Roy Eric: Taxation (Annual Rates and Urgent Measures) Bill — In Committee 
Roy Eric: Taxation (Annual Rates and Urgent Measures) Bill — In Committee 
[Volume:628;Page:777] 
ERIC ROY (National—Invercargill) 
: 
 For the benefit of those who may be just now tuning in to this debate on their radios I point out that we are debating the Taxation (Annual Rates and Urgent Measures) Bill. We are now on Part 3 which relates to the amendments to the student loan scheme to give interest-free loans to students. 
I am hugely concerned about the provisions of this part. I have had those concerns increased by listening to Moana Mackey say that no one is massaging this change to his or her own advantage. Let me just say to her that I have a number of examples but I have enough time to give only one. When this proposal came out the principal of a high school who I do not think would have ever voted National in his life said that as soon as the interest rates came off while students were studying he gave one very clear instruction to his kids. He had three kids in tertiary education and he said they should draw down every single dollar that they could draw down. He said that his oldest daughter who was finishing a double degree after 5 years had a student debt of $71000 but she had an investment account with $41000 in it. So for the Government to say that no one is making use of interest-free money shows its limitations. 
If Government members wish to cast aspersions upon the intellect or thought processes of National members then perhaps it is time for them to reflect entirely upon whether they have understood the complexities of this situation. For example Dr Bollard is hugely concerned about New Zealanders borrowing money so what does he do? He has put up interest rates nine times in a row as a disincentive to borrowing. But suddenly we have interest rates being lifted off student loans. What will happen? In one part of the economy interest rates are going up and up as a disincentive to borrowing but in another part students will have to pay absolutely no interest. What will they do? It is absolutely clear that this measure will increase borrowing. Without a doubt that reaction will follow. I suggest that any students who do not participate in that neither deserve nor are they likely to get their qualifications because of their limitations in understanding the first principle of borrowing. There is absolutely no incentive for any student whatsoever to get involved in repaying his or her loan any faster than the prescription for paying the minimal amount extracted through tax payments. 
I have some understanding of the implications of tertiary education costs. At one stage my wife and I had four kids all drawing down on student loans in the same year. Our kids have now pretty much paid back all of their student loans because they got in rolled up their sleeves and did that. The repercussions from doing that now that they are in their 20s are that they own their own homes. They know about borrowing and the responsibilities of paying back loans. It is a gross naivety on the part of the Government to presume that the impact of this measure will not increase student debt. It will have an impact on the responsibility for clearing that debt because without interest no disincentive whatsoever is applied against borrowing. 
I am appalled that we are doing this to an economy that needs to instil responsibility and create an environment where there is some equity between students and the rest of the community. Mr Bollard in order to create a disincentive against borrowing is continuing to increase interest rates. What conclusion do we draw from that? Does the Government not accept or believe that Mr Bollard’s actions are the appropriate ones to stop us from borrowing? Does it not accept that that reaction has come from us over-borrowing as a country and will that not happen to students? Clearly it will. The disciplines of having a loan understanding the responsibilities of a loan— 
Simon Power 
: It’s not easy. 
ERIC ROY 
: Exactly; it is not easy. But that discipline is completely gone now. National absolutely believes that education—