Student Loan Scheme Amendment Bill — In Committee 
Text is incorporated into the Bound Volume 
Student Loan Scheme Amendment Bill — In Committee 
[Volume:678;Page:1416] 
Student Loan Scheme Amendment Bill 
In Committee 
Part 1Amendments to principal Act  
The CHAIRPERSON (H V Ross Robertson) 
: Kia ora tatou no reira e te Whare e nga iwi e nga reo e nga hau e wha. Tena koutou tena koutou tena koutou katoa. Good afternoon honourable members. The House is in Committee on the Student Loan Scheme Amendment Bill. The question is that Part 1 stand part. It is the debate on Part 1 clauses 3 through to 33. I recognise the honourable member Grant Robertson. 
GRANT ROBERTSON (Deputy Leader—Labour) 
: 
 And I recognise the Chair too. I have seen him somewhere before. Thank you very very much for giving me the call on this bill. Part 1 of this bill is in fact pretty much all of the bill. It is all of the substantive clauses of the bill. In this first call I am going to make some general remarks around what is contained in the bill and where it is going then perhaps move on to some more specific issues coming up that I have concerns about.  
The first thing to note about this bill is that there are a large number of mainly technical amendments contained within the bill that are essentially around tidying up matters to do with the student loan scheme. The student loan scheme frequently needs legislation like this because it is a complex beast. The interaction between the tertiary institutions StudyLink the Inland Revenue Department and StudyLink’s predecessors have always caused some difficulties and issues and from time to time things happen like the Inland Revenue Department deciding to change its computer system and that means the law has to change. I sometimes think we have got things a little bit wrong in the student loan scheme when that is the case but there are some matters in here that are of very limited controversy and we do sometimes wonder whether they really need legislative change and whether there is not some other mechanism that could be used to advance the changes that are in here. Those issues are not going to get a lot of attention. They are to do with things such as changes in the names of the repayment codes and the way in which certain types of earnings are treated.  
The issues that are going to get more attention I suspect in this debate are around the issues to do with the changes to the repayment holiday. Before I come to those one major issue that has been picked up in this bill is the question of a contact person for a borrower who is overseas. When we look at the student loan scheme and the interest-free element of it the key element that the interest-free loan scheme has had is that if somebody remains in New Zealand they will not be charged interest; if they go away overseas they will be. But we have had from the beginning of the loan scheme the issue of what happens when borrowers go overseas. I am actually in principle no great fan of the student loan scheme but since it exists we do need to make sure that there are robust processes in place to ensure that people are making the repayment that they are obliged to do.  
There have been examples of people travelling overseas and not making the loan repayments that we would expect them to make and that is unfair on other borrowers. So no matter what someone like me or anyone else might think of the student loan scheme in principle we need to ensure that borrowers who are making repayments do not look at other people see them and say “Why is that person not making a repayment just because they have gone overseas?”. If a borrower is overseas I think it is a reasonable expectation that they will make arrangements to make payments. There will be many parents around New Zealand who no doubt will be glued to their crystal sets right now listening to this debate. They will be saying “Yes I am familiar with that.” I know that my own mother for many years received the student loan information relating to my brother who had long since left New Zealand—he was making repayments I hasten to add. But parents all around New Zealand will be familiar with the fact that they have remained the contact point effectively for their children when they have gone overseas. Many of them are very diligent in making sure that payments are made and that information is kept up to date.  
However what this bill does is ensure that it elevates essentially the role of a contact person and I do think there are some questions about that. I certainly believe that some people when they see the changes that have been made to the role of a contact person will start to think “Do I want to be that contact person?” because this means that they will have regular communication. There will be communication right at the beginning about what their roles and responsibilities are. I do not think the reality is that it is greatly different from the situation now but I do think it will elevate what that person’s role is. It does beg the question as to whether over time there may be some intent to have some liability for that person but that is not I suspect the intent at this time. But I do think it is worth the Committee taking just a little bit of time to consider what it means now for somebody to be listed as a contact point. It will not as I say greatly change that role but it does mean that the person will be contacted regardless of whether the borrower has defaulted on their payments. At the moment that would be pretty much the only situation in which a contact person would be contacted. Now they will be contacted as a matter of course once the person is listed. A person has to be listed so therefore it does increase the attention that a contact person will get.  
I just think the Committee does need to reflect on that. We do not want to set up a situation where for instance parents feel that they do not want to be a contact person for their children because it is going to lead to some kind of increased scrutiny on them. I do not have a problem in principle with having to supply some kind of contact details and contact information but I do think there are some matters here to consider in that regard.  
I want to move now to the question of the repayment period changes that are listed in this particular bill. On the Table are amendments of a remarkably similar nature from the Green MP Holly Walker and me thinking alike here about the change the Government has made. To clarify this for those watching the Government is proposing to reduce the repayment holiday which currently stands at 3 years to 1 year. The repayment holiday comes into force when someone goes overseas typically a young New Zealander on their OE. They go overseas and they are not obliged under the repayment holiday provisions to make repayments on their loans. They are accruing interest because the term of the interest-free student loan scheme is that if you are overseas you will accrue interest. So they are not getting a free ride; they are actually accruing interest. What the repayment holiday has acknowledged is that New Zealanders have a long tradition of going away overseas often shortly after they graduate taking some time to experience the world and then coming back to New Zealand.  
The Minister in the chair the Hon Peter Dunne understood this in 2007 when as a Minister in a Labour Government he oversaw the repayment holiday period going to 3 years. I want to quote the Minister because I do think what he said here is important. He was talking about graduates overseas and he said: “The reality they all faced was a very massive debt upon their return to New Zealand which in some cases would be enough for them to make the decision not to come home at all and our country would be the loser. We needed to take a pragmatic way through this”—this is the Minister in the chair—“and being someone who places great virtue on pragmatism”—I do not think there is any doubt about that—“it struck me that the logical course of action was to derive the solution that we have: to extend the holiday period for 3 years recognising the fact that young New Zealanders take that extended period overseas;”. I could not agree more with the Minister. It is a pragmatic response to do that.  
Hon Peter Dunne 
: Five years ago. 
GRANT ROBERTSON 
: Five years ago—it has all changed in the 5 years for the Minister.  
Unfortunately it was 5 years ago and now the pattern of movement of young graduates going overseas is actually exactly the same. The country that many New Zealanders go to for their overseas experience is the UK and the UK allows for 2 years there.  
Andrew Williams 
: And Finland.  
GRANT ROBERTSON 
: And Finland—that is good Mr Williams. We do have a working holiday visa exchange with Finland.  
Hon Clayton Cosgrove 
: We used to.  
GRANT ROBERTSON 
: We may not any more after this week but we did have it. But typically most graduates would find their way to the UK and they will spend that 2-year period and possibly a little longer; most people know that it is possible to get extensions on those visas when you are away. It seems to me that this change that is being proposed by the Government actually flies in the face of what is the typical behaviour of graduates overseas. That is what makes it wrong.  
But it has also been pointed out to the Government that it actually is not going to achieve the things that the Government wants it to do. Treasury told the Government in the Budget documents that there is little evidence that this change will improve repayments. It is actually likely to increase the debt held by overseas borrowers discouraging them from returning and therefore increase the annual student loan impairment. That is the very point and Mr Dunne noted that the pragmatic way through this the thing to do to actually encourage people to come back to New Zealand was to leave a period of either 3 years or—and I have got two amendments. One is for 3 years but we could compromise Mr Dunne between 1 year and 3 years and go for 2 years.  
Dr David Clark 
: That’s pragmatic.  
GRANT ROBERTSON 
: That is pragmatic. There is also that amendment on the Table because I think that is more realistic.  
Moana Mackey 
: Common sense.  
GRANT ROBERTSON 
: It is more common sense Moana Mackey—that is right—to actually fit it around what graduates actually do. But we have to bear in mind that Treasury is pointing out that what this is likely to do is increase debt and therefore discourage people from coming back to New Zealand.  
So the two things that we would have thought the Government wanted to do in a bill like this—reduce the debt and get the New Zealanders who are overseas back home—are both worked against. It was not just Treasury; it was also the Ministry of Education which said “This can be expected to have a negative impact at the margin on borrowers’ decisions regarding whether to return to New Zealand.” Simply this bill is wrong both in terms of the fact that it does not make common sense and it is also not going to achieve the goals.  
Hon PETER DUNNE (Minister of Revenue) 
: 
 I thought I should take a call at this point because I am the one common link in the chain that the member opposite has referred to. I want to go back to the 2007 situation because he made some comments early in his contribution that really go to the core of what the issue is. Consequent upon the then Labour Government’s decision to introduce interest-free student loan repayments for domestic borrowers after the 2005 election and to retain an interest component for those who were overseas we had the immediate challenge of locating who the overseas borrowers were and where they were. The member may recall that we had a de facto amnesty at that point whereby we allowed borrowers to come forward and identify where they were so we could actually get them into the system because frankly a flat in Dunedin is not actually a good address for a lot of people in northern Europe and we had many many people in that case. What we discovered was that although a substantial number did come forward—around 14000 or 15000 from memory—there was a large group that we had not got. We still do not know where they are yet they still have a student loan responsibility.  
I guess the starting point that we would all agree on around this Chamber tonight is that people who take out a loan have a responsibility to repay it. I do not think there is any debate about that point. But it is not fair and I think we would agree on this to have a situation where some people are being forced to repay and others are not. So you start to move up the scale. What we did in 2007 was to say: “Well look there is a trade-off here. If the borrowers will effectively identify themselves as being absent from New Zealand before they leave we will give them a period of time where they are not required to make repayments.”  
I remember the quotation that has been attributed to me. It is dead right. It is utterly accurate. And it was a pragmatic solution because frankly Dr Cullen and I at that point did not have a clear sense of what a reasonable period of time was. We thought that 3 years seemed reasonable. We thought that was a good test of the New Zealand OE. But looking at subsequent experience—and one ought to be guided by experience; I have always found it to be quite a useful concept to value—what we have found is that most people who go overseas who are notified to us are overseas for less than 3 years. Most are actually overseas for less than 2 years. We also found that the time frame of the length of the holiday had little impact on people’s decision about when they repaid.  
So when you start to think about that; you start to think about the signals you want to send in terms of people overseas having a responsibility to repay; you bear in mind the fact that already their rate of repayment is about three times slower than that of domestically based borrowers and that they are our real problem; and when you look at the work we have been doing in Australia to track down recalcitrant borrowers to make them make payments and in some cases to take them to the court to achieve those objectives then you have to question the validity of retaining the 3-year holiday period. The conclusion that we reached in the context of the framing of this legislation was that for all those reasons 5 years down the track a 1-year limit was now more reasonable.  
I want to make some comments about the nominated person because these things go hand in hand. As I said earlier one of the problems we had was that for a large number of borrowers who had fled our shores with their last-known address a flat in Dunedin or somewhere there was no effective way of making contact with them. Parents were not all that inclined for obvious reasons to want to dob in their recalcitrant borrowing children. Various other people were not particularly inclined to give us information. So what we are saying effectively is that to be part of the scheme you need to nominate a person who will be a contact point. I agree with Mr Grant Robertson actually. I have heard many many stories and seen many many instances of the papers piling up and being ignored. That is pointless. The nominated person is designed to be a point of contact so that at least the Inland Revenue Department can go to them and say: “Who is responsible? Where is this person? How can we make contact with them?”. What we have also discovered over the last 5 years is that an increasing number—in fact a significant number—of our borrowers are in contact through various web pages the internet and various news sites etc. so a lot more focus is going in on that point as well. So I say to Mr Robertson and to others that the argument that we are somehow shifting the goalposts by changing the repayment period from 3 years to 1 year does not fit the current reality in terms of what people are doing overseas. It actually has no impact based on our experience to date on their ability and the timing of their willingness to repay.  
Thirdly one factor that is becoming increasingly obvious subsequently is that we are not operating here in a vacuum. The United Kingdom has just made significant changes to its rules regarding residency for people coming from offshore so many of the people who go over for their OE will not be in the United Kingdom for 3 years anyway. They will not be able to stay there. So the point of giving them a holiday that they cannot fully access seems to me to be a little beside the point.  
What we are seeking to do in this bill is to send the very clear signal that there is a responsibility to repay an outstanding loan—to send the very clear signal that it is not a game of how far you get away from New Zealand means the way in which your responsibilities reduce. I do not think it is at all acceptable that we have a really good rate of repayment for domestic borrowers and a very poor rate for overseas borrowers. The argument that it is difficult for them to make contact or that they are a long way away or that they feel out of touch with New Zealand these days—all these things that I have heard in the last few years—I think is utterly unacceptable. The basic commitment is if you have got a loan you are expected to repay it. What this bill does is seek to reinforce that basic precept.  
So the shift from 3 years to 1 year is in fact a recognition of reality. It is not going to deter people from having their time overseas. Coupled with the introduction of the contact person it makes it better for us and easier for the Inland Revenue Department to keep track of where they are. We will see over time a better rate of repayment. What that does is send a signal to those people who have repaid their loans on time conscientiously over the years that actually their sacrifice has not been in vain. It is simply not fair for some people to get away with paying little or nothing while others diligently at a time in their lives when they might well want to be doing something else are meeting their loan repayments. This bill is a—if I can use the member’s term—pragmatic response to the current situation. It is a common-sense solution and it will work. It goes without saying as I conclude that the amendments that he and the Greens have proposed will not be supported by this side of the House. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I rise to take a call in the Committee stage of the Student Loan Scheme Amendment Bill. Labour supports efforts of course to make the student loan scheme more efficient and to improve repayment rates. The Hon Peter Dunne has talked about a pragmatic approach to this. We believe that there is a pragmatic approach to this and we want to talk in further detail about the repayment holiday changes that are proposed as they appear in clauses 4(b) and 17 of the bill. We have our own proposed amendment. 
The changes to the scheme must be aligned in our view to the basic principles of fairness and opportunity—principles that National has ignored in dealing with the student loan scheme in our view in respect of this particular aspect. Fairness and opportunity must always be kept in mind in respect of this legislation but we are particularly concerned about clause 17 as I said which slashes the repayment holiday period for overseas borrowers from 3 years to 1 year. That is a significant reduction of 2 years and we are proposing that it be put back to 3 years or indeed to 2 years if that is a more pragmatic solution that can be agreed across the House. The OE is a rite of passage for young Kiwis and it is important that those young Kiwis gather the skills they need to return and be successful in New Zealand. They give back to our country when they return they develop useful contacts and they mature—all things that benefit us as a country in the longer term. Cutting that repayment holiday from 3 years to 1 year places in jeopardy the ability of young New Zealanders to go on an OE and worse it risks forcing them not to come back. 
I think the evidence presented to us in the Finance and Expenditure Committee by the Inland Revenue Department drew attention to the dodgy nature if I can use that colloquial term of the department’s guess about what would happen in terms of repayment. It admitted it was a guess of sorts and that is not good enough. Both Treasury and the Ministry of Education have indicated that in their view this change will in fact increase obligations on people as they will decide to stay overseas. Part of the evidence the Inland Revenue Department presented to us was that it had done a survey through the Kiwi Expat Association the KEA network that suggested most young Kiwis stay overseas on their OE for about 3 to 5 years but also that it takes between 12 and 18 months to secure meaningful employment. 
A lot of Kiwis go overseas and they will work bar jobs they will do what it takes to make ends meet but when they are looking for a professional career or they are looking for the kind of work that they want to be based in long term it takes them a little bit longer to get there. I submit that cutting them off from their OE from their repayment holiday before they have secured that meaningful work will force many of them to stay in those jobs which are not the jobs that they want to contribute to long term. It will cut them short from developing the contacts and other experiences that they need to contribute as much as they can to the New Zealand economy in the years that follow their return. Worst of all it does risk forcing them not to come back. If they then find that their debt mounts because they have not yet secured that most meaningful employment they are more likely not to come back and that is in line with the broad opinion expressed by Treasury and by the Ministry of Education.  
I want to come back to what these student loans are here for. Presumably their purpose is to provide access to tertiary education not to provide barriers. That context is important because the clause in the bill that takes their repayment holiday from 3 years to 1 year is in fact presenting another cost barrier as those costs mount. I had the privilege to work in Treasury a number of years ago on a study that looked at the returns on education and one of the important conclusions of that relates directly to this. It relates to the barriers to access to tertiary education. There are studies overseas and there have been significant studies that show that those from lower socio-economic backgrounds overestimate the costs of education by many more times than those from more privileged backgrounds. I will give the exact numbers—no I do not have them with me but the order of magnitude is about right. Those from wealthier backgrounds overestimate the costs by about three times and underestimate the returns by about 10 times. That is because people do not generally understand the nature of compounding interest. Those from less privileged backgrounds actually overestimate the costs by something like 10 times and they underestimate the returns by something like 30 times so it is a much more significant problem. This has a further implication. When we add this already existing problem of perception of the costs of and barriers to access to tertiary education to the Government’s proposal to reduce the repayment holiday we have one further barrier in the way of those who would undertake tertiary education for their own good for their own betterment for the betterment of the lot of their family and ultimately for the good of our country.  
The project at Treasury covered a number of other things that also bear direct interest to this particular clause. We were asked to spend the $10 billion metaphorically that was attributed to tertiary education at that time as best we could and lay out what that might involve. That involved looking at governance arrangements whether the returns on degrees were better than those on diplomas and whether the institutions we have currently serve us well. What we found theoretically at least was that the returns on a degree are phenomenal for our country. So those people who undertake tertiary study benefit our broader well-being as a country. They bring revenue to our country. They are likely to operate in a way that means they will be good taxpayers in the future. If we present barriers to people getting degrees we are foolish. So those who are from lower socio-economic backgrounds who would find a barrier in the student loan legislation and indeed in taking on a student loan should be encouraged. There is Nobel Prize - winning work on this. They should be encouraged to undertake tertiary research even if that means that the State pays for all of their education not just the loan but for all of their education. 
So this move to reduce the repayment holiday moves in exactly the wrong direction for us as a country. We want to make tertiary education more accessible not less. What this bill does and what Treasury effectively says is that it puts one more barrier in place for people who want to undertake tertiary education. It is working for those who are privileged who will be able to undertake tertiary education anyway but it works against those who perceive a barrier to getting into the tertiary sector. To finish I want to suggest that we should amend clause 4(b) and the enactment clause clause 17 to enable that repayment holiday to stay at 3 years for the good of all of us in our country. Thank you. 
JOHN HAYES (National—Wairarapa) 
: 
 It is a privilege to speak on the Student Loan Scheme Amendment Bill. Can I discuss in this Committee the issue of fairness and opportunity raised by the previous speaker Dr David Clark. Here are some small facts. When we are considering the clauses of this bill we need to keep in mind that the Government lent $1.6 billion last year; it had $690 million paid back. The current value of new lending is 54c and the Government writes down 45c of every dollar lent. 
As of June last year overseas borrowers of these student loans which I absolutely support represented 15 percent of all of those students in New Zealand who took out student loans. Fifty percent of that 15 percent were in default and those who were in default owed 70 percent of the money that was overdue. That is why this bill has been put in place and I commend the Minister of Revenue for doing so. When we think about the fairness which the previous speaker spoke of it is worth keeping in mind that the median repayment time for overseas-based borrowers is 14.1 years. 
Hon Member 
: How long? 
JOHN HAYES 
: It is 14.1 years—compare that with borrowers here in New Zealand and you are talking 5.2 years. If you are going to borrow somebody’s money and you are thinking about fairness keep in mind that that money came from a taxpayer’s pocket. Many of them are not wealthy. Many of them are genuine hard-working people. If you are going to borrow somebody’s money you have got two choices: one is you pay the money back; the other is you default. It is not acceptable for a borrower to think that they can hide overseas. If I took the money it is not acceptable that I should think that I should be able to go overseas completely disappear and have no obligation to pay it back. 
Chris Auchinvole 
: You wouldn’t do that. 
JOHN HAYES 
: Not that I would do that and I am sure Chris Auchinvole would not do that—although he does try to hide on the West Coast.  
It is really important to think about this issue of fairness. If you are going to take money it does not grow on trees. It comes out of other people’s pockets and it needs to be repaid. As a community we are giving a good opportunity to young people to educate themselves and what I can say to this Committee is that that money has to be paid back and if they do not pay it back it is unfair. If the borrowers do not pay it back if they disappear off and they think they can have an extended 15-year payment holiday then you have got to think about whether that is fair and reasonable to the person they borrowed it from. I do not believe it is. That is why I absolutely support this bill and that is why I support clauses 1 to 33. Thank you. 
HOLLY WALKER (Green) 
: 
 I am pleased to take a call in this Committee stage of the Student Loan Scheme Amendment Bill and I am proud to move an amendment to this bill via my first Supplementary Order Paper in this House. I spoke yesterday in the second reading debate about the Green Party’s concerns about this bill particularly our concern about reducing the duration of the repayment holiday for overseas borrowers from 3 years to 1 year. So I am very pleased to move an amendment today to retain the maximum duration of the repayment holiday at 3 years.  
I am also pleased to see that great minds think alike and that Labour has also moved substantively similar amendments. I hope that Labour will be supporting mine. I also challenge the Labour Party if these amendments that we have both proposed are defeated in this Committee stage tonight to vote against the bill when it comes up for the third reading.  
I would like to revisit why we have a 3-year repayment holiday in the first place. A repayment holiday is an automatic suspension from the repayment obligations of your student loan while you are living overseas. A borrower still accrues interest but is not required to make repayments and therefore cannot fall into arrears. This is important because as was noted in the Finance and Expenditure Committee’s report a typical borrower overseas may face interest and arrears obligations after a repayment holiday that amount to two to three times the original value of their loan and that could militate against the likelihood of their ever returning to New Zealand or repaying their loan. It is very important that we get policy settings right—policy settings that incentivise people to firstly pay off their loans and secondly return to New Zealand.  
 It has been quoted extensively in the debate on this bill but I think it is worth repeating once again. The reasons that Minister Dunne had for introducing the 3-year repayment holiday in 2007 are no less relevant in 2012 and those reasons are to help remove a potential disincentive to skilled New Zealanders from returning home. We have heard the quote: “The reality they all faced was a very massive debt upon their return to New Zealand which in some cases would be enough for them to make the decision not to come home at all and our country would be the loser.” That is still the case.  
I want to address the Minister’s contribution earlier. He said that 5 years is a long time that things have changed since then and that it is a recognition of reality. Well I sat in on the select committee while it was hearing evidence on this bill and we heard from officials that very little research has been done on the impact of having a 3-year repayment holiday. It has been only 5 years since it was introduced so there has been only one full 3-year period for people within that 5 years to take a repayment holiday. There has been very little research to address what impact it actually has on borrowers’ behaviour. I will quote again from the select committee report: “there was not enough empirical evidence to evaluate the effect of the three-year repayment holiday introduced in 2007 and that limited modelling has been done on the likely effect of curtailing the holiday as borrowers’ response to the change is uncertain.”  
It just seems like bad lawmaking to me to be making this change in a vacuum of knowledge. It seems to be based solely on ideology and—if I may borrow the phrase that has been used earlier—it is completely the opposite of a pragmatic approach. The Government we know is looking for ways to rein in student loans without touching interest-free student loans and this just seems to me to be its attempt to do that.  
My Supplementary Order Paper 16 aims to prevent this bad lawmaking by retaining the maximum duration of the repayment holiday at 3 years. I invite members to support it and as I mentioned before I challenge the Labour Party that if these amendments do not pass and if Labour really believes that the repayment holiday should be kept at 3 years then it should not be supporting this bill through the rest of its stages through this House. The reasons given in 2007 from the Minister are no less relevant now and the fact is that we could be creating policy settings that will make it less likely for people to return to New Zealand and pay off their loans.  
I would like to note that one thing that has changed since 2007 is that even more New Zealanders are moving permanently overseas and we know that the figures for this in this year are the highest they have ever been. So in that context it seems very important that we make careful law that is based on evidence that does not fly in the face of advice that has been received and that has actual empirical backing behind it. We just have not had the chance since 2007 when this was introduced for that to be the case. It is irresponsible to be reducing it down to 1 year. So I invite the House to support my amendments. Thank you. 
PAUL GOLDSMITH (National) 
: 
 I want to concentrate on two clauses in this very worthy bill the Student Loan Scheme Amendment Bill which I support wholeheartedly. One is new section 88A in clause 14 which is focused on the area of adjusted net income being a means of calculating the borrower’s income in accordance with a formula. The idea there is to maximise repayments from New Zealand - based borrowers. The bill makes amendments to exclude losses such as rental losses from the calculation of net income. I think this is very worthwhile.  
Ultimately what we are trying to achieve here is a higher rate of repayment. There is a very very large liability here on the part of the taxpayers as part of a very expensive scheme and the fact is that repayments are slow. We are writing it down to 54c for every dollar that we have lent. So any means that can increase the repayments I think are worthwhile. This new section 88A which excludes such things as being able to offset losses generated from rental properties is just one way to draw back to people their responsibilities for repaying these loans.  
The other area that I want to focus on is new section 107A in clause 17 which again is this issue of the contact person to be nominated. Here in subsection (3) it talks about specifying the details of the name of an individual a New Zealand postal address an electronic address if the individual has one—and we all do these days—and a New Zealand telephone number. Again this is very basic stuff in response to the reality that we have lost track of many of these people with student loans. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
PAUL GOLDSMITH 
: As we were having our dinner break it gave me pause for thought to think about why this bill is particularly important. It is not so much a huge amount of money although it is not irrelevant; we are looking at potential increased repayments of around $14 million. I think that is a very conservative figure and that will reduce the need for further borrowing on the part of the Government—$14 million is probably an increase of 2 or 3 percent in the repayments and we are hoping for more.  
But that is not the key ingredient. The key ingredient is that it sends a clear message that when you do borrow money you should pay it back. This bill is all about just turning the knob a little in the direction of encouraging people and making it clearer that we need people to think about paying back those student loans sooner rather than later. I commend this bill to the Committee on that score. Thank you. 
TRACEY MARTIN (NZ First) 
: 
 Kia ora Mr Chairperson. I rise on behalf of New Zealand First to again state that we will be providing our conditional support for the Student Loan Scheme Amendment Bill to go to the third reading stage. New Zealand First supports the New Zealand - based contact person although we again reiterate that there is no indication in the papers that we have been able to access as to what will happen should that person choose not to provide subsequent contact details of the borrower. New Zealand First supports the exclusion of investment and business losses from the calculation of net income when accessing loan repayments.  
We take no issue with the reduction from a 3-year to a 1-year loan repayment holiday. I note that the Minister of Revenue explained to the Committee that one of the reasons why the 3-year term was incorporated originally was due to the lack of experience or reference points that would have factored into the best period of time for such a repayment holiday when this legislation was originally drafted. I would respectfully suggest that those involved should have actually gone and found themselves a debt collector or taken advice from a credit controller. It is a known reality that the longer debt is unpaid the less likely it is that it will be repaid. It is a known reality of those in those quoted professions that after 3 years you are exceptionally lucky to be able to track down that debtor. In the credit control world 6 months is about as far as you ever want to allow a debt to be neglected. But as I say New Zealand First will be supporting the 1-year repayment holiday amendment.  
I note the number of times my Labour and Green colleagues have used the example of New Zealanders not returning to this nation with their skills due to the shortening of the repayment holiday. Can I be so bold as to suggest that in some cases it might just have the opposite effect: if individuals have not found the job of their dreams overseas within a 12-month period then it may well be time to bring their skills back to New Zealand—to enter a no-interest environment and contribute to the nation that assisted them to obtain those skills in the first instance. But this bill is not about finding the job of individuals’ dreams; this bill is about debt reduction. Again from personal experience the sooner debtors address their debt the greater the likelihood that that debt will be repaid and the sooner the stress—and it is stressful to know that one has a debt—is removed.  
I want to take particular note of the words “fair” and “fairness” in discussion around this particular clause clause 17. If this bill is about being fair to New Zealand students with a student loan then why is it only those who leave our country who have an established recognition that sometimes life either through accident or design just does not go as planned and that people may need to take a break from those repayments? I gave an example yesterday of how that might manifest itself in the lives of women whether they are overseas or whether they are here in New Zealand.  
No bill works in isolation. This bill should not be just about debt reduction and obviously if the Minister is using words like “fair” and “fairness” it is not. But there is a bigger picture that this amendment could have brought to the issue of debt reduction. Couple that with the issue of skill retention and then we have a bill that really works for New Zealand if this bill extended itself to alternative debt reduction ideas such as New Zealand First’s dollar for dollar student loan reduction policy for those students who recognise that New Zealand assisted them to gain these qualifications by paying that forward through their skills by staying in New Zealand. That commitment should also be acknowledged.  
I need to close by saying that a $12 billion debt is not an asset; it is dead money and a contributor to our skills shortage. And although we support this bill going forward to its third reading we are disappointed with its lack of vision. Thank you. 
Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) 
: 
 Following on from that particular contribution from Tracy Martin I want to pick up on the last point first and that is whether in the interests of fairness the holiday period should be applied to domestic student loan borrowers. I would say that if that member does believe that this is an opportunity to convince the Government that applying the same measure to domestic borrowers is something that should be considered then we would welcome the opportunity to see what her amendment to the Student Loan Scheme Amendment Bill might look like in that regard.  
On the second issue in terms of young people going overseas I think there has been quite an extensive contribution from across the Chamber on the benefits of young people going on working holidays. I would certainly be of the mind-set in respect of young people who have gone straight from school perhaps to get their qualification and have then wanted to have that experience overseas that we are certainly richer for it because we are from a small coastal nation. It is a long way away to get over to what is often the most common destination which is somewhere in Europe—often the UK—and once you are in the UK you can travel throughout the whole of Europe. That experience in itself I think adds value to the skill set that a person has got once they have gained their qualifications. I think you appreciate the context with which you can bring those skills back into the New Zealand working environment. I appreciate that experience. I think that if more New Zealand young people—and more New Zealanders—had the opportunity to travel we would see our own country through very different eyes. In fact we would appreciate far more not only the opportunities and experiences we have here but also our ability to really contribute to this country in some very positive ways.  
On the period of debt reduction from 3 years to 1 year I made the point in a previous contribution that it would seem to me just a common-sense approach to align the debt reduction period to what is commonly associated with a working holiday period which is 2 years and some of our bilateral agreements with other countries are for the 2-year period. So I was pleased to see that Grant Robertson had introduced an amendment for members to consider and support which either retained the 3-year period or in the interests of compromise set a 2-year period. I think it is worth considering that this matter—and the point was well made—was not well reviewed. In fact advice was given to the Finance and Expenditure Committee that there was no strong rationale for 3 years and that members should be urged again to consider the time period. But I would go so far as to say that this is probably a part of the bill that should be reviewed so that members actually understand what the effects are of a holiday period for loan repayments on recouping student loans. I want to confirm certainly in terms of Labour’s position that we too believe that having a good track record and paying back debt is something that people should be inspired to participate in if this bill is sending the right signals.  
The next point I want to move to is this issue around identifying a contact person. I would like the Minister to take a call on this and in the interests of clarification maybe answer these questions. When a contact person is nominated by the borrower in the first instance does the contact person have the opportunity to opt out? I ask that because implicit in the bill is that the borrower has asked the contact person whether they can pass on those details and in the frame of thinking of young borrowers they could be putting their parents’ details there and they might not have asked their parents. That is probably the most relevant example in this situation. For whatever reason the contact person may choose not to be identified as the person who is to keep track of the borrower but it is not entirely clear in the bill whether there is an opt-out provision in the first instance for the contact person to turn down the opportunity to be named.  
In the second instance it seems to me that the intention of identifying a contact person is so that the Inland Revenue Department can keep tabs on the borrower for communication purposes. I understand that and I understand the importance of that but it seems to me that for example with regard to the need for the Inland Revenue Department to capture more data or information on that borrower the contact person has to weigh up and say: “Well I am not sure whether I have full consent to give more information or not.” And how would they be treated if they do not give over more requirements of information? I take you to the part of the bill that actually says that under the regulations the loan manager can require—that is in new section 16A(1)(e) in clause 7—“any further information specified in regulations.” So it appears to me that although there is specific information outlined in the bill that must be required if there is any further information and the contact person is not sure whether they have the right or whether there are privacy issues entailed it is not clear whether they should be in fact giving this information. I think it is important for the Minister to clarify that particular issue.  
The other part that I would like to point to is that if this is intended to give confidence to borrowers that by identifying a contact person this will ease for administrative purposes the repayment of loans or the capturing of data so that loans could be repaid then the Inland Revenue Department or the loan manager should be required to review the effectiveness of this particular clause and report on it in some shape or form. I raise that as an issue for the Minister to consider and I ask whether that has been considered or whether he received advice on it. So he could clarify whether by reviewing the effectiveness and efficiency of this clause that could continue to give confidence to people who want to repay loans—confidence in the mechanism used to have a contact person identified and therefore make contact with the borrower.  
By and large there are a number of other aspects to this bill that I think have been well traversed but in the first instance I really think that it is important for the Minister to respond to some of those key points because we still have not had a satisfactory response to the setting of the period by which loans should be repaid and the reducing of the period of repayment for loans from 3 years to 1 year. That in itself is something that would be required I think for the benefit of the Committee—to clarify why the Minister of Revenue who initially supported 3 years is now proposing 1 year.  
There is a simple amendment on the Table from Grant Robertson that could be considered by members in the Committee. I think it is a common-sense proposal— 
Dr David Clark 
: Pragmatic. 
Hon NANAIA MAHUTA 
: —and very pragmatic and it does align the repayment holiday period with the working holiday period that young people go overseas for. Kia ora. 
CHRIS HIPKINS (Labour—Rimutaka) 
: 
 Thank you very much Mr Chair—oh my goodness that is loud! And it is not even me this time. I am very happy to take a call on the Student Loan Scheme Amendment Bill and I want to begin perhaps just by canvassing a few of the principles behind the student loan scheme. The Labour Party is very proud of the track record we have when it comes to the student loan scheme. The student loan scheme was put in place to ensure that financial barriers do not prevent people from participating in tertiary education. That is one of the reasons why Labour took a number of steps during the term that we were in Government to make student loan scheme repayments faster which is one of the things this bill purports to want to do. Whether or not it is going to do that is the subject of some comments that I am going to make shortly. But we wanted graduates to get through their debts faster to be able to get on with their lives and that is one of the reasons why we made student loans interest-free. From memory the average— 
Hon Anne Tolley 
: No it helps to win an election. 
CHRIS HIPKINS 
: No actually—oh so it is to win an election? Well this just highlights the National Party’s stance on interest-free loans does it not? One moment John Key said he was going to fight interest-free student loans with every bone in his body; the next minute he said that it was shonky economics. Was that what it was—it was shonky economics? 
Dr David Clark 
: But it was good politics. 
CHRIS HIPKINS 
: But it was good politics. So now it is good politics for National members to support it but in their heart of hearts they do not believe in interest-free student loans. They do not believe in the policy that has seen the average repayment times for student loans more or less halved. So here they are bringing this bill to the House today which they claim is going to result in faster repayment times for student loans—faster repayment times for student loans; that is what they say this bill is going to do—yet they are opposed to the very policy—the very policy—that resulted in much much faster repayments of student loans. That was interest-free student loans.  
But coming back to the bill—I am not going to be distracted by that unruly lot over there. As the wheels start spinning off the Government you can see the desperation in those members’ eyes but I will not be distracted by that because on this side of the Chamber we do believe in faster repayment times for student loans. That is one of the reasons why the amendment put forward by Grant Robertson is a very sensible one. The advice that the Government has received is that by reducing the repayment holiday from 3 years to 1 year it will actually increase the amount of debt. It will increase the amount of debt.  
Now of course that is something this Government is quite happy with. It does not really mind about debt—debt on any number of levels. Whether it is student loan debt current account debt or Government debt this Government is happy to see it all increase. It wants to borrow. More borrowing—that is what this Government is all for. It does not matter who is doing the borrowing—whether it is people with student loans whether it is the Crown or whether it is households—borrow borrow borrow is the message that we get from this Government. Borrow borrow borrow. We are not going to borrow our way out of recession but that is what this Government seems to think. That is what this Government seems to think because this amendment that the Government is proposing to make in this bill will increase the amount of debt. That is not my view; that is what Treasury is telling the Government. Treasury is telling it that this is going to result in more debt—more debt—and yet it is going to go ahead. Let us be clear about what this is. This is all about the National Government looking like it is doing something. Actually this bill is not really going to make a huge amount of difference other than the fact that it is going to result in more debt.  
So to move to the amendment put forward by my colleague Grant Robertson—which I fully support—to restore the repayment holiday back to 3 years I believe that this is a very pragmatic decision. I am looking forward—I am really looking forward—to the contribution from Peter Dunne on this. I suspect it is going to be the defining part of this debate. It will be the contribution from Peter Dunne because he was very clear in 2007 that he thought that extending the repayment holiday from 1 year to 3 years was very sensible. It was pragmatic. That is what Peter Dunne was saying at the time. He seems to have changed his tune.  
I will be very interested to see how Peter Dunne votes on Grant Robertson’s amendment. If Peter Dunne votes against the amendment put forward by Grant Robertson that will simply confirm what everybody suspects—that Peter Dunne’s view of pragmatism is whatever it will take to keep his ministerial warrant. That is Peter Dunne’s view of pragmatism. I am looking forward to him proving us wrong—to Peter Dunne coming into the Chamber and voting in favour of Grant Robertson’s amendment. If he does do that and if that amendment passes Labour will vote for the rest of the bill because we actually do not have a problem with the rest of the bill. But we do have a problem with this provision in the bill that reduces the repayment holiday—the amount of time someone can spend overseas without having to worry about repayments—from 3 years to 1 year because we do not think it is going to work.  
John Key stood in the Westpac Stadium in Wellington and lamented the fact that 30000 New Zealanders left every year. Of course we have got more New Zealanders leaving New Zealand every year now than that. In fact we are at record levels of people leaving New Zealand and some of the people leaving New Zealand are recent graduates. They are recent graduates going off to do their OE—it is a bit of a rite of passage for New Zealanders. That is something we encourage; we just want them to come back. It is good to do an OE because you get a whole lot of experience that you might not get in New Zealand. If you are a medical graduate for example working for a few years in an overseas hospital is going to give you exposure to a whole lot of different things and experience that you might not get in New Zealand. 
Maggie Barry 
: But why should we pay for it? 
CHRIS HIPKINS 
: We should pay for it Maggie Barry because they will be better doctors when they come back to New Zealand. They will be better doctors when they come back to New Zealand. But this Government does not care about getting them back to New Zealand. It is quite happy to say “stay there”. After training them after spending all that money to train them this Government would rather have them stay overseas than come back to New Zealand. We in the Labour Party want them to come back to New Zealand. We do not want to see the trend continue as it has under this National Government under John Key’s Government for more and more New Zealanders every year to leave the country and not come back. They are not coming back because this Government is not giving them any hope that the future is going to be better for them when they do come back.  
This repayment holiday may seem like only a small thing but if you have got graduates overseas seeing penalties starting to rack up while they are away that will act as a major disincentive for them returning to New Zealand and that is the very last thing we should be doing. For a lot of our graduates 1 year is simply not enough in terms of the time. They might want to do a bit of work they might want to have a bit of holiday they might want to visit a couple of different countries and 1 year is not probably enough; 3 years is adequate time. After that time I think it is fair for New Zealanders to say: “Hey you’ve had your university education or tertiary education”—whatever variety it is—“you’ve had your OE you have had your overseas experience we now want you to come back and contribute back to New Zealand and if you don’t do that we expect you to start making repayments from wherever you are to get your loan balance back under control to start paying off your student loan.”  
That is very reasonable very fair. The Labour Party supports that. But requiring people to do that after 1 year is going to lead to more graduates in default more graduates clocking up debts and clocking up penalties and that is going to act as a disincentive to them coming home. That is one of the reasons why the amendment put forward by Grant Robertson is a very very sensible amendment—a pragmatic decision recognising that many young New Zealanders take that extended period overseas. That is what Peter Dunne said when he supported the 3-year repayment holiday before he went back to supporting the 1-year repayment holiday in the space of 3 or 4 years—but that is OK; that is Peter Dunne. As I said Peter Dunne’s view of pragmatism is whatever keeps his job.  
But I am looking forward to his proving us wrong. I am looking forward to the significant contributions from the Maori Party. I notice that we do not seem to hear so much from the Maori Party these days. It could have something to do with the fact that those members are not allowed to read their speeches any more. They have been kind of unplugged so to speak and so we do not tend to hear quite so much from the Maori Party. I am looking forward to the contributions of Mr Banks. The ACT Party’s Mr Banks will I am sure argue that we should do away with student loans altogether and that it should be the ACT Party’s view of Darwinism: survival of the fittest and whoever has got the most money should get the tertiary education; everyone else should just join the line.  
Moving on to some of the further substance of the bill I must admit I was intrigued by Minister Peter Dunne’s amendment. Actually it is the commencement clause that I was about to talk about so I will talk about that when we get to that part of the debate. But I am interested in the fact that one of these provisions comes into effect retrospectively. That is pretty unusual and I will be interested to hear the justification as to why we are imposing a retrospective clause in this bill. I will get to that when we come to that part of the debate.  
Just moving back to the points of principle that I was raising at the very beginning the Labour Party of course supports efforts to make the student loan scheme more efficient. We think that the student loan scheme is a very important way that we can ensure that everybody can participate in tertiary education and make a brighter future for themselves. Graduates should not be shirking their responsibilities to make repayments but the quid pro quo from that arrangement is that we have to make sure those repayment arrangements are fair. Removing the interest was fair; this is not fair. 
DAVID BENNETT (National—Hamilton East) 
: 
 I move  
That the question be now put 
. 
Hon DAVID PARKER (Labour) 
: 
 I want to deal with the issue as to what it is that is standing between borrowers and repayments. I was on the Finance and Expenditure Committee that heard submissions on the Student Loan Scheme Amendment Bill and we heard from a former official of the Inland Revenue Department who when she was with the department had responsibilities that included the recovery of student loans. She informed the committee that although it is appropriate that we have a contact person for a student loan other than the borrower—normally the parents; I do not think anyone in the Chamber disagrees with that being a sensible thing to do—in her opinion she did not think this was going to make much difference to repayments because the reality is that the vast majority of the outstanding balance of overseas-based student loan borrowers relates to interest and penalties. Once interest and penalties reach a certain point and interest compounds every interest period the amount that is accruing due to the Crown grows at such a rate that the borrower feels helpless and hopeless. They think that this has become such an insurmountable problem they choose to ignore it because they do not see any meaningful way that they can get their loan under control.  
So her evidence to the select committee was that this problem of outstanding overseas student loan amounts is not going to be properly dealt with until we come to some way of dealing with some of these very significant arrears that we have on some of these older balances. This was also the experience that we had for New Zealand - based student loan borrowers where New Zealanders were borrowing and paying interest whilst they were at university and then paying interest during the period of repayment. We had quite a number of borrowers who became so behind that they just gave up and they did not even make an attempt to repay the principal or the interest because they could just not get ahead. That is the problem that we have here.  
So I would invite the Minister in the chair Chester Borrows to take a call and to respond to this issue as to whether that in fact is the case. I would suggest it is because of the evidence that we had from the department on the effect of these measures on student loan repayments—and Dr Clark might be able to help me with supplying a figure here. The amount that this is anticipated reducing overseas student loans is— 
Dr David Clark 
: Apparently the repayment holiday’s $5 million out of $12 billion. 
Hon DAVID PARKER 
: So $12 billion owed in total on student loans and the proportion of those who are overseas is substantial. This legislation improves collections by decreasing the holiday period from 3 years to 1 year and it increases collections by an estimated $5 million. 
Dr David Clark 
: Treasury and the Ministry of Education think it will actually have the opposite effect. 
Hon DAVID PARKER 
: So Treasury— 
Hon Member 
: It’s just a guess. 
Hon DAVID PARKER 
: No it is a good point. David Clark was on the committee as well and he interjects by making the fair point that indeed the Ministry of Education thinks that rather than encouraging more repayments this is going to make it worse because more student borrowers will be getting into trouble earlier. I am not sure that I am completely convinced by that argument because I do think that if you have a lengthy holiday period then you are more likely to get used to not repaying. I think there is some benefit in letting people know what the real event is slightly earlier. But I do not think it is going to collect old debts from debtors who are not paying because their interest bills and their penalties have become so high and they compound every interest period that they just cannot get on top of the problem.  
So for the Government to present this as a substantial cure to outstanding indebtedness on loans to borrowers overseas its own analysis shows that that is not true and therefore this is but tinkering at the edges. Until the Government is willing to grasp the nettle and actually do something with these long-outstanding balances and the accrued interest and penalties that are the major part of the debt now it is not going to get on top of the problem. To the extent that the Government includes these receivables in its financial statements at probably a higher value than is truly recoverable then it is misrepresenting the position to itself. I know that it makes an allowance for uncollectable debt but I suspect that in respect of these international debts that allowance for uncollectable debts is too low. So I would ask the Minister to respond as to whether the underlying problem is for a lot of these old debtors the fact that interest is accruing. 
SIMON O’CONNOR (National—Tamaki) 
: 
 I move  
That the question be now put 
. 
KRIS FAAFOI (Labour—Mana) 
: 
 Thank you very much Mr Chairman for allowing me a call on Part 1 of the Student Loan Scheme Amendment Bill. I would just like to touch on a point that Mr Parker made around the sums that are involved in actually taking these measures and whether or not this is just tinkering at the edges in terms of National’s commitment to student loans. I understand that by taking the measures in this bill—and the member for Dunedin North did point this out in the last call—we are looking at bringing in about $14 million— 
Dr David Clark 
: In total. 
KRIS FAAFOI 
: —in total more revenue as part of the measures that are being taken in this bill. To put that in— 
Dr David Clark 
: A best guess. 
KRIS FAAFOI 
: That is a best guess— 
Dr David Clark 
: The IRD. 
KRIS FAAFOI 
: —from the Inland Revenue Department. But to put that in perspective a total of $12 billion is owed by New Zealanders who have taken out a student loan. To put that in a context of those who are now overseas $2.5 billion is owed in terms of student loans by Kiwis who have now studied have taken out a loan and have gone overseas. I understand in the nominal sense that that is 0.12 percent. In terms of what this bill is going to do in terms of taking action against those who have gone overseas and maybe are shirking their responsibilities in terms of paying their student loan back we do not think on this side of the Chamber that this will make much of a difference.  
One of the aspects of that—and there is an amendment on the Table under the name of Grant Robertson pertaining to new section 107B in clause 17—is around the repayment holiday which will be reduced from 3 years down to 1 year. As someone who has gone overseas for roughly 2 years on an overseas experience this is something that I would have been caught in if this law had been in place in roughly 2006 and 2007. This would have meant that I would have had only a 1-year repayment holiday which means that I would have come back to somewhere in the vicinity—and maybe my colleague over here will be able to correct me if I am wrong—of a debt of around $1000 or $3000 if I had not repaid my loan while I was away. As I was away for 2 years the law as it is proposed in the bill at the moment would have meant that I would be a year out and if I had not repaid then I would have returned to New Zealand with a considerable debt.  
We do think that the Committee should consider the amendment that is on the Table under the name of Grant Robertson making sure that this bill keeps the repayment holiday period at 3 years. We think it is a good solution. Given the amount of time that Kiwis usually head away overseas to take their OE we do also note—and it has been mentioned on a number of occasions—that the Minister of Revenue Peter Dunne in 2007 did state that a 3-year working holiday period would be a pragmatic approach to making sure that we can get back the revenue that we can get back and it would suit better the purposes of those students who had taken out a loan and had gone overseas. We also understand that Treasury itself has said that making this change from a 3-year period to a 1-year period may in fact mean that less money comes in in terms of revenue from those who have gone overseas.  
In terms of this bill we have already stated that we are looking forward to the contribution from Peter Dunne. We ask that he return to his position in 2007 where he quite clearly stated that a 3-year holiday period was much more preferred in terms of that holiday than a 1-year period. We also look forward to maybe seeing members on the opposite side of the Chamber who may think that this is a good move supporting the amendment of Grant Robertson. The student loan bill at $12 billion is a significant amount of money. We want to make sure that the students who have taken out a student loan do get into the habit of paying it back and if they can pay it back they do. But with $2.5 billion being owed by students who are overseas we think that much better measures can be taken in this bill in terms of what is in this now to make sure that we can get some of that $2.5 billion back. It is a significant amount of money.  
It is a concern that we had a significant interjection or a contribution from Maggie Barry across the Chamber while Chris Hipkins was speaking. We do want to try to draw some of best and brightest back and maybe taking a load off them in terms of their student loans is a way to do that but to hear Ms Barry say that we will never get them back is a concern. We want to make sure we get our best and brightest back. As Chris Hipkins said it was pointed out by John Key ahead of the 2008 election just how many Kiwis are going overseas and we want to make sure they are coming back. 
SCOTT SIMPSON (National—Coromandel) 
: 
 I move  
That the question be now put 
. 
ANDREW LITTLE (Labour) 
: 
 The principal point about this legislation is that nobody objects to improving the administrative requirements of the student loan scheme under the Student Loan Scheme Amendment Bill. But the point is that the requirements set out in this bill—which Mr Simon O’Connor my friend opposite finds so entertaining—is that it simply will not make a material difference to the Crown’s balance sheet and to the efficacy of this scheme.  
For a scheme that presently has an outstanding balance of $14 billion of which $2.5 billion is for overseas students the value of that $2.5 billion is increasing mainly because of those who are subject to compounding interest. A scheme that is going to net the Government an extra $14 million a year can be described only as creating a drop in the ocean. That is all it is going to do. With all of the other challenges before this Government and before us all there are different ways not only of skinning this cat but also of achieving a much more material effect that will improve the Crown’s balance sheet and the income and expenditure statement.  
The real question is why go to these lengths. Why shorten the repayment holiday when it is simply not going to have a significant effect? The message that it is sending young people who complete their studies is that we will just make it harder. You will not get your 3-year holiday; you will get a 1-year holiday. The signal that it sends however much that may be psychological or not is that we are going to take something off you and we are going to make it harder—and all for the benefit of $14 million.  
In fact it is not even that; it is actually $5 million because $9 million of the $14 million benefit relates to excluding business losses in the calculation of repayments in the particular year. So in reality this is a $5 million gain against a $14 billion problem. It is laughable. It is risible. The real question is why we are going to these lengths for this purpose.  
The other point too is the contact person requirement. Having to provide a contact person on paper—and let us face it it is on paper—might sound like a sensible idea but the truth is that the way this clause is drafted it is actually meaningless. It could be anybody whose name is put down as a New Zealand contact person when a person takes their holiday. It might sensibly be the parent but it may not.  
And even if it is the parent what will be the material effect of that provision? There is no suggestion that the parent will be chased for any outstanding payments or the outstanding loan nor your best buddy whose name you might provide or some name that you made up—because that is not unknown. That is not unknown in this country. It is not unknown for New Zealand citizens to make up names on forms. It is not unknown for New Zealand citizens to apply for passports in names that have been made up and indeed for MPs to behave in that sort of way. Fortunately they are former MPs now so we do not have to dwell too much on that.  
When it comes to efficacy—not only the efficacy of this bill but also the efficacy of this Parliament—and the time we spend on things creating a $5 million solution to a $14 billion problem hardly measures up. We have to do more and we have to do better. We all know and there is a wide consensus that we want to maximise access to tertiary education for the nation’s young people. At a time of great economic change there is one thing we must do and that is invest in our young people and invest in their skills and skills formation and their training. That is why the scheme plays a crucial and important role in the life of New Zealand and our young people in our tertiary education system. We do want a more effective repayment regime but a regime that simply improves the collection in any one year by $5 million when there is so much outstanding is hardly worth the many pieces of paper it is written on. So even with that even with reducing the repayment holiday even with that marginal improvement there is very little else in it. 
LOUISE UPSTON (Junior Whip—National) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 72 
New Zealand National 59; New Zealand First 7; Maori Party 3; ACT New Zealand 1; Mana 1; United Future 1. 
Noes 48 
New Zealand Labour 34; Green Party 14. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 16 in the name of Holly Walker to Part 1 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 49 
New Zealand Labour 34; Green Party 14; Mana 1. 
Noes 71 
New Zealand National 59; New Zealand First 7; Maori Party 3; ACT New Zealand 1; United Future 1. 
Amendments not agreed to. 
The CHAIRPERSON (Eric Roy) 
: The first Grant Robertson amendment is essentially the same so it is now ruled out of order as being inconsistent with the previous decision.  
The question was put that the following amendments in the name of Grant Robertson to Part 1 be agreed to: 
to replace in clause 4 “365 days” with “2 years”; and 
to replace section 107B(3) in clause 17 with: 
(3)For the purposes of this subpart a borrower reaches the borrower’s limit if— 
(a)the borrower has had 1 or more repayment holidays granted under this Act for a period of 2 years or for periods that total 2 years; or 
(b)the borrower has had 1 or more repayment holidays under Part 3 of the Student Loan Scheme Act 1992 for a period of 3 years or for periods that total 3 years; or 
(c)the borrower has had— 
(i)1 or more repayment holidays under Part 3 of the Student Loan Scheme Act 1992 for a period of less than 3 years or for periods less than 3 years; and 
(ii)1 or more repayment holidays granted under this Act for a period that equals or for periods that in total equal the lesser of— 
(A)2 years; and 
(B)the remainder of the period of the repayment holiday to which the borrower would have been entitled under Part 3 of the Student Loan Scheme Act 1992 if that Act had been repealed; or 
(d)the borrower has had his or her repayment holiday under Part 3 of the Student Loan Scheme Act 1992 continued under section 108A(2) for the maximum period prescribed for that continuation; and 
to replace in new section 108A(2)(a) in clause 17 “365 days” with “2 years”. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 49 
New Zealand Labour 34; Green Party 14; Mana 1. 
Noes 71 
New Zealand National 59; New Zealand First 7; Maori Party 3; ACT New Zealand 1; United Future 1. 
Amendments not agreed to. 
The CHAIRPERSON (Eric Roy) 
: I have a typescript amendment in the name of the Hon Nanaia Mahuta but it is not signed so it is out of order. 
A party vote was called for on the question  
That Part 1 be agreed to. 
Ayes 72 
New Zealand National 59; New Zealand First 7; Maori Party 3; ACT New Zealand 1; Mana 1; United Future 1. 
Noes 48 
New Zealand Labour 34; Green Party 14. 
Part 1 agreed to. 
Part 2Transitional provision  
GRANT ROBERTSON (Deputy Leader—Labour) 
: 
 The transitional provision in this Student Loan Scheme Amendment Bill relates mostly—in fact entirely now because one clause has been deleted—to the question of the definition of “contact person” which is a matter that I was discussing in my earlier call. Had I had another call on Part 1 I certainly would have got up and expressed my concern that the National Government had not taken up the compromise position of a 2-year period for the repayment holiday. This was a pragmatic solution proposed by members on this side of the Chamber and it is very unfortunate that it has not been taken up by the Government. It certainly runs in the face of the good old-fashioned Kiwi OE and I am very disappointed that the Committee has not seen fit to support New Zealanders in the rite of passage that they have had for many years to take that OE for a couple of years. That is what that amendment would have done.  
The transitional provision specifically relates to the question of the definition of “contact person”. The reason there needs to be a transitional provision is that the definition is changing and those people who already are I guess contact people will not necessarily know. So the particular clause in question here contains the definition that will be found in new section 193A(5) of the Student Loan Scheme Act. For people who are reading along at home that new section is inserted by clause 29 of the bill. Basically what that is saying is: “(5) In this section … ‘contact person’ in relation to a borrower means—(a) an individual whose name has been notified under section 16A in relation to the borrower; or (b) an individual nominated by the borrower under section 107A or 193B.”  
The big difference here as we discussed earlier in the debate on this bill is that the person who has previously been listed as a contact person for a borrower is now going to be more likely to be contacted than they ever were before. Previously when people have given contact details it has really been a fairly perfunctory exercise. It is one where simply contact details are given and if someone is in default they would be contacted. Now the provision—and why there is an important transitional provision on this—is that that is changing. It is a transition so it is important that the contact people who have been identified by borrowers will now know that they have an additional responsibility. That is covered in new section 193B which is referred to via new section 193A(5) in the transitional provision.  
New section 193B actually lists some of the responsibilities of a contact person. It is worth noting that section 193B(2) states: “If there is a change in any of the details of a borrower’s contact person the borrower must promptly notify the Commissioner of the changed details.” That is actually something that now impinges not only on the contact person but also on the borrowers themselves. Will they know necessarily when they are overseas that the person they have listed as a contact person has moved? Perhaps that is why this new clause ends up being referred to as part of the transitional provision. It is to give time for people to get used to this new role that is put on both the contact person and the borrower.  
So these are actually substantive changes and I guess at one level it is good then that there is a grace period through to the end of the year put in place by the transitional provision. But on the other hand as I said during my earlier call I actually think these changes are significant enough that it will come as a surprise to some people. As I was discussing earlier on parents who have become the contact person by default virtually for their children now actually have a set of responsibilities. If they move they had certainly better let their children know because that is actually the responsibility that now falls upon the borrower. The transitional provision is one that clearly is necessary in order to put in place the changes but I guess on this side of the Chamber we raise some question about those changes because just being a contact person has been a very low-level activity; now it is a much higher-level activity.  
We do have to remember that the student loan is a loan contract between the borrower and the Crown. These contact people actually have no responsibility for the loan itself so they are getting quite an additional role. They are going to be contacted by the Inland Revenue Department. They are going to be contacted by the State. Their name and their details are going to be kept by the State and will obviously be updated on a regular basis if the borrower is fulfilling section 193B which has been included in the bill. So it is actually quite a substantive change and I know that Mr Dunne acknowledged that when he was in the chair earlier on. I do think that if this bill passes in its current form it is going to be something that will be different.  
I am not going to take much more of a call other than to note that the transitional provision is not just the normal one about dates and things. It actually relates to a substantive change around what it is to be a contact person for a student loan borrower. It is now a much bigger job; one where you will be contacted more often. I do think that is going to come as quite a surprise particularly to some of the parents in New Zealand and I hope they are huddled over their radios tonight to know what the change will be. 
Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) 
: 
 That is a good point to continue because for those people who are currently identified as contact persons there should be some obligation I would think to notify them about the change of their status and the new expectations they will inherit as a result of this Student Loan Scheme Amendment Bill. So the Minister in the chair the Minister for Courts should take a call on that particular aspect because it is only right that people are informed if there are new obligations resulting from this legislation.  
That communication should go out for a specific set of people who are currently identified as contact persons so that when the new bill comes into effect as of I guess 1 January 2013 because that section will be repealed they should be informed that they have identified with the current set of contact people and that they have new obligations and they should be asked whether they want to continue to be contact persons in the event that their children or whomever they are the contact person for may go overseas. I think that is a really important point and it is the point that I raised in the previous part.  
The opt-out provisions should be very clear for existing contact persons who no longer wish to continue to be of that status going forward. There should at least as a matter of courtesy be an opportunity to update and inform them about the new provisions of the Act and by default the expectations that they will inherit and secondly the opportunity to opt out should they no longer wish to be a contact person. That is more an obligation in terms of the Inland Revenue Department I would think rather than the borrower because this is something that is a carry-over function of the existing system. Kia ora. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I rise to take a call and as I do I want to comment to start off that this is perhaps one of the least offensive provisions in the Student Loan Scheme Amendment Bill. So my comments must be taken in that context.  
As I start I just want to remind us of a few facts. I do want to talk about the barriers that this presents because I think it contributes further in some small way to the barriers to tertiary education that I spoke about in debate on Part 1. Reminding ourselves that 58 percent of the borrowers are women that $17000 is the average amount held in a student loan and that the total debt is $12 billion these provisions in this particular part Part 2 are all aimed at grabbing back—grasping back perhaps we could say—some of that debt hole that is running up. The contact person is a means of getting to those who have money owing and perhaps it is those who have taken a repayment holiday and who have disappeared into the ether.  
There is a sense that this is all part of the same objective and it is all aimed at grasping back $5 million of a $12 billion debt. In that context the fact that we are spending an estimated $2761000 worth of parliamentary time to pass this bit of legislation is infuriating. It is spurious to suggest that this will encourage students to repay when the Government’s own officials at Treasury and the Ministry of Education have questioned whether this is really true. In fact they suggest that this legislation as it relates to those who are overseas may in fact encourage them to stay overseas. It presents a barrier in that respect.  
The Labour Party is of course opposed to barriers to tertiary education and this relates to our belief in the basic principles of fairness and opportunity. They are principles that National has historically tended to ignore when it comes to dealing with the student loan scheme. We will remember that Labour introduced interest-free loans and National introduced a fee for administration— 
The CHAIRPERSON (Eric Roy) 
: Order! This is quite a narrow debate. It is the transitional provisions. 
Dr DAVID CLARK 
: Just returning to the point which is about collecting this debt and the role of contact people in that—Mr Chairman I thank you for your guidance—I really wanted to say and I will draw to a close shortly that the parents of a person undertaking tertiary education are the best predictors of that person’s outcome and they will likely be the people who are those contact people. If there is a sense when students go to undertake tertiary education that they are going to be reported on by their parents if they fail to meet some of the payments or they fall into difficult circumstances whilst overseas that will be very disappointing indeed. That is why I think it is important that this is clearly signalled to those whom it will affect and that we remain conscious of the potential barrier—another potential barrier—to tertiary education that could exist in naming a contact person and making that contact person provision stronger.  
As I have said at the beginning and to conclude this is perhaps one of the least offensive provisions in the bill but I think it is worth considering the implications of it. Thank you. 
HOLLY WALKER (Green) 
: 
 Thank you for the opportunity to take a short call on Part 2 of the Student Loan Scheme Amendment Bill. I will not take up a lot of the Committee’s time but I would like to reiterate the invitation to the Minister in the chair the Hon Chester Borrows to take a call to answer some questions about this part. I thank the Hon Nanaia Mahuta for her contribution on this earlier. I would also like to know how the increased responsibilities for those who will be taking on the role of the contact person will be notified to those who are currently named as contact people in relation to this legislation. I would like to know whether they will have the opportunity to opt out of that and how they will be provided with that opportunity. I would like to invite the Minister in the chair to take a call to explain that to the Committee.  
KRIS FAAFOI (Labour—Mana) 
: 
 Thank you very much for giving me the opportunity to speak to Part 2 which is a very narrow debate as you have already mentioned around transitional provisions around the contact persons for people who have gone overseas and who have student loans. The ears of parents around New Zealand who are watching this debate right now have pricked up because they want to know what their sons and daughters are going to get them into when they are heading overseas. They are also a little bit worried about what this provision and the provision in Part 1 around the repayment holiday may mean for them if their sons daughters or loved ones are going overseas for more than just the 1 year.  
For the benefit of those parents at home I would just like to point out again what a contact person constitutes in terms of the Student Loan Scheme Amendment Bill. It means that if someone is going overseas you have to tell the Inland Revenue Department who this contact person is. You are going to have to obviously identify this person give the Inland Revenue Department their postal address an email if they have one a telephone number for this individual and any other information that may be specified in the regulations. With the transition to this contact person regime within the bill—at the moment we have a quasi-regime where some people have taken on this duty with their sons daughters or loved ones already and they have an amount of responsibility—now they are going to have a fair deal of responsibility. It is not responsibility for the amount of money that is owed but if the person who is overseas were to go missing or not pay their student loan back in time then this is the person whom the Inland Revenue Department staffers on behalf of the commissioner will call to ensure that something is done about the money that is owed. And we do note that there is a transition period which is dated up to 31 December 2012 I believe. We hope that the Inland Revenue Department as Nanaia Mahuta has already pointed out will be able to contact as many people as possible to tell parents that there is going to be a little bit of added responsibility on them for their loved ones—for their sons and daughters—who have gone overseas.  
As David Clark has mentioned already this is something that we think is relatively pragmatic to use that word again— 
Dr David Clark 
: It’s common sense.  
KRIS FAAFOI 
: —and relatively common sense but maybe there will be a degree of concern amongst parents in New Zealand at the moment whose sons and daughters may be reaching graduation and talking about heading overseas to Europe for their big OE. Their parents— 
Grant Robertson 
: Only there for a year now. 
KRIS FAAFOI 
: And it may be shorter now; that is a good point. But there will be a degree of concern amongst parents who have loved ones who are nearing graduation and looking at going overseas when they know that these students have student loans. Some of them may have hefty student loans. Those parents may know that they may not be coming back. Those parents may also be worried that they will be receiving a phone call an email or a piece of mail through their letterbox to say “Hey where’s your son? Where’s your daughter? They haven’t paid their student loan back on time and you’re going to be in the gun for it.”  
We welcome the transitional provision within the bill. We think it is relatively pragmatic but again we do feel the pain and the concern of many parents out there in New Zealand who are worried about what this may mean in terms of their loved ones who now may be going overseas for a little less time than traditionally has been the case for Kiwis on their OE. Thank you. 
SIMON O’CONNOR (National—Tamaki) 
: 
 I move  
That the question be now put 
. 
The CHAIRPERSON (Eric Roy) 
: I am sorely tempted.  
DARIEN FENTON (Labour) 
: 
 I appreciate the opportunity to take a call on Part 2 “Transitional provision”. I have not taken a call in the Committee stage of this bill but I have been sitting here as a parent with a child overseas feeling somewhat alarmed. 
Grant Robertson 
: Are you the contact person? 
DARIEN FENTON 
: Have I been named as the contact person by my son and daughter who happen to live in San Francisco at the moment? They do have a student loan. Am I the contact person and how would I know? Under this transitional provision I am not certain even though it does appear to give some breathing space in that it is a transitional provision until the close of 31 December. So there is some breathing space I think so I might have some time to find out whether I am the contact person and whether my address my email my phone number and other details have been given to that very very frightening but very efficient department called the Inland Revenue Department.  
I felt moved to take a call on this transitional provision in Part 2 to ask the Minister in the chair the Minister for Courts some questions about this. As I said as a parent with children overseas like so many parents I regret that my children have decided that they have to go and live and work overseas. They have taken other opportunities because— 
Dr David Clark 
: More and more New Zealanders are doing it.  
DARIEN FENTON 
: Thirty thousand or so have gone to Australia but actually my children have gone further afield as I said to take up opportunities that they simply cannot get in New Zealand.  
I also listened to the debate about repayment holidays. I do not want to go into that now because I know it is not relevant—and thank you Mr Chairperson for your guidance—but as I said I do feel very very moved to take a call as a concerned parent about what this transitional provision will mean. For the purposes of those people who are listening on their crystal sets tonight— 
Grant Robertson 
: Thousands of them! 
DARIEN FENTON 
: —thousands of them listening on their crystal sets—let us see what it says. It says in clause 34(1): “Until the close of 31 December 2012 the definition of contact person in section 193A(5) of the principal Act must be read without reference to paragraph (a) of that definition.” I am trying to find my way through the bill and through the principal Act to see what that means but what it says to me is that there is at least some breathing space for me as a parent and for my children who have escaped overseas to reconsider whether— 
Grant Robertson 
: You want them back? 
DARIEN FENTON 
: —of course I want them back—but to reconsider whether I am a suitable person to be a contact person under this bill and whether they may want to think about whether they want to expose their parents to the vagaries of this bill particularly with all of its consequences with the shortening of the repayment holiday.  
As I have said I have listened to the debate with great interest. I will follow the debate further. I am deeply disappointed that we have not been able to persuade the Government to make amendments that may well have led the Labour Party to support this bill but unfortunately because of the Government’s attitude the lack of common sense that we have had— 
The CHAIRPERSON (Eric Roy) 
: Order! Transitional provision. 
DARIEN FENTON 
: —and the lack of common sense perhaps in the transitional provision— 
Dr David Clark 
: There’s no lack of common sense in the transitional provision though. 
DARIEN FENTON 
: True. Well we could have had a longer transitional provision of course. It could have been until 31 December 2013. That might have been of even more comfort to me as a parent. But I do appreciate the opportunity to take a call on the transitional provision in Part 2. 
DAVID BENNETT (National—Hamilton East) 
: 
 I move  
That the question be now put 
. 
Motion agreed to. 
A party vote was called for on the question  
That Part 2 be agreed to. 
Ayes 72 
New Zealand National 59; New Zealand First 7; Maori Party 3; Mana 1; ACT New Zealand 1; United Future 1. 
Noes 48 
New Zealand Labour 34; Green Party 14. 
Part 2 agreed to. 
Clauses 1 and 2  
GRANT ROBERTSON (Deputy Leader—Labour) 
: 
 Clauses 1 and 2 are the title and commencement date which normally would be a short debate but there are some issues when we come to the commencement clause that I think are worthy of focusing on. But in this call I want to focus on the title of the bill.  
The title of the bill is innocuous—the Student Loan Scheme Amendment Bill. In fact the bill could be better termed the “Student Loan Scheme (Ending the OE) Bill” because that is in effect what this will do for some New Zealanders. What this bill is saying to New Zealanders who want to go away on a normal length OE to the UK of 2 years is that it is not the pragmatic solution that Peter Dunne put forward in 2007 and that he articulately very well in Parliament in 2007. That pragmatic solution was struck to ensure that somebody had a provision to undertake their OE. It was not that they were getting off scot-free—they are still paying interest when they are overseas—but they got some recognition of the fact that we support New Zealanders to do this and encourage them to return.  
We have heard already in this debate that in fact the evidence that Treasury and the Ministry of Education have provided to the Government is that there is a likelihood that this may discourage people from returning from overseas and therefore increase the annual student loans impairment. So we could easily call the bill the “Student Loan Scheme (Ending the OE) Bill”.  
Certainly a title that it could not be called is the “Student Loan Scheme (Pragmatic) Amendment Bill” because it loses the pragmatism that formerly was in the legislation. During the earlier debate Peter Dunne mounted an argument for why the loan repayment holiday should be taken down from 3 years to 1 year. The problem with that argument was that if you followed it all the way to its logical conclusion there should not be a loan repayment holiday. Mr Dunne’s argument was that all borrowers needed to be treated the same essentially whether they were in New Zealand or whether they were overseas. Well if that is the logic get rid of the loan repayment holiday altogether.  
Hon David Parker 
: And the interest. 
GRANT ROBERTSON 
: That is right—and the interest as well because borrowers in New Zealand are not paying the interest. So Mr Dunne’s logic has fallen from him here because he has taken it from 3 years to 1 year but it does not make any sense in terms of the argument he made. The title of the bill certainly would not be able to be the “Student Loan Scheme (Pragmatic) Amendment Bill” and it would not be able to be the “Student Loan Scheme (Logical) Amendment Bill” because it fails both of those tests. The loan repayment holiday was put in place as a pragmatic solution to the fact that we do not want New Zealanders who go overseas for a short period to have things put in front of them that will make it less likely that they will return to New Zealand.  
During the dinner break I had a tweet— 
Simon Bridges 
: Sausage roll.  
GRANT ROBERTSON 
: I did not have a sausage roll actually. I had a very healthy dinner Mr Bridges: salad ham and a roll just so you know. Mr Bridges on the other hand was once again wallowing in his Chinese takeaway from down the road which we see him have most dinner times.  
But what this person told me in the dinner break was that they had worked overseas as a volunteer for a number of years on the basis of the loan repayment holiday. They were actually able to spend 3 years working overseas paying interest—not actually abdicating their responsibilities; knowing that interest would be accruing on the loan—doing volunteer work and have the loan repayment holiday for 3 years.  
The repayment holiday would be down to 1 year now under this scheme. That would be good and that would be useful but it does not support New Zealanders in what has been their traditional activity of going on an OE knowing that at the end of those 2 years or possibly 3 years if they got an extension on their visa they would be able to come back to New Zealand and they would not have had to make those loan repayments in that time. This is pragmatism and I do think that if the Student Loan Scheme Amendment Bill was to be titled any other way it would be around a reference to what now happens for New Zealand graduates who go away on their OE. 
On this side of the Chamber we want to make absolutely clear that we want people to pay their loans back. Whatever concerns we might have about student loans and the size of student debt we want everyone who is in this scheme to feel that people are making their repayments and that people are doing what they need to do. But when there is an opportunity for people to go overseas and do what New Zealanders have done for decades and for generations it seems very unfortunate that the Government is not prepared to take up the pragmatic solution it was offered.  
KRIS FAAFOI (Labour—Mana) 
: 
 Thank you very much Mr Chair for giving me the opportunity to speak to the title and commencement of the Student Loan Scheme Amendment Bill. A number of suggestions were put forward by Grant Robertson as to a better title for this bill but I would like to suggest that we call it the “Student Loan Scheme (Second Wave Attack by National) Amendment Bill”. We saw the first wave attack come in its first term of Government when it restricted the access of older New Zealanders to a student loan. So what we have got in front of us today is the second wave attack from National. Really it is not much of an attack because this bill does not achieve what it sets out to achieve. We have already heard that this bill will bring in only another $14 million of revenue by bringing in these provisions around the repayment holiday. 
In terms of the second wave attack it builds up a narrative about National and its commitment to student loans. It does not believe in them at all. We have already heard from John Key that he thinks it is economic madness to keep interest-free student loans— 
The CHAIRPERSON (Eric Roy) 
: Order! Title and commencement.  
KRIS FAAFOI 
: OK. We have already heard my suggestion that the bill should be called the “Student Loan Scheme (Second Wave Attack by a National Government) Amendment Bill”. Why do we think it should be called that? Because of the lack of commitment by National to the student loan scheme. We have already heard from the Prime Minister a rather large missile thrown in terms of the second wave attack that I am talking about around his commitment to the student loan scheme. He says it is economic madness to continue the interest-free part of the student loan scheme. In fact he says that if it was not for the politics of it he would not keep it. In terms of calling this bill the second wave attack bill we really do think that National is struggling to continue its commitment to what Labour brought in in 2005 to ensure that there were no barriers to New Zealanders entering tertiary education. We believe that if National actually brought in the bill it wanted to it would be the “Student Loan Scheme (Interest-free Loan Aspect Repeal) Bill” because we do not believe that the National Party is committed to interest-free student loans at all. 
In terms of the second wave attack that I have talked about around the title of the bill we have already heard about the lack of extra revenue that it brings in— 
The CHAIRPERSON (Eric Roy) 
: If the member is not going to talk about the title and commencement I will terminate his speech.  
KRIS FAAFOI 
: Thank you very much Mr Chair for that clarification. In terms of the title I think this bill should be called the “Student Loan Scheme (Second Wave Attack by National) Amendment Bill”. We have already seen— 
Simon Bridges 
: I want to help you get to 5 minutes. Give us some other titles.  
KRIS FAAFOI 
: Sorry a slight interruption. Well maybe we should call it the “Student Loan Scheme (Simon Bridges is Getting His Student Loan Interest-free) Bill”. Maybe we should call it that. But the one that I wanted to bring to the Committee today was the “Student Loan (National’s Second Wave Attack on Student Loans) Amendment Bill. [ 
Interruption 
] It is a good name—thank you very much Ruth Dyson and welcome to the Chamber. We do not believe there is a commitment from National to making sure that the student loan scheme stays interest-free. We do not believe that. We believe that it has launched the second wave attack because of what it did in the first wave by reducing the access— 
The CHAIRPERSON (Eric Roy) 
: Right the speech is terminated. 
HOLLY WALKER (Green) 
: 
 Thank you for the opportunity to take a short call on the title and commencement of the Student Loan Scheme Amendment Bill. I would like to do two things and the first is to make a suggestion for an alternative title of the bill which is the “Student Loan Scheme (Reining Student Loans In) Amendment Bill”. That of course is what John Key said recently to an audience of property developers in Auckland he wanted to do with the student loan scheme. Of course as we all know John Key would really like to get rid of interest-free student loans but as he outlined to that audience he does not see that as politically feasible and— 
The CHAIRPERSON (Eric Roy) 
: Order! The same rules apply: title and commencement. That is the subject of this debate. 
HOLLY WALKER 
: Thank you Mr Chair. That is why I am suggesting that the title of this bill should be the “Student Loan Scheme (Reining Student Loans In) Amendment Bill” because it is the only way that National can find to rein in student loans in the absence of doing what it really wants to do.  
I want to move to a more substantive point which is about the commencement. I note that there is a Supplementary Order Paper on the Table from the Minister of Revenue relating to clause 2(4). That clause states: “The rest of the Act comes into force on 1 April 2012.” The Supplementary Order Paper replaces that word “comes” into force with “is deemed to have come” into force. I want to raise a serious concern about this because what this essentially does is make the bill retrospective and I would submit to the Committee that this is bad practice and bad lawmaking. We should not be in the practice of making retrospective law in this Chamber. If the bill cannot be passed in time to meet the commencement date set out in the commencement clause then that date should be extended. We should not be retrospectively applying this bill. So I want to raise a serious concern about that and invite the Minister in the chair the Minister for Courts to take a call to explain to us why it is so important that we need to enact retrospective legislation in this Committee in order for this bill to come into force. I suggest that a far more transparent and democratic approach would be to extend the time of commencement and I will invite the Minister to take a call to explain that.  
CHRIS HIPKINS (Labour—Rimutaka) 
: 
 To respond to Holly Walker’s comment I do not think the Minister in the chair the Minister for Courts is going to respond. He is tied up with a glossy magazine over there; I am not entirely sure what is in it. I also want to talk about the commencement clause which means new clause 30D is coming into effect retrospectively. It will come into force on 1 January. What is new clause 30D? We have to turn to new clause 30D to find that it amends schedule 5 of the principal Act— 
Simon Bridges 
: “Shedule” not “skedule”. 
CHRIS HIPKINS 
: “Shedule” “skedule” “schmedule”—whatever. It amends it by repealing clause 2 of that schedule. What is clause 2 of that schedule that this is going to be imposing retrospectively? It says that no interest is to be charged by the loan manager and then the commencement clause is repealing it retrospectively. National is the party that promised us it was not going to reintroduce interest in any form on student loans yet it is repealing retrospectively in the commencement clause of this bill a clause in the schedule of the principal Act that says no interest shall be charged by the loan manager.  
We should rename this bill. It should be the “Another Broken Promise by the National Party Bill”. Not only is National going to break the promise but it is going to do it retrospectively. Under the commencement clause of this bill it imposes that retrospectively. The clause in schedule 5 of the principal Act that says that no interest shall be charged by the loan manager is gone—gone under this Government—and it is doing it retrospectively. It is imposing it from 1 January this year. That would make it a new record for a broken promise by the National Government. Less than 2 months effectively after an election it is doing away with an election promise. Even though it is now 4 or 5 months after the election National is going to break its promise retrospectively by repealing this clause in schedule 5 that says that no interest shall be charged by the loan manager. National is repealing it retrospectively.  
This has now actually become one of the major clauses. This commencement clause which imposes this change retrospectively is now one of the major clauses in this bill because it is a broken promise by the National Government. It is trying to sneak it through retrospectively in this commencement clause under clause 2(1A) which says “Section 30D is deemed to have come into force on 1 January 2012.” The clause that says no interest is to be charged by the loan manager is being repealed retrospectively. It is being repealed retrospectively.  
For a starter that is just bad law. It is simply bad law for the Government to be forcing through the Parliament any provisions that apply retrospectively. But this is a provision that breaks a fundamental promise of National’s of not having interest on student loans albeit in what is potentially quite a minor way. I have not had a chance to review the entirety of the Act in terms of how that fits into it but it is pretty clear. I will read out the clause: “The loan manager must not charge interest in relation to any loan advance made by the loan manager in accordance with this schedule.” That is pretty fundamental. It says that the loan manager cannot charge interest and the Government is repealing it retrospectively. It is doing away with that element of the interest-free student loan scheme retrospectively. Going back to the beginning of the year that commencement clause will take effect.  
That is a broken promise by this National Government. It is no wonder its members did not want to debate this part of the bill. It is no wonder nobody in the National Government is willing to leap up and take a call. It is no wonder the Minister is not willing to take a call and say why it is that this needs to apply retrospectively. Regardless of whether it breaks the promise—and I think it is outrageous that National is breaking that promise—any clause in a bill that applies retrospectively needs to be explained and needs to be justified. That is what the Committee stage of the House is all about. It is where we go through bills brought before the House clause by clause and we are now on to the commencement clause. The Minister in the chair needs to stand up and explain why this clause needs to apply retrospectively—this clause that effectively removes the restriction on the loan manager from charging interest on any loan advance made by the loan manager in accordance with that schedule—that “shedule”—of the Act. 
David Bennett 
: Schedule. 
CHRIS HIPKINS 
: That schedule of the Act. I will help old “Cue Ball” over there. He is getting a bit uptight about the pronunciation of the word. 
GRANT ROBERTSON (Deputy Leader—Labour) 
: 
 My colleague Mr Hipkins has raised what is a serious issue because the commencement clause of the Student Loan Scheme Amendment Bill does bring in a retrospective date for commencement. I think that in principle that is something we should be very careful about in this House—to have legislation having a provision that is retrospectively coming into force. I think it really does require a Minister to stand up and take a call and explain to this Committee firstly why it would be that we even have a retrospective commencement date and secondly why on an issue such as this that is deemed to be something that is OK.  
For clarification for members what subclause (1) of clause 2 in schedule 5 which is being removed says—and as my colleague has said the clause is entitled “No interest charged by loan manager”—is that “The loan manager must not charge interest in relation to any loan advance made by the loan manager in accordance with this schedule.” We will come back to some of the earlier elements of the schedule in a moment. But to clarify for members of the Committee what a loan advance is a loan advance means according to the interpretation section of the Student Loan Scheme Act: “all—(a) money that is advanced by the loan manager to a borrower under the student loan scheme; and (b) student loan establishment fees charged by the loan manager to the borrower under section 14;”—which is what National introduced last year—“and (c) student loan establishment fees and any other type of fee charged by the loan manager to the borrower in accordance with a loan contract.”  
That is basically everything. A loan advance is pretty much everything that is provided to borrowers under the scheme. So this clause retrospectively coming into force repeals retrospectively the provision that the loan manager must not charge interest in relation to any loan advance. That is what is now being removed. So this is an interesting change.  
The Student Loan Scheme Act is a complicated Act. There may well be an innocent explanation for this but we do not know. That is the problem with this being done through the commencement clause rather than through a process that is more open to the Committee because as we know the subject of interest and whether interest is charged or not is obviously at the heart of the debate over the student loan scheme. We have heard already tonight that the Prime Minister and the current Minister for Tertiary Education Skills and Employment have concerns about whether or not they think the student loan scheme is economically sound. They think it is politically sound but they do not believe it is economically sound. So that is why we become worried when we see clauses such as this included in the bill.  
Essentially it is removing one clause within schedule 5 of the principal Act and that is the clause that says no interest shall be charged. What this is referring to is actually people who took out loans in a certain period. It refers to people who took out loans between 31 December 2011 and 1 April 2012 so we are in that period now. It is affecting people right now today who under this provision in schedule 5 of the Act passed last year in this House were to be charged no interest because that is the situation for every borrower in the student loan scheme at the moment.  
So really we do need someone on the other side of the Chamber to take a call to explain what this means to explain why for borrowers in the current period we are in now who had a piece of legislation that told them that no interest would be charged by the loan manager on their loan advances that has now been taken away. If there is an innocent explanation I am quite sure members opposite are capable of getting up and telling this Committee why that is the case and then we can get on with the rest of the debate around the title and commencement clauses.  
But it is very different to see a commencement clause with a retrospective date in it. We have now been able to identify what that is and it is a serious matter. There is not much more serious with the student loan scheme than the issue of whether interest should be charged or not. The whole schedule is one that obviously relates to a specific period in time with the loan scheme but it does raise concerns on this side of the Chamber. If there is an explanation for it we would like to hear it but in the absence of an explanation we simply are left with the impression that for some borrowers the requirement not to be charged interest has been removed.  
We have heard a lot tonight from Government members of the House wanting to see borrowers treated the same wanting to make sure that people who have borrowed money are treated the same. Well at the moment if you are resident in New Zealand there is no interest being charged. Does this clause somehow only apply to people who are overseas? There is nothing in the schedule that I can read here in front of me that indicates that. I think it really highlights the dangers of passing something like this under a commencement clause rather than doing it in a more open way. This is a serious matter and I would expect someone from the Government to reply. 
SU’A WILLIAM SIO (Labour—Mangere) 
: 
 When my colleague Chris Hipkins announced that the commencement clause would repeal the interest-free aspects of the Student Loan Scheme Amendment Bill I noticed that the other members on the other side of the Chamber seemed surprised. It seemed like this was a revelation to them. I notice also that the Minister in the chair the Minister of Immigration did not appear to be all that confident about what my colleague has revealed. I am going to echo the call that both Mr Hipkins and Mr Robertson have asked for and that is to ask the Minister in the chair or even the chair of the Finance and Expenditure Committee whether they would stand and explain why it is that such an important aspect of this bill—an aspect that will have ramifications and dire consequences for thousands of students the length and breadth of New Zealand—is hidden inside this commencement part of the bill. I would have thought that such an important aspect which is going to affect the future generations of this country would have been revealed for the entire Committee to see that it would have been pointed out directly for all to see and that a significant part of the report be paid to it—but as it is it is not. So we have had to find out through our research that that particular part of the commencement does repeal the interest-free aspects of the bill which again changes the debate around the title of this bill. 
What we are now seeing is that this does not reveal the complete truth about what students should be aware of when it comes to student loans. In fact the title of this whole bill is wrong. We should not even be calling it the Student Loan Scheme Amendment Bill because that itself does not reveal this key aspect. It certainly does not reveal that this Government is repealing the interest-free loans for students and it certainly does not reveal the fact that we are doing away with the 3-year repayment holiday period and diminishing that to 1 year. If you consider the whole environment currently where there is massive unemployment and people are struggling to find jobs and this bill is suggesting that we cut the holiday from 3 years to 1 year how on earth are we expecting these young people new graduates from university to be able to repay? I have to ask again will the Minister sitting next to you Mr Chairman please take a call and explain for the benefit of the Committee as to why the repeal of interest-free loans has not been highlighted for the Committee to note. It is hidden in this commencement part here and it does change the whole aspect of this entire debate.  
Yesterday I would have supported this bill. Today because of the Trojan Horse nature of this Government and the way that this Government is not revealing for all students to know the entire truth about this I am not going to be supporting it. I know my colleagues stand united in saying that this is the wrong thing to do for students and it is the wrong thing to do for New Zealand. I say to you again I ask that Minister to please take a call and respond. There are hundreds—thousands even—of students listening to this debate and they would want for this Government to be open and transparent by revealing why it has hidden this particular aspect which is a very important aspect of the bill and why it has not even made mention of it in any part of the reports that I have seen. The Government has a lot of explaining to do. I think you owe it to this Committee to demand in fact Minister or even of the chair of the select committee to explain— 
The CHAIRPERSON (Eric Roy) 
: Order! The member cannot bring the Chair into the debate in the manner in which he is.  
SU’A WILLIAM SIO 
: I apologise. I simply was asking by way of the speech that I think we need to compel that Minister and even the chair of the select committee to explain. I do not know whether it is deliberate or not but I suspect that people listening to the debate will make their own judgment and will suspect that there has been a deliberate attempt by this Government to not reveal that it is repealing the interest-free aspect of this bill. It is the wrong title. In fact the Government should just call it the “Repeal of Interest-free Loans Bill” or it could call this bill the “Broken Promises Bill” because as I understand it this Prime Minister— 
SIMON O’CONNOR (National—Tamaki) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put.  
Ayes 72 
New Zealand National 59; New Zealand First 7; Maori Party 3; ACT New Zealand 1; Mana 1; United Future 1. 
Noes 48 
New Zealand Labour 34; Green Party 14. 
Motion agreed to. 
A party vote was called for on the question  
That clause 1 be agreed to. 
Ayes 72 
New Zealand National 59; New Zealand First 7; Maori Party 3; ACT New Zealand 1; Mana 1; United Future 1. 
Noes 48 
New Zealand Labour 34; Green Party 14. 
Clause 1 agreed to. 
The question was put that the amendment set out on Supplementary Order Paper 15 in the name of the Hon Peter Dunne to clause 2 be agreed to. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 72 
New Zealand National 59; New Zealand First 7; Maori Party 3; ACT New Zealand 1; Mana 1; United Future 1. 
Noes 48 
New Zealand Labour 34; Green Party 14. 
Amendment agreed to. 
A party vote was called for on the question  
That clause 2 as amended be agreed to. 
Ayes 72 
New Zealand National 59; New Zealand First 7; Maori Party 3; ACT New Zealand 1; Mana 1; United Future 1. 
Noes 48 
New Zealand Labour 34; Green Party 14. 
Clause 2 as amended agreed to. 
Bill reported with amendment. 
Report adopted.