Education (Export Education Levy) Amendment Bill

I move, That the Education (Export Education Levy) Amendment Bill be now read a first time. At the end of this debate, I will move that the bill be referred to the Education and Science Committee.

The Government has sponsored this bill to maintain the growth of the export education industry, infuse stability, and guarantee a principled approach to the education of international students. The bill ensures that immediate financial relief can be provided directly from the levy fund to assist students affected by provider collapse.

As recent cases have illustrated, swift action is essential to support students who face loss, insecurity, and indecision. This bill sends a clear message that international students who come to New Zealand can have confidence that in the unfortunate event of a provider failure they will be looked after. The Government—and, I am sure, all sector providers in this most important industry—hopes that in future there will not be any need to use this proposed legislation on the money that comes from it. The message that sends about stability, and the support that we have around the House, is very important to our international relationships. I ask members opposite to think of that and be slightly careful as they debate the issue.

That is a bit rich coming from this Minister, that it is now our responsibility to maintain the credibility of international education, when he has been the Minister in charge of it for 4 years! This bill is a signal of his failure.

Going back to the early 1990s, measures have been taken by Governments to maintain the credibility of the export education sector. A big question that the House has to answer tonight when considering this bill is why it is that Government agencies have failed to do the job they are charged to do by statutes passed by this House? This bill is about levying providers retrospectively to pay for the failure of the New Zealand Qualifications Authority. That is what it is about. Let us just clarify the retrospectivity of it. Clause 4(3) states: “If, before subsections (1A) to (1C) came into force, the agency responsible for the administration of the levy has made any payment that could have been made, or for which it could have been reimbursed, from the funds of the levy had it been in force at the time the payment was made, the funds of the levy may, with the approval of the Minister, be used to reimburse the agency for that payment.” So it is retrospective.

The Government has already spent the money it will levy with this bill—a bill that will not be passed for some time. The money has already been spent, yet the Minister has the gall to get up and say: “I hope no institution collapses so we’ll never have to use the money.” But he will collect it, anyway. So it could be that the money is spent before the law passes, and after the law passes the Government does not need to spend any more money. It could be a total waste of time.

Let us just get into the detail. This bill has been a reaction to some sensitivities from foreign governments about export education, not just in this country, as the Minister pointed out, but in a number of countries. We are not the only country that has been asked for a list of approved providers. In fact, Australia, Canada, and the UK have been asked, not just New Zealand. It is not a feature of our market alone, or of the people the Minister hates—that is, the private providers, whom he cannot stand the sight or stench of.

We are not being picked on. This is a reaction to the Modern Age Institute collapse and the Carich collapse. I thought to myself, being new to the job, that since those institutions have collapsed and left the students high and dry, it must be that they were never checked up on—and that would be terrible. I had a look, and what did I find? I found that these institutions have been checked up on, very frequently. Between October 2000 and 2003 the New Zealand Qualifications Authority conducted three quality audits of the Modern Age Institute of Learning. When we look at those institutions, we see that one of the central issues is whether the money students have paid has been put in the trust fund. The authority asked the Modern Age Institute whether it had put the money in the trust fund, and it said “Yes”. The authority said: “Thank you very much. We believe you. We’re off.” Now the whole private training sector will pay $400,000 for that mistake.

Carich collapsed, and who was there right alongside Carich day by day, month by month? It was the Ministry of Education and the new and much-beloved Tertiary Education Commission. They stood right by Carich’s side as it fell to the dirt and took its creditors and students with them. What were the bureaucrats doing? The Minister’s own officials watched those institutions collapse, because of their incompetence, then the officials went to the Minister’s office, and, on the spur of the moment, said: “Pass a piece legislation to cover our costs.” The cost to the Government is $700,000. I would like the Minister to tell us what proportion of that money went to students? Can he confirm that $400,000 went to students and the rest went on officials’ flights and accommodation?

That is the inherent problem with this legislation. The people who pay the bill have no control over what happens. In this case, the Minister’s officials mucked up. They let two institutions collapse as they watched; but they got to send the bill to the other private training providers who have no control over who comes into the industry, no control over how officials spend the money, and no control whatsoever over the vindictiveness of a Minister who wants to rub out any private provider of anything, including education to foreign students. That is why the levy is wrong. The Government agencies should be able to monitor the sector, as they have been required to in the past. Why have they not?

Why is it that New Zealand Qualifications Authority accreditation does not mean anything to the Chinese Government? When the Chinese Government asks for a list, why can the Government not just give it a list of New Zealand Qualifications Authority accredited providers? The reason is that the Minister has no faith in the authority to do its job properly. The law does not state that the authority monitors only public institutions; it states that it monitors all tertiary educational institutions, regardless of whether they are public or private. But when the Chinese Government comes knocking, the Minister says: “You can have the list of public institutions, but we don’t believe that the NZQA does a good enough job. So where it says ‘accredited by NZQA’, don’t believe that.” He was right. I agree with him. The New Zealand Qualifications Authority is hopeless. It is disgraceful and negligent, and the students have paid.

The Minister has given the authority permission to continue being reckless and negligent. It can do what it likes; the bill gets sent to the private training providers, not the Minister. The students will get their money, and that is a good thing—they should. However, the New Zealand Qualifications Authority faces no sanctions whatsoever for its failure, none at all. The Minister divides the world into two. If public providers go down the toilet he just fronts up with the cash. In the last 4 years my guess is that the Minister has put over $100 million into saving polytechnics that were going down the tubes. He has put in over $100 million in capital injections. The Northland Polytech has been under restructuring for 2 years. Why is he not levying all the other polytechs for the huge cost being run up by the polytechs—for 2 years at $2,500 a day, and the restructure is no closer now than it was 12 months ago? Why does he not levy the polytechs for that failure? Of course he will not, because they are nice State institutions that deserve to get all the money they need whenever they need it. A private institution will get the levy when the public institution stuffs up. Instead of passing this legislation, the Minister should get the New Zealand Qualifications Authority into his office, sack the chief executive, sack the operational people—

💬 Hon Trevor Mallard: Is the member saying that I should sack the chief executive?

Yes.

💬 Hon Trevor Mallard: That’s outrageous!

The Minister should stop quacking. He usually keeps that behaviour for public meetings.

The Minister should sort out the New Zealand Qualifications Authority, because it sold those students down the line. It failed to do its job. The authority is a statutory body charged with monitoring those institutions, and it did not do that. That is why we will oppose this legislation. If we thought there was a comprehensive package of measures where we could rely on the State institutions to enforce the code of pastoral care and rely on the New Zealand Qualifications Authority to do the auditing and monitoring it is meant to do, then we would have an open mind. However, the Minister refuses to put pressure on the Government institutions and he is making the private ones pay the bill.

At least that speech was given with far more passion than the current leader of the National Party could ever do. I rise to support this bill. It is very, very important. It is very important to maintain this critical industry so that students and their home Governments are assured that they will receive quality education in exchange for their very important investment. This bill is good. It is another example of this Government yet again showing excellent leadership.

In John Key’s speech on an earlier bill he mentioned that this Government has brought in 19 extra levies and taxes since it became the Government in 1999. After this bill is passed all the way through, there will be 20. Basically, this is a new tax. It is a tax on the inefficiency and incapability of Government agencies. The private training establishments that are performing well, doing well, and doing everything properly will pay that tax.

This is the third shot that the Minister of Education has had at trying to get in place an export education levy, and he has not got it right once. The first time was in the Education Standards Act, if members recall. There was going to be a levy on all institutions to ensure monitoring of the code of practice for international students. We supported that; we thought that it was good, that it was well done. Then there was the other rush of blood to the head: the day before we went into deliberation on the Tertiary Education Reform Bill—the legislation that was the bus passing by; it was Steve Maharey’s little baby—the Minister, Trevor Mallard, threw an export education levy into it. What happened with that? It went to a select committee for analysis, and every institution that came along criticised it. Was Simon Power there?

💬 Simon Power: I was there.

He was there. I have never seen legislation that everybody who came along said was inadequate, would not work, and was shonky, and they had not been consulted on it. Yet it was pushed through, on the basis that the Government would not increase the levy, would not put it up—that it was a levy to do just this thing and that thing, and the Government would not put it up. Even at that particular time, we were being told what that levy would be for.

What has occurred is that one or two of these private training establishments have not been monitored adequately by the State agencies. Bill English got it right: the problem is the State agencies and the lack of quality assurance systems—they have fallen over. The systems that are being demanded are good systems if they are followed through—for example, not just having money put in a bank to make sure there is cover, but also checking the bank account to see whether the money is actually there. Not doing that is a pretty fundamental monitoring error. As a result of that fundamental monitoring error the Ministry of Education, one way or the other, had to come up with $700,000. Part of it is administration costs and part of it is direct costs. The Minister then said we will recover it, and the way we will recover it is by banging up the export education levy.

💬 Pansy Wong: Who pays?

The people who are going to pay are the people who are running private training establishments that are working well, doing things properly, setting high standards, and following the rules. Now they are going to be penalised by this Minister, because the New Zealand Qualifications Authority has not done its job properly. When we look at Carich—although the circumstances are not quite the same—we see it went down as a result of some of this Government’s policies. Now the private training establishments that have been able to work within those pretty draconian policies, to operate well, are going to be penalised even further.

The percentage component of the levy on private training establishments—not polytechs or universities, and schools have been exempted already—is going to be increased from 0.45 percent to 0.7 percent. So that the people who are listening can understand the significance of this measure, I point out that the increase will apply despite the promulgation of the Education (Export Education Levy) Regulations 2003. So we are going to throw out a regulation that has been promulgated, and we will do so purely and simply to put through a piece of legislation as a stopgap measure because one of the Government agencies has not done its job properly.

Bill English is saying that collecting all this money may not be necessary. But the money has already been spent and the Minister is trying to extract it back. It is one of the problems of having a Minister of Education who is also Associate Minister of Revenue—a Minister who wears both those hats. In this particular case, it has led to unjust legislation. If, for example—and Mr English once again made this point—a polytech got itself into trouble over the very same sort of thing, would the Minister require all the other polytechs to bail it out? If Victoria University or Otago University got itself into some difficulties as a result of the export education market, would the Minister expect all the other universities to cough up extra to bail it out? The fact is that, no, the Minister would not. Unfortunately, the part of the sector that the Minister is penalising is the part that is actually achieving. These institutions are doing the very things that he wants them to do—in other words, to operate soundly and to provide good-quality export education. Yet now they are going to be penalised.

There is another downside to this. Who is going to end up paying this bill?

💬 Simon Power: The students.

💬 Pansy Wong: The students.

It will be the students. I have to say to Mr Mallard that there is a real drop-off in the number of students who are coming here—in fact, by two-thirds. Members should consider this: the New Zealand dollar is making export education even more expensive for overseas students. Now it is going to get worse. So what will happen? The Minister takes whole departments over to China to try to promulgate export education here. Can anyone explain to me why he took the chief executive officer of the Education Review Office over to China to say how good our English-language teaching is? That did not make any sense to me. Nevertheless, the Minister went over there to try to do a job, to try to fix up the mess he has created, and now he is creating even more of a mess back here in New Zealand.

So New Zealand First—I think the Minister probably has got this point—is not going to support this legislation, because it is unjust, unfair, and shonky. The Minister should put his energies into making sure the New Zealand Qualification Authority gets its systems right, rather than putting through legislation that is going to penalise quality education providers.

I rise on behalf of United Future to oppose the first reading of the Education (Export Education Levy) Amendment Bill. We opposed the export levy when it was introduced in a rush as part of the Tertiary Education Reform Bill last year, for several reasons. We believed back then that it would clearly impact on profitability and lead to subsequent fee increases, thereby reducing competitiveness, which we now see with other countries providing export education.

There were also question marks at the time as to whether the levy would achieve what it was supposed to do. The generic marketing approach, funded by the levy, was not sufficiently targeted to students for particular courses, and, at that time at least, there was no evidence of market failure in the sector in terms of marketing, quality assurance, or even pastoral care. The select committee consideration of the levy found that a significant portion of the industry was not supportive of the levy, at all. Although the Tertiary Education Reform Bill included a provision that required the Government to show there was sufficient support among industries for a levy to fund industry training organisations, as I recall, there was no similar requirement for an export education levy.

So we come to this bill tonight, which takes the levy and increases the amount, but for one class of providers only—that is, the private training establishments. This has arisen, as we know, from the collapse of the Modern Age Institute of Learning and Carich Training Centre—both private providers—which saw the Government dipping into what I call the fiduciary fund to assist international students affected by those closures. As a consequence, the bill also enables the Government now to recover those costs.

The levy was intended to enhance the development, promotion, and quality assurance of the entire industry, but the uneven nature of this change to the levy undermines any attempt to create a unified sector. We all know that a State provider, such as a school or a polytechnic, would not be allowed by the Government to collapse, as we have already heard, but I have severe doubts that, in that case, the Government would seek to recover its costs from the levy fund. The industry, not the taxpayer, should be asked to bail out State providers that falter, as well. In any case, public sector institutions are able to cross-subsidise losses from Government-funded domestic student operations in a way that the private sector cannot. Of course, the point could also be made that State providers—particularly schools—get into export education to avoid going under because of insufficient Government funding; that is a debate, I guess, for another day.

This issue goes even further than the providers. Export education is, we have been told, the fourth-biggest export earner for the country, with estimated revenue of $1.8 billion. Yet we know that only one-third of the revenue from foreign fee-paying students comes from tuition fees, some of which then is passed on to the employees of the providers. The other two-thirds is pumped into the economy as a result of students spending on accommodation, food, telecommunications, recreation, and travel. The portion that goes back to the State, in the form of GST, is considerable, going up to about $250 million—just for GST.

It is significant that the Tertiary Education Reform Bill did not include provision to differentiate the rate of the levy according to the type of provider, as the whole aim of the levy was to create a unified industry. But this bill means that law-abiding providers that are compliant with the conditions of their registration will be penalised for the mistakes of others. Perhaps the most bizarre aspect of this is that the private sector in this industry is being held accountable for the failing of a competitor or competitors. That is not exactly standard business practice in an open economy. It is the Government that controls entry to the industry, as only registered private training establishments can enrol overseas students, yet the industry is expected to pick up the tab for the Government’s errors of judgment.

I note that the Government’s original discussion document from last year on the imposition of the levy recognised the competitive nature of the industry, but also included a number of areas where industry cooperation adds value. What is proposed in this bill could conceivably come under this rubric if it can be couched in a generality, such as the need to preserve the industry’s reputation. But the emphasis throughout this discussion document is on national industry, cooperation across the whole sector, and providing a unified voice. Nowhere does it talk about differentiating between the private and public sectors. If anything, the message is that the different parts of the industry must pull together, yet this bill threatens to drive them even further apart.

Interestingly, the submission of the New Zealand Vice-Chancellors Committee on the original discussion document proposed that if there was to be an export education levy, it should come from the students’ student visa or permit, as this would be much more equitable, uniform, and, in fact, upfront. If this bill is going to discriminate, then it should at least waive the increase in levy for those providers that took on at no charge students who, because of those collapses, had lost their prepaid fees.

Yesterday I received a timely reminder that the overall impact of those collapses on the industry seems to have been rather minor, if not negligible. Despite a spate of bad publicity, the number of foreign fee-paying students in New Zealand schools continues to rise. There are now, I am told, nearly 17,500 fee-paying students, which is 14 percent up on last year. Government figures show that the number of Asian students resident in this country also increased substantially, and I am sure that the Minister of Education’s recent charm offensive in countries like China had a lot to do with this.

But I still suggest that this bill is perhaps not as necessary as first thought. Net of GST, the fiduciary export levy fund has to have received at least $3 million this year, even without adding the 0.45 percent levy. This fund has to be way ahead of its projections, as the number of students was not expected to increase by 14 percent. How large could this fund be when the levy is raised to 0.7 percent for the largest slice of the market providers—that is, the private training establishments? So what is the need for this punitive legislation? What has happened to the export education levy fund? I notice today that even the Vice-Chancellors Committee has no idea how much has been collected for this year, 2003.

💬 Hon Trevor Mallard: We’ll table the report in the House on Tuesday.

OK. Indeed, it does not know how much has been spent. Education New Zealand, as I think the funds manager is called, has really gone quiet at the moment as the bill is before us.

United Future is voting against this legislation, and if it progresses to the Education and Science Committee, I would like to think that those in the industry will have a real chance to have their voices heard on this bill, including the imposition of the levy in the first place. United Future wants to see the select committee ask some hard financial questions about where the existing levy money has gone. Surely, there is at least $700,000 left over from the worldwide trips that were made this year.

One of the disappointing things about the last 4 to 5 weeks has been the fact that I have not been able to sit on the Education and Science Committee and have an opportunity to listen to the organisations, the New Zealand Qualifications Authority and my personal favourite, the Tertiary Education Commission, when they come before that committee to discuss issues of competency, but, more particularly, to provide a check on the activity or inactivity of those organisations with regard to issues like this.

Bill English and Brian Donnelly both hit the nail square on the head when they said to the Minister that what should be done in this situation is to get the New Zealand Qualifications Authority, the Tertiary Education Commission, and—while he is at it—the New Zealand Teachers Council into his office and say to those three organisations that they are all useless. Part of the problem that we are facing with this bill is the fact that the New Zealand Qualifications Authority and the Tertiary Education Commission—as long suspected by this member—have been so caught up in the big-picture, philosophical, architectural design in their own minds of how they want to see the education system at a tertiary level develop that they have missed doing their core business. Their core business is to ensure that the quality of the education coming out of those institutions meets a certain marker and, more particularly, that the money invested on behalf of the taxpayer in those organisations is protected, monitored, and audited to the point that taxpayers know that their money is safe.

I know—because the Minister has admitted as much in question time in the House under questioning with regard to the Teachers Council—that it has problems.

💬 Hon Trevor Mallard: Fewer problems than it had a couple of months ago.

Let us hope so. The fact is that the New Zealand Qualifications Authority has been hopeless. Every time the New Zealand Qualifications Authority appeared before the select committee, when I was on it for a short time, matters just went from bad to worse. In fact, Brian Donnelly, who chairs that committee, will recall that we had to haul the New Zealand Qualifications Authority back before the committee after we had looked at transcripts of descriptions of activity that they had given the committee, because it turned out that they were completely wrong. We had to recall the New Zealand Qualifications Authority to the committee, put it under the gun again, and ask the questions a second time.

I say to the Minister of Education that the thing that concerns me most about all of this is that I know that Minister knows that the New Zealand Qualifications Authority is not doing its job properly. So why not line the New Zealand Qualifications Authority up in his office and take to it? Mr Ogilvy says that it is the institutions that will be penalised, but that is just not right. It is the students who will be penalised when the levy comes in, because all that will happen is that the cost will be passed to the users of the institution. I know that members want students to have a quality education, but the reality is that this bill is misguided in that regard.

I would bet money that the Tertiary Education Commission is a can of worms waiting to be opened. I am envious of my colleague the Hon Bill English getting to sit on the Education and Science Committee when the Tertiary Education Commission comes before it. I am tempted to do a deal with Dr Wayne Mapp to see whether I can get on there for the day. I tell members that that organisation might have the lofty ideals clear in its mind that Steve Maharey has imparted to it, but it does not have the operational aspects of the tertiary education system locked down, at all. The Tertiary Education Commission is just another New Zealand Qualifications Authority waiting to happen when it comes to dealing with those institutions—the way they are funded, the charters and profiles, and the way in which the operational matters occur.

I have said it before and I will say it again. The place leaks like a sieve, and that is a sure sign that all is not well there. I say to Trevor Mallard that if he really wants to look after international students and if it is their welfare that he is most concerned about, then he should direct the energy at the institutions that should be monitoring and auditing those providers, rather than just picking off the private providers and saying that they will carry the burden and the cost.

We have seen it happen when regional polytechnics have not met the grade. What happened in those cases? Well, the big cheques were written, and I have to say—[Interruption] I tell Ms Coddington that that is right. I have to say that when decisions in legislation are based purely on the difference between whether an institution is owned publicly or privately—regardless of the quality of the education being provided, regardless of the type of management and governance structures in place, regardless of the accountability those institutions should have to the departments that should be monitoring them—I would ask whether we should not apply the same standard to all institutions, including those institutions and Government departments that should be monitoring the use and expenditure of taxpayers’ money.

We on this side of the House know that it is actually the New Zealand Qualifications Authority—and, I am willing to bet, the Tertiary Education Commission—that should be under the gun here. Those are the institutions that have failed international students, as much as the institutions themselves that allegedly provided the education. As I said earlier, I know that the Minister of Education knows that. It seems to me that the quickest, most effective, least political way of dealing with this problem is to deal with those institutions that should be monitoring and watching these providers. I am just not convinced that the New Zealand Qualifications Authority is anything more than a bumbling group of bureaucrats who are unable to see anything past scraping through the next financial review before the Education and Science Committee. Those New Zealand—

💬 Hon Trevor Mallard: I am sure that’s not the major focus.

I tell the Minister that it should be, because the New Zealand Qualifications Authority is the organisation that should be here, and in the gun. I say that that is where the focus of this bill should be, and that it seems to me that to punish those private institutions that are doing well will actually end up punishing the students that this Government most wishes to help. When we look at the figures and statistics, of course, it is Māori who most often take up their tertiary education through private providers, and it seems to me that it is Māori who will suffer as a result of increased costs, taxes, and levies being put on these institutions.

Those costs will be passed to those students, and in that instance, it is they who will be put off entering tertiary education providers. It is they who deserve the New Zealand Qualifications Authority to be doing its job in a way they know that hard-earned money saved, or borrowed through the student loan scheme, will provide those students with an asset to improve their lot, and the lot of their families into the future. It is those organisations—the New Zealand Qualifications Authority and the Tertiary Education Commission—that should be in the gun here, not the institutions or the students those institutions wish to serve.

The ACT party will be opposing this amendment bill. The Minister of Education talks about export education as if we were talking about cattle being fattened for beef. He seems to forget that we are actually talking about human beings in this legislation, and the fact that people come to New Zealand because of the choice that is available. This new tax—because that is what it is; it is an excuse for this Government to impose another tax on people—is another tax on private providers. What did the Hon Brian Donnelly say? There have been 19 new taxes so far, and this is yet another. [Interruption] We know we are winning the argument when members opposite resort to personal attacks because they cannot even defend their own policies any more. Do members know why they cannot defend their own policies? It is because their policies are totally indefensible.

This legislation reduces choice, and it reduces flexibility for students. As Simon Power said—and he was quite right—the majority of students who choose private providers are Māori and Pacific Island students, because they like the flexibility that private providers offer them. They are often young women who have left school, had babies, and want to return to the workforce, and the part-time courses in terms of night classes and 6-week classes—instead of the 3-year classes that the public institutions force them to take—are a lot more attractive.

Simon Power was also absolutely right when he talked about bureaucracy building. This is another way for this Government to get more taxes to build bureaucracies. The New Zealand Qualifications Authority is expanding. He talked about the Teachers Council. The Teachers Council is known in the education sector as just a post office. It takes in the applications for teachers, it takes them out of an envelope, it puts them in another envelope, it sends them off to the police, they come back, and the council collects $10 on the way.

There have been several changes in the head of the Teachers Council since it was set up. It is still not even coping with the work it is required to do, and the latest letter that went out to the education sector, naming the new head of the Teachers Council said, in addition, that it would continue to advertise the position on an ongoing basis. So at least the council has accepted that it cannot hold anyone there for long. The Minister should get his bureaucrats in and get them to be accountable.

We also see in this explanatory note of the bill that this export education is a sustainable, green export. That is just cant, total cant, and this Government knows that. It is totally pathetic. Why should the public sector not be held accountable when it fails? A hundred million dollars of taxpayers’ money has been poured into polytechs to bail them out when they fail, but instead of punishing the private providers that make mistakes, this Government decides to punish everybody. That is the culture of this Government that we see all the time. If a child gets beaten to death, let us ban smacking. If one or two education institutions fail, let us tax all of them.

The Association of Private Providers of English Language put out a very good question and answer thing today, in which it addressed the issues. The association asked a very important question: “Did the Minister consult?”. This Minister is very proud of the fact that he consults. He sends me nice little friendly emails saying that he does front up, and he does consult. He has not learnt to find the caps key yet, but he is a slow learner, in his own words. But did the Minister consult? The Minister announced that private training establishments would pay for the refunds given to students of the Modern Age Institute of Learning on 8 September, without consulting the industry at all. He did not even go to the industry. He came out and announced it.

The Modern Age Institute of Learning closed because of bad management, but there was bad management in the New Zealand Qualifications Authority, as well. The authority was not keeping a good watch on the institute. It found serious problems in September 2001 and again in February 2003, and most of the problems were still there in August 2003, but they were mainly due to lack of systems and poor implementation. Why did the bureaucrats not step in then?

Debate interrupted.

The House adjourned at 10 p.m.