Hipkins Chris: Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill — Second Reading In Committee 
Hipkins Chris: Student Loan Scheme (Exemptions and Miscellaneous Provisions) Amendment Bill — Second Reading In Committee 
[Volume:660;Page:9385] 
CHRIS HIPKINS (Labour—Rimutaka) 
: 
 I will briefly respond to the comments the Minister made regarding the partners of diplomats. I thank him for that explanation and I appreciate that it is obviously an issue that is far more complicated than something that can be dealt with in this bill. I hope it is an issue that will not fall through the cracks. Partners of diplomats are leaving New Zealand for the good of New Zealand to be part of representing New Zealand overseas and it seems very unfair that the person whom they live with could be eligible for an interest-free loan but they themselves might not be eligible for an interest-free loan. I hope that that in time is something that will be able to be addressed more fully. 
I pick up on a comment the Minister made about the size of the asset that is the student loan scheme. I agree it is a significant amount of money on the Government’s books but we also need to consider it in the wider context of the value of tertiary education as I am sure the Minister himself does. It is an investment in the people of New Zealand and in building up the skills of our workforce. If we want to have a much more productive economy one in which we all enjoy a higher standard of living then encouraging people to move into all forms of tertiary education whether it be universities polytechnics or even workplace training is something we want to encourage. I hope that whenever we talk about the student loan scheme we will consider it within that context. 
I want to talk about one or two of the technical amendments in the bill and in particular the increased deduction rate that is covered in clauses 6 and 7. In effect these changes will allow the amount deducted from a borrower’s salary and wages to be increased from 10c in the dollar up to 15c in the dollar. The amendment is aimed at borrowers who have failed to have the correct deductions made and have other overdue amounts. This is a change we support but I want to talk a little bit about the way in which the threshold at which somebody has to make those deductions is established. 
Every year up until last year the threshold at which somebody has to make deductions from their salary has been increased in line with I think the rate of inflation—it might be the consumer price index; I am not sure exactly what the mechanism is. But it has been adjusted each year so that that threshold remains the same in real terms and that was not done in 2010 and 2011. In the statement the Minister put out just before Christmas—I called him a Grinch at the time and I apologise to him for doing so; I think he is a very unlikely Grinch. [ 
Interruption 
] No he was Santa’s little helper I think in the photographs in the paper. 
In the statement he put out at the time he said that the decision to hold the student loan repayment threshold at the current level for the coming year takes into account the current economic climate and the very significant costs of this $9.6 billion asset to the Crown. I think we need to be clear that although we are talking about a fairly small amount of money the principle behind it is I think is a really important one in that we are asking the borrowers of student loans to shoulder an extra share of the effects of the tougher economic climate. 
The other point the Minister made in his statement is that although the impact on individual borrowers is likely to be minimal the effect of maintaining the current repayment threshold is expected to lower the overall costs of the scheme to the Crown. I think we need to be really transparent about that. If the Government is setting out to lower the cost of the interest-free student loan scheme then it should be really upfront—I know that the Minister was upfront in his statement but it is not something that many people have picked up on—because that will have an impact particularly for those who are just near the threshold for making repayments. It is more significant for them than for somebody who is earning a significant amount of money. 
Although we are talking about a fairly marginal amount of money it will be more significant for someone on a very low income right down there at that threshold level than for someone earning a higher income. We need to be really clear and upfront about that and I would certainly encourage the Government in future years to continue making those adjustments to the threshold and not to let this be seen as a precedent for future years. 
I can accept that it was probably a one-off for last year but we would like to see that issue addressed in future years. I hope that when it is addressed this year there will be some retrospective nature of that to catch up with the fact that that threshold was not adjusted last year. 
I turn now to the interest-free loans for borrowers returning to New Zealand. I refer to clause 16 which inserts new section 38AM.