Student Loan Scheme Bill — Second Reading In Committee 
Student Loan Scheme Bill — Second Reading In Committee 
[Volume:675;Page:20695] 
Student Loan Scheme Bill 
Second Reading 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I move  
That the Student Loan Scheme Bill be now read a second time 
. This bill represents a significant shift in the way the student loan scheme is administered with the aim of making it easier for borrowers to manage their loans and to pay back what they owe when they should. Currently complying with this scheme is complex and its administration has its own complexities as well. Borrowers have to deal with different administrations at different stages of their loan which can result in confusion for borrowers about their immediate repayment obligations and their overall loan balance. The repayment system is also heavily dependent upon inflexible paper-based communication systems which make it difficult for the Inland Revenue Department to communicate with borrowers who move address frequently or who go overseas. Further the process of annual assessments for determining borrowers’ loan repayments results in complicated annual interaction with borrowers. 
This bill introduces a suite of measures to deal with these problems and to help the Government better manage this $11.1 billion Crown asset. To recap briefly the first of these measures sets the framework for consolidated loan information to be provided electronically to borrowers by the Inland Revenue Department. That will enable borrowers to access information on their loan balance and to manage their repayment responsibilities from anywhere in the world at any time. It also means that borrowers who are currently studying will no longer have to contact two agencies for this information as they do now. The overwhelming majority of borrowers will also benefit from the removal of the current annual end-of-year assessment if their income is from salary and wages only and if their before-tax income is over the pay period repayment threshold. The Inland Revenue Department will instead treat loan repayment deductions from a borrower’s salary or wages as being correct and final for the pay period although borrowers will be able to get a refund if they have significantly overpaid their pay-period obligation. The result will be a student loan system that is simpler easier for borrowers to understand and to comply with and more cost-effective for the Inland Revenue Department to administer. 
Finally the bill introduces changes to simplify the current penalty rules that apply when borrowers fail to make their loan repayments when they should. These include measures to help prevent penalties for non-payment or underpayment from reaching levels at which borrowers perceive them as an insurmountable barrier to paying off their debt. At the same time of course the bill recognises the importance of borrowers honouring their debt. Consequently a Supplementary Order Paper to the bill serves to strengthen the Commissioner of Inland Revenue’s ability to recall a loan in cases of serious non-compliance. These are the main features of the bill. 
I acknowledge the work of the Finance and Expenditure Committee when it considered the bill and I recall for the House the fact that while the bill was before that committee the Inland Revenue Department identified some measures where the original application dates needed to be delayed until 1 April 2013 to allow more time to implement changes in the Inland Revenue Department’s existing systems. The measures that are affected by this are the new interest and penalty rules that I have just mentioned certain payment priority changes and changes that will move the system away from the tax system’s period-based debt approach to a whole-of-debt approach which is more akin to a mortgage. Although the application dates of some parts of the bill will be delayed the application dates for the proposed changes that benefit borrowers such as the provision of a consolidated view of their loans will remain unchanged. 
As I say I acknowledge the work of the committee in its careful consideration of the proposed reforms and for the flexible approach it has taken to allow amendments to be made in order to help the Inland Revenue Department to implement the necessary changes the bill introduces. The result will be a simpler more effective way for borrowers to self-manage their loan responsibilities and a more efficient cost-effective framework for the Inland Revenue Department to manage its interactions with all borrowers in New Zealand and overseas. Therefore it is with great pleasure that I once more commend this bill to the attention of the House. 
DAVID SHEARER (Labour—Mt Albert) 
: 
 The Labour Party will be supporting the Student Loan Scheme Bill although we are opposed to one element of it which I will get to as I go through my remarks. As this bill went through the Finance and Expenditure Committee I think that it generated a degree of debate—not hostile debate but debate in terms of how we can make our student loan mechanism work much more effectively. As the Minister of Revenue just said making this system less paper-driven and streamlined in terms of the agencies that students go to—bringing those down from two to one—and certainly making it easier for students to be able to repay their loans particularly those students who have gone overseas is all good. 
The average student loan at the moment is nearly $7000 per student and about 587000 students have loans. As Minister Dunne just said about $11 billion in total is designated—curiously—as a Crown asset. I suppose in many ways it is an asset. These people are going through tertiary education which is a right that we are pleased about. 
Amy Adams 
: The debt is an asset. 
DAVID SHEARER 
: Yes I was looking at the word “asset” and using the word in terms of what we have and in terms of investing in our future. That is very important in terms of what New Zealand has been able to do throughout the history of tertiary education which is basically to provide easy access for students to be able to get to university and have that right of a good tertiary education. It is a very high-quality tertiary education. 
But $2.3 billion of that money is money that is currently with students overseas. So this bill which streamlines our ability to be able to help those students overseas to repay their loans is to be welcomed. Treasury estimates that by 2014 something like $22 million will be recoverable through the changes that have occurred as a result of this bill and $22 million is significant. Obviously the sum will accumulate over time as we get the basis of a new system a more streamlined and electronic system in place and one that can be built on and encouraged further after that. 
This is where we come to the issue that the Labour Party is not in support of. The particular aspect is the charging of a fee to students in order to be able to put this system into place. I think that at the moment students are in many ways already heavily burdened with student loans. As we are actually making close to $22 million off the back of the savings that will occur putting a yet further burden on to students of the administration fee in this bill is we believe over the top. Although we are supportive of the bill itself we are not supportive of the proposal in this bill to add an administrative fee for students to enable this system to come into play. The State will take $22 million which will increase over time so that fee I believe is unnecessary. It is a fee of only $40 per student; nevertheless it is a fee that will hit students who are perhaps in a position where they are already financially stretched and ironically it will add to the cost of the loan for people who are already struggling. 
While I am on this topic I will address the broader aspect of what is actually happening to student loans. An extraordinarily important subject for the country is the amount of money that we commit through student loans and the commitment we make as a country to tertiary education. Yet some areas of student loans such as that of people trying to get a student loan have been disadvantaged as a result of the last Budget. I am referring to those students who are over the age of 55 and who are effectively being shut out of obtaining a student loan. That says a couple of things to me. First of all it says that people over 55 have really no value in our education system because they are too old. We know that 55 is the very age at which many older workers look to retrain upskill and move on to other things. We know inevitably that people will be working longer as they continue their working lives and that they will want and need to upskill and retrain as a result of that. It seems highly discriminatory to penalise those people over the age of 55 rather than to support them to go into tertiary education to be able to change to a different pathway and to upskill their qualifications so that they can take part in the workforce and be more productive. Overall our labour productivity is one of the lowest in the world and we want to try to see that we provide every encouragement for workers to be able to move into more productive employment. This bill discriminates against those people over 55. 
The second point I will raise with regard to this legislation is that the over-55s have generally been paying taxes all of their lives but as a result of this bill when those people get to 55 the Government will say “Yes if you’re 18 you can get a student loan and the State will support you but when you get to be over 55 despite the fact that you’ve been contributing to society in most cases you have been excluded.” I think that is grossly unfair. This access to the student loan should be universal; it should not be discriminatory. It should be allowed to continue for those over 55 regardless of the fact that according to the Minister for Tertiary Education these people are considered high risk in terms of the degree to which they pay back their loans. Despite the fact that I have asked the Minister specific questions about the over-55s—in what courses and in what areas have they not been paying back their loans—I have not been able to get that information. It seems that this policy is somewhat like shooting from the hip and is not really thought through but is nevertheless a policy that is targeting and discriminating against those older members of our society who genuinely want to go back retrain relearn and upskill. That is exactly what we are trying to provide certainly on this side of the House through our education policy but in fact it is not the case at all with this bill. 
I just come back to the bill itself. As I said the Labour Party will support this legislation because it streamlines the ability to collect those loans that are outstanding. It provides a better interface for students who have perhaps gone overseas because we can communicate through electronic media. That will replace much of the paper-type aspects that have been the hallmark of the student loan system up till now. It will recoup—according to Treasury figures anyway—$22 million by 2014. In the next 3 years that amount of money will easily pay for what has been put in place in terms of the changes in this legislation. Thank you. 
AMY ADAMS (National—Selwyn) 
: 
 I am going to take just a quick call on the second reading of the Student Loan Scheme Bill. People who are listening at home and who heard the last speaker David Shearer might think that the scope of this bill is considerably wider than it is. In fact it is a reasonably straightforward bill that enjoys wide support. As the Minister of Revenue has said very well in his opening contribution the bill really is about making this part of the tax system simpler easier to understand and easier for taxpayers to comply with their student loan obligations and about making sure we have a tax system that works in the best interests of the stakeholders who use it. This has been an ongoing work programme for the Minister and I commend him for that work across the tax system. 
This bill represents the student loan scheme parts of the tax system. If I remember back—many many years it seems now—when I had a student loan I can certainly attest that one of the most frustrating parts of the process was not being able to get any sort of sense from the Inland Revenue Department about what the loan balance was. It was all compartmentalised into different years and one would be in credit in this year and would have a debit from last year and one could not set the debit off against the credit. It seemed to me even then that it was nonsensical and I wondered why we could not run these systems in more of a simple bank-loan way where one had a consolidated real-time balance that one could access easily and contribute to easily. Finally under the National-led Government and under Minister Dunne we are moving to a system where that sort of common-sense easy-to-use process will come into being. I think student loan borrowers for many years to come will be very grateful that we have that sort of certainty. 
I want to touch on two other matters very briefly. The first is around the pay-period certainty we are providing where the majority of student loan borrowers who are on PAYE for salary and wage payments can have some certainty that when they make their weekly fortnightly or monthly contributions that is the sum total of their obligation. Each pay period if they pay the required amount then they can be certain that their obligations are met and they will not face the risk of getting a bill at the end of the year for some changes in accounting during the year. They will not suddenly find that a bill arrives on their doorstep. As long as each pay period the right figure is paid then they can relax in the certainty that their obligations are met. Again that is the sort of peace-of-mind easy compliance that we certainly want to support. 
The final point is around the changes to the penalty rates and as Minister Dunne noted this is one of the areas where the Finance and Expenditure Committee heard and accepted the fact that the dates will need to be pushed back while there is some work done in the Inland Revenue Department to get its systems in place. But it is a good system we are moving to where we are changing from effectively penalty rates of up to 20 percent per annum on unpaid student loan contributions to rates that are effectively going to be closer to around 10 percent per annum and in fact as low as 8 percent per annum if non-compliant borrowers enter into instalment arrangements with the department. So I think we are certainly getting into a much more usable and supportable penalty regime that will not see these debts spiralling out of all control but still of course have that incentive for the borrowers to repay the debt. 
This is excellent legislation. It is the sort of making-it-easier-to-comply legislation we need to support in this House and I am very happy to commend it to the House. 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 As my colleague David Shearer has indicated Labour is supporting the Student Loan Scheme Bill through Parliament with a number of important caveats. I first acknowledge the reason why in broad principle we are supporting this bill. Obviously student loan issues is important to address. Anything that helps rein in some of the costs that have occurred in respect of some of the non-repayment issues is important to grapple with. A lot of these issues centre on those who graduate and go overseas. They make up a fairly big percentage of those who are not repaying loans and we need to try to bring them into the fold. Treasury has stated that this will bring in around $22 million a year and that is important for the revenue. 
I note a couple of things. One is the change to late-payment penalties which were nudging towards 20 percent under current arrangements. In some respects that is almost at loan shark rates—an issue the Government is finally moving on after Carol Beaumont’s excellent bill last year was rejected by the Government which left many people to pay usurious rates that were inappropriate. Now we are starting to see some action on that issue from the Government. Similarly we have the Government proposing that the interest rate that students pay on late payments should drop back to about half the rate it was down to 10.6 percent or even 8.6 percent if they enter into instalment arrangements. Obviously those repayments will be much easier with the electronic processing that is at the heart of this bill. So that is a step forward. 
I want to speak particularly though on the issue of excluding over-55-year-olds from student loan access. I speak on this issue with some real connection to it as somebody of that particular age. I say to this House that the concept that people will not be able to retrain with some assistance from the State—some hand up—is a nonsense when we consider that in this Parliament we have people in their 60s and even 70s still doing extraordinary dedicated jobs still working extraordinary hours and output rates and showing that people into their 70s are well able to contribute. In fact the whole pattern of commentary emerging is that we need to work longer if we want to have secure retirements. We are hearing that from people like the Retirement Commissioner and others yet here we have a bill that tells anybody that once they get past the magic age of 55—and a magic age it is— 
Aaron Gilmore 
: Refer to the clause that says that Brendon. 
BRENDON BURNS 
: The situation is that over-55-year-olds are excluded from— 
Amy Adams 
: I raise a point of order Mr Speaker. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Yes I know what the member is going to say. The member is going to ask that the member come to what is in the bill. I ask that we just try to bring things together. 
BRENDON BURNS 
: I will move to other commentary on the bill such as student loan eligibility restrictions. I note the commentary from Te Puni Kokiri about the new restrictions stating that this is “at odds with the declared intent of the Tertiary Education Strategy to encourage more Maori and Pasifika students into tertiary education.” I ask members opposite what particular part might it have been commenting on. I also note the Ministry of Pacific Island Affairs’ statement that the “package may result in Pasifika students dropping out of university and going onto the unemployment benefit or shifting to cheaper avenues of study.” What we want to see is people encouraged to take up tertiary study so they can progress from career to career because the reality of life is as some members opposite can testify from their own CVs we can take part in three four or more careers. In that sort of environment we need the capacity to train retrain and get a helping hand from the State to assist us through that part of life and it should not end at a particular point in life. 
This bill is of course replacing the Student Loan Scheme Act of 1992. We are looking at facts that state that the loan balance is currently standing on the Inland Revenue Department’s books at around $11 billion and we have nearly 600000 people in receipt of student loans. I was interested to see in the Finance and Expenditure Committee the average amount borrowed. We have pictures in our minds I think of students borrowing tens and tens of thousands of dollars and not repaying them. In fact that is not the case as we heard from the Inland Revenue Department. The average amount borrowed is actually under $7000 per student and the repayment time for those who left tertiary study in 2006 was around 4.6 years. So the time frames and the amounts borrowed are quite modest but cumulatively we are talking very serious amounts—currently around $11 billion and projected to go to about $15 billion in the next 4 or 5 years. Obviously that issue is at the heart of this bill: the need to allow former students with student loans many of them overseas to tap into payment systems electronically and pay back their debts at a time when often they are earning good money overseas. That is at the heart of the bill and that is why Labour is broadly supporting the passage of this bill through Parliament. 
GARETH HUGHES (Green) 
: 
 Kia ora Mr Assistant Speaker Robertson. Nga mihi nui ki a koutou. Kia ora. It is great to take a call on the Student Loan Scheme Bill—a Government bill going through under urgency. I think student loan issues are urgent and we should be dealing with them but a bill of this nature which essentially is tinkering around the edges is not the type of thing we should be addressing under urgency. 
When we look at the student loan burden across the country we are looking at an amount in excess of $11 billion on the shoulders of more than 560000 Kiwis. This is an urgent crisis and this bill does not address it. My big fear is that this bill will prolong the student loan debt burden on those hundreds of thousands of Kiwis for months and years with only minuscule benefit. 
Student loans since they were first introduced in 1992 have been a massive experiment with our tertiary education sector graduates. A massive $11 billion is currently outstanding and this loan debt is growing at $1 billion a year—a fantastically huge sum at a time when the Government is borrowing such considerable amounts. 
The curious nature of student loans is that in fact they are down on the Government books as an asset. If we look at the Government books which are not in great shape at the moment we wonder what the consequences would be if we took this asset and did something else with it. What it is of course is a massive drag on our economy students and society. 
I acknowledge and thank the submitters to the Finance and Expenditure Committee. I thank the officials and the chair of the select committee. We did not hear a huge number of submissions on this bill because ultimately this bill is pretty small-scale in its intent. Essentially this bill tightens up rules relating to overseas graduates with loans adds administration fees and most critically brings in electronic management of student loans. I cannot believe that in 2011 we are getting around to electronic management of loans. It is amazing that in 2011 we are finally getting to this. It could have been done a long long time ago. 
Peseta Sam Lotu-Iiga 
: Under the Labour Government—yes that’s right. 
GARETH HUGHES 
: The member is correct. A good question to ask Labour members is why this was not progressed sooner in the 9 years Labour was in Government. It makes common sense. Graduates— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: I say to the member on my left and the member on my right that interjections are permitted only when they are directed at the person who is addressing the House. Interjections between each other with members having their own private debate are not in order. 
GARETH HUGHES 
: It is a good example of how students have been failed by both Governments of different hues. The fact is that it is good we are finally getting around to electronic management of student loans. It is amazing that we have waited until 2011 given that the internet has been around for such a long time is such a key tool and will increase the cost-effectiveness and efficiencies of student loan administration by the Government. 
We oppose some parts of the bill and support other parts of the bill. We support the intent of the legislation which is to increase the effectiveness reduce administration costs and in particular introduce electronic management but we are opposed to the imposition of additional fees on students. These are Kiwis in New Zealand. Some of the poorest Kiwis are on student loans; they are effectively beneficiaries. These people are the least able to handle additional fee costs being imposed on them especially in this current economic environment. 
This bill brings in a $60 student loan establishment fee and an annual $40 student loan administration fee. These are substantial figures for people. It might not seem like much to members in this Chamber who have just received a 5 percent tax cut—a tax cut for the rich as it has been called in the public arena. Yet we see this Government putting additional burdens on some of the poorest New Zealanders who are facing rises in GST petrol and other costs of living. We think this bill is bad in that respect. It would have been good to get rid of this part in the select committee. Ultimately we heard from officials that the Inland Revenue Department is investing in updated computer software and infrastructure. So there is no need for additional costs for students to pay. I understand that the administration fees will raise only around $14 million. That is a tiny drop in the bucket compared with what this Government is spending on motorways which is in excess of $19 billion. 
We are opposed to administration fees for students because they add to the burden that students are already struggling under; they add to the repayment time increasing that burden over the course of graduates’ student loan repayment; and lastly they reduce the effectiveness of the voluntary repayment bonus. We think the repayment bonus is a good thing. We think we should be looking for more carrots as opposed to sticks. We support voluntary repayment bonuses. In fact we support writing off a year’s student loan debt for each year the graduates stay in New Zealand. We want to see Kiwis staying in New Zealand especially after they have graduated. We think that carrots are a much better way forward instead of looking at the path of debt collectors or of charging extra fees on the loans. 
Before I get into the substance of the bill and the reasons why we are opposed to the admin fees I make just a quick point that it is good that this bill does not introduce interest on student loans. I am sure the Government benches are looking forward to that announcement if it comes. I hope the National Party does not announce bringing back interest on student loans. It was a shame we had interest on student loans under a Labour Government for so many years and I feel that it should have reduced the interest earlier. Labour waited until 2006. Obviously the issue won the election for them. It was a vastly popular issue. A huge proportion of this country—around one-sixth or 560000 Kiwis—has a student loan. Not having interest on loans has made a significant difference to the burden facing Kiwi graduates. I acknowledge that Labour introduced it and it is good that this bill does not take it away. But I want to hear confirmation from the Government benches that National will not be bringing back interest on student loans. 
The $60 and $40 fees add to the student debt burden. It is not the way we should be going forward. We should be debating how we can decrease student fees and decrease the student loan burden. My big fear is that because interest-free student loans are so popular in this country the Government is trying to apply interest by stealth. The big fear is that these admin fees are interest by stealth. I am sure the Government benches dearly want to bring back interest on student loans. The accusation we heard in the select committee was that the administration fees are interest by stealth. 
The fact is that we already have a good system with a repayment threshold. Once a graduate with a loan starts earning over the threshold 10 percent of their salary is docked automatically to go to the Inland Revenue Department. I imagine I am probably the only member in this Chamber with 10 percent of their salary going directly to the Inland Revenue Department as I slowly but surely pay off my student loan burden. The fact is that we have this system already. The submission by the New Zealand Union of Students’ Associations called this a new tax and said quite rightly that those 560000 students in the community who are worried about taxes and about hearing the tax rhetoric from this Government will be lumped with these new fees and will see them as a tax. 
The fees will increase the repayment time for student loans. If we look at the last student loan report we see that the median repayment time is 6.6 years for someone who graduated in 2004. That is an awfully long time especially for many of these students who are in their early or late 20s and who are thinking about starting a family. This is part of the reason we are seeing such a big demographic shift over the course of the history of the student loan scheme since 1992. People are delaying having families and buying a home—that is if they can live the dream and actually afford a home. With the repayment times we are seeing a gender imbalance. We see females taking longer than males to pay off their student loans. 
We also see this bill reducing the effectiveness of the voluntary repayment bonus. We think that carrots are a good idea as opposed to sticks. We support the voluntary repayment bonus. If a graduate makes a voluntary $500 repayment on their loan they get a $50 bonus from the Government but the fact is that $40 has already gone straight to the Government in these new administration fees—this interest by stealth or as they were described in the select committee these tax increases for the poor. Ultimately the bill will reduce the effectiveness of the voluntary repayment bonus because people will say: “Why bother? I already have to pay these new admin fees. I am just not going to do it.” 
The second part of the bill which I may talk on in other calls is about the pay period. We have some concerns around the changes to the pay period. The changes will disadvantage those hard-working part-time students who earn the bulk of their income over the summer picking fruit working in the freezing works or whatever. The fact is that exemptions are available for those students but I doubt that many students will be either aware of the exemptions or able to access them. There will probably be a lengthy process. It would be good to hear from the Minister of Revenue how once this legislation passes we can make it easier for these students to access these exemptions. 
In summary we support elements of the bill and we oppose other elements of the bill. Ultimately we need a big discussion of what student loans mean in the future and of how we can reduce the student loan debt burden for students. Kia ora. 
Hon Sir ROGER DOUGLAS (ACT) 
: 
 It was interesting to listen to the Green Party representative Gareth Hughes. Essentially he was saying that the $1 billion of subsidies that goes to students is not enough and that it should be more. He was saying that the people I used to represent in Otara Papatoetoe and Manurewa are not paying enough tax to subsidise the rich students who come from Karori and places like that. Let us be very clear what he was saying. He was saying that the Government has already taken $1 billion from taxpayers but that it is not enough. He was saying that he wants to make it $1.1 billion. Guess who is going to pay it? The poor families in Otara Papatoetoe and Manurewa—the people the Green Party guys claim to represent. 
In book-keeping there are two sides of the coin: we cannot spend what we do not take from someone else. The Green Party wants to take money from average hard-working New Zealand families and give it to students so $1 billion is not enough. I have never heard one of the Green Party members saying to that young boy that 18 or 19-year-old who wants to buy a truck and set himself up in the business of carting goods that they will give him a subsidy. No damn way! They will tax him and give it to the affluent. That is what it is all about. 
The Student Loan Scheme Bill is a simple bill. ACT supports it. 
RAHUI KATENE (Maori Party—Te Tai Tonga) 
: 
 Tena koe Mr Assistant Speaker Robertson. It is a pleasure to stand and speak on the Student Loan Scheme Bill. In our family education is a big deal. My husband earned his PhD 2 years ago. He works at Massey University so he is very much into the academic world. It was 25 years ago when I started as a full-time student doing my Bachelor of Arts degree at Waikato University. I then switched after a year to turn my focus to law. Of our five children four are university graduates and they all have student loans to pay off.  
Going back to my situation who would have thought in 1984 when I started out at Waikato University that I would now be turning that study to practical effect and implementing law in these hallowed halls? In those days our concerns were about scaling down Maori. By that I mean that it was the practice to scale down the marks of students learning te reo Maori. There is an article by Jill Bevan-Brown that tells the story of a young man’s marks in Bursary Maori being scaled down from 94 percent to 67 percent. When his mother intervened she was told that the Government could not afford the cost of large numbers of A Bursaries being earned in the Bursary Maori exam. Yet the same degree of scaling down was not applied to other languages such as Russian and French. I tell this story because it is but one issue amongst a history of various blocks and barriers that Maori students have experienced in the transition from secondary to tertiary education. Such a history provides a vital backdrop to the Maori Party’s position on tertiary education and in the specific case of this bill on the student loan scheme.  
The Maori Party believes that tertiary education is a front-end investment in the nation’s future and should be freely available to all. It is from that basis that we seek to increase accessibility to tertiary education to ensure that all people have the chance to pursue tertiary education. So how does the student loan scheme fit into this framework? The Maori Party has tried very hard to ensure that sufficient attention is paid to student loan debt repayments. It has been our position that student loan debt repayments should start only when a student starts earning one and a half times the average wage. We have also recommended that there be a 5-year grace period for repayments after graduation. That is our core position so we have been on the alert to see how this bill which repeals the Student Loan Scheme Act 1992 the current student loan scheme legislation can be seen in that light. 
Significant points of the bill currently before the House are that it will increase the loan establishment fee from $50 to $60 and establish an annual $40 Inland Revenue Department administration fee. These would not seem to be aspects that we can support. Further when we read the submissions we see that the New Zealand University Students’ Association supports the current annual assessment of earnings to determine student loan repayment obligations rather than the proposed shift in the bill to pay-period repayments. 
The New Zealand University Students’ Association is concerned about the proposed move away from a simple annual repayment threshold to a weekly fortnightly or monthly pay-period system and is opposed to any increased obligations that borrowers may therefore face under this legislation. Its argument was one of consistency. A shift to a pay-period system is inconsistent with other tax obligations. PAYE payments are determined on an annual basis with a year-end square-up of income as is child support and Working for Families. Student loan borrowers should not be treated differently particularly if the Inland Revenue Department is supposedly aiming to improve systems and remove complexity for all parties. On this ground it is the view of the Maori Party that the increase in the loan establishment fee and the introduction of an annual Inland Revenue Department administration fee will have a negative impact on students who have student loans. Numerous annual reports from Te Tahuhu o te Matauranga tell us that Maori certificate-level students carry a larger student loan debt 5 years after study reflecting notably lower earnings. Maori with bachelors’ degrees or postgraduate qualifications also have notably higher average leaving loan balances than non-Maori. 
Yet some issues have come up during our discussion on the bill that warrant further investigation. The implementation of the policy and administrative reforms through a new loan management system has proven more complicated than the Inland Revenue Department expected so this bill is a genuine attempt to make implementation easier. The bill extends the exemption for full-time full-year students from having repayment deductions made from their salaries or wages to also include students who undertake the equivalent of a full-time study workload for part of a year students who start to draw down a student loan before their study commences and students who work over short non-study periods or the Christmas period and intended to study after that period. That is a step forward in terms of being prepared to factor some flexibility into the system which we see as positive if we are serious about supporting students to access tertiary education. 
This bill also rewrites the legislation governing the administration of student loans reforming the way student loans are repaid the way borrowers manage their loans and the way loans are to be administered. The changes allow borrowers to manage their loans electronically and allow the Inland Revenue Department to provide more services to borrowers. The students’ own association the New Zealand University Students’ Association has spoken very positively about this aspect of the bill. It sees that the expansion of online services and increased electronic and personal management of outstanding student loan balances will be of great benefit to borrowers generally and will be particularly useful for overseas-based borrowers. The introduction of a new electronic loan management system will enable students to monitor and manage their loans online. From accounts that has been received positively by students. 
One of the dilemmas that parties come to—well parties that have the option of voting on principle rather than just the party line—is that we oppose some parts of the bill such as the increased costs for students but we support other parts such as the incentive to be more effective and particularly to move into the information age. Our vote reflects this dilemma. Kia ora. 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 Malo le soifua. I rise to support the Student Loan Scheme Bill. All of the arguments—all of the logical arguments anyway from members on this side of the House—have been put forward for this bill. It is about reforming the tax system to bring it up to modern times. It is about delivering certainty for taxpayers so that they have the relevant information before them. It is about allowing them to interact directly with the Inland Revenue Department at any time with speed of access and that interaction is primarily online. It is about providing good value for money for our taxpayers in terms of how we go about receiving student loan payments. In doing so it is about building trust and integrity in our tax system allowing us to get higher levels of compliance and higher levels of repayments particularly when loans are interest-free. It is about bringing about change that is beneficial to all New Zealanders. It is about bringing down the costs of administration. It is about speeding up our loan repayments. 
My personal experience having spent a number of years overseas when I had a student loan was that I found it difficult to communicate with the Inland Revenue Department whether I was communicating from England Australia or the United States. The changes we are about to put in place will bring about easier access for those who actually want to pay back the moneys but who find it very difficult to communicate with the Government departments. There is a simple message: the bill is about simplicity for our users making it easier for them to comply with their requirements under their student loan contracts and easier for our bureaucrats to administer such a system. 
Before I conclude I raise one point about student loans. There seems to be some uncertainty from the benches across the other side of House about why student loan recipients are an asset. They are debtors. Student loan recipients are people who owe money to the State. That is why they are an asset and that is why in order to facilitate the repayment of debts it is important for us as a Government as it is for any prudent organisation to put in place systems that will facilitate repayments in a more effective and a more efficient way. That is why we are bringing about these changes. 
It was a pleasure to sit on the Finance and Expenditure Committee. I thank those officials and submitters who participated in the process and I thank fellow committee members. Finally I salute the Minister of Revenue for the changes he has put in place in this area. These changes are long overdue. They certainly did not happen under the Labour Government but they are happening under this hard-working National Government. 
GRANT ROBERTSON (Labour—Wellington Central) 
: 
 It is a pleasure to rise to speak on the Student Loan Scheme Bill. As other Labour speakers have indicated we are supporting this bill albeit with some concerns about a couple of matters which I will go into in a moment. First I will respond to some of the comments made during the debate. I start with my colleague Gareth Hughes from the Green Party. I want to make clear that we on Labour’s side of the House are very proud of the changes Labour made to the student loan scheme when we were in office. 
When I was a borrower in the student loan scheme we were charged interest on our borrowings while we were studying—while we had absolutely no means of being able to pay it back. It created this phenomenon called flat-spotting which means that people could earn and earn and earn money but the interest would keep going up and they could not pay it off. Labour made sure that we removed interest on student loans while people were studying. Then we moved on to remove interest completely from student loans. I am proud of that. I am proud that that achievement has made it much easier for people to pay off their loans. It has worked in trying to keep graduates in New Zealand. That was actually the purpose of the change: to incentivise people to stay in New Zealand because interest is still charged when a borrower is overseas. 
We also made tertiary education more affordable generally. We introduced the fee maxima policy. I sat on a university council in New Zealand in the mid-1990s. In 1 year fees went up by 18 percent and the next year fees went up by 15 percent. That made it really difficult for people to afford tertiary education. When Labour came into office we introduced the fee maxima policy which meant that institutions could not put up their fees by more than 5 percent per year. That demonstrably helped students by keeping the cost of their education down. We also extended eligibility to student allowances which meant that fewer people were borrowing from the student loan scheme. That was very important to the academic success and welfare of many students. So I say to Mr Hughes that although he may have ideals for further changes to the way tertiary education is funded—and I too want to see it become more affordable—I think the Labour Government’s record on tertiary education in its last term of office is something to be proud of. 
In terms of Sir Roger Douglas we heard a familiar speech from him. My only response to it is that the reason why I support investing in tertiary education is so that the children of the truck driver from Otara can have a tertiary education. Why should we limit their opportunities? We need to invest in tertiary education so that everybody has the chance to improve themselves no matter where they come from. Tertiary education in my mind—and I know that Sir Roger will disagree with this—is a public good for the most part. In the mid-1990s the Todd task force which looked into tertiary education tried to come up with a balance between the public and the private good in tertiary education. The truth is that there is not a scientific formula for that but the reality is that we all benefit from tertiary education because we benefit from having people with skills who can then go on to be part of our productive economy. It is an investment in all of our futures. It is especially an investment in the future of someone who comes from a background where they may not have the resources themselves to pay for tertiary education. I think we should have the ambition for the people from Otara to be able to be part of the tertiary education system which is why we need to invest in it rather than trying to see it portrayed as some kind of middle-class benefit. 
I will now return to the bill itself and say as other speakers have said— 
Chris Hipkins 
: Return to it? 
GRANT ROBERTSON 
: I say to Mr Hipkins that I was responding to comments in the debate. I will now return to the bill itself and say as other speakers have said that there are some good elements in this bill. I particularly support the idea of a more electronic-based system for the loan scheme. As I said in the first reading debate when I was looking at some of the forms being used for student loan borrowers when a constituent visited me in my office with a problem with their loan I recognised the forms as ones that I had been part of designing as a student politician in the mid-1990s. So there is absolutely no doubt that the time has come to update the systems. 
As Mr Lotu-Iiga said an electronic system will be very helpful for people overseas and we want people who are overseas to be able to pay back their loans and to interact with the Inland Revenue Department in a sensible way. I have one issue around the electronic system which is the question of how it interacts with the redesign of the computer system at the Inland Revenue Department. It is quite clear that historically Government agencies have struggled with large computer projects. Need I mention INCIS—the integrated national crime information system—to the House? As we go through this debate and in the Committee stage I have a number of questions for the Minister around the interaction between these changes to make electronic payments easier and the overall change of the Inland Revenue Department’s computer system. But overall that is a very good aspect of the bill and it is certainly one that we can support because it will help borrowers manage their loans and help with consistency of treatment between different borrowers. That change is important to make. 
The two areas I want to speak about in the remainder of this call—and I will certainly come back to them in the Committee stage—are the administration fee changes and the changes to the pay period assessments. It is difficult to understand exactly what the Government is doing with the administration fee. We have an increase to $60 for the fee for students drawing down a new loan and a charge of $40 for borrowings. A new charge is being introduced here. 
Chris Hipkins 
: Full of interest. 
GRANT ROBERTSON 
: Well that is the question I say to Mr Hipkins because when we look at the actual costs in front of us we need to ask whether any new increase in costs would justify a change. According to the regulatory impact statement there will not be any new cost. In fact the new computer system should save money in the long run subject to the questions that we will ask the Minister of Revenue. So money will be saved. The whole thing should lead to quicker repayments of loans so there is no additional cost there. We have to ask ourselves why a new fee is being introduced when the costs of running the scheme look like they might be going down as a result of this bill. 
The conclusion that has to be drawn here is that the National Government has been desperate to reintroduce interest to student loans. This was the policy that John Key said he would oppose with every bone in his body and now we have a new fee being introduced. It does look like the reintroduction of interest by stealth on student loans. That is what this new fee looks like. There is no actual justification for putting it in place. When we get to the Committee stage of the bill we will certainly want to ask questions about how justifiable this new fee being introduced under this bill will be. We do not believe that it is justifiable; we believe that in fact it is the introduction of interest by stealth by a Government that wants to reintroduce interest. John Key and Steven Joyce have both gone as close as they can to saying that they would like to reintroduce interest on student loans but they know that politically they cannot say so. So by stealth we have a new $40 fee being introduced here for borrowers. I believe that it is the equivalent of interest. Although we support the positive changes around the electronic system we do not support the introduction of that fee. 
The other matter as I have said is the question of the repayment period. I acknowledge the work the Finance and Expenditure Committee has done on this matter. A number of concerns were raised both in the first reading debate and then by submitters about the fact that this change would be penalising students particularly those who work intensively in holiday periods so that they do not have to work while they are studying. If they were to earn more than $367 a week in one of those holiday periods for instance under the bill as introduced they would be forced to make repayments on that. That would be unfair because that is the money they would be saving to be able to use during their study period. 
I acknowledge that there have been changes to the bill particularly to clause 48 that I think will largely deal with that concern and there are changes to clauses 73 to 89 that also deal with this matter. But when the Minister is in the chair in the Committee stage I would like to ask him some questions because I was not on the select committee. I would like to ask some questions during the Committee stage as to whether we have dealt with the question of making sure that those people who work intensively in their holiday periods will not be penalised under this law by moving from an annual pay assessment to a pay period assessment. I think that is important because we do not want students working undue hours during their study period; we want them to be able to focus on their study. In the commentary on the bill I think there is a statement about not wanting people to borrow unnecessarily either. That is a different way of looking at it. I think the select committee has made some good changes that will allay a lot of the concerns that we on this side of the House have about the way in which the assessment is changing from an annual assessment to a pay period assessment. But there are still questions to be answered to make sure that students are not unfairly penalised. 
Overall we support this bill but we do have concerns around the administration fee and the repayment period and we will be raising those in the Committee stage. 
DAVID BENNETT (National—Hamilton East) 
: 
 I will take a short call on the Student Loan Scheme Bill. This bill will have the support of at least the two main parties in the House. It is part of the wider reform of the student loan scheme in which I think everybody sees merit to make it easier for students to be able to deliver their part of the bargain in repayment. It is changing some of the requirements of the student loan scheme but keeping intact the main element of the scheme the interest-free student loans which this Government has committed to retaining and has done so. Students around the country no doubt are very grateful for that in these very tough economic times. 
Aaron Gilmore 
: What about the students in Hamilton? 
DAVID BENNETT 
: Yes students in Hamilton are especially grateful for that. I think it has been a big sacrifice for this country to make sure that we can deliver that and I think it is a tribute to the Government that it has been able to deliver that in these most difficult of times. 
The student loan scheme is enhanced by this bill. We look forward to more students being able to take advantage of educational opportunities in the future through our reforms in the education sector so that we can lift our economic performance even higher. Thank you. 
DARIEN FENTON (Labour) 
: 
 It is a pleasure to take a call in the second reading of the Student Loan Scheme Bill. As my colleagues have said Labour supports this bill albeit with some reservations. It has been very interesting listening to the debate and I think the Committee stage will be very interesting. There are certainly a couple of questions that we want addressed. 
It has also been interesting listening to people reminisce about their university days. I come from a generation who did not have student loans and student fees. I was not the best of students. I studied in the 1970s when it was quite fashionable to drop out. I hate to admit the fact that taxpayers paid for me to go to university and I did not complete my studies though I did go on later to do trade union and labour studies with my colleague Sue Moroney. I did not need a student loan for that study because my union paid for me to do it. So I have never had to experience a student loan. I am very grateful to former generations for allowing me to do that initial study which I do not think was completely wasted but also to complete studying later on. However my son has experienced a student loan. He has just returned from San Francisco this week on a temporary visit and he will be very interested in how much easier it will be for him to communicate with the Inland Revenue Department and to make his repayments. 
One of the things we hope for from this bill and the changes it will make is that it will make it more likely that some of the former students who are overseas will be able to repay their debts and bring their skills back home to New Zealand. Unfortunately I think an awful lot more than just student loans is keeping our best and brightest overseas. We know that it is to do with the low wages in New Zealand and the fact that we have a huge gap between here and Australia for example. Opportunities for jobs are so much better in many other countries. 
The purpose of this bill is to amend the student loan administration system to an electronic format. That seems very sensible. The purpose is to make it easier for borrowers to communicate with the Inland Revenue Department wherever they are. As the Green member Gareth Hughes said it is interesting that it has taken a while for the Inland Revenue Department to get student loan administration on to an electronic system. I understand that the student loan scheme as it is currently administered is pretty unwieldy is expensive to maintain and has limited ability to accommodate further changes. It is good to see the system moving to the modern era and to see the Inland Revenue Department being able to move student loans to a system that is much easier for students who have borrowed money. The repayment method is also being simplified to avoid the end-of-year square-ups for most borrowers and late repayment penalties are being simplified and eased. 
As I have said already Labour supports this bill as we believe that it will improve debt repayments. Student loan debt is a major factor driving graduates overseas and as I have said already it is one reason they do not come home. We want them to come home and bring back their skills so if this bill helps we welcome that. However we do have a couple of concerns which will be outlined in my contribution and also in the Committee stage. 
The student loan debt held by overseas graduates is a real problem. It is something we have to address. To this end we particularly support the changes in the bill to late payment penalties from a total of 19.56 percent interest per year to just 10.6 percent or 8.6 percent if the student enters into instalment arrangements. Treasury expects these changes to increase student loan receipts by up to $22 million a year by 2014. That is a positive step forward but we do have to ask why then we need to have an increase in the student loan establishment fee from $50 to $60. As other speakers have said this is an attempt to introduce interest by stealth. It seems completely unnecessary when this bill will actually improve repayments. We need to understand and we will be asking questions about why this is necessary and why the Government thinks it has to reintroduce interest by stealth. It will add an extra financial burden on those who are already struggling to pay their bills and who have incurred substantial debts as a result of their studying. 
Similarly another concern we have is that it appears unfair that a borrower who due to the new pay period deduction system unintentionally makes excess repayments of over $500 in a year is not able to apply for the 10 percent excess repayment bonus at the end of the year. It appears that the Government has not really fully thought out the impacts of this simplification plan. Perhaps a simpler and fairer way of dealing with it is to say that no student has to repay debt while they are participating in full-time study. 
This bill does take a positive approach to managing student loan debt but I have to say that there will be tens of thousands of students to whom this bill does not apply. I cannot help but reflect on that in my contribution. At a time when we should be investing in tertiary education for all we are seeing caps cuts and a dampening of demand for all tertiary education. 
Carmel Sepuloni 
: All we’re seeing is food stamps. 
DARIEN FENTON 
: All we are seeing is food stamps. That is all we are seeing. Yes that is right. But I am also very very concerned about the exclusion of 55-year-olds from loan access. It sends the message to older people that there is no point in them reskilling and no point in adult education. Of course that does not apply in this bill. These people are excluded from this bill which makes this whole policy pretty questionable. A policy that excludes over-55-year-olds is very short-sighted punitive and harsh. We are in a country with an ageing workforce. We are told repeatedly that people will have to change their jobs many times during their lifetime. They will have to reskill as things change. We know that the jobs we are training our younger students to do today do not yet exist. Yet here we are telling older people that they are on the scrap heap and not worthy of adult education. I think that is really unfair. 
We are also concerned about the removal of the fee maxima— 
Amy Adams 
: Also not in this bill. 
DARIEN FENTON 
: That is not in this bill of course but it is one of the things we are very concerned about. —and replacement with an annual fee movement limit. National members can go on and on about the delights of this bill—and I really loved David Bennett’s contribution; he was talking— 
Grant Robertson 
: I missed it. 
DARIEN FENTON 
: Oh Mr Robertson missed it. It was all about what a wonderful job this Government is doing on student loans and how students all around the country will be thanking this Government and be very very grateful to it. They are not grateful; they are very very concerned about some of the policies of this Government and the things it is doing like the removal of the fee maxima. 
As I said at the beginning Labour does support this bill. We have some concerns about a couple of questions which we will be asking during the Committee stage. I have a final word for Sir Roger Douglas. His contributions on these things are always eminently predictable. It is a long time since he represented the people of Otara. The people of Otara want their children to study and they want them to do well. Those children are as entitled as anybody else in the country to have decent and affordable study. If Sir Roger talked to any of the Pacific families in Otara he would find that out. They are ambitious for their children. They do not deserve to be treated or talked about in any way that is different from anybody else in this country. Those children are our future and we need to look after them. 
AARON GILMORE (National) 
: 
 It is a pleasure to stand and support the Student Loan Scheme Bill. I will start off by referring to the comments of the previous speaker Darien Fenton on the speech by Sir Roger Douglas. I actually agree with nearly everything Sir Roger said. He pointed out that in many situations one of the problems with the student loan system is the ability of those poor people out there to go into tertiary education. I grew up in a State house and no one paid for my education. But Darien Fenton claims that $100 a year will put people off getting a student loan and that they will not go into tertiary education. That will not happen. It will mean that the butcher in Otara and the factory worker in Aranui will not pay for the lawyer in Fendalton. I think that is a good thing as does this John Key - led Government. You see this bill is all about simplifying the student loan system to make it easier for those people to pay and to keep tabs on how much they owe and how much they are paying back and I think that is a good thing. 
In the first reading of the bill I spoke about my personal experiences of having a $12000 student loan. With paper-based systems it took months to send records back and forth and this sort of legislation removes that. Many of my friends now live overseas. I think only three out of the 14 people who were in my graduating class at university are still in New Zealand. Those people have all paid back their student loans but they all spoke of their experiences of paying back their student loans in terms of the annoyance involved in sending paper-based records back and forth from their home addresses. That caused a lot of problems for them and this bill will go towards solving that. 
No one has spoken on Supplementary Order Paper 200 which amends this bill. Given that it came in after the first reading I think that it is beholden on us to quickly touch on it. I think the Supplementary Order Paper is a very good one. It was brought forward by the Minister of Revenue. The Supplementary Order Paper means that the loans of those people who do not operate within the rules of the student loan scheme can be recalled. There have been some instances of this particularly with regard to those overseas borrowers who exit New Zealand with no intention of ever paying back their loan or of operating within the rules of the student loan scheme. The Supplementary Order Paper that has been introduced strengthens the power of the revenue authority to recall those loans. Those people will have to pay back their loans and that is a good step in the right direction. 
Finally we look forward to passing this bill hopefully in the next few days and in years to come we will look back and see that the National John Key - led Government will have spent more money on tertiary education than any other Government before it. We will see that the administration fee that we are putting in place will do only one thing: it will change the incentives so that people will help pay towards the cost of administrating their student loans. That will be a fairer scheme than the one we have today. Thank you. 
A party vote was called for on the question  
That the Student Loan Scheme Bill be agreed to. 
Ayes 110 
New Zealand National 57; New Zealand Labour 42; ACT New Zealand 5; Maori Party 4; Progressive 1; United Future 1. 
Noes 10 
Green Party 9; Independent: Carter C. 
Bill read a second time. 
In Committee 
Part 1 Preliminary matters loan advances and New Zealand-based and overseas-based borrowers 
The CHAIRPERSON (H V Ross Robertson) 
: The debate on clauses 3 to 24 includes schedule 1. 
CHRIS HIPKINS (Labour—Rimutaka) 
: 
 I look forward to a full debate on the Student Loan Scheme Bill a bill that Labour is supporting but with reservations. This part deals with the purpose of the bill and I could probably begin my comments there. I will talk primarily in this contribution about the move to an electronic system for administrating student loans but talking in more general terms about the purpose of what this Act—which the bill will become—is designed to do clause 3 states that it is to: “(a) provide for the effective administration of student loans; and (b) provide for the collection of student loan repayments; and (c) provide transparency about student loans so that borrowers understand their obligations for those loans; and (d) encourage borrowers to repay their student loans at the earliest possible time.” Those are all good things and those are all things that Labour supports and agrees with. 
It would be fair to say that the student loan scheme at the moment is radically different from the student loan scheme that was introduced in the early 1990s and one that has been in need of refinement for some time. I have spoken in previous debates on the loan scheme about the difficulties that I personally had as a student loan borrower in making sure that my loan was repaid and that I ended up with a zero balance. Getting accurate information about a student loan balance at any given time can be incredibly difficult. It is probably the most difficult for students who are still studying because in the first year that their loan is drawn down it is administered by Work and Income or StudyLink and then in subsequent years by the Inland Revenue Department. At the end of the year their loan balance is transferred from StudyLink to the Inland Revenue Department which means that if they are in the second third or fourth year of study they effectively have two loans one with the Inland Revenue Department and one with StudyLink. It has always been a challenge for people to get accurate information about their loan balance at any given time. 
What this bill does—and we are definitely in support of this—is allow for real-time transfer of information between those two administrators if you like of the student loan scheme so that at any one point in time students or borrowers will be able to log in and get accurate up-to-date information about their loan balance. That is important. It is useful. It is what we can do with all of our banking now. We can log in and check our bank balances and credit card statements without any difficulty so why we cannot do the same with student loans has I guess been a point of contention. I think that all student loan borrowers will definitely welcome this measure. 
However some pitfalls still need to be worked through. With regard to the calculation of interest payments and interest write-offs the difficulty that I constantly hear about from people is that mistakes are made in interest calculations either on their part or on the part of the Inland Revenue Department and in getting accurate information about exactly how much they need to repay. This generally tends to happen when borrowers get towards the end of the repayment of their student loan. They might get to the point where they have only a few hundred dollars left to pay so they will cancel the salary deductions from their salaries because they know that their salary deductions will potentially be more than the amount that they have to pay. They will go ahead and do that. They will then try to get from the Inland Revenue Department an accurate account of how much they have to pay and they will make that payment. However it can then turn out that they have underpaid or overpaid depending on the interest calculations that were made so they could end up getting a refund or getting a bill asking for more money. 
I hope that at some point in time we can get to a system where for instance if I want to finish paying off my loan and get a zero balance as of today I will know that this is the amount I have to pay or the amount that I am being refunded and that we do not have this process where once borrowers think they have made their final payment they have to wait a long period of time before they get to find out whether the final payment has been made. 
Aaron Gilmore 
: We agree on something Chris. We agree on that. 
CHRIS HIPKINS 
: I am pleased to see that National members agree on that because that has been a nightmare for people. The other thing that has been a nightmare is that the Inland Revenue Department’s administration of the scheme using its paper-based system has a few quirks in it at the moment. I finally got to the zero balance point with my loan after a year. It took a whole year to get from being near the final repayment to actually getting the zero loan balance with a bit of backwards and forwards with the Inland Revenue Department. Then for about 3 years after that every year the Inland Revenue Department sent me a statement saying that I had a zero balance on my student loan because its paper-based system had not quite kept up with the fact that I had actually managed to pay off my loan. That is something that I get from the Inland Revenue Department all the time. I am surprised that it did not add the cost of the postage to my loan balance and then send me a bill for it because ultimately the taxpayer was paying for these loan statements to be sent out to me long after my loan had been repaid. In the move to this new electronic system we are putting in place with this bill I hope that all of that can be avoided that the system will be a lot more efficient and that once someone has repaid his or her loan it will be finished. I think that members on this side of the House will be very supportive of that. 
My colleagues have raised concerns in their second reading speeches about the fee for the establishment of a student loan being increased from $50 to $60 and I certainly concur with them on that. One could ask why we have to increase the amount of money that a borrower will have to pay in order to have a loan in the first place if the student loan scheme is to be more efficiently administrated. Is this a back-door way of increasing the costs to the borrower when the costs to the borrower should actually be decreasing? My argument is that if this bill results in more efficient administration of the loan scheme the savings from that should be passed on to the borrower. To do anything less than that in my view would effectively resemble a broken promise by National. National promised that it would keep interest-free student loans. Of course it made some other promises about making it easier for people to repay their loans faster. If this bill increases the efficiency of the scheme but National does not pass on the benefits of that to borrowers I think that really is a breach of the good faith that many loan borrowers showed towards National by mistakenly voting for it. We can forgive them for that. But in time I think I would like to see those savings passed on. 
We have already seen from this National Government the introduction of an annual fee for student loan borrowers. In my view an annual fee is a form of interest because even if somebody does nothing other than make the minimum repayments required to just keep it ticking over they are now charged an annual fee. In my view that is a form of interest. Labour is definitely opposed to the increase of the establishment fee and we were opposed to the introduction of the annual fee. I will deal more with the repayment provisions in my contribution on the next part of the bill. 
I will return to the purpose of the bill which is around the efficient administration of the student loan scheme and greater transparency around student loans. I think we on this side of the Chamber will certainly welcome that. As I have said before it has been a bit of a black box for loan borrowers trying to figure out exactly how much they owe and trying to get to the bottom of how much they would need to pay if they wanted to repay their loan in full. I think this bill potentially helps that situation quite considerably and we certainly welcome it. 
I could talk a little bit about some of the definitions set out in clause 4 such as the “annual repayment threshold”. It is established as being $19084 a year before the compulsory repayments kick in. That is not an awful lot of money. We have seen under this Government that that figure has not been adjusted in the sense that we might have hoped. It probably would have been under a Labour Government. People on very low incomes of only $19000 a year have to make repayments on their student loans and I think we may want to consider that situation in this current economic climate. I think everybody who borrows knows that they need to make their repayments. 
Amy Adams 
: Are you still talking Chris? Heavens above! Haven’t you finished talking yet? 
CHRIS HIPKINS 
: I say to Amy Adams that we are all earning $130000-plus a year. That might not seem like a lot of money to us in this House but for people earning $19000 a year who are making repayments on a student loan on top of the tax they have to pay—on top of the tax they have to pay—it is a considerable amount of money. 
Amy Adams 
: Talk about the bill. 
CHRIS HIPKINS 
: OK. Clause 4(1) contains the definition of “annual repayment threshold” I say for the member who does not seem to be aware of what is in the bill we are debating. 
Amy Adams 
: What’s the change to it Chris? What’s the change? 
CHRIS HIPKINS 
: I do not know. What has changed? It is in the bill; therefore it can be debated. The excitable Ms Adams I am sure will take the next call to talk about that. What has changed? The threshold has not changed which is the problem because it should have been. 
GRANT ROBERTSON (Labour—Wellington Central) 
: 
 I will talk about two specific elements of Part 1 of the Student Loan Scheme Bill. I have a question for the Minister in the chair the Minister of Revenue in relation to the first of those elements. Essentially a large part of what Part 1 does is increase the obligations on borrowers to do certain things. They are actually things that I support. For instance if someone is going to be away from New Zealand they have an obligation to tell the Commissioner of Inland Revenue where they are going to be how to contact them and how they can work on the loan scheme with the Inland Revenue Department. That is not necessarily a bad thing. In fact I think it is quite useful. 
Clause 14 is an example of a provision relating to changes to residency. But in particular I ask the Minister about clause 23 which is about the question of notifying the commissioner of absence from New Zealand of 184 or more days. The language here has changed. It very much talks about what a borrower must do. That is important. 
One of my concerns over a period of time has been the awareness of borrowers of their obligations when they leave the country. As somebody with a background in working on these issues both as a student politician working for a university and now as a constituency MP I ask the Minister about the intent around advertising of obligations. Will any more work be done to ensure that borrowers who leave New Zealand actually know what their obligations are? I agree regardless of whatever concerns I might have about the cost of tertiary education or the amount of debt that students have that once a borrower leaves New Zealand we want to make sure that that borrower is aware of their obligations and is meeting their obligations. It is not fair for someone to leave New Zealand disappear off the radar screen and not have to make repayments when somebody who stays in New Zealand and works hard is making those repayments. I would like to hear from the Minister about what is envisaged in terms of new ways of letting people know about their obligations which have been enhanced. There are already obligations—I acknowledge that—but this bill enhances those obligations and I think it is important that borrowers are made aware of them. I would like the Minister to let us know what happens there. 
I congratulate the Minister and the Finance and Expenditure Committee on the way in which some changes have been made not just in this bill but previously as well around the treatment of borrowers who are not in New Zealand but for the purposes of the law are treated as if they are—in particular people who work for the Government of New Zealand overseas which has always been the case. But the question of their partners is an important one and I think that is really useful. It is important to say today that if somebody is working overseas in the service of New Zealand is undertaking postgraduate study overseas or is undertaking voluntary work—and in schedule 1 there is now an explanation of what constitutes acceptable voluntary work for the purposes of this bill—for all of those people it is now possible for their partners to be treated as if they are in New Zealand. I think that is a very good thing. It is important that when people are overseas in the service of New Zealand they do not have to worry about things like interest on student loans. Clause 20 deals with that in particular as does schedule 1. Both of those are very good things. That is my question to the Minister around the advertising of borrowers’ obligations. 
The only other point I really want to make on Part 1 is about clause 10D “Student loan establishment fee”. As I said in my contribution to the second reading we are looking at a situation now where we are told in the regulatory impact statement that there will not be additional costs on the Inland Revenue Department. We are told that the computer system that the department is bringing in will in fact reduce costs. We are told that the electronic arrangements for borrowers to communicate with the department will in fact reduce costs. Yet in clause 10D the establishment fee for students goes up from $50 to $60. Later in Part 5 we will come to the new $40 management fee. So we are actually talking about a $50 increase in total in costs to borrowers on an annual basis. That seems to me to be a pretty big cost increase relative to a system that we are told will actually reduce the cost to the Government. 
That is why we on this side of the House are suspicious of this change as essentially being a revenue grab by the Government. We think that this looks like the reintroduction of interest by stealth. It looks to us as if a Government that wanted to bring in interest on student loans— 
Chris Tremain 
: Well why are you voting for it then? 
GRANT ROBERTSON 
: I say to Mr Tremain that as an Opposition we will vote for things that are good and useful like the electronic management— 
Chris Tremain 
: You just said that it looked like we’re introducing interest. 
GRANT ROBERTSON 
: Clearly Mr Tremain has not been listening to the second reading debate or to the Committee stage. Labour is supporting this bill because it brings in important changes around electronic management of student loans but just because we are supporting the overall intent of the bill that does not mean we have to support every single clause. Mr Tremain might like to take a call on clause 10D and tell us why the administration fee is going up to 60 bucks. Then when we get to Part 5 he might like to take a call on why a new fee of $40 is being introduced at a time when we are told the loan scheme itself will become more affordable to the Government because of the other changes in the bill that we do support. 
It really does look like the introduction of interest by stealth because this is a National Government that will not go through on what it said earlier: that it wanted to reintroduce interest to the student loan scheme. Mr Finlayson wants to introduce interest to the student loan scheme; I know that. Lots of members on the other side of the Chamber do but they have decided for political reasons that they are not going to so something has been brought in by the back door to increase the establishment fee to $60 and Part 5 will bring in the new fee of $40. Members on this side of the Chamber have real concerns about that. 
Although there are some very good elements to Part 1 in this bill clause 10D is one that members on this side of the Chamber find very difficult to support because it looks like it is the National Government trying to reintroduce interest by stealth. 
IAIN LEES-GALLOWAY (Labour—Palmerston North) 
: 
 I will pick up from where Grant Robertson left off on clause 10D of the Student Loan Scheme Bill. I think calling that aspect of the bill interest by stealth is rather charitable to the Minister in the chair the Minister of Revenue. Let us be honest: this is a flat fee regardless of how large a person’s student loan is and regardless of what their income is. When we get that type of tax the name for it is “poll tax”. That is what that fee is: it is a poll tax on graduates and students. I think “interest by stealth” is one name for it but frankly that is rather charitable. Let us call it what it is. 
That is not really what I wanted to focus on. I will go back to the purposes of the legislation. Clause 3 states: “The purposes of this Act are to—(a) provide for the effective administration of student loans; and (b) provide for the collection of student loan repayments;”. I have a question for the Minister because I have an example of a bizarre set of circumstances that happened to me in relation to my student loan and I wonder how often this happens. 
I completed repayments on my student loan earlier this year. 
Hon Member 
: Well done! 
IAIN LEES-GALLOWAY 
: Yes it was a day to celebrate it has to be said. I checked with the Inland Revenue Department I got the repayment balance and I even got a letter from the Inland Revenue Department saying that my balance was zero. I had completely paid off my student loan. Strangely enough only a few weeks ago I got a letter from the Inland Revenue Department informing me that I had to change my tax code back to MSL as did the payroll here at Parliament and I started making compulsory repayments of my student loan. I am now $500 in credit. The Inland Revenue Department now owes me $500 in overpayments on my student loan. I would hardly call that the effective administration of the collection of repayments by the Inland Revenue Department. 
Grant Robertson 
: Get Peter Dunne to write you a cheque. 
IAIN LEES-GALLOWAY 
: I do not expect a cheque from Peter Dunne. I have been reliably informed by the lovely person I spoke to at the Inland Revenue Department when I finally got through—the person to whom I spoke was fantastic—that I would have that money back by October. So I am very pleased that I will be able to get that back. 
I have a question for the Minister about how often people who have organised themselves to make sure they have made the exact repayment required and have faithfully and dutifully made the repayments that they need to make and are required to make by law then find that through some error by the Inland Revenue Department they have to overpay. The Inland Revenue Department then has to make a payment back to that person due to the ineffective administration of student loans. Given that that is one of the main purposes of this bill I would be very interested to hear from the Minister how often that happens and whether he has any plans to rectify that situation. 
GARETH HUGHES (Green) 
: 
 Kia ora Mr Chairman. He mihi nui ki a koutou. Kia ora. It is great to take a call in the Committee stage of the Student Loan Scheme Bill. I will not harp on about the use of urgency to pass this law but I just want to note that a wide discussion is happening online by people asking why Parliament is under urgency to pass this law and other laws on the Order Paper. People are baffled because they do not see the urgency in this. What it does is reduce the public’s perception of the use of urgency in Parliament. I just wanted to note that before I start. 
I will take a look at three parts of Part 1 of this bill: clauses 10D 4(1)(a) and 21. But first I acknowledge the debate of Chris Hipkins who is no longer in the Chamber. Chris Hipkins was the student president when I first studied as an undergraduate at Victoria University. We have had a robust discussion with Labour members about what they did and did not do when they had the opportunity when Labour was in Government. I quite rightly remember the member Chris Hipkins when he was the student president vocally opposing the Labour Government for not acting fast enough on student loans. But I will not harp on about that point either. I acknowledge that the Labour Government did take interest off student loans— 
The CHAIRPERSON (Lindsay Tisch) 
: I am sorry to interrupt the honourable member. The time has come for me to leave the Chair for the State farewell for His Excellency the Governor-General. In accordance with that decision of the House yesterday the Committee is temporarily suspended. The Speaker will resume the Chair at the ringing of the bells. 
Debate suspended. 
Sitting suspended from 11.45 a.m. to 2.20 p.m. 
House resumed.