minister for Small Changes”, who yesterday tinkered with child support while 133,000 children struggle in poverty, and who brought in a Supplementary Order Paper late in order to correct changes and fill in gaps. Today he brings in another small, tinkering bill, the Student Loan Scheme Amendment Bill (No 2), which is hardly worth the House’s time, with another Supplementary Order Paper because of late mistakes. This is another at best missed opportunity. A tanked economy, a shameful level of unemployment, record migration to Australia from young graduates, and a growing intergenerational swindle between the baby boomers and the younger generation, and we seem to be able to do no more than to dob them in to the Inland Revenue Department. However, of the two changes in this bill, Labour will be supporting this bill because we believe that, in so far as they go, they are necessary steps to ensure the operation of the scheme. But the bill gets an epic fail for what it does not do.

By way of illustration, let us consider two individual cases, hypothetical though they may be. The first is Old Peter, the current Minister of Revenue, who was born on 17 March 1954. He is a good bloke. He is 58 years and 11 months old. He is an older baby boomer, and because of that good fortune he likely paid nothing at all for his tertiary education. Old Peter has been drawing a Minister’s salary for 7 long years now, and in just over 6 years he will also be pocketing national superannuation. Like many of his generation, it is a charmed life, certainly when compared with students currently struggling in his Ōhariu electorate who are mortgaged to the hilt before their adult lives have even begun. And for what? Because the current Minister does not believe in paying forward the same advantages that his generation has received in life.

Let us for a moment imagine that Peter Dunne was born in 1995, and not 41 years earlier. Let us assume that this hypothetical Young Peter wanted to get to the same place in life as his predecessor namesake with the same education. Peter Dunne has a 3-year BA, 1-year honours, and an MA from Canterbury University—that is 5 years’ full-time study for Young Peter if he is especially diligent—and all in political science, if the House really wants to know. Canterbury’s undergraduate arts fees are $5,512 for a single year, and postgraduate $6,248 per annum. So Young Peter would be staring down a $30,000 student debt for fees alone—$30,000. Let us be clear: there are no living costs involved in that. The whole 30 grand goes to the university. Young Peter would almost certainly need a part-time job, and that does not cover things like textbooks, photocopying, internet bandwidth, buses to the now wrecked campus, and bizarre surcharges like compulsory materials costs and library benefits, whatever they are. So forget about board, rent, or eating, Young Peter; we are talking here about the absolute minimum funds needed for his degrees.

Todd McClay: Why doesn’t he get a job?

Hon DAVID CUNLIFFE: However, if Young Peter could not get a job, as the insensitive member—“Cue ball” is at it again—over there suggested, and we all know there are not many jobs around, then he would be forced to borrow his living costs as well as fees.

At the maximum of $172.51 and a conservative 40 weeks per study year, he would have racked up another $34,500 by graduation. So poor Young Peter will be $64,500 in debt before he starts trying to find a mate, or graduating, or getting a home or a mortgage, or feeding his family. Do not ask Young Peter to take an OE. He is not allowed to travel overseas for more than 6 months, otherwise the National - United Future Government—in which Old Peter is a rotating Minister—will apply 6.4 percent to his loan. That is $4,128 interest in a year on top of the $64,500 he already owes. And after just 1 year away, Young Peter would have to pay, of course, the $3,000 minimum towards his loan in New Zealand, whether he has a job or whether it will bankrupt him and his first campaign for Ōhariu.

Of course, the apologists on the opposite benches will point out that Young Peter could stay in New Zealand and his loan would be interest-free, thanks to the good and great previous Labour Government, in which Old Peter was a rotating Minister. But, of course, even if Young Peter stays, and in the unlikely event, in this environment, that he can get a full-time job, he will certainly not be able to have a family and save for a house too. In just over a month, the domestic compulsory repayment obligation is going up again. That is another 2c in every single dollar over the repayment threshold that he has got to make room in his budget for. Even if Young Peter did pay off the enormous student debt and save a house deposit, maybe some time in his late 30s or early 40s, when Old Peter was already a member of Parliament, Young Peter would find that he cannot even get on the housing ladder, because people born decades ago in 1954 who did not pay for their education have created a horrible house price bubble by investing in a capital gains tax - free property market.

But fair credit to Peter Dunne. I am sure he would be happy to tell you how much more gifted and talented he is than the majority of internet-savvy young people born today. So let us be fair to the leader of the party of one and assume that Young Peter realises his dreams and eventually becomes a highly paid Cabinet Minister for years and years and years, no matter what Government is in power. Even then, Young Peter is unlikely to have cleared the mortgage before retirement age, and even if he did, he probably would not have any savings of his own, because taxes will have dramatically risen to pay for Old Peter’s superannuation, no matter how many houses Old Peter might be earning his capital gains tax - free profits from. In reality, Young Peter would not achieve what Old Peter has been able to achieve on the back of his parents’ generation’s largesse and the compulsory transfers from today’s young.

These are tough problems. These are intergenerational problems. These are not problems of Young Peter’s making; they are not even problems of Old Peter’s making. Let us be fair. They are problems that have built up over a generation—a generation in which the baby boomers have done quite nicely, thank you, and our young people today are bolting for the departure gates because they do not share the same opportunities. In the face of that intergenerational cheat, what have we got? In response to a student loan scheme that is creaking to the point of failure, and after years of hard work—this Minister has been toiling at it across successive Governments—we have today’s bill. What does it do? Two minor, tinkering changes, which, of course, although they require the assent of the House, are barely worth the time of debate, while the underlying issues go unaddressed by a Government that has got the worst economic record in 50 years, high unemployment, high emigration, a generation without hope, and a baby boomer who is complacent, slumbering on the Government benches while New Zealand slips and slides its way to perdition.

Todd McClay: Oh, this is like his speech on top of a bus in South Auckland.

Hon DAVID CUNLIFFE: Never was on top of the bus—you should look more carefully.

Old Peter received a subsidised, free education from the State. Old Peter has had a successful career. Old Peter had the free education. Old Peter will have gold-plated superannuation. Young Peter will have to struggle his way through university. Young Peter has been loaded up with a mortgage before he has bought his first house. Young Peter will be no better off after the changes made by the House today. We have a generation of young people growing up in this country who expect better from their Government, and in less than 2 years they will get it.

I think that last speech from David Cunliffe was exactly what Charles Chauvel was talking about in his valedictory speech last night—a plea to the Labour Party to give the party both of its wings back because it needs to fly. You see, there is such a difference between the view on that side of the House and the realistic outcome on this side of the House. The student loan scheme in New Zealand is one of the most generous schemes for tertiary education anywhere in the world, and it is possible only because this Government supports it, and it is possible only because hard-working New Zealanders pay their tax and allow the Government to lend that money to students so that they can get degrees and extra education, so that they can work hard, raising skill levels in New Zealand, and do much more for New Zealand society. The member opposite and the Labour Party opposite just want to throw that away and say to hard-working New Zealanders: “These people who are borrowing money based on the taxes you’ve paid from your hard work have no obligation to you, at all.”

Indeed, we have campaigned on saying that we believe the student loan scheme is important. We are committed to it staying here, but we must make it efficient, we must make it fair, and we must make it deliver for the New Zealand taxpayer, as well. I believe that we are doing that. You see, in the changes that have been made over the last three Budgets by this Government in New Zealand, I can say to the New Zealand taxpayer that the money that is being lent to students in New Zealand is being used better and it is being repaid at a faster rate. That means we can borrow less as a Government and we can also put more back into the student loan scheme, so that your sons and daughters, and others, be it Young Peter or Old Peter—it was a lovely story by the previous member. It is a pity that he did not spend more time reading the bill and what it actually achieves than unnecessarily making up stories about a hard-working Minister, who, yet again, is bringing a bill to this House that actually helps New Zealanders. So what we know is that this is doing very good things to support the hard-working New Zealanders who pay their tax.

Very briefly, the Student Loan Scheme Amendment Bill (No 2) does a couple of things. It broadens the definition of “income” for student loan repayment purposes. It aligns with a number of other pieces of legislation and the way that income is treated when it comes to working out what people’s obligations are. This is a loan. It is a contract between the New Zealand taxpayer and the student. Young Peter one day will go and be able to afford to buy a house under this Government, because we are doing things that actually will have an effect upon homeownership. We are not saying that we will go out and build 100,000 homes in about a year and that you will be able to buy them all over Auckland for less than $300,000, but we are doing actual things. Well, just as Young Peter would go out and get a mortgage from a bank, and he would have a contractual obligation to that bank to repay the money he has borrowed. In this case, not only is there a contractual agreement with the Government to repay but also there is a moral obligation on the part of students to repay money to the taxpayer, who has lent that to them under very important circumstances so that they can study and get ahead. So that is what we are doing there.

There are administrative efficiencies being found, and also there is the ability to match information between the Inland Revenue Department and the New Zealand Customs Service, so that in respect of people who go overseas or who are overseas and who have not met their obligation to the Government and their moral obligation to the New Zealand taxpayer, when they return, information can be sought and gathered, and we can find ways to help them realise that the only reason the New Zealand Government can lend taxpayers’ money to students to study is that they, in turn, will pay it back.

I want to say here, finally, that over the last three Budgets the changes the Government has made have brought the cost of the student loan scheme from 48c in the dollar to 39c in the dollar. We campaigned and said that we would bring it back to 40c in the dollar, and now we have surpassed that. Indeed, in Budget 2012 the forecast student support changes would have provided a one-off saving of about $250 million and then annual savings of $60 million to $70 million. Well, indeed, at 30 June 2012 the actual saving was $286 million. Again, the Government has surpassed the commitment it made to New Zealanders in the Budget.

Finally, this is the most important point. This is what the Opposition should be focusing on, not the petty politics of those members wanting to chuck money at people just to buy votes, but actually looking after all New Zealanders. Since we came to Government there has been an 11 percent increase in student loan repayments—an 11 percent increase—so that New Zealanders are repaying their debt to the Government, meeting that contractual obligation, just as many of them are when they are paying back their loans to banks if they buy houses or cars, and so on. But at the same time, they are meeting that moral obligation to New Zealand mums and dads who work hard and pay their taxes. I say to the Minister of Revenue, who has brought this bill to the House, that it is a job well done. Thank you.

Labour is supporting this bill, the Student Loan Scheme Amendment Bill (No 2). We are doing that because we think it does some useful administrative things. It makes two changes to the student loan scheme. First, it broadens the definition of “income”, and we think that this is actually quite a useful administrative change, because what it does is it broadens this definition to include income from trusts, companies, superannuation schemes, etc., as well as income. We think this actually is quite a useful thing to do, because what it does is it means the borrowers’ repayments will be based on their whole income, and not just on the income received from wages. The second thing that this bill does, and I am talking about very small things—the second change that it makes—is it allows information sharing between the Customs Service and the Inland Revenue Department, so the Inland Revenue Department can have access to the contact details of overseas-based borrowers who are in serious default. Labour is supporting the bill because we think that these small changes will make the scheme fairer, but we are not supporting the amendment that ended up at the Finance and Expenditure Committee inserting clause 39(4), which gives the Minister the power to make regulations in order to smooth the transition of the bill. We are not supporting this subclause of the bill, because we think that it gives the Minister unnecessary power and it lacks the transparency needed for borrowers to have surety of where they are at.

So what we have, and my colleague before me alluded to some of this, is a bill that does some very small tinkering around the edges. We do not have a bill that addresses the big issues of the day or indeed even addresses the big issues of the need for student support. There are some very real issues that we need to address on the issue of student support and we think that the bill fails to address these. We think that we need more people in tertiary education, gaining qualifications that are about making New Zealand a better place if we are to succeed. What we are doing in this bill does absolutely nothing to address these issues.

We can start with what the bill is not doing, in terms of the big issues of the day, because there are some connections to it and my colleague did allude to some of these. We have an economy that is in serious trouble. We have a serious number of people, and, in particular, young people, leaving our country, and this bill does nothing to support them doing that—Labour has consistently supported many efforts to improve the repayment of debt from overseas-based borrowers, but we did not support the Government’s last major change, which cut the repayment holiday for overseas-based borrowers from 3 years to 1 year. There was a very good reason why we did not support this. We thought that the cutting of the repayment holiday by the Government made no sense at all. It was not just Labour that thought that. In fact, advice from both Treasury and the Ministry of Education said that it would not make a blind bit of difference in terms of repayments. In fact, it was likely to increase the debt held by overseas borrowers, because without that 3-year repayment holiday what happened was that people just gave up trying to pay their loans. All Labour is asking for is that we have some fairness and some equity with our student loan system.

We had the previous National speaker, Todd McClay, tell us that this was about using Government money, using it better, to support students. But unfortunately that is not the case, because what we have standing are the attacks on student support that we have had from National over the last 4 years. If we just run through these, we can see that none of the measures in this bill that we have before us will do anything to address those. We had National cut the eligibility so that people aged over 55 could not access the student loan. They could not borrow. In Labour we do not think that it is particularly fair that you would say to someone who has reached the age of 55 and wanted either to continue their studies or to retrain: “No. We’re not even going to give you the chance to borrow that money.” So when we hear the rhetoric from the benches opposite about paying it back and how people need to take responsibility, this is a Government that will not even give those aged over 55 the opportunity to do that. We certainly did not see that as a better use of our education budget.

Part-time students—the way in which many people re-enter tertiary education—are no longer allowed to borrow for their course-related costs, as of Budget 2010. For many people who are retraining or come from a background where tertiary education is not their natural progression, part-time access to tertiary education is vital. To be able to access the element of the loan where you can borrow for your course-related costs, which are absolutely essential for many of these courses, is something that is not considered a better use of the money. Budget 2010 also imposed a 2-year stand-down on new residents accessing the student loan scheme. What we said to people coming into New Zealand, who came here to make their life here, was that they could not access the loan, that we did not back them into higher education, we did not back these people into getting tertiary qualifications, and we did not back their upskilling. What that does, what we think that this Government is failing to do in this piece of legislation, and what it did with this change, is it fails to seize the opportunity that tertiary education can give us in turning our country round.

But I think perhaps the most short-sighted measure that this Government has taken, in terms of tertiary support, and one that this bill does absolutely nothing to address, was last year’s Budget announcement—and what we have been living with for a year now and we have students all over the country, or potential students, making decisions based on this—when it cut the allowances for those doing postgraduate study. So what we have is a Government that talks very big on innovation. We have a Government that talks very big about the role of research in our economy. We have a Government that talks big about the need for and the place of this. But what we saw in the Budget last year was a Government that would not back our young people to get the qualifications necessary to be part of that future for New Zealand. The Government said: “You know what? We don’t value postgraduate education. We don’t think this is something that has sufficient good for us as a nation, for us to pay you an allowance.” This is not something that Labour sees as sustainable. We think that if you are going to address the issue of student support, which is what this bill before us does, you absolutely have to address that issue of allowances in postgraduate education. This is the place. Anyone will tell you that the ideas machines in so many labs and so many groups around the country are indeed our postgraduate students—whether that be at master’s degree or at PhD level. This is so crucial to our future and our innovation-led future that we just cannot ignore it.

These are some of the things that we are absolutely not seeing in the bill that we have before us. We think that it is a real lost opportunity that we have there, that what we are seeing is a piece of legislation that is not going to increase participation in tertiary education. What we would rather see, rather than the piecemeal and small administrative changes like we are seeing in this piece of legislation before us, is an overview review of the scheme to ensure that there is a fair approach and that people who need support to continue and participate in tertiary education can get that support. Tertiary education is not something that we can just tinker with around the edges. When we introduced a user-pays education system in this country the loan scheme was put there to ensure people did have access to it. What we see are actually growing inequalities under the present loan scheme. We see that people—because of age, because of the type of study, because of their time in New Zealand—do not have access to this loan scheme, and this does not address the issues of equity that the loan scheme was initially put in place to address.

So Labour supports this bill. It supports the small administrative changes that are contained in this bill, but, as I mentioned at the beginning of my speech, it does not support the powers given to the Minister to make regulation under this. What we would like to see is a broader review of the student loan scheme.

The Green Party will continue to oppose this Student Loan Scheme Amendment Bill (No 2), as we did at the first reading. In our view, this bill is part of a gradual process of tinkering with the student loan scheme through a series of amendments, all of which are slowly eroding any good things about the student loan scheme and locking us into a more punitive, individualised model of tertiary education. Although the provisions in any one of these amendment bills alone might seem minor and technical, when they are taken together we are seeing a very damaging trend in the way we approach and administer student loans—one that is likely to be harmful to students and graduates and likely to disincentivise both tertiary study and graduates to stay in New Zealand and contribute after they have completed their studies.

In a timely intervention to this debate, the Parliamentary Library this week produced a research paper on the student loan scheme, which has now been in operation for 20 years. The Ministry of Education also recently produced a paper summarising changes to the student loan scheme between 1993 and 2011. I thought it might be useful to the House to hear some of the facts presented within these papers, including some of the incremental changes that have been introduced by this Government, which are slowly eroding the fairness of the scheme. I might start—because I would like to address a straw man argument put up by one of the earlier speakers, Todd McClay—with the write-down rate that the Government receives for the student loan scheme. He said that it has had this great policy of bringing it down from 48c in the dollar to 40c, and it actually managed to get it down to 39c in the last 3 years. But, of course, what he neglected to tell the House was that when National came into Government, it was at 40c in the dollar. It increased under National’s watch, and all it has managed to do is bring it back down to what it was when it came into office.

More fundamentally, I want to run through some of the incremental changes that this Government has made to the student loan scheme that have eroded the fairness of that scheme. These include, first of all, introducing a lifetime limit of 7 years of equivalent full-time studies—or roughly 7 years—of borrowing per student under the student loan scheme, so that a student who has completed a 4-year Bachelor’s degree with honours and a 2-year Master’s degree and has started a 3-year PhD would lose access to their student loan funding part-way through their doctoral study.

The Government also reintroduced the academic requirement that a borrower has to have passed at least half of their previous 2 years of study in order to continue to qualify for a student loan. That is a manifestly unfair measure that was abolished way back in 1993 but was reintroduced by this Government.

The Government has restricted access so that students over 55 can no longer borrow under the student loan scheme, as we heard from the previous speaker, Megan Woods. This is nonsensically making it more difficult for older people to upskill and retrain during a period of global economic recession. The Government has also made it more difficult for new immigrants to qualify for the student loan scheme.

David Bennett: Rubbish!

HOLLY WALKER: It is true. It is true.

David Bennett: How?

HOLLY WALKER: You restricted the children of permanent residents from being able to borrow under the student loan scheme. [Interruption] It is true, you did it. Your Government did that.

David Bennett: Oh, that is rubbish.

HOLLY WALKER: It is not rubbish. You look it up. The Government also restricted part-time students from being able to borrow for course-related costs, which is something that was also referred to by the previous speaker. Again, that is making it very difficult for people to upskill and retrain.

It increased the administration fee on the student loan scheme from $50 to $60 per year, and introduced an annual Inland Revenue Department administration fee of $40 for graduates paying off their loan. It reduced the 3-year repayment holiday for graduates overseas to just 1 year. It abolished the 10 percent voluntary repayment bonus, and it increased the automatic student loan repayment rate from 10c to 12c in the dollar.

In short, this is a series of amendments that restricts access to student loans, makes it harder for key parts of the population to upskill and retrain, increases the cost of the scheme, disincentivises graduates to repay their loans faster, increases the likelihood of overseas borrowers defaulting on their student loans, and hits graduates harder in their back pocket as soon as they graduate by forcing them to pay back 12 percent of their income on their student loan, even if they earn less than the full-time equivalent of the minimum wage.

Meanwhile, the nominal value of the student loan debt reached $12 billion in 2012, and, as we have heard, we have cut student allowances for postgraduate students, forcing them to borrow under this scheme and increase their total student debt to pay for their living costs or, as many have done, to drop out of their courses. All in all, this is not a particularly rosy picture. So within that context, we have this Student Loan Scheme Amendment Bill (No 2), which gives effect to yet more of the Government’s punitive tinkering with the student loan scheme that it announced in Budget 2012.

As we have heard, the bill essentially makes two changes. Firstly, it aligns the definition of “income” for student loan purposes with that used for Working for Families, and it makes it easier for customs officials to share information with the Inland Revenue Department to track down borrowers who are overseas and make them repay their loans. On the first point, the Green Party’s major objection to the alignment of “income” is that this is a missed opportunity to correct an unfair element of the definition of income for student loan purposes. This was highlighted last year when the Government introduced changes to increase the student loan repayment rate.

Just to explain why that is, because Working for Families entitlements are currently calculated on net income before student loan repayments are taken into account or deducted, increasing the student loan repayment rate, as was done in the Budget, has had a real, detrimental effect on the weekly budgets of many families, because the higher student loan repayment rate is not taken into account when their Working for Families entitlements are calculated. So basically this means that the higher student loan repayment rate operates as a tax increase for those families, but with no corresponding increase in their Working for Families entitlements. The net result is bad for the weekly budget of those families and bad for their back pockets, and many of these families have young children.

A previous speaker, Mr McClay, talked a lot about hard-working taxpayers and New Zealand mums and dads who resent the fact that students and graduates borrow and have to pay back. Well, I will tell you what: I am 30 years old and I have a student loan debt, and so do just about all the mum and dad New Zealanders whom I know who have young children. They are taxpayers. They are also graduates with student loans. They are paying it back, and it is slowing them down from being able to qualify to buy a house, to start their lives, and to have children. Those mum and dad New Zealanders all have student loans in this day and age. They did not get a free tertiary education, like those guys over there.

Although this bill aligns the definition of income for student loan purposes with the definition under Working for Families, we need a corresponding change that means that Working for Families entitlements get calculated after student loan repayments have been taken into account. Until that happens, the Green Party cannot support the changes in this bill.

Secondly, on the matter of information sharing between the Customs Service and the Inland Revenue Department to chase up overseas borrowers, we have a real problem with such a policy being pursued in the context of the reduction of the repayment holiday for overseas borrowers from 3 years to 1 year that has already taken place. Although we have no problem per se with measures designed to encourage overseas borrowers to keep up with their student loan repayments, we cannot support punitive measures to track them down at the border unless we have a corresponding enabling provision that recognises the importance of spending some time overseas and the experience and skills that doing that gives to an individual, and the fact that many New Zealanders do so when they take their OE. These gains have been very well documented, and what we do not want to do is discourage people from returning to New Zealand when they have spent time living overseas.

That is why the repayment holiday was such a good idea when it was 3 years. It allowed individuals to spend time overseas for a period in which they were not required to meet their student loan repayments, and they did not rack up penalties and fines that might put them off returning to New Zealand. Introducing this information-sharing provision means that there is a much greater chance of them being pinged with huge penalties and extra debt when they return. That, in turn, means that there is a very real risk that those borrowers will decide not to return to New Zealand. At a time when more New Zealanders are moving overseas than ever before, it is vital that we design policy that maximises the incentive for young New Zealanders to stay in the country and contribute to our economy and society, and this bill does the opposite of that.

Finally, if I might turn the House’s attention to the transitional provisions introduced in this bill by the Finance and Expenditure Committee to enable the Inland Revenue Department to administer the changes. What we heard at the committee is that as a result of the large number of small, but complicated, technical changes made to the student loan scheme over the years, the department’s computer systems are now struggling to keep up and administer the scheme. It is the same problem we were talking about in the House yesterday with regard to the department’s ability to administer the new child support formula. Here, clearly, is an IT system that is in urgent need of an upgrade. It is groaning under the weight of a student loan scheme that has been tampered with so much over the years that it cannot cope any more, and the Government’s answer is to give wide-ranging regulation-making powers by Order in Council to enable this scheme to be fixed up progressively over time. It is neither fair nor transparent, and it is consistent with a theme we have seen from this Government of giving these kinds of wide-ranging regulatory powers—

Sorry to interrupt the honourable member. Her time has expired.

It is my pleasure to speak on this Student Loan Scheme Amendment Bill (No 2). There is no question that the student loan scheme that this Government inherited was excessively generous. It gave out money for free with very few checks and balances, just as in so many other areas of Government under the previous administration. We have heard more of the same from speakers on the other side saying that we should just keep pouring the money in with no regard or little sense of the context that we live in, at a time when we are trying to rein in Government spending and massive debt.

National is taking the student loan scheme and making it sustainable into the future, reducing the need for more Government borrowing, and preparing students for the jobs of the future. Our interest-free student loan scheme, let us not forget, is one of the most generous in the world and we want to keep it that way, and to have it as a sustainable scheme. It represents a major financial commitment by the Government to support people in tertiary education. You look at any of the figures around the world, and New Zealand’s student support within our tertiary education budget is very high indeed.

This bill aims to improve the value and the fairness of the scheme, and to ensure student loans are administered as fairly as possible. The result that we have seen of the scheme we inherited at the start of this Government was that every dollar lent immediately was written down to 50c. Who paid it? Well, it was other taxpayers, many of whom are struggling in their own way. This Government has not drastically altered the arrangements, but it has focused on restoring some basic disciplines to the scheme.

Earlier in Budget 2012, as we have seen, two major changes were introduced increasing the repayment rate from 10 percent to 12 percent and also reducing the voluntary payment bonus, which was repealed. This bill goes further and looks at the question of the two main areas of defining “income” in a broader sense to catch the full income that students may receive and also to match information with the Inland Revenue Department and the Customs Service.

This is all absolutely common sense. We need to make sure that this information matching is done properly. Why do we do this? Because this is about people paying back their debts to other New Zealanders. That is only fitting and proper. On that basis I commend this bill to the House. Thank you very much.

Kia ora, Mr Assistant Speaker Tisch. Thank you very much. Firstly, just to make a comment on some of the issues raised by other speakers, it is always a joy to listen to David Cunliffe wax lyrical about hypothetical Young Peter. Although it is amusing on many levels, the reality is that there is a lot of truth in what he said. I actually resent that member’s assertions that our older generation are mean-spirited and greedy, that they seek to starve our young people of their future, and that that is the reason why this bill, the Student Loan Scheme Amendment Bill (No 2), is a bad thing, even though the Labour Party is going to continue to support it. I would not like the country to forget—because most of us have not forgotten—that it was actually a Labour Government that set our feet upon this path, that took away the free education that my generation and the generation before me had the opportunity to avail themselves of. I also do not want to forget that it was a National Government that then slipped its feet into those shoes and started to run down that pathway to bring us to the point where we are at today, where it is now being suggested that Young Peter blames Old Peter for his circumstances instead of actually saying that these are the two parties in this House that brought Young Peter and Old Peter to this place. Let us not forget that. The divide and rule that goes on between our young and our old is not constructive for the country as we move forward.

With regard to this bill, though, New Zealand First will support this bill, as it supported it at the first reading. It is a technical little bill. It does two very sensible things, in our opinion. It had an opportunity to do a couple of other sensible things, and there are Supplementary Order Papers being prepared now. I mentioned in my first reading speech that we supported the Minister of Revenue when the repayment holiday for overseas-based borrowers was condensed from 3 years to 1 year. We did that because of what we believed was one of the intents of the bill, which was actually fairness, but that fairness is still not here in the legislation. New Zealand based borrowers receive no recognition for circumstance changes that mean there are times in their lives when they may need 1-year repayment holidays. I gave examples of young New Zealanders in situations where they may have such financial pressures. They may still be in employment and so still meet the criteria by which they should be making those repayments, but their personal circumstances are such that, as a State, we should allow them to take a 12-month recess from their payments so they are able to reorganise their financial lives and then come back. This is about supporting our citizens. This is not supposed to be about punishing them; it is supposed to be about supporting them for the good of the country.

The other small, technical piece that could have been addressed—and another Supplementary Order Paper will come through for the Committee of the whole House to discuss—is actually about attaching any repayment holiday to the loan rather than to the person. It is an anomaly to me, as a previous debt collector, that when a person has shown that they are a responsible citizen, that they take their debt seriously, and that they have sought to repay it, they are then penalised by never, ever, ever being able to access another loan with another repayment holiday. It does not make sense to me. They are the very people whom you want to encourage to participate in this sort of process, as opposed to the constant conversation about people going overseas, never coming back, and buying Maseratis or whatever, which we used to have around the student loan repayment scheme. So there will be some Supplementary Order Papers coming through.

I did not sit on the Finance and Expenditure Committee. It is not one that I was available for—

John Hayes: That’s a pity.

TRACEY MARTIN: I take on board your disappointment, sir. When I can, I will try to get on to that select committee. I note, however, that many submitters did actually take note of those exact points in my first reading speech, and I thank those submitters for their obvious high standard of involvement in the submission process. I note, however, that most of the submissions on behalf of those who have loans were on behalf of those who have university loans. I do not want us to forget that, actually, every baker, every tradesman, and every young apprentice is in this scheme. This is the StudyLink scheme. This is all about those young people who most often do not have unionised representation, and so we do not hear their voice in this process. Those are the workers of tomorrow—not those who can access high incomes because of a PhD, but those on whom we rely on an everyday basis when we go to the bread shop or when we go to the car mechanic. They are also affected by this bill, so let us not talk about this as if it is only the elite who can afford it. These are real people, real young people, on whom we rely on an everyday basis.

I also want to pick up on the New Zealand Medical Students’ Association submission—an excellent submission. It addressed many of the points in the first student loan scheme amendment bill. There is nothing that New Zealand First can do on this bill, in reality, to support the concerns the association had, but we do take on board its comment around the restricting of access to student allowances for those who study for over 7 years. Again, it does not seem logical or sensible to New Zealand First to penalise those students, particularly in the area of medicine, to such a point where either they do not continue to study in that field of endeavour or they feel so disenfranchised by their own State that they take their skills somewhere else. New Zealand First does not buy into the argument that at the end of their study these students have greater access to income so therefore they should get more debt now. We do not argue that they probably do have greater access to creating income for themselves, but the argument that one day a person might be rich so while that person is poor they should gain debt does not seem to make any sense to us. They are still New Zealand citizens, and the purpose of the State, the purpose of StudyLink, was to support New Zealanders to study. Again, New Zealand First could not do anything about that in this particular bill, but I wanted to make sure that the New Zealand Medical Students’ Association and other students associations that presented to the select committee—and I have read all of their submissions—know that New Zealand First will continue to address this issue.

We will continue to seek ways to bring us back to a point where there is recognition about the public good that supporting young people to study does for your country. We would advocate a stronger social contract between the young who are studying and the support that is given by the older generation. I am not sure the older generation is so terribly outraged by supporting its young people. Remember, the young people we are supporting are their children and their grandchildren. Although I think there is often a whipping up of this division between the ages, when I speak to older citizens in public meetings, and when I go to the universities and talk to young people, when they speak of their own families there is none of this aggression towards supporting each other. They just want their Government to make a system that is fair and that is reasonable.

But, as I say, these are small, little amendments in this bill. They are logical, they are reasonable, and at the moment there is nothing wrong with them, so New Zealand First will be voting for this bill. Kia ora.

It was the Labour - New Zealand First Government that brought in the SuperGold Card and had to pay for it, so it put a price on student loans. A fundamental way of running this country is that the money that comes in has got to be equated with the money that goes out.

I have got to say to this House that there were two interesting speeches this week: one by Charles Chauvel, about 3 days ago, and one by David Cunliffe. I would just say to them that there is a Māori proverb that says it is the feathers that make the bird fly. They represent the broken left wing of the Labour Party.

The changes that have been introduced by this Government over the last 3 years have been to make the student loan scheme sustainable. We said we would reduce the costs from 38c in the dollar to 40c in the dollar. In fact, it is down to 39c in the dollar, so we have surpassed that. We made a one-off saving in 2012. We said we would save $250 million. In fact, we have managed to increase that to $286 million.

I absolutely support the Student Loan Scheme Amendment Bill (No 2) and the intention of giving everybody a good education. Even if people go off overseas, we are educating them for humanity, and that is excellent. This is a demonstration of National delivering on one of our key priorities of responsibly managing the Government finances. But it is unacceptable that some people go overseas and do not meet that obligation of paying the money back—about $2 billion is in this category. I think that it is really important that we encourage those people to meet their obligations to this country, even if it means looking down the track, if the changes in this bill do not work, of tying the obligation to future passports—that is my personal view. Thank you. It is a good bill.

It is a pleasure to speak following that member of the Finance and Expenditure Committee, John Hayes. That was definitely one of his stronger contributions of late.

Labour does support the Student Loan Scheme Amendment Bill (No 2), and it does so for the reason that it is making sure that we do collect the money that is rightfully due to taxpayers. Labour believes in the value of the student loan scheme. After all, it was a Labour Government that made it interest-free, after the National Government introduced the expensive system for students. National, of course, subsequently has introduced charges, and so on, but we believe fundamentally in the student loan scheme and the way in which it creates access for people of all backgrounds to tertiary education.

In this bill we see a tightening up of measures to collect overdue debt and that can only be lauded. It is good to see the Government taking some action on that front. Of course, it is motivated to do that, particularly, because the tax take is dropping. This Government in its first term saw the tax take drop by 4 percent, and its own officials, its own officials, said that—

David Bennett: It’s not actually dropping.

Dr DAVID CLARK: Mr Bennett, I invite you to look at the projections your Minister of Finance is generating and listen to him when he is in the select committee saying that the tax take is dropping. I think he would be disappointed to know that you were not listening when he was there. The Minister of Finance, I think, is right when he says the tax take is dropping and the projections are going down.

The 4 percent drop in its first term in Government consisted of 1.5 percent that the officials said could be attributed to the global financial crisis and 2.5 percent that officials told us could be down to Government policy changes, like the 2010 tax cuts where all the money went to the wealthiest New Zealanders—an overbearing proportion—and those at the bottom of the heap, the bottom 20 percent, got just 2 percent of the value of those cuts. So we recognise that this Government has a problem. It put those tax cuts in place to try to get the economy going, and it has “Stolpered”.

In fact, the economy has been growing in small measure because the population has been growing, but wages are not keeping up. People are struggling, and this Government is scrambling to tax paper boys and paper girls and after-school cleaners to make up the gap. It is trying to stop the gaps, in this bill, and that is a commendable thing, but it also in this bill is tidying up a whole bunch of other messes, and this is something I would like to draw attention to.

It is good that there is some positive in this bill, and that is why we will support it, but actually this bill is an embarrassment for the Government—this bill is an embarrassment. The majority of this bill is about repealing decisions that it already brought to this Parliament in order to improve the student loan scheme, in its view. We have four measures in this bill that are exact about-turns by this Government because it has failed to implement them. It has brought them through the House. It has wasted House time, it transpires, because then it has failed to deliver on them. That is what the majority of this bill is about and that needs to be pointed out to the House, that what we are doing here is tidying up after the Government’s own mess.

David Bennett: Can’t accept success—can’t accept success.

Dr DAVID CLARK: So if we read the notes to the bill here, Mr Bennett, if you have not had the opportunity to have a look at it, we see that there are four measures provided for in the 2011 Act that should also be cancelled. These are the measures that are being wound back as a result of the Inland Revenue Department’s current computer system, and perhaps the lack of resourcing for the department, and the failure of the Minister to get on and fix that problem, which has been acknowledged for quite some time. Certainly, for the 7 years he has been Minister, there has been an acknowledged problem with the computer system there and some challenges to overcome.

It is a 20-year-old computer system. I think today there is $7.8 billion in outstanding debt owed to the Inland Revenue Department that it has not been able to collect to date. There are a billion unprocessed returns—I think a billion; somebody correct me if I am wrong on that—a significant number of unprocessed returns. We have a real crisis in that department—a high staff turnover, lowering morale, and lowering voluntary compliance. This Student Loan Scheme Amendment Bill (No 2) is designed to clean up some of the mess that this Government created for that department by putting expectations on those poor officials, when it was not willing to pitch in and upgrade the system in a timely fashion, so that we would have a proper tax system like everybody else in the Western World. This Government has failed—failed—in its duty to collect taxes in a fair and consistent way, as it should do.

The measures being cancelled in this bill include relief for small amounts of loan obligations, which seems like a pretty fair thing to do. But the Government is stepping away from that, saying: “No, we’re no longer going to do that; we can’t. We’ve got our hands tied. We’ve failed. We’ve failed.” This Government has failed. So it is saying that it will wind that back and will not give relief for small amounts of loan obligations that are outstanding. So there we go. It is reinstating that.

In regard to the loan interest calculation method, there was thought to be a fairer way of doing that but that is being done away with, because this Government has failed to implement the changes it put through in 2011. There is also, in regard to the payment allocation, the removal of clause 59 of the bill as introduced, in order to retain the existing way in which payments are allocated to repayment obligations and debt.

So what we see here is a Government that is going backwards—going backwards. It is doing its tidy-up here, through this House, after failing to implement the changes it brought with great ceremony to the House in 2011. We have in this bill some things that have merit—and I am quite certain that they are in there for cosmetic reasons—but primarily the bill is focused on back-pedalling, because the Government has a tired, worn-out computer system and has failed to prioritise that.

Mr English is on record as saying that $700 million from the asset sales proceeds would go towards that. I wonder whether he had Solid Energy in mind when he said that number. That company is now not worth anything, we think, as a result of this Government’s mismanagement and poor oversight of Solid Energy. What we have is a clearly identified problem with the computer system in the Inland Revenue Department, we have a department under pressure, and we have revenue needing to be found.

The bill itself makes provision for information sharing with the Customs Service. I want to say that is an excellent idea, which we examined on the Finance and Expenditure Committee. Unfortunately, the Government did not actually know how much money this is likely to generate. You know, we have some rough estimates about “if this much money was collected”, “if the people are really where they say they are”, and so on. This is a bit of a waffly bill, but it is a positive thing, and we support the effort to make sure that people repay what they are due to repay.

That aspect of the bill we support, even though it is largely cosmetic in light of the major repeals contained in the bill. We also support the widening of the definition of “income” for student loan repayment purposes, so that a borrower’s repayment obligation more accurately reflects their ability to pay. Again, that is a common-sense measure. It is hard to disagree with that. One suspects that these things—certainly that latter measure—could have been done with the discretion of the Commissioner of Inland Revenue anyway. Nevertheless, we are glad that the Government is getting on with that.

The other thing that we had a problem with in this bill is the concern we have about proposed new section 17 in clause 39(4), which inserts a regulation-making power. We oppose that clause in the bill. We have noticed that it is part of a wider pattern. It is part of a pattern that this Government has not tidied things up properly, and now it is inserting “Henry VIII” clauses. We saw one with the “earthquake czar” in Christchurch. There we supported it, because we saw an urgent situation and a need to get on with things in an emergency situation. You give the executive some special powers in that situation, and that is understandable. However, with this bill here before us, suddenly we are giving more powers to the Government because it has not quite worked out how all this stuff is going to work and the computer system might go wrong again. So the few positive changes that are actually in this bill may get backed out of again, and we are saving the Government the embarrassment of coming back to the House yet again to repeal legislation that it has put through to cover up repealing legislation that it passed before.

What we see here is a pattern. We see a Government that is tinkering with trying to get little bits of tax here and there, but is failing to properly manage behind the scenes the tax collection method, keeping the software up to date, and making sure that it has relevant policy. It is a Government that is tinkering, and at the same time the economy is puttering along, going backwards. In fact, real wages have dropped.

David Bennett: Oh, rubbish!

Dr DAVID CLARK: We have got the worst inequality that New Zealand has ever had. This Government—it is true—has the worst economic record of any Government in New Zealand in the last 50 years. It is absolutely true. If we look at the economic growth rates over time, we will see that under Labour Governments the economic growth rate was higher. Members opposite do not like it, but they know it is true. Members opposite know, because they can have a look at the figures. They can see that under National Governments the average growth rate in the last 50 years has been about 2.7 percent, under Labour it has been 3.9 percent, and this Government is the worst of all.

It gives me great pleasure to speak after the last speaker, David Clark, who represents the Labour Party, which has the worst political record in 50 years. He would know about backtracking, being dumped from the Finance and Expenditure Committee, and trying to tell this House what is happening in the finance markets. He is just not in there.

This bill, the Student Loan Scheme Amendment Bill (No 2), is good. It is what we need to do. We need to make sure that we recover money from those people who are lent money, go overseas, and do not repay. This bill is part of that process. I look forward to the bill passing through the House.

The ASSISTANT SPEAKER (Lindsay Tisch): I call Raymond Huo. This is a 5-minute call.

It is a 5-minute call. Thank you. I rise to take a call in support of the Student Loan Scheme Amendment Bill (No 2) and to register a concern in relation to unnecessary regulation-making powers in proposed new section 17 in clause 39(4) of the bill, which we do not support. We supported this bill because we supported the principle of fairness. We are happy to see that some loopholes in the student loan scheme are being closed under this bill.

This bill makes two key changes to the student loan scheme. First, it broadens the definition of “income” to include income from trusts, companies, superannuation schemes, etc. This means that borrowers’ repayments will reflect all income, not just wages. The second key change is to allow information sharing between the Customs Service and the Inland Revenue Department so that the Inland Revenue Department can have access to the contact details of overseas-based borrowers who are in serious default.

Labour is supporting this bill as these changes should make the repayment of student loans fairer. Student loan repayments are a huge burden on hundreds of thousands of Kiwis. For those struggling to pay off student debt while paying the bills and saving for a house, it is galling to hear of overseas-based borrowers making no attempt whatsoever to pay back loans. Labour expects every borrower to make an equal effort to pay back their student loan, no matter whether they are overseas or at home.

A similar principle of fairness applies to this bill’s measures to expand the definition of “income”—as some of my colleagues covered earlier in this House—to include business profits, income from trusts, and other sources of income. Those who receive income from a company, a trust, a superannuation scheme, or other sources should be treated in the same way as those who earn a weekly wage. According to Treasury, broadening the definition of “income” will save the Crown approximately $7.5 million over the next 5 years.

Regarding subclause 39(4), which inserts an unnecessary regulation-making power, there is a good opinion article by Professor John Burrows, and I urge members across the board—especially the Government members—to have a good look at the article to appreciate the nature and scope of this regulation-making power. It states: “Some of those regulation-making powers simply allow for the addition of new transitional provisions to those already existing, but many of them are what we call ‘Henry VIII clauses’, in that they enable a regulation to change or override the words of the Act itself. Such clauses enable the executive to override the word of a Parliament. Parliament makes laws by an open and transparent process, with opportunity for scrutiny in select committee public submissions and debates in the House by which those opposing the bill can express their views. A Henry VIII clause allows the executive to override statutory provisions passed by Parliament with none of these safeguards.”

Although—borrowing Professor John Burrows’ words—sometimes transitional regulation-making powers are a necessary evil in this modern, complex legislative world, we should discipline ourselves to ensure that Parliament makes laws by open and transparent processes. Thank you.

Tonight I add another Green Party voice to our opposition to this bill, the Student Loan Scheme Amendment Bill (No 2)—this technical little tidying-up bill. We are opposing it primarily because of its interaction with the existing system, which, as my colleague Holly Walker pointed out very ably in her speech previously, has been significantly eroded by this current Government. The provisions of fairness in this system have been significantly eroded.

I need to add my voice to the position that the initial system was not exactly fair in the first place. It represented a massive transference of collected debt to the individual in this country, and has entrenched and exacerbated the inequalities that exist by individualising that debt, rather than taking the opportunity for us as a country to share that burden, as well as the benefits of educating our entire population.

We believe this bill misses the boat, and although we can say that the changes are technical and small by the interaction with the existing system, they do not help us as a country, and, therefore, we will be opposing it.

Essentially, there are two main changes in the bill. One aligns the definition of “income” for student loan purposes with that being used for Working for Families. The second makes it easier for customs officials to share information with the Inland Revenue Department to track down borrowers who are overseas, and to make it easier for them to repay their loans, which sounds fine.

To go into a bit more detail to explain why we are not supporting the bill, I should say, for us, it is in regard to the Working for Families definition of income alignment. The primary reason for not supporting it is that it is such a glaringly lost opportunity to rectify an injustice that is unfairly reducing money in the wallets of families who are trying to study and improve their situation.

Although the bill aligns the definition for student loan purposes with the definition for Working for Families, a corresponding change is desperately needed so that Working for Families entitlements can be calculated after student loan repayments are taken into account. Until that happens, the Green Party cannot support the changes in this bill.

All too many families in New Zealand at the moment are living in poverty, and all too many of these families are locked into unemployment and low-paid work because of the policies of this Government, one of which has been the limiting of access, and the increase in disincentives, to higher study. Calculating Working for Families entitlements before student loan repayments is a very clear example of locking people out of higher education, which is a key tool in furthering their position in life. So this we clearly cannot support.

Secondly, on the matter of sharing information between the Customs Service and the Inland Revenue Department to chase up overseas borrowers—of course we support people following through on their commitments. Entering into a loan agreement is a commitment, so we support people following through on paying those debts. However, we do note that the Government has reduced the repayment holiday from 3 years to 1 year, and that is something we did not support, because we recognise the value of overseas travel to New Zealanders, and the real importance to our economy of ensuring that people can come back easily. The sharing of this information, when we do not have good systems in place to enable people to interact with our Government agencies here from overseas, actually increases the potential of people not coming back. They have not been able to set up those systems, and now those people are scared to come back because they are going to be caught at the border.

New Zealand has one of the most generous student loan schemes in the world. It is interest-free and we want to keep it that way. Our very able chair of the Finance and Expenditure Committee, Todd McClay, has already detailed the main provisions of the Student Loan Scheme Amendment Bill (No 2), the amendments, and the recommendations as made by the select committee, of which I am a member. In a nutshell, this is a bill that aims to improve the value and the fairness of this scheme, to ensure that student loans are administered as efficiently as possible. In my view, that is a commendable aim.

Labour supports it—sort of, in that grudging, mean-spirited way we have come to expect from it—and in the never-never land of the Greens, their philosophy is at least consistent on this bill: borrow as much as possible and take as long as possible to pay it back, in the meantime living off the hard work of others. The Greens are at least consistent, I suppose, and their predictable negativity remains at the core of their lacklustre contribution to this Parliament. I commend this bill to the House.

The question was put that the amendments recommended by the Finance and Expenditure Committee by majority be agreed to.