Rich Katherine: Taxation (Annual Rates and Urgent Measures) Bill — In Committee 
Rich Katherine: Taxation (Annual Rates and Urgent Measures) Bill — In Committee 
[Volume:628;Page:769] 
KATHERINE RICH (National) 
: 
 As I follow on from my learned colleague Bill English I think he raised a very important point. It seems that Labour does not understand or does not want to believe that some New Zealanders will change their behaviour as a result of this policy. Labour seems to believe that students and their parents will not look at the changes in this scheme and that students will not take out more money now that the loans are to become totally interest-free. 
I say to the Minister in the chair the Hon Pete Hodgson that parents with half a brain will now tell their children who are approaching university age to take out the loans they have available to them to the maximum and that if they are able to put whatever funding they have into an interest-bearing account they will find themselves better off. Already I have spoken to some students who have worked out that if they do that and put their money into either a bank account or some kind of investment be it their own student flat or another kind of investment that will earn them an income they will be better off at the end of their degrees and in the years to come. I think it is quite naive to suggest that Kiwis will not change their behaviour. Of course they will. Where money is free and there is no cost associated with taking out a loan anybody who has other financial loans will maximise the amount they have interest-free and use that to offset other loans that they have elsewhere or will put money into an account where they can earn income. That is just common sense. It is less than economics 101; kids learn that sort of thing in maths at secondary school. 
One of the things that does concern me though is the sort of incentive system that this policy continues to put in place in this country. It tells those parents who want to assist their own kids that they will be worse off and that there is now a disincentive to do that. As Bill English has pointed out we will now see some of that private support crowded out by the Government’s becoming involved and saying that it knows best and that this system is being put in place to support students. 
It was interesting to hear Dr Cullen talk about tax bribes. Well what is this policy? It was the greatest bribe of the last election. Although Labour pretended that the costings had been done it did not have a blind clue as to what the actual cost of this policy would be. The Prime Minister stood in the Chamber and said that Treasury had not done a costing because it did not cost Labour Party policy. We found out that that was not correct; Treasury had done the maths on it and the maths did not look great. If Labour was not trying to be deceitful why did it take the Ombudsman’s decision that it was in the public interest for the information to be released and that it had to be released prior to the election before it was released and we could see the workings had been done? Once those workings were released it became quite clear that the political rhetoric leading up to the election and the workings on the policy that had been done showed quite different stories. 
The interest-free student loan policy was quite clearly one of the biggest election bribes. In this case—sadly—it worked for Labour but I think what has been done is a great disservice for this country. Not only will we crowd out private family support for students as they undertake their tertiary study but we will now move to a situation whereby we actually force money on to young people and make them more indebted at the very beginning of their lives. One of the things that strikes me when I talk to students who have left university and gone on to work is that they did not understand what they were letting themselves in for when they cranked up their loans to buy a myriad of things. Money particularly when it is interest-free is easy to take on and it is not until some years later that students fully understand that ultimately the money does have to be paid back. We will see a huge increase in the number of loans taken out by students and a huge decrease in repayments.