Clark David: Student Loan Scheme Amendment Bill (No 2) — Second Reading 
Text is incorporated into the Bound Volume 
Clark David: Student Loan Scheme Amendment Bill (No 2) — Second Reading 
[Sitting date: 28 February 2013. Volume:687;Page:8351. Text is incorporated into the Bound Volume.] 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 It is a pleasure to speak following that member of the Finance and Expenditure Committee John Hayes. That was definitely one of his stronger contributions of late. 
Labour does support the Student Loan Scheme Amendment Bill (No 2) and it does so for the reason that it is making sure that we do collect the money that is rightfully due to taxpayers. Labour believes in the value of the student loan scheme. After all it was a Labour Government that made it interest-free after the National Government introduced the expensive system for students. National of course subsequently has introduced charges and so on but we believe fundamentally in the student loan scheme and the way in which it creates access for people of all backgrounds to tertiary education. 
In this bill we see a tightening up of measures to collect overdue debt and that can only be lauded. It is good to see the Government taking some action on that front. Of course it is motivated to do that particularly because the tax take is dropping. This Government in its first term saw the tax take drop by 4 percent and its own officials its own officials said that— 
David Bennett 
: It’s not actually dropping. 
Dr DAVID CLARK 
: Mr Bennett I invite you to look at the projections your Minister of Finance is generating and listen to him when he is in the select committee saying that the tax take is dropping. I think he would be disappointed to know that you were not listening when he was there. The Minister of Finance I think is right when he says the tax take is dropping and the projections are going down. 
The 4 percent drop in its first term in Government consisted of 1.5 percent that the officials said could be attributed to the global financial crisis and 2.5 percent that officials told us could be down to Government policy changes like the 2010 tax cuts where all the money went to the wealthiest New Zealanders—an overbearing proportion—and those at the bottom of the heap the bottom 20 percent got just 2 percent of the value of those cuts. So we recognise that this Government has a problem. It put those tax cuts in place to try to get the economy going and it has “Stolpered”. 
In fact the economy has been growing in small measure because the population has been growing but wages are not keeping up. People are struggling and this Government is scrambling to tax paper boys and paper girls and after-school cleaners to make up the gap. It is trying to stop the gaps in this bill and that is a commendable thing but it also in this bill is tidying up a whole bunch of other messes and this is something I would like to draw attention to. 
It is good that there is some positive in this bill and that is why we will support it but actually this bill is an embarrassment for the Government—this bill is an embarrassment. The majority of this bill is about repealing decisions that it already brought to this Parliament in order to improve the student loan scheme in its view. We have four measures in this bill that are exact about-turns by this Government because it has failed to implement them. It has brought them through the House. It has wasted House time it transpires because then it has failed to deliver on them. That is what the majority of this bill is about and that needs to be pointed out to the House that what we are doing here is tidying up after the Government’s own mess. 
David Bennett 
: Can’t accept success—can’t accept success. 
Dr DAVID CLARK 
: So if we read the notes to the bill here Mr Bennett if you have not had the opportunity to have a look at it we see that there are four measures provided for in the 2011 Act that should also be cancelled. These are the measures that are being wound back as a result of the Inland Revenue Department’s current computer system and perhaps the lack of resourcing for the department and the failure of the Minister to get on and fix that problem which has been acknowledged for quite some time. Certainly for the 7 years he has been Minister there has been an acknowledged problem with the computer system there and some challenges to overcome. 
It is a 20-year-old computer system. I think today there is $7.8 billion in outstanding debt owed to the Inland Revenue Department that it has not been able to collect to date. There are a billion unprocessed returns—I think a billion; somebody correct me if I am wrong on that—a significant number of unprocessed returns. We have a real crisis in that department—a high staff turnover lowering morale and lowering voluntary compliance. This Student Loan Scheme Amendment Bill (No 2) is designed to clean up some of the mess that this Government created for that department by putting expectations on those poor officials when it was not willing to pitch in and upgrade the system in a timely fashion so that we would have a proper tax system like everybody else in the Western World. This Government has failed—failed—in its duty to collect taxes in a fair and consistent way as it should do. 
The measures being cancelled in this bill include relief for small amounts of loan obligations which seems like a pretty fair thing to do. But the Government is stepping away from that saying: “No we’re no longer going to do that; we can’t. We’ve got our hands tied. We’ve failed. We’ve failed.” This Government has failed. So it is saying that it will wind that back and will not give relief for small amounts of loan obligations that are outstanding. So there we go. It is reinstating that. 
In regard to the loan interest calculation method there was thought to be a fairer way of doing that but that is being done away with because this Government has failed to implement the changes it put through in 2011. There is also in regard to the payment allocation the removal of clause 59 of the bill as introduced in order to retain the existing way in which payments are allocated to repayment obligations and debt. 
So what we see here is a Government that is going backwards—going backwards. It is doing its tidy-up here through this House after failing to implement the changes it brought with great ceremony to the House in 2011. We have in this bill some things that have merit—and I am quite certain that they are in there for cosmetic reasons—but primarily the bill is focused on back-pedalling because the Government has a tired worn-out computer system and has failed to prioritise that. 
Mr English is on record as saying that $700 million from the asset sales proceeds would go towards that. I wonder whether he had Solid Energy in mind when he said that number. That company is now not worth anything we think as a result of this Government’s mismanagement and poor oversight of Solid Energy. What we have is a clearly identified problem with the computer system in the Inland Revenue Department we have a department under pressure and we have revenue needing to be found. 
The bill itself makes provision for information sharing with the Customs Service. I want to say that is an excellent idea which we examined on the Finance and Expenditure Committee. Unfortunately the Government did not actually know how much money this is likely to generate. You know we have some rough estimates about “if this much money was collected” “if the people are really where they say they are” and so on. This is a bit of a waffly bill but it is a positive thing and we support the effort to make sure that people repay what they are due to repay. 
That aspect of the bill we support even though it is largely cosmetic in light of the major repeals contained in the bill. We also support the widening of the definition of “income” for student loan repayment purposes so that a borrower’s repayment obligation more accurately reflects their ability to pay. Again that is a common-sense measure. It is hard to disagree with that. One suspects that these things—certainly that latter measure—could have been done with the discretion of the Commissioner of Inland Revenue anyway. Nevertheless we are glad that the Government is getting on with that. 
The other thing that we had a problem with in this bill is the concern we have about proposed new section 17 in clause 39(4) which inserts a regulation-making power. We oppose that clause in the bill. We have noticed that it is part of a wider pattern. It is part of a pattern that this Government has not tidied things up properly and now it is inserting “Henry VIII” clauses. We saw one with the “earthquake czar” in Christchurch. There we supported it because we saw an urgent situation and a need to get on with things in an emergency situation. You give the executive some special powers in that situation and that is understandable. However with this bill here before us suddenly we are giving more powers to the Government because it has not quite worked out how all this stuff is going to work and the computer system might go wrong again. So the few positive changes that are actually in this bill may get backed out of again and we are saving the Government the embarrassment of coming back to the House yet again to repeal legislation that it has put through to cover up repealing legislation that it passed before. 
What we see here is a pattern. We see a Government that is tinkering with trying to get little bits of tax here and there but is failing to properly manage behind the scenes the tax collection method keeping the software up to date and making sure that it has relevant policy. It is a Government that is tinkering and at the same time the economy is puttering along going backwards. In fact real wages have dropped. 
David Bennett 
: Oh rubbish! 
Dr DAVID CLARK 
: We have got the worst inequality that New Zealand has ever had. This Government—it is true—has the worst economic record of any Government in New Zealand in the last 50 years. It is absolutely true. If we look at the economic growth rates over time we will see that under Labour Governments the economic growth rate was higher. Members opposite do not like it but they know it is true. Members opposite know because they can have a look at the figures. They can see that under National Governments the average growth rate in the last 50 years has been about 2.7 percent under Labour it has been 3.9 percent and this Government is the worst of all.