Hide Rodney: General Debate 
Hide Rodney: General Debate 
[Volume:627;Page:22059] 
RODNEY HIDE (Leader—ACT) 
: 
 The student debt problem about which voters—parents students and graduates—care so deeply is largely a result of Labour Party policy. It was Labour that came into office in 1999 saying to students: “We’ll give you free money and we’ll tax you hard when you graduate.” And what happened? Well students are not stupid—they are the brightest young people in New Zealand—so they borrowed more and students who would not have borrowed borrowed. 
Jill Pettis 
: That’s not true. 
RODNEY HIDE 
: It is true and Jill Pettis can read it in the official report to this Government by the administrators of the student loan scheme. They said that the number of students borrowing went up by 10 percent and the average amount they borrowed was an extra 23 percent. They went on to say in that report that that was a consequence of the free money policy of the Labour Party and now what has happened is that a few years down the track students are graduating with more debt than they would ever have had otherwise. [ 
Interruption 
] 
Jill Pettis can say that that is not true. She can deny the facts. She can also stand up in this House I guess and say that students are so stupid that they do not respond to incentives. But she will be totally at variance with what is happening in New Zealand if she does. 
This just shows how desperate Labour is. Its first response by Trevor Mallard was to launch an attack on Don Brash talking about Washington—completely made up. Then the National Party came along with an election bribe saying to graduates that it would make their interest tax-deductible. That is what it said. What National should have done was to do what the ACT policy is—to get the tax down for graduates so they can pay off their loans not make it cheaper to maintain loans. 
What was Labour’s response? The very Government that earlier said there is no money for tax cuts—none whatsoever—and that any tax cut will mean more borrowing within days came up with a $300 million bribe to graduates and told them they will not pay any interest. If one is starting out as a student why would one not borrow the maximum amount of money for as long as possible and why would a student voluntarily pay off any debt upon graduation? It is free money. 
Let us think about what that bribe will cost. Yes there will be $300 million in interest according to the Government. But more students will be borrowing. They will be borrowing more and when they graduate they will have no incentive to pay off their loans other than at the minimum rate. The estimate of the extra cost of that capital is $1.8 billion a year. There will be $300 million in lost interest and an extra $1.8 billion going on to the sum of student debt. Bill English is quite right when he says that student debt will go through the roof. Rather than cutting down the debt this Government is putting it up. 
So what is the solution? This is what should be done. We should take the surplus this Government has and return it to New Zealanders. The Government should return the surplus to New Zealanders. If that were done the top rate of tax would come down to 25c and that middle rate of 21c would come down to 15c. On average $40 a week would be put into every working person’s pocket and graduates could pay off their debt twice as fast. 
Here is the good news. If the Government did that it would not be just graduates who borrowed money who would benefit; it would be every New Zealander. Students would be left with an incentive not to load up on debt graduates would have an incentive to pay off debt and every New Zealander would benefit from a tax cut. 
A real tax cut that brought down the top and middle rates of tax would mean more investment into New Zealand more entrepreneurship more business more jobs more wealth and higher pay. We know that. Why? Because Treasury itself said that ACT’s tax policy would add 1 to 1.5 percent to growth in New Zealand.