Dr PAUL HUTCHISON (National—Port Waikato) Link to this
Thank you, Mr Chairman, for the opportunity to speak on Part 1 of this Student Loan Scheme Amendment Bill (No 2). Part 1 is a substantial part of the bill, which the Government has introduced and the National Party is supporting, because it is there to encourage New Zealand students overseas to come home. But I must say, there are some concerns about it.
Clearly, one of the issues of concern is the database issue. I think that everybody is in agreement that the database is worthwhile and that must be done if we are even to identify the number of students with loans. At the end of last year, I understand, the ministry had identified only a few thousand students but it had concerns that something like 40,000 students were studying overseas. Because of the interest-free loans available to students living here, it was not in those students’ interest to declare they were overseas, because they would have lost their interest-free status.
Of course, this brings in the whole dilemma of New Zealand’s having introduced a very expensive interest-free loan scheme, which costs $1.5 billion a year. The savings on bringing in this bill amount to about $9 million in the first year—2007-08—and, I think, $24 million the next year. But that amount is dwarfed in comparison with the $1.5 billion that the scheme is actually costing per year.
I want to spend some time going over the clauses in Part 1 relating to the collection of repayments from overseas-based borrowers and those who are entitled to the 3-year repayment holiday. There are some concerns relating to the signals that such a system sends to the students themselves. These concerns were pointed out by representatives from Business New Zealand, who said that the concept of a repayment holiday raises fundamental questions of fairness. Why should borrowers who have left the country effectively be rewarded, when those who stay home in New Zealand, who are meeting their repayment obligations and making an economic contribution to the country, are not rewarded? [Interruption] I am not too sure what the Green Party member MetiriaTurei is saying, but we are talking about fundamental fairness and systems.
I think I mentioned last night the point that we here in New Zealand are sorting out a very complex situation that has been imposed by the Government. We can compare ourselves to Singapore, for instance. The Singapore Government has just invested $1 billion or more into encouraging elite young science graduates to go overseas to places like Harvard, Johns Hopkins University, Cambridge University, and Oxford University. That Government will require the students to be bonded, and if they do not come back to Singapore, then they have to pay back their $1 million each.
The Singapore Government’s reason for doing that is that it is extremely concerned that there be clear rules around whether those students come back. One must be concerned that, here, this has been a policy very much made on the hoof by the Labour Government to win an election. Now it has to put in machinery that is fair to those students who have gone ahead and paid off their loans here in New Zealand, and fair to those students who have gone overseas and been caught up with the problem of repaying the loans. Some of the loans, as everybody admits, are very onerous to young students at a stage in their lives when, hopefully, they would be getting on to having jobs, forming relationships, and maybe later on wanting to save for a house, etc.
So there are a whole lot of conflicting issues here, and I think Business New Zealand is absolutely right in saying that from a fundamental fairness point of view, and in terms of getting the New Zealand economy going, it is very important to be concerned about repayment holiday issues.
Dr the Hon LOCKWOOD SMITH (National—Rodney) Link to this
I have not yet spoken in this debate on the Student Loan Scheme Amendment Bill (No 2), during either its first or its second reading. But I suppose I have more than a passing interest in it, because I was the original architect of the student loan scheme. We have seen that scheme screwed up and manipulated by politicians over the years since it was first established.
It makes me think back to the days when I was Minister of Education. Serious international educationalists used to say to me that one of the great tragedies for education was that preschool children do not vote. A very, very well known educationalist said that is the great tragedy of education. If we wanted to direct resources to improving New Zealand’s education system, directing resources to small children is how we would have by far the most profound impact. The human being, among all mammalian species, is kind of fascinating in that among all vertebrates it is the only one born with an immature brain. We might have all of the brain cells we will ever have, but the connections between them do not exist at that stage. Other vertebrates are born with mature brains. So it is in the early years of a human being’s life that education can have the most profound impact, but small children do not vote. Children of the age of 3 do not vote and they do not get the resources.
Parliament keeps delivering more and more resources to the people on whom education has the least impact—the oldest ones, whose brains have been predetermined long before the resources are delivered to them. But these older people vote. So at the last election we saw this massive bribe from Labour; it offered $1.5 billion to buy the student vote.
Today we work on this legislation to try to make sure that it does not have too many anomalies in it. National supports this bill because we believe that it is important to try to make sure there are no barriers preventing educated New Zealanders from coming back to our country.
I want to ask the Minister of Revenue a couple of serious things about Part 1, and particularly about new sections 89 through to 91 in Part 8—the “fresh start for certain borrowers”. Why was it decided to treat those who are honest about the fact they were overseas in exactly the same way as those who are dishonest about that fact? As I look at the examples given following new section 91 of Lenore and Keith, it seems that one of those people was honest about being off overseas, and the other one was not. Yet with this legislation we are treating them in exactly the same way. I am interested in why we would choose to treat those who are honest about being overseas in the same way as those who are dishonest.
More important, perhaps, is the latest information I have on the borrowers who registered under the amnesty to take advantage of some of these provisions. As of 27 November last year, of the 40,000 New Zealand graduates believed to be offshore, 765 had taken advantage of the amnesty. Presumably there is an update on that figure. Each year we are losing to Australia over 22,000 New Zealand residents, many of whom are graduates. That massive exodus of New Zealanders to Australia is something that should be troubling us, as well. Although we hope this legislation will have significant impact, as of the end of last year it appeared that only a few hundred New Zealand graduates offshore were registering to take advantage of that amnesty.
National members are supporting the legislation, but it would be interesting for the Committee to know from the Minister in the chair the answers to those questions. Why was it decided to treat the honest and the dishonest in the same way? Even more important than that, what is the latest update on the 40,000 graduates believed to be offshore at the moment? We were advised that 765 people had taken advantage of the amnesty as at 27 November last year. Now, about 4 months later, presumably there is an updated figure on that. It would help us to know how effective this legislation will be. I understand that the legislation now extends the amnesty for a further 12 months to try to give the chance for it to be more effective. It would be worthwhile hearing from the Minister just how effective it is proving to be, because 765 is less than 1 percent of the total opportunity out there.
COLIN KING (National—Kaikoura) Link to this
It is an honour to follow such a learned member as the Hon Lockwood Smith, the architect of the student loan scheme, who gave us those expressions of experience.
In dealing with Part 1 of the Student Loan Scheme Amendment Bill (No 2) I will concentrate on a range of things: the repayment obligations from the point of view of an overseas-based borrower; the clarification of what the term “charities” refers to; the extension of exemptions as far as overseas education goes; the reduction in the penalty rates, which were 2 percent and have now been reduced to 1.5 percent; the adjustments in respect of the collection of small amounts of money, or “trivial” amounts as they are referred to; the circumstances for appealing to the Commissioner of Inland Revenue on the grounds of hardship; the responsibility of someone who has received exemption because of hardship to report when those circumstances change; and the situation where one sets up an arrangement but breaches the amnesty, and the effects of that.
What will probably draw most people’s attention to Part 1 is the holiday provision. From a pretty basic point of view, this provision was required to allow the organisations involved to get the process into order. In actual fact, the process has been running for some period of time. Now there will be an extension, which will no doubt allow more people to try to get their house in order and set about repaying their student loan.
I take this opportunity while we are referring to Part 1 to say to the member from the Green Party who constantly refers to people having their educations paid for them that, from my position in life, many, many thousands of people in New Zealand left school and started working for a living, paid a lot of money to do that, and did not have the benefit of being able to access a student loan to get higher-level training.
I strongly urge members of the public, if they are listening at the moment, to think very seriously about just which stream of education they take, so that they do not end up having spent enormous amounts of money—which absolutely shocks me, at times—for very little value. If there is one step that I would like us to take in terms of student loans, it is to get better information to parents and children so that they can make better decisions.
There are a lot of technical changes in Part 1, which I have referred to. Probably the most important change would be the repayment obligations of an overseas-based borrower. We see in new section 34(4), in Part 1, that if $15,000 is owed, the repayment obligation is $1,000 “for each full tax year during which the borrower is overseas”. It goes up from there. There is no perfect model; as soon as someone is a bit over that $15,000 the sum is $2,000, and as soon as someone is over $30,000 the sum goes up to $3,000. I have no argument with that. I think it is clear and understandable; it needs just to be picked up and run with.
I believe that it is very, very important in the whole context of things that there is information sharing, and that the Inland Revenue Department can receive information from the Customs Service, because, as has been pointed out, a lot of people have been overseas.
Hon BRIAN DONNELLY (NZ First) Link to this
I do not think that we want to spend a great deal of time going over all the detail in this legislation; it has been traversed. But I think it is an opportunity to explain some of the issues that this bill brings to bear.
I start off by talking about the charities part of the legislation in the new section 38AEA inserted by clause 12, which the previous speaker, Mr Colin King, talked about. What the bill does—in fact, this was inserted through the select committee process—is to actually apply the criteria that were adopted in 1978 by Cabinet about what charitable donee status is. So, in other words, if somebody goes overseas the interest-free loan still applies to that person if he or she is working in a charitable organisation. But, unfortunately, that included, for example, people working as proselytisers or preachers going out and trying to get adherents for a particular religion—as distinct from somebody who, for example, was working as a teacher in a Seventh-Day Adventist school overseas, or working on a project to build a hall or classrooms, etc. So this bill clarifies that if someone is doing one of the latter then he or she falls into the charitable donee status, and, therefore, he or she has an interest-free loan while he or she is overseas doing those things. But people donning a white shirt and tie, running around the roads, and knocking on doors with a Bible under their arms unfortunately do not fall into that status. The Education and Science Committee, and certainly New Zealand First, totally agree with that.
This part brings in the 3-year repayment holiday. That really is the crux of the whole issue, because even prior to the interest-free loans there was a real problem with people going overseas and not understanding their obligations. They go to come back and, whoops-a-daisy, find that not only interest but a whole lot of penalty payments have been put on top of their loans as well. With the interest-free loans, that applies only to people who stay in New Zealand, not to people who go off overseas, with the exception of the charitable donees. So people believe that they can go off overseas and they do not have to pay interest. The problem is that not only do they have to pay interest—I think it was one-fifteenth, but it has now changed to the figures mentioned before—but they then get clobbered with the penalties. So when it comes time to come back their loans are much, much larger because of that, and there is a disincentive to return to New Zealand.
So this says that people can go off overseas and that there will be interest on their loans, but they will not be required to make any repayments. People picking fruit in North Viet Nam, for example, and earning 1,000 dong per day will not be able to make repayments as was required under the past system—however, they are getting a great deal of experience, etc. They will not have to make repayments but the interest will be accruing. That really is the crux of it, because, as New Zealand First has said time and time again, the best immigrant is a New Zealander returning home. We want those young people to come back home with the experience that they have gained while they were overseas.
Paul Hutchison talked about Business New Zealand. It asked why we made it different—the changes really create an incentive to go off overseas. I think it failed to understand the difference between those who go off overseas, who still have to pay some sort of interest rate, and those who stay behind, who do not. So, in fact, the incentives are really to stay in New Zealand under the system that exists. Also, there was another proposal that we should have an income-related formula that depends upon where people work. I ask members whether they can imagine 140 or 150 different countries trying to gain information as to what people earned in those countries and then relating them to income limits back here in New Zealand. It would be completely and utterly unworkable, so New Zealand First does not support that.
The only other issue was really the interest-free loans for borrowers studying full-time overseas at an undergraduate level. A number of the submitters to the bill got the idea that if they went across and did postgraduate level study, they could utilise the New Zealand loan scheme. In fact, they were wrong. Last night I praised the officials, because the officials, I believe, went out of their way and made the effort to go out and meet up with those people and groups in order to ensure that they actually fully understood. So I take my hat off to the officials because I think they went beyond the call of duty.
Finally, the last thing is that the application of care and management is a fundamental Inland Revenue Department principle; it does not apply to students. When the Inland Revenue Department has mucked up and got the thing wrong, there should not be a penalty against the student who carries a loan. That principle is now to be applied to students under student loans, and that is a good thing.
ALLAN PEACHEY (National—Tamaki) Link to this
National is supporting this bill, the Student Loan Scheme Amendment Bill (No 2), but that is not to say that National members do not have some reservations about it, or points that we would like to make. It is very important that the incentive is there for our young graduates to return to New Zealand—that is a point that has been made by speaker after speaker—but let us be very, very clear about what this legislation is all about.
I must say that it is better legislation for the work that was done in the select committee under Mr Donnelly’s leadership. The legislation is quite complex, and the work that the select committee did has improved this bill considerably. Let us be very clear that what we are dealing with is a tidying-up of a bit of a mess, which came about not because the policy of interest-free student loans was carefully considered and thought through—and a judgment was reached that this was actually something that New Zealand would want to do, should do, and needed to do—but because it was a policy rushed out 2 weeks or 10 days before an election, in order to buy votes.
I listened to the interjection from the member of New Zealand First Brian Donnelly, and I will reflect for a moment on a meeting I had the other day in my electorate of Tamaki with half a dozen mums and dads, who between them—each family—are working three or four low-paid jobs just to keep their heads above water, get their children to school, get them school uniforms, and that sort of thing. The point that these people made to me was very simple; they said they were taxpayers and they did not wish to be dependants of the State, but they were finding that the more they worked and took on extra jobs to help their kids—yet they knew they were not, because it meant they were away from them so much more—the more heavily they were penalised by tax. Their plea to me was to advocate for a flat tax rate—and these are some of the lowest-paid workers in New Zealand!
I want to express the wish that those borrowers who benefit now from the holiday on repayment, and that sort of thing, will actually take a moment to respect that this comes at a cost, and that other New Zealanders—many of them who are not in a position to do so, and many of them who would like to take more responsibility for their families than they can—are actually paying taxes so that this can work. I come to the repayment holiday period for people who are overseas, and if I could send a message to those graduates, it would be that they should respect what this House is doing to assist them and realise that it is in their best interests to pay back the money. If they borrow money then they should pay it back; they do not earn a lot of respect from their fellow New Zealanders by taking the money and then seeking ways of avoiding paying it back. I would urge those young New Zealanders who are considering taking the holiday to contemplate whether it would not be better for them, and better for their fellow New Zealanders, if they made every effort to continue paying back their loans.
We hear a lot from young people today about the hardships of loans and of going to university. I have four young adult children, all of whom are either at university or have gone through university and graduated, so I understand as well as anybody the challenges and the difficulties. But it was actually no easier in my time. In actual fact, I would have had more options available to me had a student loan – type scheme been operating. So it is important to keep this sort of thing in context.
National supports this bill, but National members are a little bit uncomfortable about having to tidy up what we think is untidy legislation. We want young New Zealanders to come back, but we also want borrowers to respect the contribution that their fellow New Zealanders—taxpayers—are making. Borrowers should bear in mind that there is a group of New Zealanders out there who really struggle to make ends meet, who pay their taxes honestly, who do not want to live off the State, and who want to get a fair break for their children. The taxes that those New Zealanders are paying—some of which will contribute towards this measure—will actually mitigate against their ability to do that.
Dr PAUL HUTCHISON (National—Port Waikato) Link to this
I take this opportunity to speak again on Part 1, which is the major part of the Student Loan Scheme Amendment Bill (No 2). I certainly reiterate the point made by Allan Peachey. It is very important to make sure that young people understand the basic signals and disciplines required to get on in life. It was interesting to hear Brian Donnelly say that a lot of students went off overseas and did not understand their obligations. The technical term for that is denial—selective denial. Certainly, I was aware of friends and relatives of mine and my children who slipped off overseas and had a great old time, but they were in denial of the very serious obligations they had.
When we think about what the student loan scheme was initiated for, it was all about giving more New Zealanders the opportunity of a university or tertiary education. That is a great privilege and it carries with it a variety of obligations. Of course, during the decade from the 1990s until now, we have more than doubled the number of New Zealanders who participate in tertiary education. That is a great and wonderful thing and it has been right across the board in terms of all socio-economic areas and ethnicities. I think that is tremendous.
When I was at Otago University I was told that fewer than 0.05 percent of the students down there were Māori. As I understand it, the figure is now about 7 to 8 percent, which is a wonderful thing. Hopefully that will be doubled in the next 10 or 15 years, which will bring it up to about proportion, and it may treble over the next 10 years. If we could have afforded, as a country, to allow a completely free tertiary education system that would be great, but this is one of the ways we have got there.
The thing we have to balance, of course, is the very point that in Australia, where many of our young students go to work, the average wage was 22 percent greater than New Zealand’s in 1999, and now, 7 years later, after a Labour Government, the average wage in Australia is 35 percent higher than it is in New Zealand. The quid pro quo of this bill, as pointed out by some of my colleagues and by Business New Zealand, is that we have to inculcate disciplines and appropriate realisations that there are obligations to go with this wonderful privilege of access to tertiary education.
One of the points that Lockwood Smith made was the difficulty of the signal between someone who declared themselves as non-resident and someone who said: “Oh well, I’ll just nip over there and hope the hang that the IRD don’t find me.” One of the unfortunate realities of the amnesty situation is that, in the end, the person who is honest does not get any greater benefit than the person who is dishonest. Hopefully the Government will go to a great deal of effort to make sure that from when this legislation comes into place, people are much more aware of their obligations and the extent to which their loans can build up so rapidly once they get on to penalties.
I note again that the Government is changing the penalty rate from 2 percent down to 1.5 percent. Indeed, 2 percent is a pretty hefty amount but it is what those out there in the commercial world have to pay—for example, it is what the young sharemilker who was being talked about earlier on has to pay for his herd if he gets behind in his repayments. It is pretty hefty. One would think that a university student would hopefully have the nous to be able to find out what the consequences are of not paying back a penalty regime.
Hon PETER DUNNE (Minister of Revenue) Link to this
First, I thank the members who have contributed to the debate so far. They have raised a number of interesting points and I want to respond to as many of them as I can in the time available to me.
The first point of substance raised related to the question of why the bill penalises the honest. I think Dr Hutchison answered that question in his last contribution when he referred to the “unfortunate realities” of this bill. That is the truth. Wherever we draw the line, there will be people who fall either side of it.
The reality we face, and what drove this legislation, was the recognition that significant numbers of young New Zealanders were living overseas, for a variety of reasons. Some were on their classic OE, some had a fear of returning, and some had no intention of returning. But for a number of them the meter was ticking in regard to their student loan indebtedness. The reality they all faced was a very massive debt upon their return to New Zealand, which in some cases would be enough for them to make the decision not to come home at all, and our country would be the loser.
We needed to take a pragmatic way through this, and, being someone who places great virtue on pragmatism, it struck me that the logical course of action was to derive the solution that we have: to extend the holiday period for 3 years, recognising the fact that young New Zealanders take that extended period overseas; to have better tracking at the border of where people actually are, through the procedures contained in the bill to match immigration data and student loan data; and to rule that in that 3-year period, when interest will accrue to their accounts, the penalties that hitherto have applied will not apply, so that when they come back to New Zealand they start paying their loan plus accumulated interest.
A question was raised earlier about how many people we are talking about. It has certainly been estimated that potentially around 40,000 students are living overseas at the moment. Reference was made to the fact that some 765 people had entered into voluntary arrangements. That figure was given at the end of last year. I am not in a position to update that figure, for this simple reason: we never actively pursued those people. So the people who declared themselves in this category did it out of the goodness of their own hearts and their own sense of integrity and conscience.
Through the mechanisms contained in this bill we will now be in a position to pursue much more actively those students who are overseas. We will certainly be making contact with their parents and with their flatmates at their last known points of abode in New Zealand, to make sure that we can send information to these students about what this bill means for them and the responsibilities it imposes upon them.
One or two speakers have referred to the issue of students working overseas for charitable organisations. We have applied the same definition of charitable organisation and charitable status as applies generally in regard to donee status. It is quite a tight test, and I should tell the Committee that whenever an organisation is recommended, it is actually considered by the Inland Revenue Department, and a formal process that goes right through to Cabinet approval of those organisations ensues. We are always trying to make sure that the genuine get through. Once the registration process of charities under the Charities Act is completed—which is a separate issue—the process will be all that much more rigorous.
The final point that a number of speakers have commented on is the issue of obligations. There are obligations here. I think it is absolutely correct to say to students that this is not a free lunch, that although they are being given the opportunity to have that traditional overseas experience for a New Zealander for up to 3 years, they will still be incurring some obligations. They need to know what those obligations are, and that we expect them to meet them.
This bill is designed to strike a fair balance between the obligations and the overseas experience. The situation we have at the moment of students simply finding it easier to escape and become refugees is clearly unacceptable. This bill strikes a reasonable balance, and I am grateful for the support that members have shown on that point this evening.
Dr PAUL HUTCHISON (National—Port Waikato) Link to this
I am grateful for the opportunity to speak on Part 2 of this Student Loan Scheme Amendment Bill (No 2). This part deals in particular with the issues around data matching, and the disclosure of arrival and departure information for the purposes of the Student Loan Scheme Act 1992.
I note that efforts have indeed been made to ensure that the amount of information given to customs officers is limited. New section 280H(4), which is inserted by clause 36, states: “If the Customs has arrival or departure information relating to a borrower, the Chief Executive may, for the purpose of this section, supply to the Commissioner any of the following … (a) the borrower’s name: (b) the borrower’s date of birth: (c) the borrower’s tax file number: (d) the time and date on which the borrower arrived in, or, as the case may be, departed from, New Zealand.” But the provision goes on to state, in new section 280I(3): “In accessing a database for the purpose of this section, the Commissioner—(a) may only search for arrival or departure information relating to pre-selected borrowers who are of interest to the Commissioner; and (b) must not search for—(i) any information other than arrival or departure information; or (ii) any information about a person who is not a borrower.”
In looking through the submissions on this bill from the New Zealand Law Society, I noted that although on the one hand the society commented that this was a very complex bill, and that the complexity of the repayment holiday and amnesty provisions was extremely difficult to follow and put into practice, on the other hand, with regard to data matching, the society said that the bill did indeed allow only limited data to be shared between the Inland Revenue Department and the New Zealand Customs Service. It said that it was desirable to allow the Inland Revenue Department access to immigration records—in and out of New Zealand by borrowers—and that it was also desirable to have a limited form of data match to ensure as best as possible that the correct individuals were identified.
The Law Society went on to say that the provisions around data matching are certainly appropriate. That can be reassuring to those civil libertarians who may be concerned that other inappropriate data is being checked up on at the same time. It is certainly reassuring to students, who might have fears that they will be set upon by a border guard or dog, and taken into custody or something similar. No such thing will happen—
Dr PAUL HUTCHISON Link to this
Oh, that is the next one, is it—the trained beagles that then go on to something more sinister? Certainly, students can be reassured that this provision is only for the purposes of identification, and to ensure that the loan system works as well as possible.
We have only to reiterate that the initial reason for this legislation was that there were incentives for borrowers to go overseas and not to declare that they had an interest-free loan. They would not be charged interest if they went overseas and did not declare it, but if they did declare it they would be charged interest. It seems as if all the 15 submitters, and pretty well all the parties in Parliament, are comfortable with this data-matching system.
I guess the area we feel somewhat uncomfortable about is the fact that on the one hand the Government is saying that this might save us $24 million a year, but on the other hand there is a real basic cost of this scheme to New Zealand in terms of its priorities. Of course, that was identified by the OECD report into tertiary education in New Zealand. OECD officials described much of our system as being wonderful and having its own unique features. But in terms of prioritising, when there was a limited amount of money to spend on education, they questioned whether having this scheme was the right thing to do. Of course, one has to be sceptical about the Labour Government putting this in as an election bribe.
COLIN KING (National—Kaikoura) Link to this
It is nice to speak to Part 2 of the Student Loan Scheme Amendment Bill (No 2). Yes, following on from my highly valued colleague Dr Paul Hutchison, I agree that this part is about the data match and how the mechanisms are consistent so as to be able to make this scheme work. I found it very interesting that such a low number had taken advantage of the provision to come clean and acknowledge their responsibilities. The Minister stood up and acknowledged that barely 800-odd people last year had done that. I will certainly be looking forward to a lot more of them doing that. Again, speaking for those people who have not had the privilege of going to university, and having to pay for everything, I take quite seriously some of the ramifications that could arise. So when we look at what is proposed in Part 2, we see that it is quite concise and clear again. However, there will have to be an education programme, because I am sure that although we are aware of where we are at this stage and time in this Chamber, a lot of people are still beavering about their business, totally unaware of what we are trying to achieve here—that is, the best of both worlds and a balance of what is fair and reasonable. So let us hope we do get some traction around people signing up. We can say that we are talking about thousands of people. I am sure that those people who are overseas enjoying that 3-year holiday will continue to do so, as is the tradition.
When looking at Part 2 we can see that it does impact on a number of other Acts of Parliament. There is, of course, the Customs and Excise Act of 1996. Well, it had to be that Act, because we need to have that data match, and we have to have some structure so that there will be some comfort that the information being shared is fit for purpose, that the situation is not being abused, and that there is clear understanding that the information being handed over is appropriate. We can see that specified in new section 280H of the Customs and Excise Act, inserted by clause 36. Effectively, the information covers the name, the date of birth, the tax file number, and the time and date on which the borrower arrives in, or, as the case may be, departs from, New Zealand. There has to be a written agreement that that information has been requested.
However, there is a lot more to the part than just that. There are also some levels of delegated authority, and information as to where that delegated authority is required—because the old commissioner would be run off his legs, would he not, with the thousands of people who are going to register and come clean with the money they owe? The commissioner is able to delegate that authority, although the record must be kept and the person who accesses that information must use a register. The register will carry the name of the person, the reason for accessing the database, and the identity of the persons who access the database and their reasons why.
I must admit that, generally speaking, I am very satisfied with the process. I must say to the Committee that it was a pleasure to deal with the Inland Revenue Department, because it saw clear lines of accountability. It was not mixed up with some of that fuzzy thinking that comes out of “those people should get this” or “should get that”. It seemed to relate quite well to an old shearer, who got paid only for what he did. If he owed some money he paid his bills.
I turn back to the consideration of the Chairperson and his thought about the best way forward for this bill. I would like to draw to the attention of members on the Government side of the Chamber that other steps have been taken to wipe off the penalties on childcare payments. It concerns me hugely that we could be taking another step towards that ultimate outcome, and I would be very, very disappointed if in actual fact we got to the stage of offering to young people the grandest of opportunities of going to the most highly esteemed learning institutions in our country, and we have to wipe off those student loans.
Hon BRIAN DONNELLY (NZ First) Link to this
There is a slightly unfortunate assumption that all of these students who are going off overseas are university graduates, but of course that is not the case. Many of these students going off are at the other end of the tertiary education spectrum. They may be people, for example, who have dropped out of year 12 of their schooling because they are not having great success there, and they have gone off to their local polytech and done an acting course or something, have not necessarily completed it, and have ended up with a $10,000 student loan. We have to recognise that people with student loans are not all professional graduates who can possibly go across to England and get some pretty good money. That is the first thing.
This part is the second part of the quinella, and it actually makes the whole thing work. It works for all parties; it works for the Government, the taxpayers, and the Inland Revenue Department. It ensures that we do not have people taking off overseas with no one knowing they are there, so they are not paying any interest because it is assumed that they are still in New Zealand. It is fair on the taxpayer that the provisions for those who go off overseas are, in fact, applied to those people who go off overseas. But the provisions are also an advantage to those who go off overseas and inadvertently do not realise that they are leaving obligations behind them. We had a submission through the Education and Science Committee from someone who had done exactly that, and who thought that the income limits that applied in New Zealand also applied when someone was off overseas. Unfortunately, that person came back to a very hefty loan.
So New Zealand First believes that data matching is essential, and certainly through the select committee process we questioned very, very hard to make sure that it was to be used for only the purpose it should be used for. The provision for data matching is very tight, and I think everyone recognises that it is tight and that there is no opportunity for the information to be used for a variety of other reasons. In fact the select committee went so far as to check out what would happen with the information once a person was back in New Zealand and had paid off his or her loan. There was an expectation and a principle explained to us that the records would then be destroyed. Certainly, New Zealand First members believe it is only fair and reasonable that information used for the purpose it is needed to be used for should then no longer be kept and be open to misuse. However, we believe it is necessary to have this particular measure if we want to have the whole system to operate. Therefore we believe, as I say, that it is the second part of the quinella, and without this part we do not get the big prize that we are aiming for out of this legislation.
ALLAN PEACHEY (National—Tamaki) Link to this
I appreciate the opportunity to speak to Part 2 of the Student Loan Scheme Amendment Bill (No 2). This is the part of the bill that, as the previous speaker said, makes it work. We are under no illusions about this at all; what we are dealing with here is an election bribe. I want to pick up on an interjection that Mr Donnelly of New Zealand First made when my colleague Paul Hutchison was speaking. There is no way that attention can be diverted from the actual intent that the Labour Government had with this legislation by describing a tax cut as a bribe. One cannot and does not bribe people with their own money. If there are people in this Chamber who have that view, then I would very, very strongly suggest that they think about the nature of representative government, and the purpose of taxation, and consider very, very carefully the morality and the integrity of a Government that collects huge sums of money off hard-working New Zealanders to keep in the fighting chest to buy an election.
The bill will not work without Part 2. It is important to deal with the issue of data matching. It is important to be able to match details of departures from New Zealand with arrivals. It is important that those people with student loan obligations get the message from Part 2 that the House is serious and that there is a determination to make this work. There are all the protections that are needed to protect the privacy and rights of individuals, because access to the data is limited and for a specific purpose. It is fair, and the protections are reassuring. Again, I think Part 2 reflects the excellent work done by the Education and Science Committee in preparing the bill to come back to the House.
In that regard I would like to join my colleague Colin King in paying tribute to the officials of the Inland Revenue Department. On the Education and Science Committee we deal with so much woolly stuff, particularly in the education sector—less so in the science sector—and it is very, very frustrating to sit there week after week, trying to get to the nub of an issue, and trying to get officials to get straight to the point and get rid of the “if onlys”, the “buts”, and “on the other hands”, and all the rest of it. To be working with officials who got straight to the point, were clear, precise, exact, and unequivocal, was certainly—for me—most refreshing. If that sort of culture and attitude could be inculcated in some of the other ministries we find ourselves dealing with on that select committee, that would be refreshing as well.
Hon PETER DUNNE (Minister of Revenue) Link to this
I will begin by thanking members who have expressed admiration for the contribution of officials. I work with these officials on a daily basis and I thoroughly concur with the sentiments that have been expressed. We are very well served by our Inland Revenue Department policy people, and their ability to go to the heart of complex issues and provide relatively clear solutions is, I think, unparalleled. So I appreciate the support that members from around the Chamber have given to them this evening.
I also acknowledge the work that the Education and Science Committee did—in particular the Hon Brian Donnelly as chair—in dealing with an issue that by its own admission was a little bit outside the norm. I think the committee has done a good job, and I am very grateful for the amendments that it has written into the bill.
I want to pick up on the question that has been raised by some speakers about the disclosure regime in the bill—the data matching and the very tight way in which it has been drawn. That is highly deliberate. The Tax Administration Act and the Income Tax Act have very tight provisions about access to taxpayer information, and most of that power resides in the commissioner. As Minister, I have very limited ability to access anyone’s tax details, and that is entirely as it should be. So when this provision was being drafted it was critical that it was described in such a way that the information being collected about individuals was relevant only to the issue at hand, and did not allow people to go on a wider fishing expedition to see what else those individuals had lurking in the background.
I think Mr King made reference to the child support scheme. I should just foreshadow that we are looking at a similar data-matching arrangement in respect of child support, to help us better match some of those people who are overseas with obligations that are outstanding—people whom we are not getting our hands on at the moment. I stop the analogy at that point, because Mr King did express a concern that we might end up writing off large amounts of student loan debt in the way we are alleged to be doing in regard to child support. I tell members that in the area of child support we are saying that if people enter into arrangements to repay, we will look to writing off a portion of the penalty provision of their debt rather than their actual principal. What we are saying here in regard to student loans is that we want people to enter into a voluntary arrangement with us to disclose, and we want them to take the holiday. At that point they will then become absolved of penalties for that 3-year period, but the interest payments will still apply to the loan and will need to be repaid once they return to New Zealand. So it is a different arrangement from the child support regime, but it does have the similarity of putting the onus on to, in this case, the borrower—and in that case, the liable parent—to meet his or her responsibilities.
This picks up a theme mentioned by speakers in the earlier debate. There is a balance between rights and responsibilities in this whole area. We do acknowledge the ability and the wish of young people to be able to travel and not be encumbered by debt. At the same time, we expect them to recognise their responsibilities. The mechanisms here with regard to the data match in particular will make it easier for us to track where they are so that they simply do not escape the coop altogether—as they are doing in too many numbers today. Again, as I said at the beginning, it is a pragmatic outcome, it is one that will work, and I am grateful for the support members have given it tonight.
Dr PAUL HUTCHISON (National—Port Waikato) Link to this
Thank you, Madam Chair, for the opportunity to speak on the title and commencement of the Student Loan Scheme Amendment Bill (No 2). We have heard that all the major parties of Parliament are in agreement that it is appropriate to get this bill through the House. We have heard that the Education and Science Committee members worked well together, under the chairmanship of the Hon Brian Donnelly, and we have also heard that the Inland Revenue Department has been very forthcoming in being open and helpful towards fixing this very, very complex tangle that the Labour Government has got itself into with regard to having brought in interest-free student loans.
One might ask what other names we could we call this bill. Maybe we could call it the “Labour Government (Let Us Dream up Another Complex Bureaucratic Fix to Our Election Bribe) Bill”, or maybe we could call it the “When You Sin by Bribing It Will Come Back to Bite You Bill”. There is no doubt that the title “Student Loan Scheme Amendment Bill (No 2)” does not convey the complexity of the bill. I think it is worthwhile to again point out the complexity created by the Labour Government’s machinations in order to get into power.
What did the Law Society say? Its submission has a section headed “Complexity of the Repayment Holiday and Amnesty Provisions”. In it the society states: “The provisions of the bill that provide for a borrower’s entitlement to a 3-year holiday, and in particular the way the amnesty eligibility ties in with that entitlement, are unnecessarily complex.” The society goes on to state: “A review of the provisions proposed for Part 9 of the Act shows that borrowers who are wishing to ascertain their amnesty and/or repayment holiday entitlement will be required to work their way through a series of cross-referenced and complex provisions in the Act.” It notes further: “…this complexity may be a barrier to borrowers being able to simply, and with certainty, ascertain their entitlement to amnesty and/or a repayment holiday.”
So it certainly seems as though the Labour Government, true to form, has once again woven a tangled web of highly complex bureaucratic arrangements. I hope that the Minister Peter Dunne will take a call later on and explain to the Committee what he intends to do to ensure that the amnesty arrangements and the provisions for extension are clearly made public and clearly made understandable to future student borrowers.
We have this major problem in New Zealand of a diaspora of 1 million, and for a population of 4 million that is fairly extensive. I understand that perhaps even more serious is the fact that our diaspora of postgraduates is something like 10 times the number of Australian postgraduates who are overseas. That is the reason National is supporting this bill. Despite its complexity, and the machinations of the Labour Government to stay in power, etc., we are concerned about our students. We want our brightest and best to come back to New Zealand to live, and to have highly productive lives here, rather than live overseas. There is no doubt that the basic thrust of this legislation is indeed to encourage our students who have gone overseas to come back here to New Zealand.
But I think we must not forget that this bill is the result of consequences of actions taken by the Labour Government to stay in power. Organisations like Business New Zealand have pointed out as well that this bill certainly is not perfect in any way.
COLIN KING (National—Kaikoura) Link to this
In speaking to the title, I say that the Student Loan Scheme Amendment Bill (No 2) could be called quite a number of things. As my most valuable colleague Dr Paul Hutchison has alluded, it could be called the “Database Matching Student Loan Scheme Amendment Bill”, or it could be the “Evidence-based Student Loan Scheme Amendment Bill”. It could even be the “Poor Choice of Education Student Loan Amendment Bill”, or the “Poorly Supported Student Loan Scheme Amendment Bill”. I certainly hope the bill is not given that last title, because we do want to see a strong uptake on this. As citizens of New Zealand we want to see the thousands of people who have student loans take up this scheme.
As my learned colleague and chair of the Education and Science Committee has corrected me—and I stand corrected—a number of shearers did theatrical training with student component funding, and I can say that it did help their footwork; they were very good. But it did make the instructor scratch his head at times and think on what planet was the person who advised the young adult to take it up and spend that money. I would like to think that there has been a lot more maturing of thinking around the value of tertiary education in the last 10 years, and that in actual fact people are making better choices today. I think that another title we could probably give to the bill is the “Final Solution Student Loan Scheme Amendment Bill”. On that basis I want to say how much of a pleasure it has been to work with the select committee on this bill.
It is interesting to note that those people who have an obligation to repay a student loan and who have been overseas since the provision for interest-free loans was rolled out by the Labour Government—as my colleague Dr Hutchison has so accurately informed me, it was an election bribe—have cost the country $143 million. This is from the time when it was signalled that there was to be an interest-free loan provision, providing one stayed at home and committed oneself to this nation. There could be another title, and it is possibly the foundations of a policy that I might take from New Zealand First—the “Best Immigrant Who Ever Comes Home is a New Zealand Citizen Bill”. It could also be called the “New Zealand Citizen (Return Home) Bill”.
However, whatever it is called, I hope it does not become the beginning of a very long and drawn-out saga of disappointments and utter failure. I am quite confident it will not, because what I have seen around this student loan scheme stuff is that $1 billion has been written off in bad debts. With the way it is going, by 2014 or 2015 we will have something like $12.7 billion of debt. So I would not like to see that included in the title in any way.
In fact, student debt is growing at an alarming rate of $66 million a year. When we look at the total outstanding loan balance—which would not be a very nice title for the bill—we see that it is forecast to increase at an average of 5 percent a year. That 5 percent a year on the total is $526 million a year. In terms of the title of this bill there is an enormous amount of expectation from those of us who have been fortunate enough not to have to go to university and suffer some of the failures of education. We hope that those students who avail themselves of a 3-year repayment holiday do so fully informed. As they learn to access all the in-depth research, process, and structure around getting a PhD in something, we hope that they know how to pay their loan back.
I do not have a lot more to add, but I have been very blessed with the privilege of being able to have my say on behalf of those without student loans, who are doing their utmost to be successful and to pay our taxes. I am sure, as my information tells me, that for those with loans, the fact that they have a loan does not stop them from doing an awful lot, regardless of what they owe.
MOANA MACKEY (Labour) Link to this
I am happy to stand up and talk on the title of the Student Loan Scheme Amendment Bill (No 2). Any bill that contains the words “student loan scheme” followed by the word “amendment” in the title will, under a Labour-led Government, be a good bill. This bill is absolutely no exception.
We have heard some interesting contributions on the title. Maybe we could call this bill the “Student Loan (Does Anyone on the Other Side of the Chamber Remember It Was Actually the National Party that Brought in this Scheme) Bill”, the “Student Loan (Continuing to Clean up the Muck-ups of Dr the Hon Lockwood Smith) Bill”, the “Student Loan (Labour Government Continues to Improve the Onus on Student Loan Borrowers) Bill”, or anything like that. I very distinctly have the impression that a lot of new National members have forgotten the history of their own party, the role it played in the student loan scheme, and the incredibly unfair conditions it placed on the young graduates of New Zealand. Apart from the fact that we now no longer know whether National members support this bill, maybe we could call the bill the “Student Loan (Will the National Party Keep Labour’s Policy of Interest-free Student Loans?) Bill”. There is silence, absolute silence. There was raucous debate, then suddenly there is silence when we ask National members what their policy actually is on this bill.
This is a very good bill, and the title accurately reflects that. I agree that this bill should be brought through the House quickly so that we can get the benefit from it as soon as possible and we can make sure that our graduates who are overseas for 3 years will be able to have a repayment holiday while they are there. That will give them the incentive to let the Inland Revenue Department know that they are going overseas. Overall, this is the kind of bill that will bring our graduates home to New Zealand.
National members are all getting very raucous now. Once again I ask them whether they will keep Labour’s policy of interest-free student loans. Will they keep Labour’s policy of interest-free student loans? No. The National members say that it was a bribe, but that their policy of spending $7 billion on tax cuts was not a bribe. They say that, no, that was fine, because it was giving people their money back. Of course, the National Party records and measures everything in terms of money and wealth. If one is rich one is worth something, and if one is not then one is not. We in the Labour Party and in those parties that are supporting this bill believe that policies like this do the entire country good. Policies like this help our families, our graduates—
Simon PowerWell, this is great. I look forward to Simon Power turning up at the university he went to and paying back the 75 percent that the Government paid for him to go to university.
I raise a point of order, Madam Chairperson. Despite the member’s lack of humility, she might be interested to know that I was the first member of Parliament to arrive in this House with a student loan—to the sum of $27,000. So she cannot tell me that I am unaware of what is going on and should be repaying my loan. She can be assured that I paid back my loan in full, with interest.
The CHAIRPERSONIn true Simon Power style he did not actually listen to what I said, which was not that he did not have a student loan, or did not pay it back, but was that the Government actually provided a large proportion of his tuition fees. I was inviting Simon Power, who had suggested that maybe the Government should not be involved, to go ahead and repay the money the Government had paid—
I have never been skiing. I invite the member to pay back that money if he thinks that no tax should be taken and that tax is not worthy in this country. He can pay that money back. I am sure the Hon Dr Michael Cullen will be happy to receive his cheque.
The member also brought up another very interesting National Party attitude towards students, which is that they all take out their student loans so that they can go on ski holidays. It might surprise Simon Power to know that a large number of students actually use their student loans to pay for fees, rent, and the cost of living. Although I suspect that it is National-supporting students and Young Nats who take out all that money to pay for such things as ski holidays, I can assure him that the very serious, studious, and worthy Labour-supporting students who take out student loans do so because they need to in order to attend university. I understand that it is sometimes hard for parties like the National Party to understand that some people cannot afford things, that their families cannot pay for everything, or that their families may not be able to pay back money on behalf of the students themselves. But Labour is interested in passing policy and bills that represent all New Zealanders—not just those who can afford to pay for university themselves or to pay their loans back quickly, but all New Zealanders.
Hon Maurice WilliamsonMaurice Williamson—what can one say, really? He is an intellectual stalwart of the National Party. He was around at the time this scheme was introduced; he was a great fan of it. This scheme has brought a lot of damage to our country. It is funny that National members rant and rave about this bill but are voting for it. This is another flip-flop. In conclusion, I suggest that this bill be called the “Student Loan Scheme (Another National Party Flip-Flop) Bill”.
Hon BRIAN DONNELLY (NZ First) Link to this
I just reflect upon the fact that this debate was going along in a very decorous fashion. It was being advanced, but then Moana Mackey came into the Chamber and made one contribution and, within the first 30 seconds, caused all hell to break loose. One has to ask oneself what is going on here: like mother, like daughter. Those people who know Les Misérables will know that wonderful tune “Bring Him Home”, and possibly this bill could be called the “Bring Them Home Bill”.
First, I will reflect upon a statement I made that seems to have touched a nerve. The members of the Opposition were continuing to claim that the interest-free loans policy was an election bribe. I said that yes, it was, just before they got in with their tax cuts bribe. It seems I touched a nerve. I have to let those members know that I believe that the interest-free loans policy was an election bribe, and that New Zealand First does not agree with interest-free loans. We believe that what is happening under those circumstances is that the Government is giving away money to people who are going off to tertiary institutions. By the time they pay a loan back, they will never have paid back what they initially received, because of the very nature of inflation, etc. Allan Peachey made a very valuable contribution when he talked about the fact that people have to pay taxes and make that contribution in order to enable the interest-free loan scheme to operate.
New Zealand First says that at the very least, interest on the loans should be charged at the rate of the increase in the consumer price index, if not more. It certainly should not be charged at the 7 percent rate, which was fairly punitive. At the same time, we have to say that anybody who does not believe that the tax cuts policy was an election bribe should read The Hollow Men. We do not want people to be painting too hallowed a picture of themselves under these circumstances.
Let us go back to the objectives of this bill. Some of the issues around the bill may have been created by the interest-free loans policy, but the objectives of the bill are to ensure that those of our young people—and older people—who have student loans do not stay overseas indefinitely. It creates incentives for them to come back. What we really have to ask ourselves is whether this legislation will do what it sets out to do. That is why there is universal support for it around the Chamber. Although we can play games and argue up hill and down dale, I think everyone agrees that the bill will in fact achieve its purpose of reducing the disincentives for people to return home and increasing the incentives for them to do so. Therefore, New Zealand First has provided support for it all the way through, because, once again, we have always said that the best immigrant is a New Zealander who is returning home. I have to publicly congratulate Peter Dunne on the work he has done in order to get a bill that, when it passes into law, will achieve the purpose of bringing more and more of our young people back home, enriched by their overseas experiences.
ALLAN PEACHEY (National—Tamaki) Link to this
I appreciate the opportunity to make, possibly, the final contribution to this debate, and to speak to the title and commencement of the bill. For a little while I thought we would have a bit of fun with the title for 5 minutes, but then the Labour speaker came in and raised a couple of interesting issues. I realise that I am a new member of this House, and I understand that the Standing Orders do not allow me to refer to the absence of members from the Chamber. So somehow I need to say to the Labour member that had she participated in the debate earlier on, she might well have had cause to reflect a little on some of the things she had to say.
Let us look at the title for a moment. The bill is the Student Loan Scheme Amendment Bill (No 2). It is appropriately named, for a couple of reasons. It amends a principal Act called the Student Loan Scheme Act 1992. It may just be wise to remind the Committee that in 1992, when that Act was passed, New Zealand was in the middle of a major economic crisis. The country had been brought to its knees by the policy of a Labour Government, in which the current Prime Minister was Deputy Prime Minister during the 1989-1990 period. So if the Labour member wishes to give the Committee history lessons, I suggest she get her history right. Let us look at the title a little more closely. What does “No 2” tell us? It tells us that the Government got the No. 1 bill wrong. What does “No 1” tell us? It tells us the Government got the original legislation wrong. Let us not lose sight of that.
Before I refer to the commencement, I come back to two things that I have referred to already when I spoke tonight, which obviously escaped the Labour member who spoke earlier. The first was the reminder that I gave to borrowers to respect the fact that the money comes from other New Zealanders. I remind the Labour member of the time that I spent with half a dozen mums and dads who, between them, share three and four jobs each, all lowly paid, just to feed their kids and get them to school and pay the rent. Their plea to me was that they should just be allowed to keep some more of their own money. Let us just talk about taxation and bribery for a moment. I repeat, for the benefit of the socialists over there on the Government benches, that to give people their own money back is not bribery. People cannot be bribed with their own money. It is difficult for me to hide the contempt I feel for politicians who do not understand the nature of representative government and government by consent. It would be a good idea if the Labour members opposite who are screaming and shouting would just pause to think a little about the nature of representative democracy and whom they are accountable to when they sit in this Chamber.
In terms of the commencement dates, I think clause 2 sums up the complexity of the bill. Again, I come back to the great work done by the Education and Science Committee and the Inland Revenue Department officials in guiding us through all of that. The great bulk of the bill is due to come into force on 1 April 2007. I guess I could use up a bit of time by talking about April Fool’s Day and all the rest of it, but that is kind of obvious, because everybody knows what the Labour Government has done with regard to this bill. This is not good, sound, thought-out, logical policy. It is a bribe to buy an election—nothing more. So maybe 1 April is appropriate. Other sections come into effect on 1 October 2007, and others on 1 April 2008. Gosh, there is that date again—1 April! How many weeks will it be until Labour members lose office?
Hon PETER DUNNE (Minister of Revenue) Link to this
I have listened with interest to the very creative suggestions made by a number of members about the title of the bill. I have thought seriously about whether we should adopt some of those titles, but I say to the Committee that, with respect, I decline to accept any of that advice. I think the title set out here, the Student Loan Scheme Amendment Bill (No 2), is probably the most accurate title. It does really say it all.
I am comforted in the choice of that title by the support of Mr Williamson. I take the view that on this issue at least, what he says goes. He is happy with the title being the Student Loan Scheme Amendment Bill (No 2), and I will go along with that more than happily.
In the midst of all the frivolity that passed for the debate on the last couple of clauses, one or two members raised questions about what will be done to let students know that this bill has been passed. There are a couple of things. There will be a publicity programme—
Members can provide their own wine if they like. There will be a publicity programme that will draw to the attention of borrowers the provisions of the new scheme. We will certainly be doing what we can to make contact with borrowers through the records we have, and through the records obtained through the data match. Already, since the bill was introduced, we have been indicating to a number of people, particularly parents who have written on behalf of students overseas to inquire about students’ indebtedness, the changes that are likely and the steps they will need to take in order to draw to the attention of their son or daughter the provisions that will apply. So there will be a concerted effort to draw to the attention of those up to 40,000 students what the changes are, how they will be affected, and the steps they need to take.
I do not think there is much more that I need to say on that, other than to acknowledge the support that all members have given to this bill, and to thank them for the comparatively speedy time in which we have been able to consider it this evening.