Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill

Hon PETER DUNNE (Minister of Revenue) Link to this

I move, That the Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill be now read a second time. The measures in this bill are part of continuing efforts to ensure that the student loan scheme is managed in an efficient and consistent way. They include a suite of mainly technical changes to the repayment rules to ensure that the law is clear and consistent, and that it operates as intended. The bill also extends interest-free loans to borrowers from Niue, the Cook Islands, and Tokelau, which share a special relationship with New Zealand that is sometimes referred to as their being part of the Realm of New Zealand. I note that when I used that term in an earlier debate Mr Hayes, I think, took some exception to it, but I quickly reminded him that it is the phrase that the Governor-General often uses in such situations, and without bringing him into the debate, I think it is appropriate to follow his guidance. Because the Ross Dependency is also part of the Realm of New Zealand, borrowers who go there may also qualify for an interest-free loan.

The 183-day requirement for borrowers to be present in their country is the same criterion that must be met by New Zealand - based borrowers to qualify for interest-free loan status. That requirement is in place to encourage borrowers to remain in New Zealand or to return home from overseas to make their contribution to our economy and growth. The bill applies the same 183-day requirement to borrowers from what we now describe as realm countries so that they have an incentive to return home after their study and make a positive contribution towards the economic and social future of their particular country.

This bill also acknowledges the value that students who pursue further study overseas bring to New Zealand, and extends interest-free loans to include students furthering their education overseas through full-time study under formal exchange programmes or formal agreements between New Zealand and overseas tertiary education providers.

I acknowledge the work of the Education and Science Committee on this bill; it made several worthwhile refinements to it. The first of these extends the overseas exemption to include those engaged in full-time study overseas if their New Zealand tertiary provider has confirmed that their studies cannot be completed in New Zealand, but would count towards a New Zealand qualification at level 8 or above. The other small but important change provides greater clarity by defining the term “overseas tertiary provider” so it is clear what type of organisation borrowers must be engaged in full-time study with overseas in order to qualify for interest-free loan status.

The remaining changes in the bill are largely of a technical or remedial nature to ensure that the law works as intended. Briefly, they include an amendment to correct an unintended change to the hardship relief provisions made by the Student Loan Scheme Amendment Act 2007, a change that allows the Inland Revenue Department to raise the compulsory deduction rate from 10 percent to 15 percent to help ensure that borrowers pay their correct loan repayment amounts, and the removal of a technicality so that borrowers returning to New Zealand who wish to fully repay their loans before they have met the 183-day requirement to qualify for an interest-free loan can do so.

They are the main features of the bill. I record my thanks to the select committee for its detailed consideration of this matter, and for its thoughtful recommendations, which have made for further improvement and clarity in this bill. I think that, overall, these changes will help ensure that the student loan scheme works in the way that it was intended for both borrowers and the Crown, and consequently with great pleasure I commend this bill to the House.

Hon MARYAN STREET (Labour) Link to this

I rise basically in support of the Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill, but to begin with I need to draw attention to the complete shambles that has developed in this House because of the taking of urgency. This may be the one bill in the whole panoply of bills that the Government has put up under urgency that actually warrants urgency, because some action is required to be taken by 1 April. But this bill is about the only one that does. Even this bill was teetering on the brink of not being able to be introduced into the House for its second reading, because there was not a competent Minister in the Chamber to move the motion. The Government whips had no sense of anticipation that because of the shambles that was developing over the previous bill under consideration, they needed to alert the Minister in charge of this bill, the Hon Peter Dunne, to get to the House promptly so that he could take it up. In the event, two Ministers, the Hon Chris Finlayson and the Hon Paula Bennett, were sitting in the House, but neither of them had the wit to get up and even move procedurally or do some kind of form speech while waiting, presumably, for the whips to ring the relevant Minister’s office to get the relevant Minister to the Chamber pronto.

This is a complete shambles. This is what happens when a Government tries to avoid question time, when it has been trying to use the procedures of this House in order to defend indefensible Ministers. This particular bill warrants urgency. I am—and we in the Labour Party are—perfectly happy to acknowledge that it warrants urgency. We support this bill. But this cannot go past without some trenchant criticism of the process by which we have got to this moment. In the urgency motion there was a raft of legislation that did not need to be taken under urgency. It was clearly a ruse and a device that allowed the Government to let its panicked, panicky Ministers—such as the Minister of Education, Anne Tolley, or the Minister of Housing, Phil Heatley—to get off the hook and not be subjected to the kind of grilling their performance in the task of being a Minister of the Crown absolutely demands that they be subjected to in the process of question time. This cannot go past without comment. Although we are now at the second reading of the Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill, I have to say that it is only by the skin of its teeth and by some cooperation on our part that this bill is reaching this stage in any kind of order. That fact goes to the competence of the Leader of the House, Gerry Brownlee, and to the attention paid by the Government whips to what is actually transpiring in the House as we proceed.

However, there is one other thing I wish to raise in relation to the Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill. Between the time this legislation was first introduced into the House, was referred to the Education and Science Committee, and appeared for its second reading, we have had a change of Minister for Tertiary Education. Although this is a bill that rightly comes under the purview of the Minister of Revenue, it will be interesting in the Committee stage if the new Minister for Tertiary Education responds to some of this debate, so that we can discover whether the Minister of Revenue has briefed him about this bill. This is about the student loan scheme, it is about miscellaneous provisions, and it refers to exemptions. It will be interesting to see whether the fact that the new Minister, Steven Joyce—who was brought in to repair the damaged and broken relationships between this Government and the tertiary education sector, which resulted from the stewardship of the previous Minister for Tertiary Education—has student loans in his sights has any bearing upon this current legislation.

This legislation extends the student loan scheme to all those within the Realm of New Zealand, and that is a good thing. We support that, despite the fact that there are not many in the Ross Dependency who are likely to take this up—we may have the best educated penguins in the world. We are supportive of the extension of the scheme to people in Niue, Tokelau, and the Cook Islands. However, I am somewhat at a loss to know quite what the direction of the student loan scheme will be under the new Minister for Tertiary Education. He has made it explicit that although he acknowledges it was a political call to maintain interest-free student loans—in other words, the Government would have taken a real drubbing on this issue at the general election had it not decided to continue to support it—he has decided that he will make it harder for students to access student loans. This is clearly on the agenda of this Government under the new Minister. The previous Minister’s relationships with the tertiary sector were in such a parlous state that she was beginning to not even meet with them any longer.

COLIN KING (National—Kaikōura) Link to this

It is a pleasure to take part in the second reading of the Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill. I start off by pointing out that National did commit to keeping interest-free student loans in place. We recognise that the scheme is a very generous contribution by taxpayers to tertiary education students, so we want to see that the whole process around the student loan scheme is tidy, appropriate, and fair. That is the very essence of this bill. It tidies up a number of areas, enhancing the student loan scheme and giving people certainty and clarity. We need to do that because 500,000 New Zealanders have student loans. Therefore, the scheme has a significant impact on the Crown accounts as a debt to be managed. It is in the region of $10 billion. We want to ensure that those people who enter into a student loan get quality education and that the country in return receives the most benefit from those people’s higher education by way of completions, success, and the students realising their potential.

One concern we have in Government on this side of the House is that under the previous administration there was a total lack of incentive to repay one’s student loan. In fact, there was a general sloppiness in the behaviour of the tertiary education sector,. That is why the Government in September introduced the 10 percent bonus repayment, which means that if people pay over $500 of their loan above their minimum requirement, we give them a benefit or a bonus on that.

This bill has come through the House courtesy of the Minister of Revenue, who has oversight of it. I encourage everyone in the House to go on to the website and download the annual report relating to the student loan scheme. It is quite staggering to read. The principle itself is a good balance. In the context of this bill and the student loan scheme, there is an enormous amount of public good, but done properly there is an even greater amount of individual good. That is what we want to see.

I will get on to the bill and interest-free loans for residents of the realm countries. We do a lot to aid those countries within our region—and when talking about our region, I am referring to the South Pacific, effectively—be it Niue, Tokelau, or the Cook Islands. Those countries have rights under our laws, and one of those rights is access to interest-free student loans. Up to this date, when those students came to New Zealand that was the case, but when they returned home it was not the case. This bill appropriately extends the provision so that students can continue to have interest-free loans when they return to their home Islands. That change is very good, because it benefits not only the Islands but it also balances out students’ rights to the student loan scheme. Otherwise, invariably those students would stay in New Zealand in order to keep that right. Those Islands have an enormous need to be supported and to grow economically, and one hopes that those things are gained from the student loan scheme. The change will apply when the bill is brought into law.

This bill deals with a very interesting aspect of overseas study. At present there is a gap in our education system. At times there is no ability for students to continue their studies overseas on an interest-free loans basis, even though there may be a formal relationship between an institution in New Zealand and an overseas institution. This bill addresses that matter. Where there is a formal agreement between the New Zealand tertiary education provider and an overseas tertiary provider, there will now be the opportunity to retain the status of an interest-free student loan.

Up to this date, as soon as a student left the country to study or work, the calculator would start ticking away. I trust that we can manage this change. We will need to register what those institutions are and what courses are being taken. The education needs to be at that higher level and one that is not provided in New Zealand. That, in itself, is fair but we must remember that when the interest-free student loan scheme was implemented it came to the attention of the Minister of Revenue that some 40,000 students overseas were claiming interest-free student loans but were not really deserving of them, so that had to be tidied up. Exemptions are an important aspect of bill, and we look to this amendment to tidy up matters respectfully around that issue, because we want the full ambit of opportunities to be opened up to students, whether they are doing a master’s degree, PhD, or whatever.

The other aspect that I thought would be controversial, with regard to the Green Party minority view, is that the Inland Revenue Department will have the ability to increase the rate of repayment deduction from 10c to 15c in the dollar for borrowers who have failed to have the correct deductions made or to pay any other amount when it is overdue. It became clear under examination by the Education and Science Committee that that provision does not include the occasion when there is failure by the Inland Revenue Department to send out the appropriate notification of payments. It would be unfair to be ruthless and try to claw that money back in an insensitive way. However, in many situations the department needs that flexibility. When we are talking about 10c to 15c in the dollar, it is not just one or the other; it is a sliding scale.

This is a small bill, and although some speakers in the first reading debate said there was not a lot of substance to it, it is an important aspect of the legislation going forward. The bill adds to, critiques, and improves the Student Loan Scheme Act 1992. It is a balanced bill, and, generally speaking, on the select committee we worked collegially, and the advice we received from officials was very appropriate. The bill, in the form returned to the House, is still in much the same vein as it was at its first reading. The committee made a couple of recommendations and it was good to see that the Minister has picked up on those. On that basis, it is a pleasure to commend this bill to the House in the second reading.

STUART NASH (Labour) Link to this

My colleague Grant Robertson said to me a moment ago: “Get ready to jump up; it sounds like Colin’s winding down.”, but he said that from about the first minute of Colin King’s speech. I wonder whether Colin King has any interest in education or whether he was given that speech and told to read it because we are 2 hours early, due to the earlier stuff-up in the House. He should show a bit of passion about education.

I think that education is the most important thing we can do for our children and our communities. That is why I stand now to speak in support of the second reading of the bill. It is hard to believe that the first reading was in August last year. Too many important bills affecting the people of New Zealand have been rushed through the House under urgency since then. Goodness me! We are only into the third week back this year and already we are rushing legislation through the House in what appears to be a slap-hazard way. I assume there must be some sort of plan or logic to the process—

CATHERINE DELAHUNTY (Green) Link to this

Tēnā koe, Mr Assistant Speaker Roy. The Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill has some merit, but the Green Party has looked at it closely and, in context and on balance, we remain opposed to some of its key provisions. We may be a lone voice in the House and easily dismissed as unreasonable, because some good ideas are cemented by this legislation, namely the extension of interest-free loans to borrowers from Niue, the Cook Islands, Tokelau, and the Ross Dependency. The Green Party is delighted to see the principle of interest-free loans being expanded to these communities. We hope this indicates recognition by the Government that education can be made inaccessible by both geography and market principles, and that the State can positively assist access to tertiary study. But under the new Minister for Tertiary Education we are not holding our breath and under the previous Minister we were not, either. There may not be many students in the Ross Dependency at the moment, but who knows? If we stick to the current pathetic climate targets, the area may become warm enough in the lifetimes of our children for a whole university.

The Green Party applauds also the modifications that have been made to the bill since the select committee process. They have resulted in the Inland Revenue Department accepting, after a little bit of pressure, that it made a mistake in not notifying some students about overdue loan repayments, and, therefore, could not penalise them. There was a proposal to enforce a 15 percent repayment penalty on those students, but fortunately—after some discussion at the Education and Science Committee, which I was happy to persist with—the department withdrew support for that idea. This is a good example of the value of select committees in highlighting anomalous provisions that would create unintended consequences and unfairness, and the change is well made.

We remain concerned about this bill, mainly because of the late payment penalties. As the New Zealand Union of Students’ Associations stated in its submission, the increases proposed to the compulsory repayment deduction would be unmanageable and unacceptable. Student loan repayments kick in at the very low threshold of $19,084, and now is one of the worst possible times to increase student repayment rates. Whatever the optimistic economists and politicians choose to say, we are in recession. Many students are part of the low paid and underpaid. They are struggling to meet rent, food, and clothing costs, let alone debt. This especially applies to women students and to former students who are yet to experience pay equity in many occupations, let alone in the public sector. It is all so easy for Campbell Live to focus on the minority of irresponsible young people who wasted their money on inappropriate goods and behaviours. However, they are not necessarily the people who will be hurt by the increase in late repayment fees. Even they are merely reflecting back to us the lessons we have taught them: that they can have it all, that they can borrow and spend, and that they can live with debt because they are worth no real investment, and they must bear the risks.

The relationship with debt that the student loans scheme entrenches is one of the most insidious and destructive processes invented. In a world where shopping for the latest goods and experiences that global capitalism can provide is promoted to everyone on every screen, we cannot blame the young for wanting it. Then we lend them money for their education. First, there was the crippling interest on all those loans and all students and then there was interest on overseas students only. Now there are murmurings of more changes to the student loans scheme by the new Minister for Tertiary Education, Steven Joyce.

It is pretty clear that Mr Joyce was not given this portfolio just as something to do while eating his lunch in between building more unnecessary motorways, and that the student loans scheme could always be made worse for students. This was also signalled in the Prime Minister’s statement to this House when he waxed lyrical and said he wanted “a careful look at … student support and allowances to ensure that taxpayers’ generosity is not being exploited”. What did he mean? He is really concerned about the public getting their money’s worth, but students are also members of the public, and they are not getting their money’s worth. Now Steven Joyce is rolling up his sleeves to see what can be done about it. The political risk of reintroducing interest on loans seems too high right now, but, as Steven Joyce said last weekend, “we’re going to look at other requirements around those student loans,”. What does Mr Key mean by taxpayer generosity? Does he mean that all of us older politicians who had no student loans are being awfully kind by indebting the next generation, and that we will demand more blood? What does Mr Joyce mean? Could he be referring to eligibility to enter study or to remain there? Will that be tightened? None of this is good news for students.

In the meantime this bill causes concern for the Green Party, mainly because of new section 20A(2)(a), which allows for an increase in the standard deduction rate of 10c in the dollar to a maximum rate of 15c in each dollar. Clause 20, which relates to section 55, talks about hardship relief. Considering that many, many students are in hardship they might need to think about this provision, because it could apply to a lot of people the Government is about to impose extra penalties on. If the Commissioner of Inland Revenue considers that a repayment obligation would cause serious hardship, he or she can offer hardship relief. But as serious hardship is not defined and would have to be proven, very many people are unlikely to be able gain this form of protection from clause 20.

We are very concerned about adding debt to people who are already failing to repay. It does not incentivise; it punishes. This is a bit like environmental pollution, whereby the burden of proof is always on the citizen and not on the polluter. The burden is on students to prove they are in hardship. Students have no choice but to have a debt if they want to study, and if they are not wealthy they cannot always earn their way out of it. At the select committee there was much talk about how students could earn their way out of debt. So many people I know who have left university are not earning their way out of it, because they are barely managing to live, let alone get a mortgage, and their student loan is still a huge burden on them. They are not progressing financially in the way that my generation just took for granted. It is purely unfair. It is a real indication of the value we put on our student body and the value we put on our society as a whole. The poor cannot earn their way out of debt when they start off with debt as young people. That is something I did not experience.

We oppose the additional burden, and the burden of proof being on students to prove that they are in hardship. We are opposed to the provisions of the bill to such an extent that we have to vote against the bill. Although we thought there was good discussion at the select committee about all the different aspects of the extension of interest-free loans, and we support that extension, we are deeply in opposition to clause 20, which adds to the hardship. It is just not fair to use the student loan scheme as a way of keeping people in poverty. To say that it is a debt on the country is true, but we have to take responsibility for the debt that was created. We created that debt when we created the student loan scheme. Many people out there today know what I am talking about, because they have not earned enough. Women, migrants and refugees, tangata whenua, Pasifika, and people with disabilities have absolutely no chance of the high-wage economy that the student loan scheme assumes is behind people’s ability to repay loans. So the Green Party will continue to be consistent and principled in our attitude towards the student loan scheme and towards added burdens on young people in their education and in future life, and we will not support this bill. Kia ora.

LOUISE UPSTON (National—Taupō) Link to this

I am very pleased to stand and speak in support of the Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill. That is the bill we are talking about. It is actually in the name of the Minister of Revenue, Peter Dunne, but, unfortunately, some of the Opposition members keep mentioning other Ministers in the House, so it would be very helpful if they could remember that. This bill is in the name of the Minister of Revenue, and it is a technical bill that makes some changes. I am very pleased that I am able to remind members on the opposite side of the House of that and to correct the error of their ways.

I want to agree with other speakers today on one thing: I want to agree with an earlier speaker from the Labour benches, who said that education is the cornerstone of economic growth. Clearly, a National Government totally agrees with that: education is a massive platform for us in terms of growing our economy, and we are extremely committed to having in place a student loan scheme that is balanced. But the important thing is also to put the right incentives in place to support and enable people to pay off their student loans faster than at present.

I just want to put a bit of context around this bill in this second reading. We have heard from the Minister of Revenue that more than half a million New Zealanders have a student loan. Half a million—that is a huge number. On the one side it is fantastic that there has been that amount of uptake; obviously the number of people in tertiary education is high in this country, and we need it to be. But one of the difficulties when as many New Zealanders as that have a student loan is that the scheme has a significant impact on our economy. I remind members on the other side of the House that hard-working New Zealanders who pay tax fund the student loan scheme. There are not just poor students with student loans; poor, hard-working New Zealanders pay tax from their income to support the student loan scheme. That is another important context that I want to put across. For some people, the Government’s money grows on trees and everyone gets to write fat cheques with it. No, it is hard-working New Zealanders who fund the student loan scheme.

When National came into Government, it was concerned that under Labour there had been no incentives whatsoever for people to repay their loans earlier than they had to. That meant that loan holders were likely to be in debt for longer than was necessary, which we know is not good for anyone. That has implications and flow-on effects for other areas of former students’ lives: delaying choices about whether to have a family, when to have a family, and whether to buy a house. National has fulfilled its election commitment to keep interest-free student loans for tertiary students. Part of that was also a commitment to build in a strong incentive for students to pay off their debts faster. That is great behaviour for us to reward, because we believe that education is the cornerstone of economic growth.

In effect, there are three areas in this bill that I want to touch on. The first area relates to interest-free loans for the realm countries. This is particularly important to me as there is a large Pacific Island population in the electorate of Taupō, so I am very keen to support the development of education for those people, as well. The second area relates to the overseas study provisions, and I want to talk about a case that I have had in my Cambridge office of a constituent who wanted to study overseas. The third area is the minor and technical amendments, which, for some reason, members on the other side of the House seem to think are unimportant or boring, but there are very important technical changes included in this bill.

Let us look at the first area, the interest-free loans for residents of realm countries. Many of the speakers today have talked about the importance of our support for Pacific countries. This means that borrowers in realm countries will be exempt from the requirement to be present in New Zealand in order to qualify for an interest-free loan. That is fair; it makes a lot of sense. It recognises the special relationship that we have with the realm countries. If we go back a step and look at the situation when interest-free loans were introduced in 2006, we see the scheme encouraged borrowers to remain in, or come back to, New Zealand. That was part of its intention. Niue, the Cook Islands, and Tokelau have a special relationship with New Zealand that gives their citizens the automatic right to reside and work here. So we wanted to extend the interest-free loans to borrowers who reside in these countries in order to recognise that special relationship. That is the first area of the bill—interest-free loans for residents in realm countries.

The second area relates to overseas study, and there was some very interesting discussion in the Education and Science Committee around this particular measure in the bill. One of the issues is that when people want to study overseas, the situation generally is not that they want to study overseas but that they want to extend their existing study, and sometimes the course that they are interested in is not available in New Zealand because of its speciality or because they want to pursue a very technical field. I have had a case of that very kind in my electorate. A constituent came to see me because her daughter wanted to study in a very specialised field, and the course was not available in New Zealand. We do not want to be in the position where we restrict students’ choice by limiting their study options, so this bill introduces an extension of the interest-free loan entitlement to students who are studying overseas full-time where the New Zealand Government has a formal exchange programme in place with the education provider. It means that students who want to pursue further studies in very specialised fields have that option available to them. In a case in my electorate of Taupō, that was a very relevant consideration, and this particular clause will be helpful for that student.

The third aspect of the bill is the minor, technical amendments. Members on the other side of the House may say that this is the not very exciting bit. Well, I totally disagree with that. I think that the minor, technical amendments are a critical part of this bill. Several matters are dealt with in this area of the bill. The Green member Catherine Delahunty spoke about hardship, and it is fair to say that many New Zealanders are experiencing hardship at the moment. This particular measure looks at students who are repaying their loans and makes some minor changes. Currently, the availability of relief is limited to the year that immediately precedes the current tax year. We, as a Government, want to make sure that students know about their obligations in terms of their debt. We have provided incentives for them to repay debts earlier. With regard to these changes, there will be some students who, unfortunately, fail to have the correct deductions made or who need to pay amounts that are due, so a change has been made in the deduction rate. There are also changes in some other areas relating to the early repayment of a loan and the grace period.

This is important legislation, and I am proud to support it in its second reading.

GRANT ROBERTSON (Labour—Wellington Central) Link to this

I thank Louise Upston, the previous speaker from National, for her reminders on various matters during her speech. Members on this side of the House, however, were a bit disappointed that Maurice Williamson did not take that call, because earlier in the debate we heard the great quote—probably the quote of the year, actually—from Mr Williamson: “Slash and burn never hurt anyone.”

JO GOODHEW (National—Rangitata) Link to this

I rise to speak on the Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill, and I note that this opportunity has been used for political statements, so I intend to make a couple of my own.

The first thing I want to say, having been on the Education and Science Committee that examined this bill, is that I am left with no illusions: the student loan scheme is extremely important to New Zealand, and it is important that it is working appropriately and managed in an efficient and consistent manner. That is what this bill is all about. It is not about revisiting whether we should have student loans. It is not about trying to scare the horses, which we have been listening to members from Opposition benches doing. This bill is about making sure that the student loan scheme works in an efficient and consistent manner.

At the same time, I take this opportunity to say that we need to send the right messages to our students. We need them to understand that the student loan scheme is important to them but also to New Zealand, and that its value of $10.3 billion represents a significant asset to the Crown. We need them to be under no illusion that we see them also—the students of New Zealand—as a very, very valuable asset, and that is why they have the opportunity to take student loans. I am right in the midst of this at the moment, with three daughters at university, the last of whom headed off to university just a couple of days ago. One delivers one’s children to university and hopes like hang that they use that opportunity and understand the responsibility that they have to make wise decisions for their future.

Of course, the students who are going to university will be making decisions about whether they take out a student loan and whether they have a holiday job, and about their future and what courses they will take. Some of them will make the wrong decisions, and will revisit those decisions. But they will have in place a student loan scheme that National is committed to having in place, and a student loan scheme that is balanced but at the same time puts in place incentives for those young people to pay their loan more quickly.

One in four New Zealand graduates heads off overseas, and that is really regrettable because we want those young people to stay here in this country. It is not just the correct settings on the student loan scheme that will enable that; we have to put a whole lot of settings in place. I note that yesterday there was an announcement by the Government to extend voluntary bonding to my own district health board of South Canterbury. I understand that that is yet another way that we can keep students and medical graduates in New Zealand by putting in place the right incentives. That is exactly what this National Government is doing—looking at all incentives to keep those valuable young people here. Who wants to think of their children being in another country—having a good job, perhaps—and having to go and visit them and their grandchildren? This is something that is certainly coming home to roost to me. I really hope that our daughters will find good jobs in New Zealand.

More than half a million New Zealanders have a student loan. Many have made long-term financial decisions on the basis of the current interest-free student loan policy, and we want to assure them that they can plan with certainty. National, however, was concerned that under Labour there was no incentive for students to repay their loans earlier. That seemed pretty crazy to us. That meant that loanholders were likely to have their debt for longer, of course, which has implications for other areas of their lives—as well as implications for the Crown—such as when they are buying a house or starting a family.

National has fulfilled its commitment to keep interest-free student loans for tertiary students. Back in September 2009 we passed legislation that provided for a 10 percent bonus for both New Zealand borrowers and overseas-based borrowers who make voluntary repayments on their student loans of $500 or more in a tax year, which gives those students the opportunity to reap the rewards of saving and paying off their student loans earlier.

This bill introduces mainly technical changes—and I will probably go into more detail about those changes in the Committee stage or third reading. It extends the grace period, removes the hardship criteria, and allows students who return to New Zealand 6 months of interest-free loan, to fulfil our commitment to a balanced scheme that takes into account these more difficult economic times. I make no apology for making my share of political statements in my speech this morning. However, we really need to get back to the reason for this bill. It is about managing the student loan Crown asset, which is what it is, in an efficient and consistent manner, and I commend the bill to the House.

CHRIS HIPKINS (Labour—Rimutaka) Link to this

It is a slightly strange feeling for me to be standing to speak in favour of a Government bill; it is something we do not get to do very often on this side of the House. It is nice to be able to support one of the initiatives that the Government has in place. The interest-free student loan scheme is one that I am particularly proud of, and one that the previous Labour Government is particularly proud of. It is good to see that National has come round to supporting the interest-free student loan scheme, albeit probably temporarily. We hope that it continues to support the scheme. We also think that there is actually a compelling case for passing this Student Loan Scheme (Exemptions and Miscellaneous Provisions ) Amendment Bill in a bit of a hurry because of the looming deadlines involved in this legislation, unlike some of the other bills that have gone through the House under this current, somewhat shambolic, urgency session.

I am pleased that the Minister of Revenue managed to get to the Chamber in time to make his second reading speech—

AMY ADAMS (National—Selwyn) Link to this

I do not intend to take up much of the House’s time on this bill. I want to make a contribution about a point that my colleague, Louise Upston, touched on, which is something I have not heard discussed so far in this debate. I come back to the fact that this bill is a revenue bill; it is in the name of the Minister of Revenue, Peter Dunne. I just want to make a contribution wearing my Finance and Expenditure Committee hat, I guess, even though that committee did not consider this bill.

One of the issues that the Finance and Expenditure Committee has been very much engaged in is the management of tax debt, and I think that in looking at student loans we cannot overlook the fact that they are a $10 billion chunk of the Government’s books. They are a serious and significant part of the Government’s accounts, and steps such as those in this bill will help manage that tax debt. We know that that debt is spiralling out of all control, and Opposition members agree with us on that. We have to get a handle on tax debt.

The part of this bill that introduces the ability of the Inland Revenue Department to put up compulsory payments from 10 percent to 15 percent when borrowers have been in default, in terms of having the correct deductions made, is an important part. It is important for managing our tax debt. The other thing it is important for is legislating consequences for borrowers who fail to live up to their obligations, and that is something I fundamentally agree with. If borrowers do not ensure that correct deductions are made, there should be a legislative consequence for that action. If that means moving to 15 percent until the indebtedness is cleared, and if that encourages borrowers to be more compliant, to be more aware, and to take more responsibility for their obligations, then that can be only a good thing. I commend the bill to the House. Thank you.

CARMEL SEPULONI (Labour) Link to this

I am very happy to stand and take a call on the Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill. I may be one of the few young members of Parliament who currently still have a student loan and are still paying it off. I am nearly there. It has taken me 9 years, but I am nearly there. So I do have a heart for our students out there who are taking out student loans with the best intentions: trying to get ahead in this world, and trying to do good things for themselves and their families.

The Labour members are supporting this bill. I will talk first about aspects of the bill that we support. One of those is the fact that the bill extends interest-free student loans to borrowers who are resident in Niue, the Cook Islands, Tokelau, or the Ross Dependency. I think that is a good idea. One of the things that we came across on the Foreign Affairs, Defence and Trade Committee trip to Niue last year was the fact that Niue is suffering from depopulation. If we can encourage Niueans to go back and work and contribute to their economy there—and it is the same with the Cook Islands and other countries—then that is a good thing that New Zealand can do. Those countries talk about the fact that their Pacific people are contributing here in New Zealand, so I think it is important that we allow them the opportunity to go back and contribute to their countries, especially given that we have something like 22,000 Niueans in this country and there are only 1,000 in their homeland.

Some of the concerns that have been raised in respect of this bill are about the National Government’s future plans for students loans. This kind of bill makes alarm bells go off in our heads. We are concerned about some of the comments that have been made on student loans recently by both the Prime Minister and the new Minister for Tertiary Education, Steven Joyce. The fact is that the Prime Minister has recently said the Government will take a careful look at the policy settings around student support. The concern is that—and we do not trust the Government to take this scheme seriously—National members have talked many times about the number of students who are rorting the system, apparently. Apparently, we have heard from Government members and from the media, students are doing things like taking out student loans then saving the money because it is interest-free. That is very much a small, small minority of the students who access student loans. The vast majority are people who need the student loan scheme in order to have the opportunity to take up tertiary study in the same way that those who have money do.

So it is concerning to hear the National members talk about student loans and changing the policy around them, because we do not know how far down the track National will go. Of the something like 13 years that I spent living in Auckland, I spent 11 years working at the University of Auckland or studying there. I have worked with a large number of students—Māori, Pacific, single parents—who rely on the fact that they can access student loans. If there are to be any changes down the track that jeopardise the accessibility of student loans, then this country will be in huge trouble.

Mr Key referred to the fact that some students do not take their study seriously or do not get a job quickly after qualifying. One thing that we need to recognise is that research shows that, unfortunately, Māori and Pacific students often take longer than other students to complete their degrees. The reason for that is not anything to do with their having lesser intelligence or anything like that; unfortunately, what we see is that many of the Māori and Pacific students are still the first person from their family to go on to high-level tertiary education. The culture of the environment at universities is very foreign, compared with what they have ever experienced in their lives. When they go into that environment, many of them struggle to come to terms with being in it. It is completely strange and foreign, compared with what they have ever experienced before. So if the Government does go down the track of putting limitations on student loans, it will be those Māori and Pacific students, and also—I will talk more about this shortly—solo parents, who will suffer more than anyone else because of that.

One of my colleagues has already talked about the fact that the training incentive allowance was cut. We have been receiving emails since that was announced in the May Budget from women who do not know how they will be able to cope with tertiary-level study, with degree-level study, if they do not have that tertiary incentive allowance. If we put limitations on student loans, that will only further serve to marginalise that group. Those are aspects that we are concerned about. It is important that we alert members on the Government side of the House to those concerns so that when they are looking at the policy, and when they are looking at further legislation, they will take those considerations seriously.

The Greens brought up their concern about increasing the amount that students who are in arrears will have taken from their earnings under this legislation. The increase will be from 10c in the dollar to 15c in the dollar. The Greens have raised a valid concern. But as my colleague the Hon Maryan Street referred to before, we have to make sure that people are using the correct tax codes and are not trying to rort the system in any way. Again, the thing that we need to be cautious about, and that the Government needs to watch very carefully, is that it is not certain groups that are affected by the introduction of this clause. We know that Māori, Pacific people, and women will earn less once they get out into the workforce after completing their tertiary studies. If they are solo parents with children to raise, then increasing the amount from 10c in the dollar to 15c in the dollar may affect their ability to look after their families. Those are some of the things that the Government will need to watch very carefully. We do not want to push through legislation that may marginalise particular groups. That was one of the Green Party’s valid concerns.

As I said before, the direction that the Government seems to be taking with regard to student loans is concerning. As my colleague Chris Hipkins pointed out earlier, the National Government does not have a good track record with regard to tertiary education—it does not have a good track record on tertiary education. Fundamentally, underneath all the rhetoric National did not, and it does not, support access to student loans. As I yelled out before to one of the National Party MPs, the chances are that the daughter she spoke of did not have to access a student loan. The chances are that anyone who is working here can afford to pay the fees for his or her child. Not everyone has access to that kind of support, so we need to make sure as a country that we support those who do not have access to that type of money to go on to tertiary-level education. That is one of the things that we do not trust this Government to do. We do not trust this Government to make sure that every New Zealander has an equal opportunity to access tertiary education. That issue has come up in the past. National voted against policies that the Labour Government put forward in its 9 years. Those policies and legislation were conducive to ensuring that all New Zealanders have access to tertiary education. As we head into the future we are aware of the fact that, if given the opportunity, the National Government would make changes that would be detrimental to some of the more marginalised groups in New Zealand.

I also say the Government needs to take aspects of the student loan scheme seriously. I saw many students come into my office, over the years while I was working at the university, who had been put back or affected negatively by some of the operational matters of student loans: some of the timeliness issues, and things like that. When students have to wait for 6 weeks to receive money in the first semester of the year, they are severely put back in terms of their ability to go to classes—sometimes they are actually shut out—and their ability to obtain their course outlines and everything else. That can have a detrimental effect on their success in that first semester, or even in that first year. So there are other matters related to the student loan scheme that this Government needs to take very seriously and look at in order to make sure that the scheme works successfully and efficiently for students who need to access student loans.

We have pointed out that, at the end of the day, if further changes are made to the student loan scheme and accessibility to it is affected by the Government’s ideology on whether student loans should be interest-free or on how accessible they should be, it will be Māori, Pacific, and, I think, women students, as well, who will be most affected by any possible changes that the Government may go down the track of making. We are concerned about that. We have discussed it very broadly amongst our caucus. We are keeping our eye very closely on the situation, to ensure that the groups that I have discussed are not affected negatively by the Government’s future policy on tertiary education and the student loan scheme.

DAVID GARRETT (ACT) Link to this

The Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill is a good bill but not a great bill, and ACT supports it.