Student Loan Scheme Amendment Bill (No 2) — In Committee 
Text is incorporated into the Bound Volume 
Student Loan Scheme Amendment Bill (No 2) — In Committee 
[Sitting date: 19 March 2013. Volume:688;Page:8658. Text is incorporated into the Bound Volume.] 
Student Loan Scheme Amendment Bill (No 2) 
In Committee 
Part 1 Amendments to principal Act 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It is a pleasure to take a call or—who knows—a couple of calls on the Student Loan Scheme Amendment Bill (No 2) in its Committee stage where we are discussing Part 1. I wish to reaffirm that the Labour Opposition will be supporting the bill at this stage and I would like to acknowledge the work of the Finance and Expenditure Committee and indeed the Minister of Revenue in bringing the bill to the House. 
The bill does two relatively straightforward but relatively minor jobs to the student loan scheme. Firstly it broadens the definition of “income” so that it includes income from trusts companies superannuation schemes and so forth in calculating eligible student or family income. Secondly it allows information sharing between the Customs Service and the Inland Revenue Department so that the Inland Revenue Department can track students who are in serious default of their repayments when they go overseas. 
The bill however is notable not so much for what it does do but for what it does not do. Although it does save the Crown approximately $7.5 million over the next 5 years it ignores a total of $2.67 billion—that is $2.67 thousand million of accumulated student debt. There are no solutions for the student loan debt crisis in this bill nor are there any solutions for the longer-run and just as important issue of the intergenerational unfairness between the generation represented by most but not quite all members of this House which is the baby boom. I do not personally have the pleasure of being part of that generation because I just squeak into Generation X I am happy to say— 
Hon Members 
: Oh! 
Hon DAVID CUNLIFFE 
: Thank you members opposite. I know that there is a certain amount of jealousy there from the backbench of the Government benches. I may give Alfred Ngaro the benefit of the doubt but I most certainly will not be giving that member from Hamilton too much benefit on that call. It is also somewhat interesting— 
David Bennett 
: Are you going to make your speech about what I said 5 years ago? 
Hon DAVID CUNLIFFE 
: That is all right—settle down gentlemen settle down. It is also pretty interesting that the Minister in the chair the Minister of Revenue has got this bill to the Committee stage today being the day that the second of his two tax measures the cellphone tax has been torpedoed by the Prime Minister following as it does yesterday when his car-park tax was similarly torpedoed. There is of course a common theme between those measures which the Government is now seeing reason on and the measures in this bill. The common theme is that this is the “Minister for Small Changes”. The Minister has made small things happen while ignoring much bigger problems. In the tax area of course it is the gaping chasm created by a lack of a capital gains tax. We are one of only three countries in the OECD not to have one. Of course we need one says the IMF says the OECD but we do not have that debate today. 
Of course we need to have more fairness in the income tax system. Of course we need to fill in major avoidance loopholes. Those are huge jobs; they are just jobs the Government is not tackling. 
Here in the student loan scheme there are two principal strategic issues. The first is that the scheme is costing the taxpayer an arm and a leg and the debt is mounting. That debt is now to the tune of billions—$2.67 billion according to the latest information—and it is growing. This bill shaves off over 5 years perhaps $7.5 million which is not quite $1.5 million a year of cosmetic trimming to the cost of the scheme but in the meanwhile it does nothing much to address the inherent unfairnesses. 
I see that the member Holly Walker has resumed her seat. She gave a very good speech in the first reading of this bill where she drew attention to those intergenerational problems and said that the student loan scheme is putting at great risk a generation of students who are working hard playing by the rules and learning as fast as they can but who are starting their working life with a mortgage even though they have no house. 
In my first reading speech I used the example of two hypothetical people Old Peter and Young Peter—one was hypothetically the age of the current Minister and another was one of today’s students—and compared the situations faced by both of them. The results were based on some pretty straightforward calculations—for example at a minimum of $172 per week living costs and a study year of a conservative 40 weeks Young Peter would have racked up $34500 by graduation. Including fees his debt would be $64500 before he starts trying to graduate get a house get a mate or feed a family. That is the burden that today’s young people are growing up with and what we want them to know from the Labour perspective is that we understand their plight and that we are going to work tirelessly—not just through this bill but through a number of measures that we will be working on and bringing to the public before the election—on that issue of intergenerational fairness. 
We think for example that a capital gains tax and an active housing policy that provides more affordable homes for young New Zealanders is an important complement to measures like the affordability of tertiary education. We certainly do not like the arbitrary 5-year limit on receiving student loans which is essentially putting postgraduate study beyond the reach of all but those who were born with the proverbial silver spoon. 
It is interesting is it not that in the current Government there are one or two poster children for social mobility: the Prime Minister it is often said—although that is a carefully crafted narrative—and indeed the Minister for Social Development. But the difference between this side of the Chamber and that side of the Chamber is that when members on this side see someone climbing the ladder they want to make sure the ladder is there for the next generation. The difference between us and the Government is that it has made rather a nasty habit out of pulling the ladder up after itself to save money from its own tax bill and damn the torpedoes of the implications for the next generation. This bill—although we support it because it does nothing wrong and it takes minor steps towards making the scheme slightly fairer—is a bill of two small things while the elephant in the room is a scheme that is foundering under the weight of debt and foundering under a growing and pressing problem of intergenerational unfairness. It is time that the Minister responsible for the student loan scheme the Hon Peter Dunne stood up and took responsibility for those major issues just as he should stand up and take responsibility for the major issues in the revenue portfolio. 
New Zealand does not need just tinkering. We do not need more of the same. We do not need lipstick on the pig that is the New Zealand economy. What we want is a step change. We want vision we want strategy we want “go forward” and we want jobs for hundreds of thousands of New Zealanders currently without work so that they can get ahead so that they can make the best— 
Mike Sabin 
: Lipstick on pigs is not something I’d be bringing up. 
Hon DAVID CUNLIFFE 
: —of their potential and in this context Mike Sabin so that they can pay off their student loans because if they do not have a job they cannot pay back their loans. It is well known that we face— 
Andrew Little 
: Step change not a small change. 
Hon DAVID CUNLIFFE 
: It is a step change not a small change—well put Andrew Little. Unfortunately we have got the “Minister for Small Change not Step Change” in the chair—the “Minister for Small Change not Step Change”—and we need a step change. It is well known that in the next few weeks hundreds or possibly thousands of workers in one of New Zealand’s largest telecommunications companies—many of them smart young people on good wages—are going to lose their jobs and the question is where are the replacement jobs when hundreds of telecommunications company workers hit the streets? What about the jobs for the smart new graduates from the business school and the engineering school who would like opportunities like that which will not exist? And what about those like Young Peter who start work with a mortgage of greater than $60000 because they are similarly burdened by debt? 
Mike Sabin 
: Where’s that aspirational positive attitude we’ve come to see? 
Hon DAVID CUNLIFFE 
: Well the member over there talks about aspiration. I have aspiration for my children and that is that they can get a good tertiary education that I can help them and they can pay the balance and that they will get a job when they finish and they will maximise their potential and thereby their contribution to this country. When we have a small change not a step change we are leaving a generation out in the cold. Those people deserve better. They deserve these small changes but they deserve a whole lot more besides. 
HOLLY WALKER (Green) 
: 
 I would like to thank the previous speaker the Hon David Cunliffe for raising the issue of intergenerational equity in relation to the student loan scheme because it is indeed the elephant in the room when we look at this Student Loan Scheme Amendment Bill (No 2). I am speaking as probably one of the few speaking on this bill who has a current student loan and who is therefore qualified to speak about the provisions in this bill so I would like to thank that member for raising that important issue. Indeed it is for many people of my generation a significant detriment to starting their lives to beginning their lives as families to considering the prospect of homeownership and to starting their adult lives with the equivalent of a significant mortgage hanging over their heads. 
Where I differ from the Hon David Cunliffe is that in the Green Party’s opinion there actually are some things wrong with this bill and that is why we oppose it and will continue to oppose it. We see this bill as part of the gradual erosion of the fairness of the student support scheme and I think we have seen under this current Government in the last 5 years or so a very damaging trend of gradual amendments to the student loan scheme that harm students and graduates disincentivise tertiary students from studying—particularly those from low incomes—and incentivise graduates to move overseas. 
In my contribution I would like to look at two elements of Part 1 of the bill that are of concern to the Green Party. The first of these is one of the two major changes that this bill makes and that is the provisions for greater information-sharing with the Customs Service. The Green Party has no problem per se with encouraging overseas borrowers to keep up with their student loan repayments but the big problem it has with the provisions in this bill that make it easier for information to be shared with the New Zealand Customs Service and to track down graduates at the border to ensure that they are meeting their repayments is that it comes in the context of the reduction of the repayment holiday from 3 years to 1 year. I note that the Minister of Revenue who is in the Chair introduced the 3-year repayment holiday and it was a very good idea and one that we were very happy to support. 
The reason we supported a 3-year repayment holiday is that we think provisions in the student loan scheme need to reflect how young New Zealanders spend time overseas. What we know is that the average young New Zealander who goes on an OE or travels and works overseas for a period of time does so for more than 1 year. That is the typical New Zealand OE experience. While doing that they gain skills and experience which they bring back to New Zealand when they return. There is a net gain to New Zealand of their return to New Zealand. However there is a big “if” over that: the “if” is “if indeed they do return to New Zealand”. 
Our concern with bringing in these punitive provisions to allow the Customs Service to share information and track graduates down at the border as this bill does in the context of only a 1-year repayment holiday is that it makes it significantly more likely that many graduates will be pinged with penalties and interest because they do tend to be overseas for more than 1 year. This creates a real disincentive for them to return to New Zealand. If their student loan bill is racking up penalties and interest there is a real disincentive for them to return. We know from talking to New Zealanders overseas who are in this position that many worry about the size of their student loan when they return. That is why the 3-year repayment holiday was such a good idea when this Minister introduced it. But now that it has been reduced to only 1 year we in the Green Party think that it will make it very difficult for graduates to meet their repayment obligations when they are overseas. The Green Party cannot support provisions that make it more punitive and more difficult for graduates and easier to track them down in the context of only a 1-year repayment holiday. It was a very short-sighted decision and for that reason we cannot support those provisions in Part 1 of the bill. 
The second part of Part 1 I wish to address in my contribution in this Committee stage is the transitional provisions and regulation-making powers inserted by the Finance and Expenditure Committee. These provisions added at the select committee allow the Inland Revenue Department to administer the changes in this Student Loan Scheme Amendment Bill (No 2). But what we have seen—and as I have mentioned this bill comes in the context of a trend of small but punitive adjustments to the student loan scheme over a number of years—is that there have now been so many small and complicated changes to the student loan scheme that the Inland Revenue Department’s computer systems and administrative systems are groaning under the weight of them. There is a real question mark about whether those systems are sufficient and are able to actually administer the changes that are being made in this bill. We have seen a similar difficulty recently with the same systems with the changes to child support. Clearly the IT at the Inland Revenue Department is in urgent need of an upgrade. What we have seen is a student loan scheme that has been tampered with so many times that that system can no longer cope with the complicated array of amendments it is expected to administer. 
The Government’s answer to this and this is the provision that has been inserted by the select committee is to introduce wide-ranging regulation-making powers to allow for transitional provisions or any changes that need to be made at the Inland Revenue Department to administer these changes to be made by Order in Council . We have a real concern in the Green Party with this model of lawmaking. We think that it represents a trend that we have seen in this House since the introduction of the Canterbury earthquake recovery legislation of introducing wide-ranging regulation-making powers under Order in Council. When there are tricky issues for a Government to administer or deal with instead of bringing them back to the House for the proper parliamentary scrutiny and due process it is easier just to shove in an Order in Council provision and deal with it that way. That is a real problem. We think the changes in this bill are representative and these transitional provisions and regulation-making powers in Part 1 inserted by the select committee are symptomatic of that approach. It is a very concerning approach that we have seen from this Government. I note that the Labour members of the select committee also expressed their reservation about this at the select committee and I am sure we will hear from them about that. But it seems to me to represent a very concerning model. 
Those two changes the transitional provisions and the information sharing with the Customs Service and tracking down borrowers at the border are the two parts under Part 1 I wish to address in this contribution. As I said at the outset of my speech the elephant in the room of course is the $12 billion of debt that is now on the backs of the people of my generation who had to pay for our education and take out a student loan. Instead of taking the opportunity to enhance the fairness of the student support system—and there are many ways to do that—this bill contributes to a gradual erosion of the fairness of that scheme and a damaging trend that will harm students and graduates disincentivise tertiary study and incentivise those graduates to move overseas or to stay overseas if they are there already. 
TRACEY MARTIN (NZ First) 
: 
 Kia ora. I rise on behalf of New Zealand First to speak in support of the Student Loan Scheme Amendment Bill (No 2). But before I begin on the statements I wish to make around the first part of the bill I just want to pick up on the fact that David Cunliffe mentioned intergenerational fairness and Holly Walker mentioned intergenerational equity. I think on behalf of New Zealand First I would like to express our disappointment that we have lost the goal of actually returning to a time when the debt that is recognised by our young people through the provision of education is the debt of their time their skill and their commitment to their country as opposed to a financial debt. I think it is a shame that it appears that Labour and the Greens have decided to move away from that being a goal that New Zealand First still holds through greater income across the whole of the nation so that we can support our young people more. 
With regard to the Student Loan Scheme Amendment Bill (No 2) I would like to spend the moments that I have addressing the Supplementary Order Paper 184 amendments to clause 10 in Part 1 which I have on the Table. I mentioned these at the first and second readings and I apologise for the fact that I was not on the Finance and Expenditure Committee so I was unable to bring this comment to the select committee at the time but I have now brought the amendments to the Committee. 
Supplementary Order Paper 184 in my name seeks to address the concept of fairness. It is a word that is used in the preamble of this bill and we have already heard it several times this evening. I want to be clear around why the amendments to the two clauses that I have placed on this Supplementary Order Paper should be supported by all members of this Committee to address the fairness for New Zealand based borrowers. For New Zealanders with student loans who choose to stay at home who choose not to troop overseas but to remain in the country paying their taxes both direct and indirect and using their skills to benefit the nation my Supplementary Order Paper seeks to address the fairness of the repayment holiday. Right now there is no recognition that New Zealand - based borrowers can find themselves in circumstances of financial stress. 
For example let us take a hypothetical New Zealand two-parent two-child family residing in Gisborne. Both of the partners have pursued higher education and they carry student loans. In the last 3 months the company with whom partner A was employed has shifted its production lock stock and barrel to Melbourne Australia. Partner A now through no fault of their own has found themselves without income. Obviously under the current legislation partner A is not required to keep up their loan repayments as their personal income has fallen below the repayment threshold but what about partner B’s income? This family is now totally dependent upon partner B’s income. This family has been able to go to their bank the one holding their mortgage and gain recognition of their financial difficulty and gain a mortgage holiday from that institution. My Supplementary Order Paper would allow this New Zealand family to take the same set of difficult circumstances to their Government via the Commissioner of Inland Revenue and gain a 1-year repayment holiday while they rework their finances. That is the first part of my Supplementary Order Paper 184. 
The second part of Supplementary Order Paper 184 is to shift the 1-year repayment holiday limit from the individual to the loan. It is another small yet practical step to address fairness. Let us take the case of a 25-year-old engineering student who has completed her degree and has been lucky enough to find employment in her chosen field. While at university she met the love of her life and went on to purchase a home here in New Zealand and begin a family. Let us imagine that this young woman is actually partner B in the previous example. If my Supplementary Order Paper passes the commissioner would quite rightly recognise the financial difficulty that this young family had and would grant this young woman a 1-year repayment holiday from that initial loan. Under current legislation this would have completely used up this citizen’s repayment holiday entitlement. This young woman goes on to repay her student loan in full after that 1-year repayment break. 
Fast-forward 20 years. That young woman is now a confident 45-year-old. Her children have grown and now as a lifelong learner she returns to university to upskill to enhance her ability to add value to New Zealand. She needs to avail herself of another student loan to complete that study. Thankfully she is only 45 not 55 or she would be totally out of luck but that is another story. Now she completes that study and once again takes up full employment. Within 4 years she and her family suffer the loss of her partner through an accident. This event obviously has a substantial effect on this lady’s life in many ways. One of these ways is her ability to meet the financial commitments they made jointly. My Supplementary Order Paper 184 would recognise that this New Zealand - based borrower has not had a repayment holiday on this particular loan. It would recognise that she met all her previous repayment obligations in respect of her previous loan and there should be no impediment for this New Zealand - based borrower to gain another 1-year repayment holiday due to hardship. 
I believe that cost could be or will be used as an argument to suggest that my Supplementary Order Paper should be voted down. I would argue that just as the Minister cannot predict how many students with loans will seek a repayment holiday on the basis of travelling overseas in any given financial year nor can he expect a flurry of applications from New Zealand - based borrowers or predict such a flurry should this Supplementary Order Paper become part of the amendment bill. So I contend that this particular argument should be dismissed especially considering that the commissioner would have the ability to grant these repayment holidays under a set of criteria unlike the ability of overseas-based borrowers to leave the country without any required clearance. We come back to fairness so I ask all the parties in this Chamber to support my Supplementary Order Paper 184 for the fairness of New Zealand - based borrowers. Thank you. 
PAUL GOLDSMITH (National) 
: 
 I am very pleased to take a call on this bill the Student Loan Scheme Amendment Bill (No 2). I was intrigued to hear from the Greens spokesman Holly Walker that apparently the Government is being punitive in what it is doing with the student loan bill—punitive—which is amazing to me because the New Zealand student loan scheme is amongst the most generous in the world. If you look at some of the figures here—I have got figures from the latest distribution of public spending on student financial aid—New Zealand spends about 42 percent of its tertiary education budget on student financial aid. That is much higher than any of the other countries here. Australia spends only 32 percent Canada only 15 percent the United Kingdom 30 percent and the United States 20 percent. As a result as a part of our overall tertiary education budget we spend very very heavily on student financial aid primarily through the student loan scheme. 
It has been a very generous scheme and the previous Government in my view was reckless in its approach. It was just one of the many things that that previous Government did that left the country pregnant with financial deficits for the next 10 years because of all the promises and all the looseness and laxity that it engaged in. So although it might be a seductive notion to be generous with other people’s money it is not at all a worthwhile thing to leave the country heading on to an endless line of deficits. This Government had to do something about it. It has been working in all sorts of areas of the economy but the student loan scheme has not been left out. This Government has set about getting some realistic boundaries around the student loan scheme. Previously we reduced lending to borrowers who are less likely to repay loans. It makes good sense. We have introduced academic performance requirements for borrowers requiring students to pass 50 percent of their full-time courses over 2 years—again perfectly good sense. We have stopped lending to students who are in default on previous student loans. My goodness why would you not do that? We have limited borrowing to 7 full-time studying years. Well given the fact that every dollar that has been loaned out has been costing everybody else in society around 50c it is not an unreasonable thing to put some limit around the time. 
That has led to some significant progress over the past three Budgets. We have been able to reduce the costs to the Government of student loans from 48c in the dollar to about 39c today which is a very significant achievement. What that means is that every dollar that we loaned out was immediately written down by 48c in the dollar when we took over but now it is down to 39c which is still very significant but at least somewhat more affordable. This is another demonstration of National delivering on one of our key priorities—to responsibly manage the public finances. 
What does this bill do? As we have heard in the previous readings this bill contains three main elements. Firstly the definition of income has been broadened for student loan repayment purposes to align more closely with the income that we have used for determining Working for Families tax credits. So if you are based on an income you need to have a realistic view of income including trusts and so forth. That makes good sense. We have also introduced some information matching between the Inland Revenue Department and the New Zealand Customs Service and we have heard lots of whining from other parts of the House about that being unreasonable. How can it be unreasonable? If you are living overseas you are a New Zealander and you have been in default on your loans—i.e. you have been given money by New Zealanders and you are refusing to pay it back—how can it be regarded as unreasonable for the New Zealand Customs Service to share some basic information when you seek to come back to New Zealand or to renew your passport and so forth? I think that is something that New Zealanders would be shocked to discover we have not been doing. I absolutely agree that we should be doing that in this bill. Thirdly amendments are being made to revisit aspects of the design of the student loan scheme to ensure that its administration is as efficient as possible. 
So all in all I think National is making the student loan scheme sustainable into the future. We do believe that it is important to support students and we do believe that the sooner they pay back their loans the better it is for everybody not just for the nation which is lending the money but also for those students so that they can get on with their lives and we can prepare students for jobs in the future. We do have one of the most generous schemes in the world. 
Just in conclusion I think the best thing we can do is encourage students to borrow only very carefully and to pay it back very quickly. Thank you. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I want to start with a small correction if indeed I heard correctly Tracey Martin from New Zealand First—normally an incredibly scrupulous and careful MP—say that both the Greens and Labour were moving away from the goal of collecting moneys from students. I want to say that that is not true. Certainly in our case we are supporting the Student Loan Scheme Amendment Bill (No 2). 
Tracey Martin 
: No that’s not what I said Mr Clark. I said you’re moving away from a free education for all. You’re moving away from that goal. 
Dr DAVID CLARK 
: “Moving away from the goal of a free education for all.” says Ms Martin. That I would also dispute. I do not think that is true. Labour certainly wishes to have free education for all and that is something that we intend to move towards over time as it is an affordable policy. That is something we certainly will not rescind from. 
We have concerns about the bill although we will be supporting it because we support the effort to collect these moneys that are due to the taxpayer. When money is given in good faith to support an education it is right that the Government collects it back. That is the principle that we start from. 
In one of my previous lives I had the privilege of being the warden of Selwyn College in Dunedin— 
Tim Macindoe 
: Not a bad college. 
Dr DAVID CLARK 
: —which I am proud to say is regarded by many and rightly so as New Zealand’s finest college. The member opposite may beg to differ but I credit him certainly with having attended New Zealand’s second-finest college and that is saying something. In that role I had the opportunity to see many students who were striving earnestly to study and to make the most of their opportunities. I have to observe that since I was a student myself times have become more difficult. It is a lot harder for students to pay their way through their studies. They now either require a generous benefactor or must work every hour and more of a 40-hour week through the summer holidays beforehand as well as some time during term time in order to pay their fees in an establishment that feeds them and provides accommodation. That is not a good state of affairs because it can distract from the efforts of study. Many students are not reaching their potential at university now because they are forced to work to supplement their studies to a level that was not the case certainly when people of my generation were students. The student support scheme in those days was far more generous. Unfortunately inflation has eaten that away. 
The point that I am wanting to develop through my discussion as you will hear is about the sustainability of the scheme which is a point that goes to the heart of this bill—part of the reason why we support it and part of the concerns we have with the bill. The preservation of the scheme was touched on also by Mr Goldsmith who made some claims about it costing 50c in the dollar and patting his Government counterparts on the back for drawing that cost in. I want to point out to the Committee and to those watching at home that much of the so-called reduction in cost is in fact based upon accounting tricks. The fact that moneys are written off and then later re-included is a strange treatment in the student loan scheme that is not seen in other loan schemes so one must be very careful with the statistics that are used. They are used for convenience in my observation by the Government when it wants to make it sound a far more expensive scheme than it actually is because it is not in favour of this scheme. 
We know that National introduced the loan scheme. Labour later followed up with an interest-free scheme because we believed in reducing the costs of education moving towards that free education system that Ms Martin also spoke of. We took a step in that direction. National of course subsequently has introduced interest again on that loan scheme and that tells you the direction that it wishes to take it. Certainly Mr Goldsmith is advocating for an understanding of the scheme that it is far more expensive than the reality and that probably also hints at where he would like to go with the scheme—if one did not get that from his maiden speech in Parliament. 
One of the things that is challenging in this bill certainly for the Government is the fact that it contains a good deal of U-turns. It is a bill that pulls back from policy previously passed through this House. Mr Dunne in the chair may be becoming more accustomed to U-turns as recent days would illustrate. However there is— 
Hon PETER DUNNE (Minister of Revenue) 
: 
 One of the themes that has come through from just about everyone I think who has spoken in the debate so far has been sustainability and that is a critically important aspect of all of the changes over a period of time that have been made to the student loan scheme. I want to take just a little bit of time to recount some of the background and also to deal with one or two of the issues that have arisen in the Committee so far. When I became the Minister in 2005 there was very little control in place on the way in which the scheme was administered who was eligible and how repayments were chased. We did not even know at that point how many overseas-based borrowers there were let alone how many were paying their student loans off and how many had just simply gone into hiding or oblivion. So what we did in 2006-07 during the term of the previous Government was have a process whereby we sought to identify the numbers overseas as a proportion of total New Zealand borrowers so we could then start the process of tracking those people down and making sure they met their responsibilities. The attraction of the interest-free policy meant that there was more pressure on the scheme even then and the priority had to be to make sure in terms of its sustainability that we sought repayment. 
We carried on with that policy once the change of Government occurred and in 2010 we began the process of chasing defaulting student loan borrowers in Australia where the bulk of our overseas-based student borrowers are followed by the United Kingdom and various other parts of the world. What we know from the information is that domestically based borrowers on average repay their loans in around 3 to 5 years whereas the overseas-based borrowers take three to four times as long. So our focus is very much on those overseas-based borrowers for two reasons. Firstly there is a basic fairness issue. I am amazed every time I am interviewed by journalists on this subject usually young journalists with a student loan how at a certain point in the interview the journalists will always say: “These people get me angry because here am I paying off my loan and they are getting away scot-free.” It is a real gut reaction from a lot of people in this country who are genuinely seeking to make their repayments. When you see some of the examples from offshore borrowers about their arrogance in assuming that because they are offshore they are out of sight out of mind I think it really reinforces from the sustainability perspective the need to put pressure on those borrowers to repay. 
That brings me to some of the measures that are contained in this bill the Student Loan Scheme Amendment Bill (No 2) and it would be wrong to see this bill in isolation from the suite of measures that have been introduced over the last 4 or 5 years because it is one part of a continuing programme. One of the members spoke about concern about information sharing at the border. The point here is that we need to be able just as we do with recalcitrant child support payers to track down people who leave this country with a debt and actually get them to make some commitment towards repayment. That is why we introduced previously the concept of a nominated person and that is why we have started the campaigns in Australia in particular and will be extending those more broadly to other countries to physically contact those people and get repayments from them. The results we are getting so far are quite dramatic. Just recently we hit $1 million a week in repayments. That is an extraordinary achievement. It is a goal to be proceeded with in the future. I do not share the concerns about information matching and it is certainly not for any sinister purposes. It is to get a better record of where people go with debt so we can follow them and make sure they meet their obligations for repayment. 
The member Holly Walker also felt that there was some concern about the capacity of the Inland Revenue Department’s technology to cope. The system can cope with these changes. They have been designed in such a way to ensure that that is the case and the transitional provision that the Finance and Expenditure Committee has prudently inserted I think which is in the Supplementary Order Paper is designed to ensure that we can deal with some cases that have arisen—and there were some a year or so ago—quite swiftly without having to delay the issue of repayment even further. 
So I just wanted to take a call at this stage to make the point that there seems to be common ground on sustainability being a critical issue here. There is a conflict because at one stage members talked about a generous scheme. It would be great to have a generous scheme. We already do by world standards but that generosity brings you up against the sustainability argument very quickly. What we have to do in the interests of the current generation of borrowers and future borrowers to come is ensure that the scheme is sustainable. We do that firstly by prudent management of it and secondly by ensuring that people who enter into loan commitments are under some legitimate pressure to make their repayments because it sends all the wrong signals to simply let them go scot-free. So that is why this bill deliberately focuses—[ 
Bell rung 
] Mr Chairman if I can take just another few seconds. 
The CHAIRPERSON (Eric Roy) 
: Peter Dunne. 
Hon PETER DUNNE 
: If members will indulge me. I am not going to take a full 5 minutes. That is why this bill really focuses on making changes to ensure that we can track those people more responsibly. 
I acknowledge the support of other parties for this legislation. They may dismiss it as a small step. It is one of a series of continuing steps to ensure that our loan scheme remains viable that our borrowers can continue to take advantage of it and equally important that we expect them to make their repayments when they fall due. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I will not take more than a couple of further calls at this point. With your indulgence I turn to where I was at when the Minister of Revenue took a call—and I am glad that he did because I have to say it is very good to have a Minister responding from the chair. We do not always get it in this Chamber. When we have questions it is good for the Committee to debate them fully so I commend the Minister for engaging in the debate. 
Where I was getting to before was to point out just how humiliating this bill the Student Loan Scheme Amendment Bill (No 2) really is for the Government. It does achieve some good things and we will be supporting it for the fact that it is an attempt to make sure that the collection of student loans is fairer. It is an attempt to make sure that those struggling to pay off their student debt in New Zealand are aware that those overseas are equally obliged to pay off their debt as Mr Dunne has made clear. 
But what the bill also does is smuggle through a range of changes that are actually back-downs on previous policy. This Government deemed that to be policy that was good enough to take up the House’s time to be debated fully and then to be implemented. At that point the Government then realised that it was incapable of actually implementing it. 
This is a problem that has become a theme at the Inland Revenue Department. We know that the computer system there is over 20 years old. The computer system at the department existed well before Facebook—10 years before Facebook came into existence—and well before Google. In fact it existed well before the internet as we know it today. This Government has failed to upgrade that system. The current Minister of Revenue has been the Minister in that role for I think more than 7 years and we have a computer system that is not up to the task of delivering the policy that this Government would want to implement to make sure the student loan scheme was fairer and that is a disgrace—that is a disgrace. 
Part of what we have to debate here today is withdrawing things that this Government has deemed would make the scheme fairer peeling back those steps forward. It is using the Committee’s time to debate those issues again and to try to argue that they are no longer as important as they once were now we have realised just how ruined—I was going to use another less polite word—the Inland Revenue Department’s scheme is. 
We know for example that that is illustrated in the 70000 phone calls that went unanswered in the GST filing period in July last year. That shows a department under stress. There are over 1 million unprocessed returns. There is over $7 billion in outstanding tax to be collected. We know that the Inland Revenue Department is a department under pressure. We know that the computer system is struggling and yet we have seen no credible plan from this Government to address that issue. We have seen no credible timeline no credible plan for building a replacement system. It has spent tens of millions of dollars on consultants—Capgemini lead amongst them—and this means that we should expect to wait to be able to implement this legislation. 
I have grave concerns that the data matching as outlined in this bill will not be able to be implemented by this Government. I have serious concerns. Perhaps the Minister in the chair may take another call to outline a credible plan for making sure this happens. The Government has I have to say put a little clause in there which we have opposed that would give it free rein to withdraw any further things and to change the details of how things are implemented or the time frames. It has put in what is commonly known as a “Henry VIII clause”. This is cover for future humiliating back-downs and it may be the case that everything we are debating here today is unable to be implemented by this Government. That is a ridiculous position to be in. 
Hon Trevor Mallard 
: What’s Parliament for? 
Dr DAVID CLARK 
: We wonder what Parliament is for at that point if it is not to debate the changes that are going to be made to all of our public services over time. We are here debating these but we have no idea whether they can be implemented and the historical evidence is that in the past they have not been able to be implemented. 
So I would like the Minister in the chair in a future call to stand up and to explain a credible time line for repairing the tax system. We know that the tax take dropped 4 percent during the previous terms of this Government—only 1.5 percent of that was estimated to be from the global financial crisis and a great chunk of it was from policy changes by this Government the tax cuts for the wealthy—and since then the Government has been revising down its tax forecasts. It has a problem. It has a tax hole problem— 
RAYMOND HUO (Labour) 
: 
 Thank you Mr Chair— 
Hon Trevor Mallard 
: Did you call? 
RAYMOND HUO 
: Yes I did— 
The CHAIRPERSON (Eric Roy) 
: Raymond Huo has the call. 
RAYMOND HUO 
: —I did. You made the right observation during question time because I watched the tape again and it proved Mr Trevor Mallard was correct and the Speaker was wrong but that is a different matter. 
The Minister of Revenue talked about sustainability but from a historical perspective the Student Loan Scheme Amendment Bill (No 2) is not a good example of sustainability. Instead the Government is tinkering to fix its previous tinkering attempts which have gone wrong. 
My colleague Dr David Clark has just covered the issue regarding the “Henry VIII” clause and I apologise for interrupting his good speech. Although Labour supports the overall intent of this bill we are opposed to clause 39(4) which inserts an unnecessary regulation-making power. There is a very good opinion article by Professor John Burrows regarding this particular issue. I reckon that all the members should have a good look at this article to appreciate the nature and scope of this regulation-making power because any unnecessary regulation-making powers should be approached with caution. 
I also note the Finance and Expenditure Committee’s view that the changes the bill would make to the 2011 Act are complex. They involve amendments to previous amendments that have not yet come into force the repeal of provisions that were to come into force in the future and interrelationships between provisions that would be amended or appealed at different points in time. There is also the challenge of ensuring that the Inland Revenue Department’s computer system implements the amendments accurately. There is a relatively high risk that unforeseen issues or unintended consequences may emerge in the transition to this legislation creating a need for regulations. I am very pleased to hear the Minister just confirm that in terms of technology the department could cope with those issues. But this seems to confirm what the Hon David Cunliffe just said in his previous speech which is that this bill was introduced by the “Minister of Small Changes”. 
Some of the other select committee recommendations focus on inserting new provisions to correct errors made in previous student loan scheme legislation passed by National. Not only is the Government tinkering around the edges of the major student loan issues with this bill but now it is using tinkering to fix its previous tinkering attempts that have gone wrong. For example under the Student Loan Scheme Act 1992 repayment obligations under $20 were not collected and were written off. The 2011 Act changed this so that small amounts remain part of a borrower’s loan balance for future collection. However because the department has not been able to update its computer system chasing such small loans would actually end up costing it more than it would save. The select committee therefore recommended amending clause 22 of this bill to reinstate the old provision. This bill was introduced not only by the “Minister of Small Changes” but also by the “Minister of Tinkering”. 
JOHN HAYES (National—Wairarapa) 
: 
 I move  
That the question be now put 
. 
Dr MEGAN WOODS (Labour—Wigram) 
: 
 I would just like to back up what many of my colleagues have said in the Chamber tonight on the Student Loan Scheme Amendment Bill (No 2)—that Labour is supporting this bill because we think that the changes will make the repayments of student loans fairer. But I would like to also underscore the point that my colleagues have made that this is a bill that does not do very much. It tinkers around the edges and it does not address the fundamental problems of what the student loan scheme is meant to do. 
The student loan scheme is about access to education. When we put allowances and loans together it is about how it is that ordinary New Zealanders access tertiary education in this country. What we have is a Government that is really moving the balance between loans and allowances and shifting this. We have seen an attack on both of these by the present Government. We have seen that postgraduate students are being denied access to student loans and we have heard members opposite during their calls tonight—I believe it was Mr Goldsmith—saying that what National was doing was limiting it to 7 years of study. Well this is not the full story because it is not just about limiting the student loan access to 7 years. The changes that National brought in in its last Budget explicitly excluded postgraduate study: Master’s degree and PhD. So any postgraduate study beyond the Bachelor’s degree with Honours level has been explicitly excluded. This is a very worrying trend in our education system in this country. It is yet another example that this is a Government that talks big on the rhetoric of innovation. It talks big on the need for us to have an innovation-led economy. Well these things do not happen by magic. They require really skilled New Zealanders and really educated New Zealanders in there. Limiting the access of people to do postgraduate research is just counter to that. 
Paul Goldsmith 
: Let’s not waste money. You’re leaving it overseas. Let’s not waste it overseas and not get it paid back. 
Dr MEGAN WOODS 
: This pretty much sums it up—we have Mr Goldsmith over the opposite way calling this a waste of money. That is the difference between Labour and National. Labour believes that postgraduate education is to the betterment of New Zealand—that this is the way that we will get ahead. That is the kind of thing that this Student Loan Scheme Amendment Bill (No 2) does nothing to address. Postgraduate education—my colleague David Cunliffe is quite right—is an investment. It is an investment in our country and it is an investment in our future. 
What we have seen also is a tightening up of access to loans for various people by this Government over the last 4 years. We have those over 55 now being denied access to the student loan scheme. This is something that we view with a great deal of concern. We put this in the context of the economy that we currently live in and we see that there are a number of people who are losing their jobs yet still have a number of years in which they need to earn an income and actually some retraining would be the best way for them to go about that. So we do not think it is particularly fair what this Government has done in terms of limiting access to this. 
What are the other things in terms of access? We have to remember that when Steven Joyce did take the reins as Minister for Tertiary Education 2 years ago it was made very apparent that National was going to introduce a series of cuts to student support in the area of both loans and allowances in an effort to do what it called “dampen demand” for tertiary education. So we see in Budget 2010 that part-time students can no longer borrow from the student loan scheme for course-related costs. This has real ramifications. My colleague Dr David Clark talked about being a warden at Otago University and seeing the change from when he was a student to when he had responsibility for caring for students in that environment. I also observed that change in my time from being a student to teaching at the University of Canterbury. By the time that I finished teaching at Canterbury it was not unusual for undergraduate students to be working 30 hours a week. 
This is simply not the way that you get a university education. University education is about immersion in learning. It is about being able to devote yourself full time to that and about having the time the energy and the focus to devote yourself to that. What we are seeing this Government introduce in terms of access arrangements is really damaging to the experience and the benefit that students can get from the scheme. I guess there is a number—and a growing number—of us now in this Parliament who stand here with student loans being not just a theoretical issue— 
MAGGIE BARRY (National—North Shore) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 71 
New Zealand National 59; New Zealand First 7; Maori Party 2; ACT New Zealand 1; United Future 1; Independent: Horan. 
Noes 49 
New Zealand Labour 34; Green Party 14; Mana 1. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 185 in the name of the Hon Peter Dunne to Part 1 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 105 
New Zealand National 59; New Zealand Labour 34; New Zealand First 7; Maori Party 2; ACT New Zealand 1; United Future 1; Independent: Horan. 
Noes 15 
Green Party 14; Mana 1. 
Amendments agreed to. 
The question was put that the amendment set out on Supplementary Order Paper 184 in the name of Tracey Martin to clause 10 be agreed to. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 57 
New Zealand Labour 34; Green Party 14; New Zealand First 7; Mana 1; Independent: Horan. 
Noes 63 
New Zealand National 59; Maori Party 2; ACT New Zealand 1; United Future 1. 
Amendment not agreed to. 
A party vote was called for on the question  
That Part 1 as amended be agreed to. 
Ayes 105 
New Zealand National 59; New Zealand Labour 34; New Zealand First 7; Maori Party 2; ACT New Zealand 1; United Future 1; Independent: Horan. 
Noes 15 
Green Party 14; Mana 1. 
Part 1 as amended agreed to. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I raise a point of order Mr Chairman. I would like to draw to your attention a matter that relates to the judgment as to whether or not a closure motion should be taken. I know that it is a matter entirely for your discretion but I would want to point out that this bill the Student Loan Scheme Amendment Bill (No 2) is actually a significant piece of legislation that Part 1 was a very big part and that we had less than an hour’s debate on it. I just want to say to you Mr Chairman that it is the view of Opposition members—a number of whom including the deputy leader of the Labour Party had just come down to speak on it—that we were very much short-changed. 
The CHAIRPERSON (Eric Roy) 
: I note the member’s comments and I do not think that I could be accused generally of curtailing speaking in the Chamber. 
Hon Trevor Mallard 
: No no you’re generally pretty good. 
The CHAIRPERSON (Eric Roy) 
: I am. At the time I took the closure every single person who was seeking the call had spoken—every single person had. I measure very carefully what has been said. I think the member knows that I am on the case. 
Part 2 Amendments to principal Act that apply for 2013-2014 and later tax years 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 Part 2 of the Student Loan Scheme Amendment Bill (No 2) is the part that introduces the “Henry VIII” clause into the legislation. It is the part with which the Labour Party has the biggest problem. We think this clause is entirely unnecessary. It is a clause that is perhaps appropriate in a situation like that of the Canterbury earthquakes. We note that the Labour Party joined in supporting giving Gerry Brownlee powers that became known as those of an earthquake tsar. We can debate hither and yon about how well those powers have been applied but what seems clear is that in such an emergency situation having powers beyond those that would normally be at the discretion of Ministers is entirely appropriate and the judgment of Parliament is that it is appropriate in those circumstances to give “Henry VIII” powers to make law essentially without reference to Parliament. In the bill we are now debating we have clause 39(4) which inserts a regulation-making power and gives the Minister of Revenue discretion to implement or not implement legislation according to any technical hitches. 
The officials who serviced our Finance and Expenditure Committee were excellent I have to say and they did a very good job of servicing our questions of answering our queries and of trying to come to grips with the concerns of members in the committee. If I take one example we had great concerns about where overseas borrowers were located. We wished to know where they might be and what the likelihood of collecting tax from them was. I will come back to that point. One thing the officials shared with us in response to our inquiries about the “Henry VIII” clause was that indeed it was primarily there as a backstop should the computer system not be able to implement legislation. That is a huge admission. That is a huge admission—admitting that a problem had previously been spotted that a problem with implementing other legislation had come to notice. In fact that the bill currently enables the repealing of previous decisions that could not be implemented is right there in front of us. It was something that was unavoidable to debate. The officials told us that really this clause ensures that should further technical issues come up the Minister has at his discretion the ability to revoke decisions made by Parliament in order to ensure that the thrust of this legislation is implemented fairly. 
That is where we really come to the point of debate. We in the Labour Party will probably have quite a different view from the current Government about what is the thrust of this legislation. We believe that it is the duty of Parliament to debate these issues to resolve them and to pass law that has been overseen that has been scrutinised by parliamentarians on behalf of the taxpayer. That is what we are paid to do as our jobs to make sure that the best possible law is created. This clause although entirely appropriate in an emergency situation where Parliament would not have time to sit and meet seems entirely inappropriate in a situation where there is no particular hurry. The Government could come back to this House should it wish to in order to repeal yet more of its decisions. It could bring them to Parliament and explain that it has been unable to implement them as it has done in this legislation and come back with a different set of recommendations that it could implement and that it thinks are roughly in line with the original intention of the principal Act. 
The overarching point I am making here is that there are different ways and means of repealing legislation. What we have here is a Draconian measure inserted into a piece of law where it is not needed—in fact where it is inadvisable. We had the legal advisers also at the select committee warning us that this is an unusual but increasing trend in Government legislation. It was a very rarely used measure in days gone past and is increasingly being used by this Government as it passes legislation and runs up against troubles particularly in the area of student loans and particularly in the area of tax collection. 
I wanted to touch just briefly also on the potential gains from this bill which is despite our grave concern about that clause that we will be opposing why the Labour Party will support this bill. It goes back to the comment I made on the first part of the legislation which was around the frustration that many New Zealand borrowers feel when repaying their loans as they look across the Tasman and further afield and see that their compatriots abroad are not paying their fair share. We asked officials to supply some estimates of the amount of money that could potentially be collected overseas if there was appropriate compliance and we heard from Mr Dunne earlier about how low the compliance is currently. The estimates we got back were that if there was 100 percent compliance we might expect to see an extra $110 million collected in the March 2012 tax year which would indeed be very good. If there was a compliance level similar to New Zealand’s—a 96 percent compliance level—we might expect to see $106 million returned to the taxpayer. A more likely figure of 70 percent compliance was also provided which would see $77 million returned to the taxpayer. 
There is a real paucity of information about where overseas borrowers are and this is something else that was brought to be understood by the committee. Borrowers with an unknown place of residence number 50 percent of those who are overseas—32 percent are known to be in Australia 12 percent in the United Kingdom and 6 percent in other countries. These borrowers who make up the bulk of those overseas are borrowers for whom there is a “no address” recorded of their overseas residence. The Government has attempted through various means to begin tracking down these people and trying to make sure that they meet their obligations. 
This is something the Labour Party supports. We believe in the importance of full student support. Indeed there is good international evidence that we should be providing more student support particularly to those from low-income backgrounds who would find a lack of student support a barrier to their participation in tertiary education. I recall many years ago working on a project at Treasury where I had the opportunity to look at Canadian studies which showed that people from wealthier backgrounds overestimate the costs of education and underestimate the benefits of education manyfold—manyfold. That is people from wealthier backgrounds. Those from poorer backgrounds underestimate the benefits by a factor of 10 or more because people fail to understand compound interest and overestimate the costs because they are perceived as a huge barrier. There is Nobel Prize - winning research that suggests that for talented students from lower socioeconomic backgrounds in fact the State should pay the whole amount of their tuition because not only is that better for the individuals concerned— 
Paul Goldsmith 
: It’s not the State. 
Dr DAVID CLARK 
: —but also it is better for their families and better for society as a whole because GDP goes up Mr Goldsmith and we are all better off because of that if we grow the economy. This Government is so unfamiliar with growing the economy that this may be a challenging concept to wrap one’s head around on the other side of the Chamber. But it is true that if we grew the economy we could afford better social services and we could continue to move towards providing free education from which we all benefit not only economically but also socially. So the paucity of information is something that definitely needs to be addressed and I believe that the measures in this bill if they can be successfully implemented will go some way towards improving that situation and towards collecting money that the taxpayer has loaned in good faith not necessarily all to people from modest backgrounds in order to retrieve it. 
There is no doubt that the Government will struggle to implement this bill. It would not have needed or felt the need to put a “Henry VIII” clause in if it thought it was something that could be implemented— 
The CHAIRPERSON (Lindsay Tisch) 
: Order! Can I just remind the member that we have actually passed clause 39. That was in Supplementary Order Paper 185. 
Dr DAVID CLARK 
: It’s in Part 2. 
The CHAIRPERSON (Lindsay Tisch) 
: No it is not; it is Part 1. Most of your first call was actually on Part 1 and now you are coming back to Part 1 again. We have dealt with Part 1; we are now on Part 2. 
Dr DAVID CLARK 
: Well I’m very briefly— 
The CHAIRPERSON (Lindsay Tisch) 
: No. In fact the member’s time has expired. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Firstly may I record my agreement with the substantive points made by my learned colleague Dr David Clark. It is a matter of procedural nicety that the earlier Part 2 was inserted by Supplementary Order Paper 185 into Part 1 of the Student Loan Scheme Amendment Bill (No 2) as it were at the last moment and thus the offending “Henry VIII” clause has been embedded in Part 1—just for the benefit of the listeners. 
The CHAIRPERSON (Lindsay Tisch) 
: Let me just reply to that. We have actually dealt with Part 1 so let us just concentrate on Part 2. 
Hon DAVID CUNLIFFE 
: I move to the substantive Part 2 which is a collection of transitional provisions relating to other parts of the Student Loan Scheme Act 2011. Unlike the offending “Henry VIII” clause which delegates from the legislation a regulation-making power that is thus not subject to the oversight and supervision of Parliament or to the full measure of the democratic process these clauses are in fact in some cases perfectly sensible ways of handling the transition. 
If I might draw the attention of the Committee to clause 55 of Part 2 it says that it replaces a fixed nominal interest rate which is the late-payment interest charged on an unpaid amount which was in section 139(2)(a) and (b): “replace ‘0.843% of’ with ‘the late payment interest rate multiplied by’.” New section 139(3) makes clear that “late payment interest rate means the base interest rate plus 4% calculated as an equivalent monthly rate expressed as a percentage and truncated to 3 decimal places.” That is extremely useful for us to know because what it does is provides a living mechanism whereby the legislation sets the rule which is then automatically updated as the base interest rate and thus the late-payment interest rate which is the base plus 4 percent changes over time. That is an example of how to do a transitional provision without offending either the Regulations Review Committee or the estate of the late great Henry VIII. It is not delegating an opaque broad regulation-making power; it is delegating only a very specific numerical formula that replaces a formerly static number that of course became less and less meaningful over time because of the time value of money and inflation. 
It is a matter of some interest that the Minister in the chair the Minister of Revenue has presided over this piece of legislation which in one place offends the best principles of parliamentary scrutiny—as you say Mr Chairman quite rightly now vested by amendment in Part 1 of the bill—and here in Part 2 has other clauses that do not so offend the Standing Orders the Regulations Review Committee principles or the best practices of parliamentary democracy in the Westminster system and that would leave McGee for example perfectly comfortable with the mechanism being followed. The question is why the Minister has a bob each way in two different parts of this bill. If it was good enough to do it properly in Part 2 why did the Minister feel the need to insert an offending clause by amendment in the middle of Part 1? 
Mr Chairman I guess that brings the Committee back to matters that were the subject of debate before your colleague Mr Roy departed the Chair which was that this bill is a tinkering bill. Although on the face of it in general the Labour Opposition supports it because it does act toward the principle of fairness in a very small way it is mainly a bill of missed opportunities. 
We are tinkering with a student loan scheme that is bedevilled by two fundamental flaws. One is that it is building up a mountain of billions of dollars of debt much of which will not be repaid because the students concerned have become exiles overseas in what is the second-highest diaspora after Ireland of any country in the developed world. 
The second problem is that it is perpetuating by its inaction an intergenerational unfairness or inequity that has seen people of the Minister’s generation benefit from a free subsidised State education all the way to postgraduate level without having to take out huge student loans and getting paid a bursary just like I did whereas today’s students if they have the courage to take on the debt to get their way through tertiary education finish with a mortgage and no house—a mortgage and no house. 
We all know that New Zealand’s earning rates for graduates vis-à-vis say Australia are around one-third lower. They were 30 percent lower when the current Government came into office but the current Government promised New Zealanders it would close the gap with Australia and so of course inevitably it got wider. My latest understanding is that it is now about 37 percent different on a GDP per capita purchasing power parity basis. In other words in common English it is getting worse. The gap is getting wider and the implication is that more and more of our graduate students are leaving in order to be able to repay the student loans that are the millstones round their necks. That is a perverse consequence that this House is going to have to spend a whole lot more time on in the term of the next Government working together because the Minister in the chair is not prepared to do step change. He does only small change and all the Committee has today is small change. 
Let me draw the attention of the Committee to clause 53 which replaces section 119. It replaces the former meaning of “excess repayment”. It contains a number of subsections and paragraphs—(1)(a) (b) and (c) and (2)(a) through to (d)—which cover in some detail the penalties and obligations apportioned to excess repayment. There is a certain irony in this clause. How many of today’s recent graduates or current students are capable of so-called excess repayment? Excess repayment would be a fine thing when they can barely feed themselves or pay for the rent while they get their first jobs straight out of university with the millstone of a huge debt round their necks. And it is because of their inability to repay because of forces beyond their control like the fact that we are 270000 jobs short in this country and we have a Government that is doing precisely nothing to fix it—those are factors beyond their control—that there will not be much excess repayment under this clause in Part 2. 
Clause 56A amends section 145 which is about the application of different types of relief for borrowers. Well that sounds interesting. Perhaps it is a neck and shoulder massage. But no we see in the proposed new section 146 that the commissioner may grant relief from late-payment interest. That in our view is a very sensible provision to include in this bill because it gives the commissioner discretion to look at individual life situations on a case by case basis. Why is discretion important in the law? Because no two lives are the same and it would take volumes to try to write prescriptively all the criteria that a sensible and worthy commissioner should take into account if trying to decide every case off some fantasy rule book. Better to have a well-trained commissioner subject to proper principles and oversight and to delegate appropriate discretion. The same does not apply to “Henry VIII” clauses as have been vested by the Minister by amendment in Part 1. 
Summing up all in all the transitional provisions currently contained in Part 2 of this bill are somewhat underwhelming. They are for the most part sensible. They do not for the most part—in fact I do not think at all—offend the principles of Standing Orders such as that clause now vested in Part 1 which delegates a regulation-making power because the Government could not think its way properly through legislating. That is the problem. The problem is that as with the rest of the bill worthy though most of it is it is a bill of small changes whereas what we need is a step change. It does not address the yawning chasm of billions of dollars of student debt by any more than $7.5 million over 5 years—barely enough it might be said to cover the cost of Parliament’s time the implementing officers’ time and the compliance costs associated with the measure. It certainly does not solve a billion-dollar problem. Secondly it does nothing to resolve the intergenerational equity issues that have bedevilled today’s students. 
HOLLY WALKER (Green) 
: 
 I will begin in Part 2 of the Student Loan Scheme Amendment Bill (No 2) where the previous speaker David Cunliffe left off looking at clause 57 which replaces section 146 and looking at the discretion given to the commissioner to grant relief from late payment interest. We agree that it is very sensible that the commissioner has that kind of discretion to grant relief to borrowers who are charged late-payment interest and penalties on their student loans. As we have heard those can be significant and it is sensible that the commissioner has that kind of discretion. It would be good if the commissioner still had the same discretion through the 3-year repayment holiday provision which is being repealed and shortened to 1 year to grant relief from late-payment interest and penalties to borrowers living overseas who are there for more than 1 year as most New Zealand graduates are. It is an example of the inconsistency between some of the sensible provisions of this bill and the series of very damaging changes to the student loan scheme that have been made over a number of years by this Government. 
Indeed I think the kind of discretion described in replacement section 146 in Part 2 is the kind of discretion that my colleague Tracey Martin was talking about earlier in the debate when she talked about the discretion for individual circumstances including borrowers living in New Zealand who may become learners at different stages throughout their lives to have the ability to take a repayment holiday for example from their student loan. Those are sensible provisions similar to what is proposed here and yet not supported by this Committee. 
While I am on the subject of the contribution from my colleague Tracey Martin earlier I think it is important to correct the record. She questioned the commitment of both the Green and Labour parties to free tertiary education. I was very pleased to hear my Labour colleagues reiterate the Labour Party’s commitment to free tertiary education. Of course the Green and New Zealand First parties are quite aligned on this matter. Like New Zealand First we stand for a universal student allowance we stand for the reduction of tertiary fees and we stand for exploring a debt write-off and bonding options under the student loan scheme so we have a lot in common. Of course our concern about the financial burden that students and graduates such as myself are dragging around does not detract from our commitment to that principled stance on tertiary education. 
I want to briefly turn my attention to the contribution from the Minister of Revenue earlier. I was pleased to hear him say that it would be wrong to see this bill in isolation from the suite of measures introduced over the last 4 to 5 years. 
The CHAIRPERSON (Lindsay Tisch) 
: Sorry to interrupt the member. That was in Part 1. We are now on Part 2 so just confine your comments now to Part 2. 
HOLLY WALKER 
: Thank you Mr Chair. Indeed the changes in Part 2 should not be seen in isolation either from the suite of changes that have been made to the student loan scheme over the last 4 to 5 years. 
I would like to review for the Committee what some of these changes are because they are very concerning. We have also heard in the debate on Part 2 mention of the lifetime limit of 7 years of equivalent full-time study so you cannot borrow under the student loan scheme if you have been studying for more than 7 years. That was a change introduced in the last 4 to 5 years by this Government and it is a very punitive change. It means that a student who has completed a 4-year Bachelor’s degree with honours and then starts a Master’s degree and then moves on to a PhD would lose access to their student loan part-way through their doctoral study. Similarly students who are medical students who have been studying for 7 years but are doing an 8-year course would lose access to their student loan before they have completed their medical degree. Similarly students who undertake bridging courses to prepare themselves for tertiary study then find that that has contributed to their lifetime equivalent full-time study limit and are unable to borrow later on in their degree. Those kinds of changes are very detrimental to those students and they are part of that suite of changes that we have heard about which is very concerning. 
As I began this contribution on Part 2 with the observation that the commissioner under this part has the discretion to grant relief against financial penalties and late payments similarly as I have mentioned we have seen a similar discretion be removed—the ability to grant a repayment holiday for 3 years and for that repayment holiday to be reduced to only 1 year. Under Part 2 that kind of discretion is given to the commissioner and yet it is removed by some of those other changes we have seen in the last few years. We have also seen a reduction of the academic requirement that a borrower must have passed at least half of the previous 2 years of study in order to continue qualifying for a student loan—a manifestly unfair measure that was abolished in 1993. We have seen the restriction of access to students over 55 so that they can no longer borrow under the student loan scheme. That nonsensically makes it more difficult for older people to upskill and retrain during a period of global economic recession. We have seen the Government make it more difficult for new immigrants to qualify for the student loan scheme. We have seen the Government restrict part-time students from being able to borrow for course-related costs. We have seen an increase in the administration fee of the scheme from $50 to $60 per year and we have seen the introduction of an annual $40 Inland Revenue Department administration fee for graduates who are paying off their loans. As I have mentioned we have seen the 3-year repayment holiday reduced we have seen the 10 percent voluntary repayment bonus abolished which is also referred to in Part 2 of this bill and we have seen the student loan repayment rate increase from 10c to 12c in the dollar. 
I think what is really important to keep in mind when we are looking at the amendments in this part of the bill and the bill as a whole is the question of who are the people affected. I think this House has a habit of thinking that bills that make amendments to the student loan scheme are about students alone. Actually most of the time bills that amend the student loan scheme including the parts in Part 2 are actually about graduates who are paying off their loans. These are people who have finished studying and who may not have studied now for several years. These are people who are grown-ups; graduates are grown-ups. They are employees. They are taxpayers. Many of them are aspiring homeowners. They are parents. In fact most of the people affected by this bill are your typical “mum and dad” New Zealanders—and I put quote marks around that because I hate that phrase. But actually that is who we are talking about. I know that many members of this Parliament like to think of students as being free-loading slackers and that this bill tightening up provisions around the student loan scheme just makes a very generous scheme fairer for students. It is actually not about current students; it is about graduates and they are your “mum and dad” New Zealanders. 
I think the Government in its continued slow erosion of the scheme and in making things harder for those graduates—making them pay their loans back at a higher rate for example—is actually putting a lot of pressure on everyday “mum and dad” New Zealanders. You know they are the people like the journalists whom the Minister spoke to who say they are angry with overseas borrowers. They are also angry about their increased repayment rates. I think the Government ignores that at its peril. 
The CHAIRPERSON (Lindsay Tisch) 
: I call Dr David Clark. Part 2. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 Part 2. I am delighted to speak directly to Part 2 of the Student Loan Scheme Amendment Bill (No 2) and in particular the broadening of the definition of “revenue” which is so crucial to the actual measurable impacts of this bill. I mentioned earlier the excellent work done by officials in servicing the Finance and Expenditure Committee. One of the pieces of work that they did was bringing back to us some figures that I have mentioned earlier around what might be collected from overseas borrowers if obligations were met. 
The definition of “revenue” is touched upon in many of the clauses in Part 2. I note for example in clause 51 there are a number of additional definitions inserted that describe the meaning of an unpaid amount: “an amount that must be paid by a borrower in accordance with a written notification under section 52;” is new paragraph (f) “a late filing penalty:” is new paragraph (g) “a student loan shortfall penalty:” is new paragraph (h) and “an underestimation penalty” is new paragraph (i). These are all broadening the definition of “revenue” presumably in response to some tricky situations or some technical situations that have been faced where a borrower has disputed whether indeed the revenue was appropriate to be collected. 
The officials gave us an estimate of the additional revenue that would be collected through the broadening of the definition of “revenue” and that estimate was $1 million a year from 2015-16. We know that putting legislation through this Parliament costs more than that so some of us in the committee were quite concerned and those of us who were concerned raised concerns that we did not have clear estimates of how much additional revenue would be collected as a result of this bill. I raised earlier my concern that some of the substantive parts of the bill might not be able to be implemented because of challenges with the computer system. So we are left with the definition of “revenue” being the substantive and substantial amount that can be quantified and it has to be said in tax terms and in terms of the time of this House and in terms of the priority of the Government that a $1 million tax grab is actually a little on the small side. 
The Minister in recent days canned a car-park tax that was aimed at gathering $17 million which is 17 times the amount that we know for sure will be collected by this tax. We have had the paper boy tax and there is talk of an iPad tax although that looks like it will be hit on the head as well. We have a Government that is trying to through small measures broaden the tax base. The general effort to broaden the tax base we of course support because we believe that everyone should pay their fair share. But it does seem that a lot of these measures could be brought together in one bill rather than being debated over a lengthy period of time when we know that these are small measures and also the ones that look more substantial are not yet certainties for implementation and certainly on past record may not be possible. 
The broadening of the definition of “revenue” goes into much detail in this provision and I will not debate all of that simply to say that a lot of it is around small matters of wording. We also have some discussion around late payment interest and the ability of the commissioner to grant relief. Look we support those kinds of things because as my colleague David Cunliffe has previously pointed out the intent to specify every single case where relief may be granted goes a step too far and indeed in some cases it is appropriate that there is discretion for the commissioner. 
In closing this short contribution I want to say that Labour supports the bill as a whole. We have already outlined our concerns with the “Henry VIII” clauses. We are concerned that there really is not a clear picture about how much revenue this will collect and it is not even clear to us and became increasingly worrisome in the committee that this could not already be accurately collected through the Customs Service compulsorily requiring some details to be provided. Thank you. 
Dr MEGAN WOODS (Labour—Wigram) 
: 
 I just want to build on what some of my colleagues have said in relation to Part 2 of this Student Loan Scheme Amendment Bill (No 2). In particular I will speak to clauses 50 through to 62A in terms of the transitional arrangements that are going to occur in here. I think that what we see is the complexity of the phasing in of these changes. The transitional arrangements that we are going to have to have in order to implement the changes that are embedded in this legislation really speak very much to the tinkering that is going on in this legislation and to how it really is fiddling around the edges and not addressing some of the bigger issues around access to tertiary education in this country through loans and allowances. 
I just want to reiterate what my colleagues who have spoken before me have alluded to in terms of the shifting of the “Henry VIII” clause into Part 1 of the legislation. What we are seeing is that a lot of the concerns that were there really do need to still be there in Part 2. If we have a look at these transitional arrangements—and to pick up on the point that Holly Walker made—when we are thinking about this we do need to think that this is not just about students who are currently studying but also about graduates. I was saying in my last contribution—before I was cut off in my last contribution on Part 1 of this bill—that I am one of the growing number of parliamentarians in this place for whom student loans are not a theoretical issue. I have a student loan and I list it on my pecuniary interests as a growing number of parliamentarians here do. 
These are not just small little changes that you fiddle around with. I know that for many members of my peer group people who are my friends and who are my age these kinds of changes about how things like this are phased in—how it is done and the fairness and equity in terms of how these changes are made—are really some of the do or die factors of whether or not they stay in New Zealand; whether they stay here and contribute to our country and use their skills their training and their education which could be for the betterment of all New Zealand if they do choose to stay here and do that. I think this is something that we do have to bear in mind all the time when we are looking at how we bring in these measures. 
My colleague David Cunliffe went through some of these transitional arrangements in quite a lot of detail. If we have a look for example at clause 57 of the bill it states when it is that the commissioner may grant relief from late payment interest and how it is that that is going to be used. What we are trying to achieve in this legislation is a fairer student loan system by saying that everybody who borrows should be paying back their student loan and Labour supports that element of the bill. But what we do not want is any provisions in this bill to be an impediment to people coming back to New Zealand or to their being able to face up to their loan and to make the payments that are needed. So we do need to make sure that we have fairness and that we have equity in how we are implementing these transitional arrangements because they do make a difference. These are not theoretical situations. These are the very kinds of rules on which every day young New Zealanders who have left to live in other countries make their decisions about whether they stay or go. 
The other point I would like to know about in terms of the complexities of the transitional arrangements and in terms of the implementation of this is the infrastructure that is going to be needed to implement it. What we are going to have is a whole lot of different rates and offsets that are going to operate for a period of time while we phase in these changes. That is inevitable with any piece of legislation and we are supporting this legislation. But the point that Labour would like to make is that we do have some questions around the technology that is going to be needed to implement this legislation—about whether it will be in place and about whether we will be able to phase in these changes in the way in which this legislation sets out in these transitional arrangements in Part 2 of this bill. 
I think what everybody in this Committee is after is a way in which to make this scheme fairer and that is why Labour is happy to support this legislation. But what we would like to see is a scheme that did actually go to more fundamentally addressing these issues of access to tertiary education in New Zealand and that we do have a way in which New Zealanders can access our polytechnics can access our universities and can access training and education at all levels. We do not want to see this limited and we want to see all New Zealanders given this opportunity. We would not like to see any impediments in terms of how this legislation is going to be implemented put in there. 
My colleague Holly Walker spoke in relation to Part 2 of this bill. She spoke about how it is that we have seen an attack on student access by this Government throughout this term and the previous term. She said that there really has been an agenda to dampen down demand in terms of transferring people from student allowance in terms of borrowing it and being saddled with that debt in terms of student loans. This is something that we do need to bear in mind. We need to be creating systems whereby more New Zealanders want to be part of our future—to stay here and to have the skills and the education and the training to stay here and to be part of it. We just want to make sure that that can be implemented in a transparent robust fair and equitable way. Thank you very much. 
The question was put that the amendments set out on Supplementary Order Paper 185 in the name of the Hon Peter Dunne to Part 2 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 105 
New Zealand National 59; New Zealand Labour 34; New Zealand First 7; Maori Party 2; ACT New Zealand 1; United Future 1; Independent: Horan. 
Noes 15 
Green Party 14; Mana 1. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 2 as amended be agreed to. 
Ayes 105 
New Zealand National 59; New Zealand Labour 34; New Zealand First 7; Maori Party 2; ACT New Zealand 1; United Future 1; Independent: Horan. 
Noes 15 
Green Party 14; Mana 1. 
Part 2 as amended agreed to. 
Part 3 Amendments to principal Act that apply for 2014-2015 and later tax years 
The CHAIRPERSON (Lindsay Tisch) 
: We now come to the debate on Part 3. This is clauses 63 to 68 and schedule 3. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I rise to take a short 20-minute call on Part 3 even if I have to read it several times in order to satisfy that criterion. I draw the Committee’s attention to clauses 63 to 68 of the Student Loan Scheme Amendment Bill (No 2) situated as they are on pages 46 and 47 of the bill as amended and reported back to the Committee and not the original printed version of the bill which was on the Table earlier and which I think it is fair to say did give rise to more than a little confusion having as it did the old Part 2 in Part 2 which now resides in Part 1—[ 
Interruption 
]—none of which is relevant to the interjections coming from that unruly mob known as the National backbench. You know the extraordinary thing about that mob is that it will bray when there is something to talk about and it will bray when there is nothing to talk about and I venture to suggest that we are in the latter category now. 
Clause 63 is a very important clause. These are the amendments to the principal Act that apply for the years 2014-15 and later tax years. There is something we all know about the tax year 2014-15 is there not colleagues? That will include the first year of the next Labour-Green Government and it may well be with the New Zealand First Party in coalition. And it will be the first year in Opposition for members opposite—the first of their next 10 years in Opposition. They may think I am kidding but no. In fact I am deadly serious on this matter because we are now in the inner entrails of this bill. We have gone beyond the transitional provisions we have gone beyond the all-powerful “Henry VIII” clause we have gone beyond the transition in Part 2 and we are down to the transition of the transition of the transition in Part 3 and it is really quite something. 
If I read clause 63 for the benefit of the Committee and those riveted to their screens while the Committee is occupying itself with this matter of import clause 63 says: “Section 4 amended (Interpretation)—In section 4(1) repeal the definitions of ‘annual gross income’ ‘annual total deduction’ and ‘pre-taxed income’.” That definition right there raises some very important issues because the first one “annual gross income” is something that a lot of New Zealanders are lamenting because the median annual gross income has declined in both nominal and real terms since the current Government took office. So if there is one thing that New Zealanders in the middle of the heap know about annual gross income it is that it is going down. They are worse off and that is one reason why the 2014-15 tax year to which this refers will be the first year of the next Government. 
Similarly “pre-taxed income” is in this clause. It is a very important phrase as it brings to mind the doings of the last 2 days: one failed tax has been shot between the eyes by the Prime Minister on each of the last 2 days. That is something of a record. We are holding our breath for tomorrow to see whether there will be a veritable trifecta of skeletal taxes lying slain upon the floor of the House a mere flash in the pan of revenue history rather like the reputation of the current Minister of Revenue who has presided over these small tinkering taxes where the grey hand of the State is inserted ever deeper—ever deeper—into the wallets of New Zealanders. It may be a laughing matter to the collector of dairy farms over there on the back row of the Government benches. That dairy farm collector may not trouble himself with small matters such as car-park— 
HOLLY WALKER (Green) 
: 
 I apologise to my honourable colleague. Perhaps he will get to fill in the other 15 minutes of his 20-minute call shortly. I would like to address clause 64 of Part 3 which is the clause that gives effect to one of the more significant changes in this Student Loan Scheme Amendment Bill (No 2) and that is the alignment of the definition of “net income” in the student loan scheme with that used in Working for Families. That is one of the two probably more significant changes amongst a raft of very minor technical amendments in this bill. 
We feel in the Green Party that this alignment and this new definition of “net income” with that used by Working for Families is a sad missed opportunity to correct what is a very unfair element of the definition of income currently used under the student loan scheme and indeed for Working for Families. This unfairness I think became apparent at the time when the Government introduced the increased repayment rate under the student loan scheme from 10 percent to 12 percent so that graduates now pay their student loans off at 12c in the dollar when they earn over the threshold which is less than the full-time equivalent of the minimum wage. At that time what became apparent looking at the definition of “net income” used for both the student loan scheme and for Working for Families was that Working for Families entitlements are calculated based on the household’s income before student loan repayments are deducted. That is significant because as I mentioned in my previous contribution when we are talking about who is affected by the changes to the student loan scheme we are talking about graduates. Graduates are grown-ups who have lives jobs homes and families. Many of them are eligible for payments under Working for Families the definition of income for which this bill aligns. 
Many young families have student debt and the changes therefore impact directly on families and on the mum and dad New Zealanders I talked about earlier. What this means and what is now in practice under the current regime is that the higher repayment rate for student loans of 12c in the dollar essentially operates as a tax. It operates as a higher tax or a tax increase on those families because they get no corresponding increase in their Working for Families entitlements but their income is less each week because they have higher student loan repayments. So they are actually out of pocket every week by a significant amount. 
If we are talking about aligning the definition of Working for Families income with income under the student loan scheme in our submission that needs to be aligned after student loan repayments have been taken into account. It is all very well to align them as this bill does but what this bill could have done and fails to do is correct that unfairness that Working for Families entitlements are calculated before student loan deductions have been removed. For many families this actually has had a significant impact in their weekly budget. 
The second point I want to address on this point of aligning the definition of Working for Families income with the student loan scheme income is that they are not actually 100 percent aligned by this bill. The reason for that is that by definition the student loan scheme income is always calculated on the individual level because it is the individual borrower and their individual debt. But actually Working for Families calculates income at the household level because it is looking at household and family entitlements. What I would have liked to see is the Government explore that a little further before making the changes made in clause 64 in Part 3 of this bill to actually explore whether it would be possible or practical to align the definition of income for student loan purposes with household income. I believe that that would make it easier—or allow for an amendment that would make it easier—for couples to help to pay off each other’s loans. 
If I can just explain a little bit of what I mean by this. I believe that this would help to eliminate a significant gender inequality in the student loan scheme. What we know is that women tend to take much longer to pay off their student loans and over their lifetime they have higher student loan debt because of the length of time they take off to raise children and because of the penalties and interest that they have in many cases accrued before student loans were interest free. 
An amendment such as the one that I am suggesting here which again I think is a missed opportunity that this bill did not take is that if you calculated student loan income at the household level you could allow an amendment to take place that would make it easier for partners to assist each other to pay off their loans. For example if a woman or even a man has taken some time out of the workforce to care for children their partner could continue to pay 12 percent of their income although it should be lower towards the student loan debt of their household but they could split it between their own loan and their partner’s loan so that the woman—or indeed the man but in most cases it is the woman—does not accrue a higher student loan debt over their lifetime. I think that would help to eliminate what is one of the significant gender inequalities in the student loan scheme. It could be achieved through what this clause here is trying to achieve in aligning the definition of income for student loan purposes with that used for Working for Families. 
The bill actually does not go all the way. It goes part of the way to aligning that definition of income but because it does it only at the individual level and does not contemplate doing it at the household level I think it is a significant missed opportunity to eliminate that gender inequality. It would be a complicated change to make and I acknowledge that. We have had a number of complicated changes already to the student loan scheme but I think it would have been great if the Finance and Expenditure Committee or indeed the Government had explored this opportunity in a little bit more detail because for the purposes of the bill—aligning the definition—it would actually achieve that to a greater extent. It would make it easier for partners to help each other to pay off their student loans. As a partner who is about to pay off mine and considering helping my partner to pay off his I think that would be great. 
Both of these changes I think highlight the effect that I talked about in an earlier contribution which is that although the Government and the members opposite like to talk about changes to the student loan scheme as if they will affect only those greedy selfish current students who never had it so good in fact the people affected by the changes in this bill and the other changes to the student loan scheme that have been made by this Government over the last several years are graduates who are grown-ups who are living their lives who are homeowners who have families and who indeed may be voters potentially for this Government. 
I think it ignores that group of people at its peril and that it continues with these punitive changes at its peril instead of looking at some smart amendments like those I have just outlined which could actually make life and the weekly budget easier for those families who are struggling to make ends meet but working very hard working to pay off their loans and working towards owning their own homes. There are changes we could make to the definition of income in the student loan scheme that would make things easier for those families. Sadly the clauses in Part 3 here are a missed opportunity to do that. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 In Part 3 of this bill the Student Loan Scheme Amendment Bill (No 2) as my colleague the Hon David Cunliffe was saying there is a variety of broader definitions of income descriptions much the same as in Part 2. Here also there are definitions that are about broadening income descriptions. He mentioned the annual gross income and made the point that New Zealanders know a lot about that because it has been dropping in real terms under this Government. Wages in this country are indeed a big issue for New Zealanders in the light of rising costs and a Government that is not growing the economy. 
Clause 65 provides the new definitions of income and they are broader. That is indeed the intention of the legislation—to broaden the definitions of income to collect the extra million dollars per annum of revenue from 2015-16 onwards which is captured in Part 3 of the bill “Amendments to the principal Act that apply for 2014-2015 and later tax years”. That is where we see this really taking effect albeit—again as has been pointed out by numerous members of this Committee—they are very small piecemeal measures. In many ways it is a lost opportunity. 
The other point I have made is that in this bill we see many measures that are repealing earlier decisions taken by this Government measures that in most cases have been repealed because they have proven too difficult to implement or too costly to implement when faced with an aged computer system that was built 20 years ago and for which the Government has not yet outlined a credible plan to rebuild. I am still hoping the Minister in the chair the Minister of Revenue will at some stage address our concerns about the ability of the Government to implement these changes and will outline a credible time line and plan for replacing this aged decrepit system that is proving incapable of implementing Government policy. It is a serious concern that could see billions of dollars in Government revenue not able to be collected in the future. 
 Further on in Part 3 we see also some amendments relating to the repeal of provisions on the 10 percent bonus. This is something that we have seen also debated in the House previously where this Minister having introduced the 10 percent repayment bonus for students has discovered that it was not a very effective policy and has repealed it latterly—yet another U-turn. 
We see in these U-turns—on the car-park tax the upcoming one on cellphones the ones in this bill relating to measures that cannot be implemented and indeed the repealing of provisions around the 10 percent bonus—a pattern emerging of two steps forward three steps backwards. That is no way to run a Government. That is no way to run a Government. We need to see a Government that is taking bold measures in the tax area and instead of debating how we are going to collect the extra million dollars is considering the bigger issues that are facing our economy—for example around the investment signal for export-led growth the kind of change that a capital gains tax would make for the benefit of our economy to see our economy grow and to see it compete with overseas countries whereas right now we are one of very few countries in the OECD that do not have such a measure. 
I come back to the provisions in the bill because I think it is very important to stick to the clauses that are before us in this particular part of the bill. I am sure that you Mr Chairperson will agree with me on that. We see that in clauses 67 and 68 we have clauses relating directly to that repeal of the 10 percent bonus provisions another failure on the Government’s part to implement policy. It is being forced here through this legislation to withdraw it again. 
 All of these measures that are ultimately positive we support. That is why overall Labour will support the bill because we believe that the changes in here that are substantive will make the repayment of student loans fairer. We recognise that it is pretty humiliating for the Government to be having to pass a good deal of measures that are repealing earlier measures that it brought through the House thinking that they were improvements. We of course have made a little sport of that but we have concern that Parliament is wasting time where it could actually be making bigger and better decisions for New Zealand. 
Dr MEGAN WOODS (Labour—Wigram) 
: 
 Part 3 of this bill the Student Loan Scheme Amendment Bill (No 2) and in particular clause 64 which I am going to speak to here is where it really becomes clear what this legislation means for individuals. It is where we get to these definitions of adjusted net income and are replacing them in terms of gross income. We have heard speakers prior to me talk about this in terms of the impact that this has in terms of everyday life. We have seen earlier from this Government an increase in the student repayment amount from 10c to 12c which effectively makes the marginal tax rate of a graduate very high. I think that is something we need to consider in a very careful way and it is in clause 64 in Part 3 of the bill that this becomes very clear. 
This is something that we have to give real thought to because it is effectively this marginal tax rate these very definitions we are seeing here that is often the thing that drives young New Zealanders offshore to go and live in other countries and contribute to the development of and make contributions to societies other than our own. 
We hear a lot of rhetoric from the Government about the income benefit that someone with a tertiary qualification gets in New Zealand. I think that a few facts need to be put around this claim that we are hearing all the time from members opposite because what we are seeing in terms of OECD countries is that the benefit you get from having a tertiary qualification in New Zealand in terms of income is much lower than in many other OECD countries. Our wages are lower and there is a whole raft of reasons—which probably fall outside Part 3 clause 64 of this particular piece of legislation that we are looking at—as to why it is that we have these lower wages in New Zealand but we have to face this reality. 
I think that the New Zealand University Students Association gave a very useful submission to the Finance and Expenditure Committee on this piece of legislation. The association provided some facts around what an average student income looks like. An average student leaves a tertiary institution after some study with a mean debt of $17176 and a median graduate income is $42120. I will talk a bit more in a couple of minutes about how this is calculated. The average time to repay this debt is 5.2 years with the real value of the loan repayments being 92 percent. What we see is that these 5 years the very years when someone has finished their tertiary study might be a time when they are looking hopefully be able to buy a home and maybe start a family. 
These are the things that actually get in the way and it is these kinds of numbers that make individual New Zealanders make decisions every day to get on a plane and leave New Zealand. If we have a look at what I am talking about—and the mean debt and median repayment time is for a domestic borrower; I just want to make that clear. As the submission says these figures are: “Based on: mean debt and median repayment time (for a domestic borrower) from the 2011 Annual Report on the Student Loans Scheme graduate income (less than one year’s experience) from NZ Immigration Service with 5% annual growth a discount rate of 3.5% (reflecting borrowing cost + 0.5% risk).” I think it is really important to think about what numbers like this actually look like—living in your street shopping at the same shops that you do and going to the same schools that your children are going to—because these are the experiences of a generation of New Zealanders. A generation of New Zealanders now have student loan debt and it is their children who are about to enter tertiary education so what we have is a generation— 
House resumed. 
The Chairperson reported the Minimum Wage (Starting-out Wage) Amendment Bill with amendment progress on the Student Loan Scheme Amendment Bill (No 2) and no progress on the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill. 
Report adopted.