Mallard Trevor: Student Loan Scheme (Repayment Bonus) Amendment Bill — First Reading 
Mallard Trevor: Student Loan Scheme (Repayment Bonus) Amendment Bill — First Reading 
[Volume:653;Page:2814] 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I am caught betwixt and between things here. I cannot tell whether the Minister of Education is as financially illiterate as she pretends to be or whether she is a wolf in sheep’s clothing. I cannot tell which it is. Frankly I am very disappointed in the Minister of Revenue— 
Hon Anne Tolley 
: Whenever you lose an argument you resort to bullying. 
Hon Member 
: Calm down. 
Hon TREVOR MALLARD 
: No I will work my way through this situation slowly for the benefit of the Minister. 
I want the Minister to assume that someone has an income of $50000 a year and that that person is a new graduate with a $50000 loan. That person’s normal repayments would be $5000 a year—10 percent of his or her income. If for example that person could afford to pay another $1000 a year—we will keep the numbers nice and round—he or she would have a couple of choices. That person could take advantage of the scheme in year 1 and get a 10 percent additional bonus payment. Paying an extra $1000 would mean there would be a $100 bonus so an extra $100 would come off his or her loan. Or the person could choose to put the $1000 into the bank earn 7.5 percent for example—we will ignore the tax and ignore the facts that obviously the interest would compound and that the tax that came off it would be a factor. But if we ignore both of those factors after 10 years that $1000 would be worth $1750. 
I ask the Minister what sort of education system for tertiary students we would have if the graduates of that system chose to take the $100 discount instead of the $750 that they could apply at the end of their loan in order to pay it off. It is a matter of basic maths and basic logic and I am saying to National members that it makes no sense at all for any student other than a student who is in about the last 18 months of his or her loan repayment period to take advantage of this scheme. At any point earlier than that the student would be better off by putting the money into an interest-bearing account. 
There is one exception to that. I remind members that details of this exception come from the same member and the same sources from which I heard about Cabinet’s decision to reverse the tax changes which has now been more or less publicly announced by the Prime Minister. About a month ago I commented on that issue in the House. It was denied at the time but now of course it is accepted that that will happen. The same source—and I will make it very clear that it is not a Treasury source—has indicated to me that Ministers have Treasury working on papers to reverse the interest-free component of the student loan scheme. Treasury is currently working on papers to reverse the interest-free part of the student loan scheme. 
I tell the Minister of Education that if she has taken that decision or intends to take that decision then this legislation makes sense. I ask the Minister to deny that to me in the House. No she declines to deny it. The Minister of Education will not deny the fact that Treasury with the assistance of the Ministry of Education is working on papers—or may have completed the work by now because I have had the information for a little period of time—in order to reverse the interest-free student loan policy which was very heavily criticised by the current Prime Minister at the time when it was promoted and introduced. We will note we will put it on the record and we will make it absolutely clear that Anne Tolley was in the House. She was challenged to deny that that work is going on and she declined to do so. I will give her some credit for that because she is a basically honest Minister. But she is not very financially literate nor is she very good at deceiving people because she could not really explain why National was ripping off students in a way. Anne Tolley is not very competent but she is basically honest. She knew she could not deny that that work is currently going on within the Government. 
I will go back to the point I was making before I was diverted by Anne Tolley and I will address the Minister who is in charge of this bill the Hon Peter Dunne. I know that he is financially literate so I challenge him by way of interjection or response if he wants to to correct me on the logic of the assumptions I have made that people would be better off if they do not make extra repayments. No? There are some behavioural assumptions; for example the assumptions that people could put the money into the bank and leave it there or could pay it off their mortgage. The best possible thing they could do would be to pay it off their mortgage rather than pay it off their loan. But working on the assumption that people are able to put their money in the bank and leave it there for say a 10-year period and have the interest compounding they would be much better off under that year-by-year repeat return on their investment than they would under the one-off return that would occur as a result of using this scheme. 
I leave it to the Minister in charge of the bill to indicate whether I am wrong. He will not do that either because again he understands the position in this case. He is honest and has integrity in these matters. I admire him for his flexibility in working with a number of different parties. I know that even in the time of the previous Government the Hon Peter Dunne was involved in introducing or changing legislation that he was not particularly keen on. He may or may not be keen on this measure. I do not know his real position on interest-free student loans; it is not something I am familiar with. But I think I have gathered over the years that at least politically he was not prepared to oppose them. In this particular case I admire him for swallowing the rat—the dead rat—and being the person who has introduced this legislation. 
There is not a lot of point in going through the details of this bill. I think it was one of a number of National’s policies. I accept what the Minister of Education says; this was the National Party’s policy. No the guts of it were clearly spelt out before the election. It was criticised as being a rip-off at that stage. I think I was involved in drafting some things and certainly Pete Hodgson made some comments on the policy at the time indicating that intelligent graduates—intelligent former students—would not use the policy. The National Government has delivered; in fact it has over-delivered. It has made it easier for people to be ripped off by doing the repayments on a weekly basis or on a $500 basis rather than on an annual basis. It has to be $500 a year. The Government has made it easier to be ripped off because one can do the repayments on a weekly basis on a PAYE basis rather than on a one-off payment basis and it has extended the net to people who are overseas. 
I might say that is the bit where there is some logic because people who are resident overseas are still subject to the interest I think on the loans. The Minister of Revenue is agreeing with me. People who are overseas would be the group where there could well be some logic at some point in applying this measure because they would have the compounding effect of the reduction in the principal and therefore they would not have interest compounding over a period of time on their loan. Probably mainly because of tax factors that could well be something that would be of benefit to them rather than having the money in the bank and having the interest accumulate over time. I thank the Minister of Revenue for his nod on that particular matter. 
This is a sneaky little bill. It is designed to rip off people who have been students and I think that we do not have 14700 graduates of tertiary institutions who are stupid enough to be ripped off in this way in New Zealand this year next year or in any other year.