Student Loan Scheme Amendment Bill (No 2)

I think it is very sad that the last speech from the New Zealand First Party showed that it tries to take advantage of our young people in this country and say that the Government is making them feel sad about having to repay a debt. I think it is very sad that the New Zealand First Party has to stoop to those levels, but that is traditional for that party, so I do not think that it is that unusual in this House.

The bad thing in this debate is actually the Green Party. The Green Party is a party that goes on to all these campuses and says that it represents young people. It puts out the image of dealing with environmental issues that it does not actually really care about. Then when Green members actually look at the facts, they will not represent the facts as they are. They will not say it as it is, and they create a lot of disharmony in our country, and that is a very sad thing.

When you look at the facts, New Zealand spends more on tertiary education than Australia does—New Zealand spends more on tertiary education than Australia does.

💬 Le’aufa’amulia Asenati Lole-Taylor: That’s because they earn more.

It is because of what?

💬 Hon David Cunliffe: Neither per capita nor percentage.

We spend more than they do as a percentage of GDP—we spend more than they do. The other thing is that if you look at the student support part of our Government expenditure on tertiary education, it is far, far in excess of what the Australians spend. So what happens is that in New Zealand we spend more money on tertiary education but a higher percentage of that goes on student support. It does not go to the institutions; it goes to student support, and that is the student loan scheme. This is a scheme that has been around for a number of years now. Most students will say: “Well, we don’t want to lose it.”, and that is rightfully their case, because it is something they take advantage of.

But there is a problem with that, because if New Zealand continues to spend more money on tertiary education and a higher percentage of that goes on student support, then what actually happens is the money that is spent on the institutions—the universities, the polytechnics, and suchlike—is actually lower than what is spent on institutions in Australia. In New Zealand we spend less on our institutions than they do in Australia, and that is because we spend so much more on student support. That is a shame, because that can actually mean that our institutions are not funded to the level that they should be. That is the difference that we are looking to try to find a solution for through the changes in the student support scheme.

We want to make sure that there is that balance there so those institutions get that funding so that they are competitive. And I want those students in New Zealand to listen to the Green Party, because the Green Party wants to give you money to live for today, but it does not want the ticket that you are going to get to mean much in the future. That is the issue. The National Party wants that ticket that you are going to get to actually mean something. We want to give those institutions the ability to deliver those tickets to the future so that those young people get the income-earning potential that they strive for by going into tertiary education.

That is the difference between these two political parties. That is the truth of the matter. That is what the Green Party needs to actually go out there and say. It is too much for the New Zealand First Party members to understand, because they have to wait for their leader to understand before they can say anything. The Labour Party will be looking at it and going: “Oh, this means that we need to give more money to tertiary institutions.” Well, that would be lovely, and we need to be able to do that over time, and that will happen as New Zealand gets richer and we deal with our financial issues. But at this time, this is the best we can do. Thank you.

I take a short call to support the third reading of the Student Loan Scheme Amendment Bill (No 2). It provides an opportunity to respond to David Bennett, the member who has just resumed his seat, who has just presented the House with what could only be described as a relatively incoherent diatribe even for him. He has alleged—[Interruption] They do not like it. They do not like it. They can give it, but they cannot take it. He spent most of his speech abusing—

💬 David Bennett: I raise a point of order, Mr Speaker. Maybe this member would like to return to his normal seat in this House.

The ASSISTANT SPEAKER (Lindsay Tisch): No, no. Look, that is not a point of order.

Speaking to the point of order, you probably do not need to explain to the public that giving a speech is not the same as an interjection, and therefore that was not a valid point of order. The member has alleged that New Zealand spends more per capita on tertiary education than Australia does. That is, I am assured by quick research by my staff, incorrect both in absolute dollar terms and as a percentage of GDP. Clearly, he was being defensive against the perception that the Government’s measures today are a funding cut, and the irony is that he need not have been so defensive, because this bill really trims only $7.5 million over 5 years. Really, the big lesson of this bill is that it does virtually nothing at all. It does no harm, and the measures are measures we can support, but in the face of a $2,670 million student debt, it tidies up about $1 million a year.

So, Mr Bennett, I would say you need not worry, and you probably should not have resorted to that last attack on the Green Party, which was to accuse it of promising young people free tertiary education. That will surely drive them into the arms of National in droves—political genius from the member for Hamilton!

However, he was trumped by the elephant in the room, the previous National speaker, Mr Hayes, who gave a stunning example of the generation gap, really—the intergenerational inequity to which this bill really refers. He said—and it was a piece of sterling wisdom, acquired over a lifetime of experience around the world—“Money does not come out of trees; it comes out of workers’ pockets.” This is clearly what National members think. Like some latter-day Robin Hood in reverse, they will take the money from the poor and give it to the rich, like they did in the tax switch. They will take the money from the young and give it to the old, like Mr Hayes or the Hon Peter Dunne.

The problem with it is that it begs the obvious question: how did the money get into the workers’ pockets in the first place? Is it a kind of fungus that just grows there, or might it be that people earn it—that they might earn it hour by hour, through wages or salary, or perhaps unit by unit through a retirement home development? I do not know, but it is certainly not always a living wage, and that is part of the problem. But when you learn—not you, Mr Assistant Speaker, but when the generic young person learns, they tend later to earn. We learn, then we can earn. Therefore, we invest in tertiary education; we do not just spend on it. But enough about the Government’s A-team.

Let us go back to the bill. What the bill does do is two small things. It is a typical bill from the “Minister for Small Things”. It broadens the definition of income to include income from trusts, companies, and superannuation funds. It is obviously sensible to get a real picture on that income. It provides information sharing between the Customs Service and the Inland Revenue Department, so that people who are grossly overdue on their student loan repayments when they are overseas can be more effectively traced. Although there are civil liberties issues at the margin, we believe that measure is warranted.

But this bill is most interesting to the public for what it does not do and does not say. Here is a short list. It does not address the yawning and growing intergenerational equity gap between today’s young generation, who acquire a mortgage during their tertiary education, who cannot buy a home because of the rapid escalation of the housing crisis, and who are saddled with debt from day one in their careers, and older generations. That is not an issue that faced the “Minister for Small Things”—Mr Dunne—or many members of this House when they were acquiring their tertiary education, but it sure as heck is an issue for our young people today. That is unfair, because we are asking them to pay the escalating superannuation and health care costs that are going to support the baby boomers while taxing our young people more and more heavily. That is not fair. That is why a generation of them are leaving our shores.

The bill does not promote access to tertiary education. By National’s own numbers, 25,000 young people have been excluded from tertiary education due to its last round of cuts—25,000 young New Zealanders have been excluded from the tertiary education system by National’s previous round of cuts. Postgraduates are finding it almost impossible to survive in the tertiary education system, because among those cuts the current Government has limited student loans to a cap of 5 years of education. But a PhD takes with a Master’s degree 2 years or with an honours degree 3 years. That is 7 years, and people are struggling to get through. Many are giving up and many are going to Australia. Export education has become the export of the educated. That is not a profit-making solution for New Zealand.

This bill, obviously, does nothing to reverse the Kiwi brain drain. We have lost 54,000 New Zealanders in net outgoing migration in the last 12 months. We would have had 8.4 percent unemployment. The Government has the worst economic management record in 51 years, and that is what Bill English himself described as a safety valve. We are exporting our smartest young people as a “safety valve” to keep the unemployment numbers down and stop the Government being embarrassed. This country is in decline. It is in decline. We are depopulating. We are losing hope. We are losing steam. We are losing identity. We are losing a vision for our future.

In the face of all of those problems, what does this bill do? It does two tinkering little changes—unobjectionable though they may be—which should have occupied about one page of a proper bill on tertiary education and not have taken up the whole time of the House doing tinkering little changes that are, frankly, wasting Parliament’s time. That is not because they are wrong, but because they are so minuscule in the face of the challenges that this country has. The Government and the Minister should be embarrassed to take up the time of the House on them.

The changes in this bill do not even make the student loan scheme sustainable. They save, as I said earlier, $7.5 million, at best, over 5 years, which is a little over $1 million a year. In the face of a $2,670 million debt mountain, with over half of all overdue borrowers overseas—ironically, there are 54,000 at last count, which is equal, almost exactly, to 1 year of the brain drain. There is $400 million of overdue debt—$409 million, to be precise. This bill solves, at best, $7 million of that over 5 years. It is inadequate. It is desolate. It is devoid of ideas. It is devoid of vision. It is, as one commentator said of the Prime Minister, like a map with no compass—a map with no compass. It does not serve this House well that we take a whole session of House time to debate what is essentially a bill of two substantive clauses.

Is this Government so run out of ideas that this is the best it can do for tertiary education or for revenue? Is this the best it can come up with? I would warrant that officials, if given the encouragement, could come up with way more than this. There are so many gaps in the tax system that it looks more like a Swiss cheese than a revenue—like a Swiss cheese, it has got so many holes—or a motorway system, because you could drive buses through it.

In the face of that we get tinkering, nit-picking little bills like this, or measures like last week’s debacle of the car-park tax and the iPad tax, which no sooner had gone into the public domain than the Government flip-flopped and rolled over because they were patently absurd. It is not just that they are bad, it is not just that they are inadequate, but it is that this country is going to rack and ruin because of the Government’s inaction. We want vision. We want a future. We do not need just this petty—although relatively unobjectionable—little bill.

I take a short call on behalf of a colleague. I was not part of the Finance and Expenditure Committee, but after that tower of Babylon doom and gloom over there, the question that must be put is this: do they, and will they, support this bill, the Student Loan Scheme Amendment Bill (No 2)? The answer is yes. I ask the New Zealand First members whether they do, and will, support the bill. The answer is yes. That is what the public want to hear. Despite all the goings-on, they will support the bill.

I simply want to answer the question asked of those members on the other side. Have they received a student loan, and have they paid their student loan? I am one who has received a student loan. I have repaid that student loan. The question that this bill asks is this: is it fair and is it just that you should pay back that which you have received? The answer is yes. It is fair and it is just. I think what this bill does is fair, and that is the reason it has support. It simply answers the question—that with an increase from 10c to 12c it is fair enough that the repayments mean that in a shortened space of time you can pay back what you have received, what I have received, and what many New Zealanders have received, which is a great education through this Government. I commend this bill to the House.

I am happy to take a call on the Student Loan Scheme Amendment Bill (No 2). I can say to the member Alfred Ngaro, who has just resumed his seat, that I too had a student loan and I too have paid it off. I did take the responsibility of paying back my student loan very seriously, and I was very pleased to. It was a great relief when I paid my loan off, because it meant my pay went up every week. The money was no longer being taken off me, so I was very pleased about that.

I want to respond, however, to some of the comments that the member David Bennett raised earlier on. I think he completely misunderstands the way tertiary education in New Zealand is funded. When he talked about the large percentage of tertiary education funding that goes to student support, and therefore argued that the institutions were being underfunded, what he did not seem to acknowledge was that the majority of money that is tagged as student support actually goes to the institutions. It is called student fees. The form of student support that is paid as student fees goes to the institutions. That is the way we fund the tertiary institutions. A significant proportion of their income comes from student fees. It is tagged as student support but is money that goes to the universities and to the polytechs and so on. So to argue that because such a large proportion of our tertiary education budget goes into student support and therefore the institutions are underfunded suggests that the member has not done his homework and has not made any effort to actually understand how tertiary education funding in New Zealand works.

The Labour Party is supporting this bill because we do believe that people have an obligation to repay their student loans. But we also believe that those people who are able to hide their income in trusts and in other complicated mechanisms should not be able to get away with not repaying their loans. It would be blatantly unfair if someone on a low income, say doing a cleaning job, had to make all of their mandatory student loan repayments while someone on a much higher income who was able to disguise that income did not have to make the same level of mandatory repayments, simply because they were better off in the first place and able to disguise their income. This bill tightens that up, and I think that is very important. It broadens the definition of income to include income from trusts, companies, superannuation schemes, and the like. I think that is a very fair change, because it means that people are not able to hide where their money is coming from, and it means that everybody gets treated the same when it comes to making student loan repayments.

The second key change that the bill makes is that it allows 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. This is probably a more controversial aspect of the bill. One of the reasons that we know graduates go overseas is that they want to get away from their student loan debt. I have done a lot of work on the student loan scheme over many, many years, including working on the policy of introducing interest-free student loans under the time of the previous Labour Government. I do encourage anybody who is going overseas to make sure that they make arrangements while they are away to keep their student loan repayments up to date, because a number of people unexpectedly have been stung with very large penalty repayments when they return to New Zealand. It was not necessarily that they deliberately did not keep up to date; it was simply the fact that they, I guess, took the opportunity once they had finished their studies to go overseas, to do an OE, and then things might have changed. They might have met someone while they were overseas. They might have got a job. They stayed away overseas for longer than they anticipated. In some cases they might have been away for 4 or 5 years. They might even have got married and had kids in that time. They come back to New Zealand and they try to get a job. They suddenly find that they are stung with this massive bill for student loan repayment penalties, because they have not kept up to date with their payments while they were away overseas. That is something that we do want to avoid happening.

I guess the sharing of information so that people can be contacted and made to be aware of all of their obligations to repay their loans is probably a good thing. But we should not overlook the reason why people get into default in the first place while they are away overseas. Many, many times it is unintentional. Also, I guess, we should not overlook the fact that problems with student debt are one of the reasons why students feel compelled to leave New Zealand in the first place. Of course, one of the key reasons is that if they have got a large student loan balance and they can earn more money by leaving the country, they may feel that they are actually in a better position to repay their loan by leaving the country. The crux of that debate, therefore, is how we get New Zealanders earning more money. How do we get higher-paying jobs in New Zealand so that it is not necessary for people to leave the country in order to earn enough money to repay their student loans? I think that is a very important point.

At the Finance and Expenditure Committee privacy issues were raised. I understand from members on the select committee that they have been reassured that those issues have been addressed. The Labour Party has supported many other measures to crack down on those who are not meeting their obligations to repay their student loans, although we do not agree with many of the measures that the Government has taken in respect of restricting access to student loans and in respect of other, more punitive measures that, in our view, restrict access to tertiary education. I just want to check that this is a split call and I am going to get a—

The ASSISTANT SPEAKER (Lindsay Tisch): No, no. You have got 10 minutes.

No, it is a split call. If I have used my 5 minutes, I just wanted to make sure that—

The ASSISTANT SPEAKER (Lindsay Tisch): My apologies. Yes, you have had more than that.

OK. Well, I will finish. Thank you.

The ASSISTANT SPEAKER (Lindsay Tisch): So you had better stop. I did ask, and I put my—

And I nodded.

The ASSISTANT SPEAKER (Lindsay Tisch): That meant 10 minutes.

I said “split”. I did say “split”.

The ASSISTANT SPEAKER (Lindsay Tisch): My apologies. I will call Catherine Delahunty.

It is my pleasure to take a call on behalf of the Green Party, and also to confess, as that seems to be what the House is doing, that I did not have a student loan. I went to Victoria University and it cost $100 a year. We did not value our education any less because we were not indebted; we really appreciated the opportunity to see a country where the Government invested in the student. We went to university and took it seriously and got a lot out of it.

Then we had the opportunity—my privileged generation had the opportunity—to buy homes and to have children without worrying about whether we could afford it, and to value our education without the perverse incentives that are now built into the student loan scheme and that are effected by this Student Loan Scheme Amendment Bill (No 2). My word of the week is “omnishambolic”, and it actually describes the student loan scheme, which has now become so omnishambolic that many, many people cannot understand it, let alone interact with it honestly and fairly. Although this bill, as others have said, changes a couple of things that are not necessarily objectionable, we will not be supporting it, because, yet again, it fails. It fails to deal with the substantive issues that make the student loan scheme such a mess and such an albatross around the neck of the next generation from me, who were not lucky enough to be born in a time when we got, basically, a free education.

So the tinkering, the contradictions, and the inconsistencies will continue. There will be more bills like this before the House, because this omnishambolic mess is going to continue to need changes made as the tax system changes, as people’s Working for Families and other mechanisms change, and because the Government does keep changing the goalposts on student loans, including increasing the amount of repayments. One of the reasons we have a problem with aspects of the redefinition of “income” is that for Working for Families the increase of repayment rate does not take into account the increase of rate from 10 percent to 12 percent of income, so Working for Families people are being penalised. As we all know, for those who get Working for Families, it is hard enough to live, without any more additional debt and complication. So the real solution to the incapacity, confusion, and inequity that affects the student loan scheme is not here. I believe this will be back before this House, having to be modified again—there will be more student loan scheme amendments, No. 2 and No. 3, as we continue to try to fix up the mess, without dealing with what is in fact system failure. System failure is not addressed in this bill.

The $12 billion albatross is around the neck of so many families—including my own, for members of my family—and it gets heavier and heavier as the cost of living goes up. It gets harder and harder for people to say: “I can afford to have an education.” What was once something that everyone in this country thought they were entitled to is now something that they are entitled to only if they are prepared to live in debt. One of the really perverse incentives behind the student loan scheme is the normalising of debt. Call me old-fashioned, but I grew up in a generation where you did not borrow and you did not live in debt. Now the Government says it is the right thing to do: “Indebt yourself at an early age. Get a credit card to pay for your food, because we’re saying that you’re not worth investing in for a proper public education, and that will be fine.” What that has done to a generation of younger people is to normalise debt. So living in debt, having credit cards, having to borrow a great deal, and living in that false universe where you are never quite keeping up, you do not really know what you have got, maybe you cannot afford to take the next steps in your life, and you are not really in control of your finances—that is now normal.

When we were young, we did not have credit cards, but we usually knew what we had in our pockets. Now the Government says that being in debt is a good thing, and you have got to pay it back, otherwise you are reneging. There is no sense of a social contract between young people and the Government. That is why the Green Party is popular on campus. That is why people come and talk to us, because they know that we appreciate that actually as a generation they have a right to exist without debt. Debt is actually something that you may take on in later life when you have got a job and may take on in later life when you are paying off a mortgage, but when you are 18 to 22, you should not live in debt. So there are perverse incentives. On the one hand, there is a philosophy that says there is no common good; on the other hand, there is the perverse incentive of creating generational debt. So we cannot support this bill, because it does nothing to fix that.

I have fantastic colleagues on this side of the House who have covered all the issues in this third reading of the Student Loan Scheme Amendment Bill (No 2), so I am proud to support it.

Could I remind members, just as a matter of interest—Asenati, although you corrected yourself, you cannot say “in support”. There have been occasions when the presiding officer has ruled out that vote, so in the future just be mindful of that.