Education (Export Education Levy) Amendment Bill

I raise a point of order, Mr Chairperson. I hope there is not going to be a presumption by the Chair that this is simply a narrow, technical piece of legislation. You sat in the Chair and, as far as I could see, heard perhaps two contributions to the debate on Part 1, and then saw fit, as is your right, to bring that part of the debate to a close. I was seeking the call, with new material, and there was no indication actually that the debate had run out or become repetitive. This is not a narrow, technical piece of legislation. It involves a number of aspects of significant public policy, and I hope that fact will be taken into account in your consideration of the length of the debate for this part.

The CHAIRPERSON (Hon Clem Simich): I thank the honourable member for that. I had indicated on the call before, that that would be the last speaker, and I thought I gave a clear signal that it would be. I am conscious of the issues the member raises.

The clarity of your signal does not necessarily confirm its correctness. I will address clause 7, because this clause, and clause 5, was meant to get rid of the retrospective nature of the legislation. But, in the increasingly sloppy way in which we see the Government handling legislation, clause 7 is actually retrospective. What it does, as we see when we read it, is that: “Any funds … that are unspent on the day that this Act comes into force may be used in accordance with the purposes specified in section 238I of the Education Act 1989 (as amended by this Act).”

So what this says is that funds that were raised for one purpose, quite specifically laid out in legislation, are going to be used for a completely different purpose. That is what that clause means. It means that funds that were raised under section 238I for, as subsection (1)(a) states: “the development, promotion, and quality assurance of the export education sector, … ”, and it goes through a list of purposes: “(i) professional and institutional development; and (ii) marketing; and (iii) implementation of scholarship schemes;” and so on.

Then, with some care, subsection (2) of 238I states: “The funds of the levy must be kept in a separate bank account that is used only for the purposes of the levy.”—all the paraphernalia of a very specific purpose for which that fund was raised. I bet that there was significant discussion at the time—in fact, I know there was—about the raising of this levy, because it was new in the education export sector, and they were not keen to pay it. They were suspicious, as they should have been, that the Government agency set up to use this levy would display all the weaknesses that generically funded industry-based organisations like that do. We were familiar with them right across our economy in the past, and less so now. So they would have debated that at some length, and many of them would have been persuaded by the purposes set out in the Act, and in the end it was pretty hard to resort to civil disobedience over a levy that had such noble purposes as those laid out in section 238I of the Education Act. So they went along with it and they paid it, as law-abiding citizens, whether or not they agreed with the legislation Parliament had passed. Today, or when this bill passes—but today is a step along the way—we are going to agree to change those purposes some considerable time after that money was paid to the Government.

💬 Dr Wayne Mapp: It’s outrageous. It’s retrospective.

It is—it is purely retrospective. There is absolutely no reason why this legislation should not replicate the provisions of section 238I(2), which states that “The funds of the levy must be kept in a separate bank account that is used only for the purposes of the levy.” So why do we not do that for this particular purpose? Why do we not say that the money levied for this purpose goes into a bank account to be used for the stated purpose in the legislation? That is what happened last time, and people knew that when they paid their levy, it went into that bank account to be used for that purpose.

If the Government had not thought that mattered, it would not have bothered taking up time and space in the statute to write it in. Quite frankly, I was a bit surprised to see it there, but there it is. It was put in there no doubt because people wanted it stated as clearly as that. They wanted to know that that bank account existed, with that levy, for that purpose, and no one could mess around with it, because they did not trust the Government.

And what has happened? They have discovered that their mistrust was well placed. Now, even though the money raised for that purpose went into the bank account specified in that section of that statute, this Minister has decided to use it for something else. He has decided he has a better idea than he told them then.

💬 Lindsay Tisch: Sneaky.

Well, it is sneaky, but, more important, it is actually unnecessary. There is no need to further corrode the confidence of this sector in the Government by passing this particular measure.

Well, I have to say that the Hon Bill English absolutely put his finger on the pulse. Nobody can trust this Labour Government or, especially, this so-called Minister of Education. I think that the U-turns, the subtle movements, and the way the Minister rode roughshod over the industry, and particularly over the export education sector, is absolutely unprecedented. I would call on the Green Party members, who always claim they have principles and that they support the rule of law, to re-look at this situation. Otherwise, I totally accept what my colleague Dr Wayne Mapp has pointed out—that the Greens never respect the rule of law. This action of theirs would confirm that.

I also make this point: why should there be any levy funds left unspent on the day that this legislation comes into force? There are a few hundred thousand dollars left in the first six-monthly accounts of the export education levy. That is very concerning because a levy, we are told, is supposedly different from a tax. When the Government taxes people it is not sure what the money will be spent on. But the export education levy was meant to be imposed on the institutions for specific purposes. I think the Committee appreciates the fact that the Hon Brian Donnelly gave us a very detailed and good account of the history of the export education levy. The Minister did not bother to adhere to the rule of law in the process of getting the industry’s agreement to impose the levy. Then, in the first year of the levy’s existence, the Government reported a surplus. After reporting that surplus, the Labour Government has introduced this legislation to the House in order to bring in another provision just in case the gatekeeper, the New Zealand Qualifications Authority, fails to do its job again and another college collapses. This additional levy would then be used for that purpose.

The only other problem I have—and I think the Minister should take a call to assure the public on this—is that I would like to know whether, with regard to all the existing private education providers, the New Zealand Qualifications Authority has established that all of them are in a sound financial position. If not, this levy is, in effect, retrospective, because some educational institutions will be called upon once again to pay up for institutions that are already in existence, and that are accredited and supposedly audited and monitored by the New Zealand Qualifications Authority. If such an institution goes into liquidation again, it will mean that any new institution that has just joined the sector, and the good performers and providers in the sector, will be called upon to bail out an institution that was previously approved and accredited by the New Zealand Qualifications Authority.

Although we were told by the Minister that he has removed part of this bill because he agrees with New Zealand First that it should not impose any retrospective provision, I am afraid the Hon Brian Donnelly may not have done the whole deal—he may have just done part of the job. Part 2 certainly gives a very clear indication that it is retrospective. Not only can the existing levy be used for different purposes, but we have not been reassured by the Minister or by the New Zealand Qualifications Authority that none of the existing institutions will fall over.

Although I do not want to refer to the previous part, I think it is fair to say that it was slightly more substantive than this part, which is technical. The regulations that were gazetted in 2002 had an error in them: they did not have a clause to spell out the purposes of collecting the levy and what it would be spent on, which was required by the Act. No one ever complained about that, asked for their money back, or said that we should stop spending the money, but we thought it was worth putting some belts with the braces and making sure we had that tidied up. It is a very narrow, technical validation.

We are now addressing Part 2, and I will look at clause 7, which the Hon Bill English has already pointed out is retrospective. Under section 238I of the Education Act, the levy that was taken was to be held in trust accounts for certain purposes. We are now seeing this new legislation because two institutions, in particular—the Modern Age Institute of Learning and the Carich Training Centre—took money for one purpose and used it for another purpose, and the students were not able to do the courses that they had enrolled for. We now see the Government changing the legislation, so that it can take money for one purpose and use it for another purpose. I do not think that is on. Mr Mallard can stand up and explain why he thinks that is justified. Referring back to Part 1, which we have already debated, I note that one of the new uses for which the levy can be put is to reimburse the Crown for any expenses it may incur in refunding students or putting them back into the same position they were in before the institution they had enrolled at failed to provide their course. In other words, it is just a tax.

The Minister should come clean, and say that this is not a fund or a levy to reimburse students who are out of pocket. He stood up earlier, in the second reading debate, and said that this legislation was necessary as he did not want to see students out on the street because they did not have accommodation. But, in truth, this legislation shows that it is just an excuse for a Crown entity—and in this case it is the New Zealand Qualifications Authority, which I note is going through its resources at a rate of knots and probably does need propping up—to take money off the private providers and use it to justify its own expenses. We have a huge conflict of interest whereby the New Zealand Qualifications Authority sets and monitors the regulations and entry rules—specifies those who can and cannot come in from overseas—and is also responsible for setting students right when the institutions fail to provide the courses that they say they will provide, and for which they take fees. That same Crown entity can then reimburse itself from those funds—not only from the new funds that will be collected from the date that this legislation is passed, but from any funds that are already accumulated and not spent on the day this Act comes into force, as is stated in clause 7. There is a name for that. It starts with “h” and I am not allowed to use it, but the Minister knows what it is.

I invite the Minister to take a call and justify why these funds, which have been paid in for special purposes—marketing, etc.—can be taken out of that named account and used to reimburse a Crown entity for money it has spent on reimbursing students, or putting students back into a similar situation to that before they were disadvantaged by the failure of a private sector provider. The Minister can choose to take a call on that or he can choose not to, but I think it is an important issue that has not been addressed. In the Education and Science Committee we got rid of the retrospective clauses in this bill, but there is still a retrospective provision here in clause 7.

💬 Hon Trevor Mallard: Oh!

The Minister is obviously bored by it all. It is absolutely unbelievable that the Minister is bored by all the worry and angst that he is causing the private education sector. He just does not care how heavily he tramples on the private sector. He will tax that sector and use it to prop up a Crown entity, and he will be cavalier about the whole thing.

My call will be brief, but I will point out why New Zealand First has concerns with regard to this bill and the legislation that went before it. I mentioned that the last amendment, upon which this bill is based and which it amends, was put before the House 2 days before the Education and Science Committee was to deliberate on it. It was inevitable, under those circumstances, that we would get little hiccups in the process. When it comes to the law they are actually quite big hiccups, as the Minister of Education, who is also the Associate Minister of Finance, knows. This bill is just an example of the need to correct that situation.

I also take the opportunity to point out something else that seems to be escaping people. Everyone keeps saying that it will be the private providers that have to pay the levy. Ultimately, in fact, it will be the students who pay, because the cost of the levy will be added on to the cost of courses. Whatever levy we impose will go on to the students, and that will make our courses here in New Zealand less competitive with courses held elsewhere. Let us face it, there is a very competitive market in export education. Back in 1997-98, we were trying to make that industry worth $1 billion per year—it is already worth $2 billion per year. The Australians are in the industry in a big way, as are the Americans and the Canadians. In Britain, the Government is subsiding and supporting the industry in a big way. New Zealand is actually pretty late off the block in that respect.

When this levy was debated previously—and I said there was a lot of opposition to it—one of the problems mentioned was the fact that the providers were not necessarily opposed to an export education levy, but were opposed to the purposes it would be put to. They did not necessarily accept that an export education levy should be used to give scholarships, for example, or agree with a number of the other purposes it would be used for. This part now states that if any money is left over from the levy and is not spent on the purposes outlined in the bill—and let us remember that it is money that has been levied on students—it can be used for some other purpose that is not stated in the bill. This part really is untidy. It leaves New Zealand First with a great feeling of discomfort about the whole progress of the legislation around the export education levy. Therefore, that explains why New Zealand First will continue to oppose this legislation as it goes through Parliament.

National is very concerned about Part 2, “Validation”. We have looked carefully at the regulations from 2002 and at the provisions of the Education Act. At the very minimum, therefore, we want some assurances from the Minister, concerning the following issue.

The regulations of 2002, which are being validated, do not contain a purpose clause. That was stated to the Education and Science Committee by the ministry. Section 238I of the Education Act, set out in the Reprinted Statutes of New Zealand, volume 34, states that the purposes of the levy are the promotion, development, and quality assurance of the export education sector, which may include professional development, marketing, the implementation of scholarship schemes, research, support, etc.

The one thing missing from that is, essentially, an indemnity provision, whereby successful institutions would pay for unsuccessful institutions—which is the purpose of the current legislation. An indemnity provision is not contained in the regulations of 2002. It is not contained in the statutory provisions that were inserted in 2001. This new indemnity provision is being created only in the legislation before us now, and it is worth noting, as others have noted, that there was an intention to apply this provision retrospectively. But that intention has gone, and that is good.

I question the Minister whether we are simply validating some regulations that have expired, or whether the intention of the Government is—because we are voting against the regulations so we are not validating them—in a sense surreptitiously, to achieve by way of the validation of the regulations what it has not achieved through the legislation. In other words, has the Government sought to achieve through the regulations what it has not been able to achieve through the legislation?

That is a very important issue. The sector will need an absolute assurance if that is the case. One would like to think that the only thing clause 7 does is simply confirm the types of expenditures that were set out in section 238I of the Act as passed in 2001—that section which did not have this indemnity provision.

I want to make two points. Obviously, National is opposed to the whole idea of the indemnity provision. We think that that statist solution is wrong, and that there are better methods, which were suggested by the sector itself. The Minister must know about those.

The second thing is that National is opposed in principle to validating regulations that have expired, and clause 7, at least on a narrow reading, will validate the narrower, expired regulations from 2001. Even that is bad enough, because it means all the levies that were collected in 2001, 2002, and 2003 were inappropriately used once the regulations had expired. The Government used the levies, even though it did not have the authority to do so, and now the Government has come to Parliament essentially to ask us to fix up its mistake.

Frankly, members on this side of the Chamber will not partake in that legislative charade. We think the proper course would be to pay the levies back. Is that not really the principled approach—instead of our having to come along with the pooper-scooper and fix up this problem for the Government? Well, we will not play any part in that.

I want to speak to Part 2, and, in particular, to clause 7, “Use of export education levy”, which everybody is touching on. One of the previous speakers talked about this clause as clearly being a retrospective take. I think it goes far further than that. I think that not only is this clause retrospective, because a growth fund has been built up, but it really is equivalent to a land grab. Here is a fund that no one owns, and no provider has asked to take back its money—it is just left over. I would say that in today’s world, people would be somewhat shocked if we did a little land grab around New Zealand at this stage, especially given all the sensitivities we now have. Here is the equivalent of that; it is called a fund. The Government grabs all that is left over, because no one has the right to get the money back and apportion it out to those who gave to the fund.

I find something of a paradox in the way we are handling this provision. The solution given in clause 6 is simply to state that the collection of the levy is a lawful process. So be it, but why not look at some of the other solutions to the problem, rather than to see a levy as the only solution? Submitters to the Education and Science Committee had a numbers of solutions that would solidify the industry and make it work properly. I think it may be good to use this call to go over one or two of those solutions, and to remind Parliament of what the industry thinks about this legislation. The industry thinks that, yes, there needs to be some security, and that there needs to be proper accountability for any failure. Nobody had another view on that. But it is true that if there is no solution other than a levy we are left with what we have before us, and I think that is the worst of all solutions, because it is something no one has any control over.

Some of the solutions proposed by submitters were arranged around, for instance, setting up a proper bonding regime. One or two submitters said that if the export education industry saw itself as being on a par with the airline industry, just like the International Air Transport Association it would bond itself, or even that if the industry saw itself as being on a par with another form of profession, such as the legal profession, it would take on board a fiduciary fund, so it would be able to stand in the place of rescuing those who failed, and there would be proper accountability in that manner. There was also the suggestion that some proper arrangements could be made through an insurance programme, and there were examples given to us of such arrangements. If I recall matters rightly, a firm by the name of InterGlobal Insurance Services was suggested as an insurance firm that would look after—and does look after and can cater for—the students. I think one of the previous speakers made it very clear that we are here to ensure that students get their education, and that is it. So an insurance programme or a bonding programme would be in line with bringing about proper accountability for failure.

United Future is of the mind that those sorts of solutions would be much better to place upon education providers than a levy. Once again, I say United Future is unhappy about the process and the intention of Part 2 of this bill, so we will vote against it.

I move, That the question be now put.

I want to speak to clause 6, which concerns me. First, I reiterate the point made by my colleague Mr Mapp that if one looks at the regulations, on the face of it one would see that the levy was payable once. If the Minister could tell members when the regulation was renewed, that would be helpful. I understand the Act has generic provisions about the levy, including the fact that it must be reviewed in 2006, but the regulation is not generic. It applies to the academic year 2003, and it specifies dates for payment. It is quite specific. So if regulations have been renewed, or the process has been changed since then, we would like to know about it, because it is not in the book.

The second question I raise is this: why is it that the people who write our legislation cannot get this sort of thing right? It is not as if raising a levy is something new to the Government—a Government of any sort. All Governments of all colours raise levies. They write legislation that allows a provision to write regulations and the Governor-General to promulgate them, and the levy is thereby collected. But, somehow, in the middle of this machinery that writes all our law, there is confusion about what is done when it comes to the purposes of a levy.

So we have clause 6 here because, when the draftsmen wrote the regulations they did not include a purpose for the levy. Presumably, the argument was that the purpose of the levy was in the Act, and so it did not need to be repeated in the regulations. Well, whatever the argument was then, it has now changed and it has been decided that that might not have been right. What is going on here?

The Parliamentary Counsel Office writes regulations every day—in fact, I think for about 23 hours of the day, judging from the volume that comes out—and when its staff are not writing regulations, they are writing bills. But apparently they do not know what is meant to be done about regulating the purposes of a levy. When are they going to find out?

This clause does not even clear the issue up. It just says that whatever was in the regulation was valid—whatever was there. We had to legislate that those regulations themselves were valid, because it was not clear that they were, and it wastes the time of this Committee to pick up the work of some dopey draftsman who still does not know how to do it.

So I want to know what Parliamentary Counsel Office policy is, and its officials can tell the Minister while he sits there. What are the rules now? If one writes a set of purposes into legislation, does one then have to repeat those purposes in the regulations—yes or no? I do not want to stand around in this Committee wasting time on this kind of mess-up again. If the dopey draftsman does not know the answer, then presumably the expansively and interplanetary bright people who run the Parliamentary Counsel Office ought to know the answer. [Interruption] Members might think it is trivial, but it shows sloppiness.

Levying that kind of money from free citizens of New Zealand is a serious business. The question of whether the levy is valid may not matter to the member for Otaki, but it sure as anything matters to the people who pay it, and that is part of the problem. That member does not care, because as far as Labour is concerned, this is costless regulation. To clean up a problem at no cost means at no cost to the Government, but there is certainly cost to the payer.

So I want to know whether the Parliamentary Counsel Office knows enough about levying levies to know whether regulations should have a purpose, because this clause is not satisfactory as far as this Committee is concerned. All it says is that no matter what the dopey draftsman does, the Government can always legislate later to make sure it is right. But, surely, there is a policy and a principle about how to do that.

I move, That the question be now put.