Clark David: Student Loan Scheme Amendment Bill (No 2) — In Committee 
Text is incorporated into the Bound Volume 
Clark David: Student Loan Scheme Amendment Bill (No 2) — In Committee 
[Sitting date: 26 March 2013. Volume:688;Page:8956. Text is incorporated into the Bound Volume.] 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 Clauses 1 and 2 in the Student Loan Scheme Amendment Bill (No 2) of course refer to the title and the commencement date. These clauses are often debated in a lively fashion and members suggest alternative titles and perhaps in some cases that the legislation should never come into effect. I do not intend to debate the timing around this bill because although we disagree with the introduction of the “Henry VIII” clause we in principle support the introduction of a fairer means of collecting. As my colleague Andrew Little has alluded to the attempt to make sure that all types of income are more fairly measured when repayments are made is something that we will support. I do however have a few suggested changes to the title so as to more fairly reflect some of what happens in the bill and I put them forward as suggestions. 
The first is that this bill could be called the “Fingers Crossed We Can Implement It Bill” because this is a bill that makes very clear and lays asunder the challenges that the Inland Revenue Department is facing in terms of implementing legislation because of its decrepit computer system. The computer system at the Inland Revenue Department as we know is 20 years old and the department has over 1 million returns that remain unprocessed and over $7 billion in outstanding tax. Those things all hint rather loudly at a computer system that is struggling and needs to be updated and we have a Government that seems to have been very reluctant to actually lay out a timetable and a credible plan for replacing this system despite not being the only country in the Western World that needs a functioning tax system. This Government has been asleep at the wheel when it comes to bringing the tax system up to date so that we can support the schools hospitals and other things that are done through a fully functioning tax system. So my first suggested title is the “Fingers Crossed We Can Implement It Bill”. 
If I read from the description at the start of the bill we can see very clearly that the provision for the relief of small amounts of loan obligations is needing to be adjusted: “Under the Student Loan Scheme Act 1992 repayment obligations under $20 were not collected and were written off. The 2011 Act changed this so that small amounts remain part of a borrower’s loan balance for future collection.” This was one of the changes this Government brought in. 
Now that the scheme will continue to be administered under the Inland Revenue Department’s current computer system it has been decided that it is not cost-effective to go down that path and so this bill reinstates the discretion to write off small obligations under $20. So we have a perfectly good provision that has been there for years then the Government says: “Right we’ll update it. We’ll make it a bit more modern.” Then it decides: “Well actually we have got a fair way down the track and we can’t do it.” The computer system simply will not cope with this little change it is not cost-effective to do it and so this bill aside from introducing those fairness components is also covering up a whole lot of humiliating back-downs that have slipped in there for things that this computer system cannot implement. The bill itself is a vehicle for getting all of those changes back through that amend—or repeal—decisions made by the Government previously. 
David Bennett 
: What about those overseas bank accounts? 
Dr DAVID CLARK 
: Mr Bennett down the back is interjecting but I cannot hear what he is saying so I shall ignore him— 
Hon Ruth Dyson 
: You haven’t missed a thing. 
Dr DAVID CLARK 
: My colleague tells me I have not missed a thing. 
My second title that I would suggest is that this is the “Small Steps Towards Fairness Bill” covering over these humiliating back-downs because more generally there are more back-downs in this bill. In fact most—well not most but a good half; no actually a majority—of the explanatory material in the front of this bill is about other back-downs and reprioritisations as a result of changes not being able to be implemented. 
So this bill recognises “that some of the changes to the administration of the … scheme originally provided for in the Student Loan Scheme Act 2011 would be too complicated to implement within the Inland Revenue Department’s current computer system and should therefore not proceed.” So this is the material that explains the remaining humiliating back-downs that are in there. It introduces four measures that are provided for in the 2011 Act that should be cancelled. I have already covered the relief for small amounts of loan obligations. In there as well is the loan interest calculation method which becomes problematic and must be adjusted. It says that the bill as it was introduced with clause 54 would change the interest calculation method in two ways effective from 1 April 2013. This then suggests by way of amendments that clause 54 is removed from the bill to retain the existing loan interest regime and it also makes related amendments. 
There is also the payment calculation—“the removal of clause 59 in the bill as introduced in order to retain the existing way in which payments are allocated to repayment obligations and debt.” Again it was too complex to administer. Then further on there are some amendments that line up adjusted net income so that it is broadly aligned with the definition of income under Working for Families tax credits. 
Finally the other suggested title that I might recommend is the “Student Loan Tsar-creation Amendment Bill” because this bill introduces a “Henry VIII” clause for goodness’ sake to manage future changes should there be more embarrassing back-downs required. So in future when these kinds of embarrassing back-downs that I have just listed come up the Government has a provision in this legislation so it does not need to bring them back to Parliament. When the computer system cannot implement them the Government behind the scenes can change the regulations and say: “Well it was roughly in line with what we were intending to do. No need to put this out to the public. We realised that we can’t do it because we haven’t yet committed to building a proper tax system a proper tax computer system. We’re still struggling along with the old one. We’re not doing our job very well and we will at some stage announce some changes but we haven’t got around to it yet and so on we go. We’ll give it a go but actually we need these tsar-like powers in case we can’t actually manage it.” 
This is an embarrassing bill for the Government in the sense that it has had to bring about a bill that although it has some useful data-matching principles in it and some useful broadening of the definition of income really it is a vehicle by and large for a number of embarrassing back-downs. So these other suggested titles are up there for consideration. I guess I am not putting any false modesty up there when I say it is unlikely these titles will get adopted but I think that they illustrate some of the limitations in this bill and some of the limitations in this Government’s thinking. We really do need as a country a functioning tax system. We need to get past the situation we have where in the last GST period in the middle of the last year 70000 phone calls went unanswered at the Inland Revenue Department where $7 billion in tax revenue— 
The CHAIRPERSON (Lindsay Tisch) 
: Order! Very narrow. 
Dr DAVID CLARK 
: I come back to the title. One of the suggested titles is the “Humiliating Back-down Bill” and I put it to you that really there is a humiliating situation at the Inland Revenue Department which is caused by the inadequacy of this computer system. That is the point that I am making because right now that department is unable to do its job properly and it is actually to do with the lack of Government planning around replacement of this computer system. It is no small beer—we are talking $1 billion here in terms of replacement cost—and we have not yet seen from this Government a credible plan to replace that tax system and no time line. This Government is sitting on its hands. John Key has talked about it over eons we have seen no action and it is typical of a Government that has taken its eye off the ball and its hands off the wheel and the economy in New Zealand is suffering.