McClay Todd: Student Loan Scheme Amendment Bill (No 3) — First ReadingText is incorporated into the Bound VolumeMcClay Todd: Student Loan Scheme Amendment Bill (No 3) — First Reading[Sitting date: 27 August 2013. Volume:693;Page:13016. Text is incorporated into the Bound Volume.]Hon TODDMcCLAY (Minister of Revenue): I moveThat the Student Loan Scheme Amendment Bill (No 3) be now read a first time. I nominate the Finance and Expenditure Committee to consider the Student Loan Scheme Amendment Bill (No 3).This bill continues the Government’s focus on providing proper governance over this multimillion-dollar taxpayer-funded scheme by making borrowers aware of their personal obligations to repay their loans and the consequences they will face when they choose to ignore them. I should add at this point that the overwhelming majority of borrowers do the right thing and take their repayments seriously. However there remains a small group of mainly overseas-based borrowers who consistently renege on their loan repayments. As at 30 June this year this group was responsible for 80 percent of all overdue loan repayments. This lack of personal responsibility is clearly unfair to the borrowers who do honour their repayment obligations. The main purpose in this bill is therefore targeted at the small group of overseas-based borrowers who in spite of the Inland Revenue Department’s best efforts to encourage their compliance continue to ignore their responsibilities despite having the ability to recognise them.The proposed changes which were signalled by the Government in the Budget earlier this year will give the Inland Revenue Department greater powers to deal with this group of individuals. The proposals in this bill build on measures introduced last year that allow for an information match between the Inland Revenue Department and the New Zealand Customs Service to identify borrowers at the border who are in serious default on their loan repayments and to forward their contact details to the Inland Revenue Department for follow-up. This was the first step towards identifying individuals at the border who failed to respond to the Inland Revenue Department’s best efforts to encourage them to make repayments on their loans. The principal measure proposed in this bill strengthens this provision by allowing the Inland Revenue Department to request an arrest warrant for borrowers with the most serious history of non-compliance who are attempting to leave the country after visiting New Zealand.I would like to stress at this point that this action would be taken only when dealing with the most serious cases of non-compliance. This means that action would be taken only when all other efforts by the Inland Revenue Department to persuade the borrower to make repayments have failed and only for borrowers who can clearly afford to pay. It is however intended to send a clear message to all borrowers that a student loan carries the same responsibilities as a commercial loan and that it must be repaid irrespective of where the borrower may choose to live.The other major proposals in the bill are also based on promoting personal responsibility for loan repayments and greater fairness across the student loan scheme. The principal proposal of these provisions is to bring overseas-based borrowers’ repayment obligations more into line with their New Zealand - based counterparts. Under the current rules an overseas-based borrower’s repayment obligation is based on their loan balance. For New Zealand - based borrowers however their repayment levels are based on their level of income.The effect of this difference is that the repayment obligations for an overseas-based borrower decrease as the person’s loan balance falls whilst a New Zealand - based borrower’s repayment obligation increases as their personal income rises. In the interests of greater fairness the bill proposes to fix repayment obligations for overseas-based borrowers based on their loan balance. Overseas borrowers with a loan balance over $45000 will also have their repayments rates increased. The effect of these proposed changes will be to reduce the current repayment time and the amount ofinterest these borrowers will ultimately have to pay on their loans. This will result in a fairer more efficient outcome for all concerned in the student loan scheme.The remaining measures proposed in the bill are largely remedial in nature. Their purpose is to ensure that the student loan scheme operates as intended and that it delivers value for money to the Government for the taxpayer and for borrowers. It is therefore with great pleasure that I commend this bill to the House.