Student Loan Scheme Amendment Bill (No 2) — Second Reading 
Student Loan Scheme Amendment Bill (No 2) — Second Reading 
[Volume:638;Page:8153] 
Student Loan Scheme Amendment Bill (No 2) 
Second Reading 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I move  
That the Student Loan Scheme Amendment Bill (No 2) be now read a second time 
. The purpose of this bill is twofold: first to remove the barriers to borrowers overseas who are returning to New Zealand and second to ensure that borrowers receive their correct entitlements under the Act. 
The bill aims to encourage greater compliance amongst overseas borrowers by making it easier for them to meet their student loan obligations. In doing so it also helps to remove a potential disincentive to skilled New Zealanders returning home. Briefly the main changes for overseas borrowers as a result of this bill will be a repayment holiday of 3 years for borrowers who go overseas in recognition of the fact that it is not always easy for people to repay their loans while doing their OE and working in holiday jobs. The effect of that change will be that borrowers will not have to make repayments although their loans will still attract interest. For overseas borrowers who are not taking a repayment holiday the bill introduces progressive repayment obligations based on the size of their loan balances. For many borrowers who are overseas that will mean annual repayment requirements are lower than they are under current law. 
Interest-free loans for people who are studying overseas will be extended to undergraduates who are studying full-time at bachelor’s degree level. That does not mean that people will be able to take out a loan for study that is undertaken overseas. Rather it means that any existing loan they had before leaving New Zealand will be interest-free while they are studying. 
The amnesty on penalties declared last year for non-resident borrowers who are in arrears with their payments will be extended by 1 year to 31 March 2008. That will allow borrowers who are identified in the proposed data-matching between the Inland Revenue Department and the Customs Service to come within the amnesty. 
The second group of changes contained in the bill applies to all borrowers whether in New Zealand or overseas. Their purpose is to update the legislation so that it is consistent with the intent of the interest-free student loan scheme provisions that came into effect from April last year. Let me recap those changes briefly. First data matching between the Inland Revenue Department and the Customs Service will be introduced making it easier than it is at present for the department to identify who is overseas and to ensure that only those entitled to interest-free loans receive them. Second the late-payment penalty will reduce from 2 percent a month to 1.5 percent a month. Third the hardship provisions in the Student Loan Scheme Act are being amended to give the Inland Revenue Department greater flexibility in administering them. 
Collectively the changes to the overseas borrowers’ rules and the changes to the way the student loan scheme is administered will make it easier for borrowers to comply with their loan obligations and for the Inland Revenue Department to administer the scheme fairly. The changes will also go some way towards removing the disincentive for skilled New Zealanders to return home. 
In bringing the bill to its second reading the Education and Science Committee has reported that the majority of the submissions it received supported the proposed changes to the student loan scheme believing them to be a significant step forward in improving the overall functioning of the legislation. With that in mind the committee has made some important recommendations. The first of those is for a new amendment specifying that in order for overseas borrowers to qualify for an interest-free loan on the basis that they are working overseas as volunteers or for token payment as an employee of a charitable organisation they must establish that the organisation applies its funds to one or more specified purposes. Those purposes include the relief of poverty or of the effects of war or disaster and the raising of economic or educational standards in a developing country. The second recommendation relates to an amendment to the Tax Administration Act to ensure that care and management provisions apply to the Student Loan Scheme Act in relation to interest. That legislation currently applies in the case of repayment obligations. The amendment will ensure that there is an adequate basis for correcting any balances that may be in error as a result of a miscalculation and is important to the Inland Revenue Department’s ability to protect the integrity of the tax system. 
I would like to thank the committee for its expeditious consideration of this bill which I now have great pleasure in commending to the House. 
Dr PAUL HUTCHISON (National—Port Waikato) 
:  
Thank you for the opportunity to speak on the Student Loan Scheme Amendment Bill (No 2). National will support this bill because it aims to help student loan borrowers living overseas to return to New Zealand and it simplifies the system. There is certainly a lot to be done to simplify the system of bureaucracy that the Labour Government has created over the last 7 years. 
The Labour Government undoubtedly made the student loan scheme even more complex when it brought in its $1.5 billion a year interest-free student loan scheme and by doing so it provided an incentive for borrowers living overseas not to let the Inland Revenue Department know that they were out of the country. In fact it was a revelation to everybody including the Labour Government that there were probably 40000 borrowers living out of the country. I hear Mr Donnelly saying that 40000 was the number estimated by the Inland Revenue Department. It is quite remarkable that Dr Cullen and Labour did not think about the complexities at the time of bringing in this interest-free loan scheme—or maybe they did but they just did not care. They love complexity and in many ways this bill is about unravelling that complexity that they have brought in. 
Further scaring the Inland Revenue Department is the fact that it has a computer system that was started off in 1992 and I understand that the computer system is breaking into a bit of a cold sweat as it has to deal with the complexity of unravelling this bill let alone the Working for Families package the new international tax regulations and shortly the KiwiSaver scheme. The computer system will be under severe strain and I believe that one of the department’s officials pretty well admitted to the Education and Science Committee at the time that the capacity of the computer system would indeed be stretched if not highly rattled. 
The Labour Government is prone to creating complex and bureaucratic systems. Students come to me and ask why they can have an interest-free student loan but have to pay interest on it that is then paid back to them. One does wonder how one creates this sort of thing and one can only think that the Labour Government wants to make it harder. It wants to increase the bureaucracy because there is no other way for people to get jobs etc. 
I was not fortunate enough to be on the select committee at the time but I understand that something like 15 submissions were received on the bill and that indeed most of them supported the intent of the bill as we do in National. But it is worthwhile spending just a little bit of time looking at the submission from Business New Zealand as to why it was concerned about some aspects of this bill. I think everybody was in agreement with the data matching. There is no doubt that when we have something like 40000 students going overseas it is remarkably concerning. The Inland Revenue Department has made an estimation of how much could be saved by making sure that data matching occurs and I think it goes up to about $24 million a year. In fact the department estimated that data matching by reducing the number of incorrect interest write-offs would save $9 million in the 2007-08 fiscal year rising to $24 million per annum in the 2009-10 and out-years. 
But that figure does not compare to anywhere near the 100 percent write-off cost of the student loan scheme at $1.5 billion a year. It is important that we take note of the OECD report on the tertiary education system in New Zealand that queried whether the Labour Government had its priorities right in terms of introducing this 100 percent write-off at all. But the scheme is here and it has created considerable complexities. The data-matching aspect of this bill is worthwhile and I think every submitter was in agreement with that. 
The repayment holiday provision is another issue and there is some worry there. I note the comment that public and Government attention has tended to focus on the student loan scheme as a cause of long-term emigration by skilled New Zealanders yet the evidence to support this assumption is actually pretty light. The most detailed analysis of the role that student loans play in encouraging overseas travel was in the Ministry of Education’s 2006 report  
Do student loans drive people overseas—what is the evidence? 
 but the report noted that the scale of the linkages even though the loan balance is a statistically significant factor is not clear and that its findings should be viewed with caution. 
The report goes on to state that the causes of permanent and long-term departures from New Zealand are still not very well understood although the ministry’s suspicion is that higher wages and a wider range of career opportunities offshore are key factors in the decision to move overseas. This is a very important point because when this Labour Government came to power in 1999 the average wage for the Australian worker was 22 percent better than that of the New Zealander. Seven years after the Labour Government took power the average wage for the Australian worker is 35 percent better than the average wage for the New Zealander. That is an indictment on the Labour Government. Clearly it is one of the reasons that we have this problem of a million New Zealanders being offshore. In fact compared with the number of Australian post-graduates 10 times as many New Zealand post-graduates live and work offshore. That has to be an indictment on this Labour Government. 
The Business New Zealand submission further states: “depending on the size of an individual’s loan and his or her income the establishment of a repayment holiday for non-resident student loan borrowers could actually create incentives to leave the country.” I think it is important to be aware that that actually is a reality. The concept of a repayment holiday raises fundamental questions of fairness. Why should borrowers who have left the country effectively be rewarded when those who stay in New Zealand meet their repayment obligations and make an economic contribution to the country are not? 
I look to Singapore quite often. It has recently created a system whereby $1 billion has been spent on young elite scientists for them to go overseas to some of the best universities in the world and then return home. Singapore does it by bonding them. There is about $1 million per scientist and if they do not pay it back the Government will certainly chase them to the ends of the earth or maybe bring out the rotan rod. Obviously that is not something we would do in this country but in many respects the Labour Government is bringing in some perverse incentives. 
The second issue is that of repayment obligations for non-resident borrowers. The bill proposes to introduce new repayment rules for non-resident borrowers. It seems extraordinary that the current rules are designed to ensure that loans are repaid in 15 years and require borrowers to pay off 1/15th of their principal each year whereas with this system it will become much more complex. Again it is an example of the Labour Government’s contortions in order to try to fix up a problem it created at the start. In fact in terms of reducing the obligation the reduction varies from 40 percent to 18 percent depending on how much has been borrowed. So there certainly is no consistency within that aspect of the repayment obligations for non-resident borrowers. When one thinks that in this country something like 47 percent of our tertiary education and university students have either opted out or not completed their bachelor degrees within 5 years one realises that that is of considerable worry when we are expending so much on tertiary education. 
MOANA MACKEY (Labour) 
: 
 I am happy to stand in support of the Student Loan Scheme Amendment Bill (No 2) and I thank all the submitters who came to the select committee and who shared their points of view with us. There was not a large number of oral submitters on this bill. I think it is fair to say that submissions were pretty one-sided. With the exception of a few people who raised a few concerns here and there people were largely very happy with any legislation that would reduce the onus of the student loan scheme on those people who have borrowed money. 
It is fair to say that many of the people who raised concerns came from across the board. They were not just students; they were students’ parents grandparents and families. All of them were concerned about a number of issues including things that have come before this House more and more often such as the affordability of housing the issues we have with young people putting off having families and the pressure of work-life balance that comes from many of these things. Student loans feed into all those problems and we have seen many young people putting off buying houses getting mortgages and having families—not because it is the right decision for them to make at the time but because it is what they can afford to do with the weight of a student loan hanging over them. I personally welcome any bill that comes into this House that attempts to alleviate that in any way. 
Let us put the blame for the complexity of the student loan scheme firmly where it belongs which is with the Government that created it at the time—the National Government. I was one of those unfortunate guinea pigs who came in in the years after the student loan scheme was created. It was extraordinarily unfair. We paid interest on our loans whilst we were studying. Someone who comes from a place like Gisborne who does not have the luxury of living at home while studying has to take out a student loan. I worked all the way through from the age of about 13 to save for tertiary education. By the time I got there the goalposts had been shifted so many times that I had only enough money to pay for my fees and my first term’s board at the university hostel Weir House in Wellington. Then I had to get a job which meant I was not attributing as much time to my studies as I probably should have been particularly when it came to post-graduate study. 
It really was difficult to get by without taking out a student loan. I did not take out the maximum amount of student loan; I was very proud of myself for not taking out as much as I could have taken. But when I graduated and got that final bill from the Inland Revenue Department that showed me just how much I had borrowed and how much interest I had accrued over the time I had been at university—studying being unable to work very long hours having to support myself and not having the luxury at that time of parents who were able to support me—I was staggered. I was absolutely staggered. My loan had got up into the $20000s when I had thought it would be around $15000 or $16000. It is quite a knock for young people starting off in their working careers suddenly to realise that there is actually a very real opportunity that they may never pay off their loans. There were a lot of items around in the media at the time about the fact that a lot of women take time out from the workforce and if their loans keep accruing it is very difficult for them to get ahead. When all these studies were saying to us that there was a very real possibility that we would die with that student loan—that for the rest of our lives whenever we worked we would be paying 10 percent of our income to that loan—that really is a scary option for a young person who is starting his or her working career. 
We have heard some talk about the fact that wages are so much higher in other countries. Well they certainly are when we factor in the consideration that we are paying another 10 percent of our incomes which we never see straight to our student loans. There was certainly a time for my part when I very seriously considered getting a job overseas and working there but because I wanted to live in New Zealand—because this is where I wanted to be and because the work I had done on my science thesis was agriculturally based and this was the best place to do that—I did not. I stuck around. 
Certainly when Labour came into Government in 1999 we picked up the policy of New Zealand First which was to have no interest on loans while people were studying. That was a great policy. It was very fair. It was a good first step. Let us be in no doubt that these policies are very very expensive. There was a lot of will at the time to do far more radical things but it was very expensive. When one was starting new in Government and when there was so much call and competing interest on where money should be spent that was a good first step I thought. It made a large difference to a group of students who at least knew that when they graduated they would have to pay back largely what they had borrowed. I think that that made a huge difference to a group of students. But we have to firmly place the blame for a lot of the complexity on where it belongs. 
There has been some talk that this bill might send people overseas because there is an incentive. When we talk about student loans I have always found that people tend to think in the theoretical and ignore common sense. I wonder when people say that they have talked to students whether they really have talked to students. Certainly I know people who live overseas and who have student loans and I have tried to help them pay back those loans since we have been here. I have fed back to the Minister the many many problems a lot of them have had with the complexity of trying to pay back an income-based repayment whilst they are overseas—given that work fluctuates and they do not know whether they will be working from one week to the next and given the exchange rates and all of that. 
This bill is very sensible in setting up the 3-year repayment holiday. I think that that is a very very good step. It recognises that New Zealand students travel. They get out of university and they travel. It is part of our culture and it is becoming more and more so as air fares reduce in price. It is almost an expectation now—it is almost as if there is something wrong with people if they do not finish university and then get a job very quickly so they can go on their OEs and experience the rest of the world for a while. We have to make sure we can bring those people back. 
I do not think there is any point in talking about stopping people going on their OEs. We simply cannot do that. They may not leave simply because of their student loans but they may very well not come back. The student loan might not be the only reason but it might be the tipping point that says to them that they have all those things so they should be weighing them up. On balance because they have student loans and a lot of penalties sitting at home—because they have not made their repayments either because they have not organised them or because it has been too hard—their loans might be the tipping point that tells them they should stay in the UK or somewhere else in the world and not come back to New Zealand. That is where we lose a lot of our experienced people. 
Again we need to be realistic. In some sectors people will travel. Certainly in the scientific community there is an awful lot of inter-country movement between scientists; people want to go where the best science is. We get a lot of very good scientists coming here for example to work in geological and nuclear science disciplines. They tell us that they get people from all around the world. This country is like a living laboratory for geological and nuclear sciences. We have to learn to play that up as well if we want to bring some of these people back. But student loans are a factor. I know that because I have so many friends who have told me that they are a very large factor when they consider whether they will return to New Zealand. Most of them are away for only 2 or 3 years and the idea of a repayment holiday—even if they are still paying interest on loans—to them is a great relief. It is one less thing they have to worry about whilst they are overseas and trying to plan their repayments. 
Then on the other side we also had criticism from some submitters who said it was not fair to give a repayment holiday only to people who go overseas and that we should be giving it to all people in New Zealand with student loans. But I think it is important to remember that those who remain in New Zealand are getting interest-free student loans so it is not as if they are not getting anything. The repayment holiday is I think for a specific group of students for whom we want to address a specific issue they have which is largely time-limited—that is limited to the time they spend on their OE. So I think that this bill has a very very good balance. 
I am very pleased to hear that the National Party will be supporting the bill. I would also like to hear National members say that they will keep Labour’s policy of interest-free student loans should they ever become the Government ever again—at any time in the next 50 years. I think that is a question National members will have to answer because the student loan scheme has created an awful lot of problems and some of them we are only just starting to realise now in terms of the impact the scheme is having on 20-somethings and 30-somethings and the decisions they are making. 
We have an assumption in this country that people who go into retirement own their homes freehold. In that way we can set levels of superannuation and we know that people will not be driven into poverty. Well this situation may very well change with a generation of people who have had student loans and who because of that and because they have felt they have wanted to get rid of their loans before getting into a mortgage may well have chosen to rent instead of buy their own homes or may have put off buying for so long that by the time they retire they have not got into the position where they have been able to have freehold homes. That has a huge implication for this country when it comes to superannuation policy. So the student loan scheme has infiltrated so many other parts of our society. 
I stand here proudly and support any initiative that allows students and their families—and their future families—to alleviate the burden of the student loan scheme. I look at a lot of members in the National Party across the House whom I do not think came through the student loan scheme and whom I do not think really appreciate the kind of psychological impact it has on people. I am very thankful that I was able to come into this job where I was able to pay off my student loan because I cannot tell people the sense of relief when someone knows that he or she no longer has a student loan. There was a time in my life when I thought that I would never get rid of my loan when I thought that National Party policies might reign forever and—God forbid—when I thought that the scheme might have even become worse in terms of interest rates. So I congratulate the Minister the Hon Peter Dunne on this bill. I congratulate all the parties that are supporting it. This bill will make a real difference to New Zealand and to New Zealanders. 
ALLAN PEACHEY (National—Tamaki) 
: 
 I appreciate the opportunity to speak on behalf of the National Party and to express our support of the second reading of the Student Loan Scheme Amendment Bill (No 2). It was a pleasure to be part of the Education and Science Committee which held the hearings—although I was not at all the hearings—and I would like to compliment the chairman of that committee Mr Donnelly on the way he led us through some very very complex submissions and information. I congratulate the submitters. Some very very well-thought-out and well-reasoned comments were made to the committee. 
Before I address the bill specifically I will just express my sadness that the last speaker for the Government chose to spend so much of her time looking backwards. 
Darren Hughes 
: That suits the National Party. 
ALLAN PEACHEY 
: There we go—the callow kid from Kapiti is at it again. 
Darren Hughes 
: Oh he’s practised that. 
ALLAN PEACHEY 
: Yes I did; I could not wait. I suggest to that young man that he be quiet and listen. 
Darren Hughes 
: He’s so useless he can’t even come up with an original line. Give us the next one you’ve practised. 
ALLAN PEACHEY 
: Oh dear it is little wonder that this Government is on the way out. The point I want to make is this. I would suggest that the last Labour speaker should take a little time—she is young—to talk to the Prime Minister and the Deputy Prime Minister about the role they played in the 1987-90 Labour Government which brought this country to the point of economic collapse. They may just remind that young member of the courage and integrity of the previous National Government which pulled this economy around and set it on the path to prosperity. 
The amendment bill to the Student Loan Scheme Act 1992 will do a number of things. Some of them are in the interests of students—borrowers with loans—others will be in the interests of the taxpayer and others will make it easier for those charged with the administration of the scheme to do their work well. The whole body of regulations and legislation around student loans has been very very complex and it is good to see it being simplified. It will be easier for those students—those young people with loans—to actually figure out what is going on and to make better decisions for their future. 
Darren Hughes 
: Is the member supportive of free student loans? 
Paula Bennett 
: Don’t answer that. 
ALLAN PEACHEY 
: It is tempting but I will not. No he is not worth it. From the perspective that I have one of the great merits of this bill is that it sends at least one message to young New Zealanders: that we want them home. The reality is that our best and our brightest are leaving this country in droves. There are so many signals being sent to them by the present Government to say that this is not a country in which they can fulfil their potential. This is not a country where they see that their initiative will be rewarded and frankly it is not a country in which they see that they have a future. That Government over there is responsible for that perception amongst so many of our young people. So it is good to see this House sending at least one message to our young people that yes we want and need them back. 
I was particularly taken by a submission made by the medical students association. It was a good submission. It made the point that it is not unusual for medical graduates to want to go overseas in order to advance their learning widen their horizons study a little more and work. In that regard they are no different from our young engineers our young lawyers our young teachers and our young nurses. They want to go overseas. But we want and need them back. 
I recall during my days as a school principal employing over the years literally hundreds of young New Zealand graduates and encouraging them to go overseas to work in teaching to travel to try other things to broaden their horizons and in some cases to grow up. But I always said to them that I wanted them back and that I needed them back. 
New Zealand desperately needs our top young people back here so that we can have the advantages and the benefits of the top-quality education that many of them had while they were in New Zealand particularly in the professional fields. They come back smarter people they have more to contribute to the country they provide us with a high-quality workforce and because they have seen the world they see New Zealand in context and they can help us to figure out where we fit in and the direction in which we have to go. Of course that direction includes in less than 20 months’ time—fortunately—a National Government. 
I will address for a moment the idea of repayment holidays. I think that we probably all appreciate that it is better for our young graduates to be paying back the money they have borrowed as quickly and as soon as they can. Although I recognise the merit in allowing our young people to travel overseas and in giving them the opportunity to have this up to 3-year break I hope that they do not misunderstand the intent and the purpose of this House in giving them that opportunity because they know and we know that at some point in time that money has to be paid back. 
I will just repeat: we want them back in New Zealand we want to make it attractive and easy for them to come back but we want them travelling overseas for the right reasons and coming back for the right reasons. Travelling overseas in order to avoid a financial commitment like repaying one’s loan is not the sort of thing we want to be encouraging our young people to do. 
The bill in addition to being in the interests of students and of the taxpayer also assists those charged with the responsibility of administering the scheme. The select committee gave a lot of thought to the matching of data that is provided for in the bill between the Inland Revenue Department and the Customs Service. I believe it is right and proper that that matching should occur. In fairness to those students—those graduates—who meet their obligations it is right that that should occur. I have every confidence that both the Inland Revenue Department and the Customs Service will respect the intention behind the legislation and use the information available only for the purpose for which it is available. I have every confidence that the information gained will be protected by the Inland Revenue Department and will be used only by those who require it. On behalf of the National Party I am pleased to support the second reading of the bill. 
Hon BRIAN DONNELLY (NZ First) 
: 
 The discussion that has taken place forces me to cast my mind back to 1997 when I was a new MP. A reasonably desperate father came to my office in Whangarei. His daughter who had been a student at Whangarei Intermediate when I was principal there and who was now 16 had been enrolled in a course at Northland Polytechnic for 6 weeks. Her boyfriend took off to England and she decided to cash up her student loan and follow him overseas. There was nothing the father could have done to prevent this from taking place. 
There seemed to be some major flaws in the system. New Zealand First discussed it with its coalition partner. That flaw was just one issue. The problem was that under the contracts legislation even though students could take out a contract for a student loan there was no obligation for them to actually pay anything back. That was the situation in place in 1997 when people enrolled in a 1-year course took out lump sums on their loans bought themselves motor cars stereos and trips overseas and were lumped with relatively high interest rates that were compounding etc. It was a dog’s breakfast. 
That was the loan scheme in place in 1996 when New Zealand First came into coalition Government with National. New Zealand First worked with National and I give great credit to the then Minister of Education Wyatt Creech who recognised that there were some serious problems and worked with both me and the then Treasurer the Rt Hon Winston Peters to make some changes. One of those changes was that a student could not take out a loan until he or she was the age of 18 unless there was parental permission. That was in line with the contracts legislation. Students could not take out lump-sum loans; they could take them out only in instalments. That stopped the incentive for people to take out loans and buy a motor car or go off overseas. 
Finally people do not realise that partial interest write-offs came through in the 1998 Budget. One of the things that surprised people about the interest-free policy that Labour put up was that it did not cost anywhere near as much as it seemed it would. The reason was three people—I was one of them—from New Zealand First and National had worked on partial interest write-offs. In other words the student loan scheme was a dog’s breakfast in 1996 but there have been continual amendments to it. 
Now students who have gone overseas have some real negatives in their understanding of the situation particularly in relation to the interest-free policy that Labour introduced after the last election. New Zealand First has long believed and long stated that the very best immigrant is a New Zealander returning home and we stand by that particular policy. Unfortunately the situation that exists has created a lot of disincentives for some of our brightest and best to come home and bring up their children to become fully fledged New Zealanders in the same geographical area where their grandparents live who could add to the upbringing of those children. Students have gone overseas believing in many cases that they do not actually have to make any repayments. Unfortunately not only is there interest accruing but also there are penalties. After 3 years when these students decide to come back they look at their student loan and oops-a-daisy it is massive. They are saying: “How can I go back to New Zealand on the sort of salary I will get there and be able to repay that loan?”. 
This really has been exacerbated by Labour’s interest-free policy in the sense that people believed that it applied to them if they went overseas. It was not made clear that it applied only to people who remained in New Zealand. Those who went overseas had a requirement to pay back one-fifteenth of their loan and if they did not pay it back then—guess what—they got lumbered with all the penalties. 
The Student Loan Scheme Amendment Bill (No 2) which New Zealand First believes is very sensible legislation cuts through many of those particular issues. It cuts through them by providing that holiday. Let us make it very clear: if people go offshore and work in England for 3 years they still have to pay interest on their loan; the interest will still accrue. But there is a recognition that in many cases students who go overseas might be fruit picking. They will not have enough money to pay back one-fifteenth of the loan. The legislation states that these students do not have to make any repayments during that holiday period. The interest will accrue—certainly when they come back they will owe the Inland Revenue Department more than when they left—but in fact the penalties the punitive part of the thing will not be added on to it. There will therefore be incentives for them to return. We believe that is a very sensible approach to the dilemma that the country is facing. 
I thank the Education and Science Committee because it approached this legislation in a very sensible way looking at how we could make things better for New Zealand rather than playing party politics with the issue. It was a very good select committee to work on. 
I had some trepidation because this is an Inland Revenue Department bill. I think—in my time anyhow—that this was the first time the Inland Revenue Department had presented a bill to the Education and Science Committee. I have spent a period of time in the Finance and Expenditure Committee. I remember we had a tax bill that was 200 pages long and full of complicated equations etc. I tell members here and now that I could not understand anything past the title. It was with some trepidation that the Education and Science Committee had the Inland Revenue Department coming to us. 
I must mention that in the particular case of the bill with the hundreds and hundreds of equations Michael Cullen had missed the fact that one equation had a minus sign rather than a plus; he was totally mortified that he had missed that it was a minus rather than a plus. As I said I could not understand the equations anyhow. 
In reality I believe that the officials helped the Education and Science Committee very very well in understanding the issues behind this bill. The committee members themselves approached it from the point of view of how we could make this legislation as good as we possibly could. 
Part of the legislation is data matching between the Customs Service and the Inland Revenue Department. That is really critical because as was mentioned it is estimated that something like 41000 borrowers have gone overseas and no one knows that they have gone. The Inland Revenue Department is still treating them as residents in New Zealand and giving them interest-free loans. It is considered that $143 million has been taken from the revenue base because of that. That is a lot of funding that could be used for educational purposes elsewhere. So data matching is really important and I think most people in the select committee agreed to it with the protections that were explained to us. Let us face it the select committee members asked what protections were in there to ensure that things are not misused. 
The first of the two areas that the select committee made changes to as a result of its discussions was a change in the definition of charitable activity to bring it in line with other definitions etc. Essentially if I go overseas as part of a religious organisation purely and simply to proselytise and get more people into that religion that is not considered to be a charitable activity and therefore I cannot claim that status and get an interest-free loan. However when I worked in Rarotonga there was a Seventh-Day Adventist school along the road from us. People would come up and in 6 weeks a whole hall would be built. Those people were not there to proselytise; they were there to develop educational purposes. In those circumstances somebody who was there for 6 months or a year would be considered to be there for a charitable purpose. The other area we made changes to was the way that the Inland Revenue Department would apply care and management provisions. 
 I have mentioned the select committee and I think its members acted extremely well. I thank the officials; I was extremely impressed with the clarity of the information they gave to us. Something that impressed me most of all was that when one set of submitters got it wrong and misunderstood the legislation—it could have been to their detriment—the officials specifically went out of their way to meet up with those people to explain what the legislation meant. I take my hat off to the officials for doing that. 
Finally I congratulate Peter Dunne because this is very good legislation that will improve the operation of our student loan scheme. 
METIRIA TUREI (Green) 
: 
 The Greens are supporting the Student Loan Scheme Amendment Bill (No 2). We have supported it from the beginning and we will continue to do so through its remaining stages. I am pleased to hear that National is supporting the bill as well though I just mention to Mr Peachey that we can really do without those kinds of anachronistic and patronising attitudes. I think that that really was beneath him. 
It is certainly true that although the Green Party supports the bill we have from the start been very dissatisfied with the whole student loan scheme. I thank my colleague Nandor Tanczos who in our view set out a very clear critique of the scheme as a whole in his first reading speech on the legislation. Some interesting issues have been raised about that. Mr Brian Donnelly talked about the original loan scheme and how easy it was for people to get into huge amounts of debt get lots and lots of money and not really understand the process they were going through. It is still a concern for me as I travel around universities and particularly around polytechs and other kinds of institutions that people who are still quite young are getting loans to study. 
Those people are doing very well and wanting to achieve in their studies but they still do not truly understand the future implications of getting student loans. They do not have access to the information that would mean they really knew what they were getting into. Sometimes when we talk to them about what the implications might be and how long it might take them to pay off their student loans it can be a real shock for them. That is still a very serious concern particularly for those under 18 who have left school for what are probably very good reasons and are trying to make sure they stay educated and get a skill—without realising the implications of the effect of the student loan scheme. 
I heard the argument about fairness in respect of the bill when it was first introduced. From the Green Party’s perspective the scheme has never been fair and never will be fair; it is deeply and fundamentally unfair. What we have in this country is the first generation of students who have to pay a considerable amount for their own education. When they finish their tertiary education they have to pay for their parents’ superannuation which they have to do through their taxes; they have to save up and pay for their children’s education and some of us who have student loans have children who are now teenagers and for those people that is now a serious concern; and additionally they have to save for their own superannuation so they can be assured of some kind of reasonable income at the end. This is the first generation of New Zealanders that has to pay for all of those costs all at once out of one lifetime’s worth of work. 
Additional to that are the issues that Moana Mackey raised around the difficulty with housing and the fact that people may not have freehold homes by the time they retire because of the impact of the student loan scheme. It is a massive social experiment. It will have huge detrimental effects well into the future and those effects will be intergenerational. This cannot be underestimated when one looks at the impacts of the loan. 
Unfortunately we make the changes only as they arise. As we see the problems happening we will be continually making changes to this loan scheme for decades to come unless we find a more suitable way of enabling New Zealanders—in particular young New Zealanders—to gain an education that does not require them to go into such massive levels of debt for such little social and fiscal support that we find through the student allowances scheme. 
We agreed with the provisions of the bill at the time it was introduced. The Education and Science Committee has done a very good job of working through the legislation and I confess that I somewhat miss being involved with that select committee having been a member of it during my first term of Parliament. I am very pleased with the changes that the select committee has made. I noticed that it raised some good issues in terms of data matching. It has always been a concern for the Greens that if there were an excess of data matching that could be abused. I note that the select committee report refers to the committee believing as a principle that the information collected on individual student-loan borrowers should be permanently deleted when the purpose for which the information is obtained is no longer required. We think that that is a very sound proposition from the select committee and we are pleased to see it there. 
We are also pleased with the new provisions that the select committee has put in concerning charitable organisations. It is really important that New Zealanders have the chance to participate in the social well-being of other nations and other communities. That is in part what a lot of people do when they go overseas and get involved in charitable organisations and we are pleased to see that provision in the bill. We are also very pleased to see the application of care and management issues which Brian Donnelly has also raised because people should not be unfairly affected by errors made by the agencies. It is quite responsible and reasonable that these provisions should be in the bill. Also the repayment obligations around raising the threshold level from $250 to $330 makes perfect sense and we are very pleased to see such sensible provisions in the bill. Presumably the Committee stage and the third reading will pass quite swiftly as there is such good support for the bill from the various parties in the House. We would be very pleased to see that happen. 
We do not look forward though to the continual changes that we believe will have to happen to this student loan scheme as these issues arise year after year. At some point we will have to bite the bullet and realise that the student loan scheme in the long term is a failure. It is not doing well particularly for Maori students and for other students so we will have to address that specifically bite the bullet and make the hard decision that a new system is required. I would prefer that we did that sooner rather than later and not allow further generations of New Zealanders—my own children and the children of other members—to have to suffer and go through this process again for no good reason. Kia ora. 
HONE HARAWIRA (Maori Party—Te Tai Tokerau) 
: 
 Kia ora Mr Deputy Speaker. Kia ora tatou katoa i te Whare. When we were on the road during the election campaign back in 2005 this old Pakeha guy sat me down to talk about education and the cost of education etc. What he said stuck in my mind and I will share his thoughts with the House. He said: “If education is essentially the passing on of knowledge from one generation to another then who are we to charge our children for something that we got for free?”. That is the thinking that guides me in this and every debate on education because the Maori Party believes that if we are going to be silly enough to charge our kids to get a tertiary education then we should not be surprised when they all fly overseas as soon as the ink dries on their degrees. 
As for the debt what does the student debt add up to? Well I invite folks to take a seat pat themselves on the back and shake their heads at the foolishness of it all because it seems we have mortgaged the future of our nation to the tune of $9 billion. That is the level of student loan debt in this country. For once Maori are right up there with their own student debt level at $1.5 billion. That is a heck of a lot of money in anyone’s calculations—in any Maori’s calculations anyway. Certainly it is right up there for Maori. That sum is more than the Government set aside to settle 150 years of land stolen confiscated and just plain ripped off from Maori over the last couple of centuries. 
But still for all that I cannot help thinking that the debate is just a little bit skewed. It should be more than just a discussion about money owed. The debate should also be about the return generated by our young people’s academic endeavour. It should be about the commitment the time the energy and the sacrifice and about the benefits that accrue from our young people being more educated more creative and more productive. But it ain’t. Instead the debate is about paying back loans interest rates penalty clauses repayment obligations holiday repayments and how to keep paying money back even when people are overseas. Yeah right! 
So we checked it out with some of the whanau to see what that debt really was. My own daughter is in her third year at law school racking up $10000 a year in student debt. My advice to her is to get her degree then jump on a plane fly away overseas and forget about her debt for a few years. She should go and enjoy the world have a life and fingers crossed she will come back when she is good and ready and worry about debt repayment then. Certainly she should not worry about paying it back while she is overseas; she should ignore it completely. For heaven’s sake it is tough enough just getting by these days without having to spend all one’s life at school flog oneself to death getting a degree then have to start paying off a debt the size of a home mortgage before even being able to afford a house. 
Another young woman qualified with a prestigious environmental land management degree but in the process racked up a loan of more than $35000. She applied right out of university for 59 jobs without success and ended up as a waitress in a pub. So for a laugh she applied for a job to teach English in Japan. Hello! Job application number 60 was successful so off she went. That was OK for a while. Then she wanted to come back home but the salary was a pittance compared with Japan and to get a decent wage would mean having to go back to teacher’s college and rack up another student loan and even more debt. So what would this legislation have done for her? Well it would have meant that she had a number of options. First she could keep working in Japan and still pay off her debt. Yeah right! Secondly she could study in Japan and not pay interest on her loan. Or thirdly she could even enrol with a tertiary institution here do her studies in Japan and get another student loan to go with the one that she started with. 
But here is the thing: debt repayment policies will not stop the brain drain. Increasing student fees and costs and the lack of access to decent student allowances mean that student debt continues to rise and student flight along with it. At another level Waitangi Tribunal claim Wai 910 lodged by Te ManaAkonga states that the student loan scheme breaches the Treaty of Waitangi in that it unfairly discriminates against Maori. It notes that first Maori have to borrow more from the student loan scheme than non-Maori; secondly Maori have more student loan debt over $20000 than non-Maori; and thirdly Maori have greater difficulty repaying student loan debt than non-Maori. 
So here we have the old catch 22. Because of the failure of secondary schools a lot of Maori students are more likely to study at certificate and diploma levels which means they move into lower-paying jobs and consequently take longer than their non-Maori counterparts to repay their loan debt. The only time that things seem to even out is when one compares Maori and non-Maori degree-level graduates. The irony of that of course is those degree courses are the most expensive. 
The Maori Party supports any move to reduce student debt. We support the notion of a repayment holiday although we would make it 5 years rather than the recommended 3 years. But I go back to our fundamental concern that we are driving our graduates into crippling debt before they even start work. Education is supposed to be a nation’s investment in its own future and we need to be visionary and bold in how we approach student cost and student learning. The Maori Party sees MataurangaMaori as a treasure and its protection is guaranteed under the Treaty of Waitangi. We also see a decent education as being a treasure that we should guarantee to all our youth. Accordingly we support a greater investment in tertiary education in order to help reduce student costs and student debt. 
We also support the submission from the National Council of Women which stated that although some people claim education is primarily a private good and therefore students should pay for it the council believes that keeping and attracting students is actually in the public interest that it makes good sense to reduce student debt in exchange for student commitment to society at large and that if tertiary study was seen as a public good then we would not see the numbers of graduates we have seen being driven overseas. 
As recently as 1989 student fees were $129. In 1990 the Labour Government introduced a flat fee. That flat fee was ten times the amount of the previous fee—$1250. Then National got into Government and changed the Act so that institutions could set their own fees. Since then fees have increased and increased. It is a shameful legacy that both Labour and National have created—of which the Prime Minister herself said back in 1999: “Tertiary fee rises are crippling our future.” 
Last year’s annual report of the student loan scheme talked about ensuring that the student support system promoted equity and fairness was consistent with the wider income-support systems and made tertiary education affordable for all. If that means my daughter with her $40000 debt the young woman with her $35000 debt who received 59 job rejections before taking a job in Japan and the thousands of other Kiwis who have had to borrow under the scheme and then skip overseas so they do not have to pay it back will not have to be burdened with massive debt at a time in their lives when they should be preparing for their own future and our nation’s future then it is all good. If not then excuse the Maori Party for continuing to fight for a future that includes our own kids running our own country instead of leaving it and us having to bring in immigrants to cover the gaps we have so foolishly created. Kia Ora Mr Deputy Speaker. 
DARREN HUGHES (Labour—Otaki) 
: 
 It is a great pleasure to speak on the second reading of an excellent piece of legislation the Student Loan Scheme Amendment Bill (No 2). What this legislation does is further extend the great work that this Government has done since its election in 1999 to make the student loan scheme legislation a fairer more equitable and a more decent piece of legislation. We have heard from different speakers tonight exactly how this bill achieves that. 
As Hone Harawira was saying there has been a long history in the whole area of how we support students in New Zealand. In actual fact at one point in 1998 the then Treasurer was promoting a universal tertiary tuition allowance that would be paid to all students from the year 2000 but as soon as New Zealand First left the coalition Government the National Party turned its back on that. 
The bill of course amends the famous original 1990s student loan scheme introduced by Dr the Hon Lockwood Smith PhD—a man who has a long record when it comes to tertiary education in New Zealand; he went up and down New Zealand in 1990 saying that the “toll gate” which was what he called the Labour flat fee of $1250 to study at university in New Zealand would be removed or he would resign as Minister. 
Moana Mackey 
: That’s right and he signed it. 
DARREN HUGHES 
: He signed that pledge card up and down New Zealand. 
Then National became the Government and rather than Dr Lockwood Smith getting rid of the fee he said to the university and polytech councils: “Oh you decide whether you want to charge a fee or not. Of course I won’t give you any money to get rid of the fee so you will probably have to keep on charging one.” Then when people demanded his resignation up and down New Zealand he said: “Oh well it’s not me it is the university councils that are charging the fee. I have abolished the fee. I have told them they don’t need to charge it.” Of course they had no money to pay for it they would have had to sack all their staff they couldn’t provide any classes for any students but there was no fee—Dr Lockwood Smith had spoken. 
Dr Smith gets very upset in the Chamber whenever we challenge him on his policy at the time. There were times when the Minister of Education as he then was would visit university campuses around New Zealand and have to beat a hasty retreat to the bathroom and climb out the lavatory window— 
Moana Mackey 
: Laboratory! 
DARREN HUGHES 
: That is what the problem was—it was a laboratory window! He had to climb out of the science lab window in order to get away from braying student protesters who knew that the National Party had not been consistent with its 1990 policy. So that is how we ended up with the student loan scheme. 
Of course the Labour Party—in Opposition in those days—did not support the scheme because we could see the big problems that would result from the fact that so much expectation had been built up by National’s promises in 1990 that were not delivered. Labour came to the Government benches in 1999 and said that as a first step we should remove interest on student loans while students are still studying. 
The only slight hint of bitterness I have about that policy is that the day I was graduating from Victoria University was the day the new Cabinet was being sworn in so I did not benefit from that policy by one single dollar. When I was a student at university we paid interest every single time we borrowed money. So what would happen is that at the end of every year we owed more money than we had borrowed because we were paying interest the whole time and that never seemed fair. We could accept that we had to pay for some of our education because we knew that the Government could not pay for the whole lot so at one level we could understand that. But I always felt it was really unfair that a time when the Government was lending us money because it accepted we could not earn money to pay for our own rent food books and whatever it was charging us interest for the use of that money whereas if we did not have anything to do at all the Government would be giving us money by way of the benefit system. I am really pleased that we put in some positive incentives for students back when that scheme came in. 
Of course the National Party opposed that scheme and voted against it in the House. It said that students should pay interest while they were studying. So first of all we had the broken promise around the fee. Then National said that students should pay interest while they are studying and it opposed Labour’s legislation. Then we had the doozy of them all. Labour said at the last election that if it were returned to Government and given the faith and the privilege of 3 more years in Government it would like to lead a coalition of parties in the House that votes to abolish interest if those students stayed in New Zealand. It was a way of saying to people that once they had finished their studies and they were working in their career if they decided to stay in New Zealand the Government would not charge them any interest on their student loan— it would be a straight repayment of the money that they had borrowed. 
The Government had this fantastic idea that people would repay what they borrowed. It seems pretty fair to me. The National Party went up and down New Zealand campaigning against that policy as well. National members said: “No no students should pay not just what they have borrowed they should pay money on top of that as well.” But students are trying to improve not only themselves—obviously there is a private benefit—but also our country and our community. National did not want to put any value on that at all. They said: “No no education is entirely a private personal gain there is no benefit to society in it so therefore you should pay interest while you are studying.” I think that response is pretty bad but the worst part about it was that the National Party went and told people a whole lot of things that were not consistent with the truth in relation to the cost of that policy. 
They said that it was a bribe by the Labour Party. This was from the same people who were running around the country promising tax cuts at a cost of $7000 million. They were tax cuts that would see all of us sitting in this Chamber getting $92 a week in tax cuts tomorrow when our pay goes through while the people that we represent—or certainly the people we represent on this side of the Chamber—get absolutely nothing from it whereas in actual fact from 1 April every child gets $10 per week under Working for Families. That was going to be cancelled under National to pay for the tax cuts. 
National said that we could not afford the student loan policy; that we could not afford not to have interest on student loans; but that we could afford its $7 billion tax cut package—the biggest bribe in history. Of course after the election we passed the other amendment bill that sits alongside this legislation and the cost of the scheme has been dramatically less than what National said. Did National members apologise for that? Oh no they still give the same speeches saying what an expensive policy it is despite the fact that it has come in way under what John Key and his co-leader Mr English said all through the election campaign when they held the finance and education roles and before they came together in their current interesting combination. They said they were going to absolutely oppose what Labour had done. 
Moana Mackey 
: But would they reverse it? 
DARREN HUGHES 
: Moana Mackey asks a good question. Would they reverse that policy? Opposition members are very quiet. Mr Peachey the former principal had a lot to say before. He had even rehearsed a line in case I interjected on him which I felt really pleased about. He had sat up in his office working out an alliteration of three words together that had the word “Kapiti” in it. 
Moana Mackey 
: Otaki was too hard. 
DARREN HUGHES 
: Otaki was far too hard. He thought “O” might be for “Owesome” in that regard I guess. He was fine with his first line but when we asked him for a second line we realised that he will have to work on it. I am sure that next time he is in the House we will get two lines and we will be able to ask for three. There was a time when Tamaki was much quicker on its feet in that regard but I guess time moves on in politics. 
I want to know from the National members whether they will get rid of interest-free student loans. There is silence from members opposite. They will not even look up. They made so much noise during the 2005 election campaign when they were busting their guts to get into this place. They wanted to talk about the student loan policy and how unaffordable it was but tonight they sit quiet. 
It reminds me of the speeches National members used to give about one standard of citizenship and how Maori were privileged in New Zealand. But we never hear those speeches any more either. Half of the members on National’s list got their seats in this Chamber generated on the back of party votes that were anti-Maori but they have forgotten all that now. So now we know that National’s Maori policy is parked up. 
I suspect that their silence means they might be in support of Labour’s interest-free student loan policy but because John Key has not gone on television to announce it yet they cannot say. The sad thing for National backbenchers is that they are too scared to say in Parliament what a National Government might do because they are not sure what John Key has announced yet. The unusual policy that other parties have of deciding their policy together in the caucus room first—that really weird way of running politics—is not how it is done in the National Party. If people want to know what National’s policy is they should get out of bed early on a Saturday morning turn on  
Agenda 
 and they will see what John Key has to say. 
I am looking forward to hearing what John Key says about interest-free student loans. [ 
Interruption 
] What did Mr Borrows say? 
Chester Borrows 
: It was a real good show last week. Did you see it? 
DARREN HUGHES 
: I saw him on the television and I have to say that it was very off-putting early on a Saturday morning. But Mr Borrows has spoken up. That is as close as we will get to the National Party policy on interest on student loans—somebody with the surname Borrows. It is appropriate that he is the only National MP who wants to interject when we are putting a few questions across the House. 
Ron Mark 
: It’s a hollow interjection. 
DARREN HUGHES 
: It is another hollow interjection. They love their hollow words over there. Not much has changed from the night-time reading of  
The Hollow Men 
. I am looking forward to the sequel coming out— 
The Shallow Men 
—which will tell us about all the things we are hearing now the flip-flop jandals on the roof and all the public relations disasters.  
 The great thing about the National Party is that we have only to wait. We do not have to wait very long; all its things turn to disaster. But this bill will make a lot of difference for the students who go overseas for 3 years. They will get the holiday from the interest which means they can get around the world before they have to start repaying their loans. That will make a big difference I think and it goes to the heart of the tension: it is great to keep our young people at home with their new skills but on the other hand when we live at the bottom of the world— 
Ron Mark 
: Maybe the Brethren could fund the student loans. 
DARREN HUGHES 
: I am sure. The Exclusive Brethren do not believe in tertiary education. Their kids are not allowed to go to university which is maybe why the National Party is so silent on it. They did not want any policies that might actually benefit the kids who are normal Christians or indeed who are secular agnostic. No no—they had to be only for the Exclusive Brethren kids. So that is the National Party for us. 
The Government wants to see young people staying in New Zealand with their new skills but when people live at the bottom of the world it is also important that they make connections. They see that the world is a big place and they go and do their OE. I think that Labour has always supported that to build up the diaspora of people around the world who understand what we are trying to do here in New Zealand. The legislation will give students a 3-year window to do that and if they stay beyond the 3 years there is a mechanism for repayment to make sure that they do not get behind in all the penalties and that sort of thing. 
So the bill is very important in the next wave of reform of student loans. I think we are making a very important change. I have supported all of them because I think that consistency is a reasonably important thing in politics; the National Party has opposed most of them and tonight is in favour of this one. I am not quite sure why that is. In conclusion I say that I strongly support the bill. It is another great example of the work we are doing to help young people in New Zealand. 
COLIN KING (National—Kaikoura) 
: 
 I will take a very brief call in support of the Student Loan Scheme Amendment Bill (No 2). Although I am keen to stand up and speak on behalf of National it would be very remiss of me if I did not say for one moment that I would like to see those people who take out student loans be just a bit more thoughtful about the courses they take and where they actually spend the money. It is taking them 9 years on average to pay back their student loans which is an improvement from 10 years previously. 
By the year 2014-15 the scheme will cost $12.7 billion and by the year 2034 we expect that repayments will start to exceed borrowings. So for the next 15 years we will see in fact an annual growth in the student loan scheme of about 4.7 percent—about $66 million each year. We will see the forecast loan balance increase on average by about 5 percent a year. 
I agree with the bill; a lot of the things in it make the scheme a lot clearer. I certainly support the object of making it clearer to those people who are overseas that if they owe $15000 they will simply be required to make a repayment of $1000 but that if the loan is over $15000 they will need to pay $2000 and that if over $30000 they will have to pay $3000. 
It has been a pleasure to work with the Education and Science Committee on this bill. However I think in support of everybody who spoke we have to make sure that those people who go into student component funding are a lot more focused and a lot more directed by career advice so that when they do accumulate debts and loans they are aware that they will get value for money. At the end of the day education needs to be about getting value for money and in many many cases in my experience we have seen far less value than the debt that is held out there. 
I have great pleasure in supporting this bill and on that point I will take my seat. 
Bill read a second time.