Taxation (Budget Measures) Bill — In Committee 
Text is incorporated into the Bound Volume 
Taxation (Budget Measures) Bill — In Committee 
[Sitting date: 24 May 2012. Volume:680;Page:2475. Text is incorporated into the Bound Volume.] 
Thursday 24 May 2012 
( 
continued on Friday 25 May 2012 
) 
Taxation (Budget Measures) Bill 
In Committee 
Debate resumed. 
Part 3Student loan scheme: Repeal of 10% voluntary repayment bonus  ( 
continued 
)  
The CHAIRPERSON (Eric Roy) 
: Good morning everybody. The sitting is resumed and the House is in Committee on the Taxation (Budget Measures) Bill. The question is that Part 3 stand part. Chris Hipkins has the call; he has 4½ minutes remaining. 
CHRIS HIPKINS (Labour—Rimutaka) 
: 
 Thank you Mr Chairperson—I am very happy to take those. As I was saying before I was rudely interrupted by the break last night it is slightly ironic to be here debating the Taxation (Budget Measures) Bill only a few years after the National Government introduced it. We heard from the likes of the revenue Minister Peter Dunne that he could not fathom why anybody would oppose it—he could not fathom why anybody would oppose it. And here he is in the chair today and doing away with that very measure that he could not fathom why anyone would oppose.  
There are other National members who had quite a lot to say on this as well—Louise Upston for example. Louise Upston was very very supportive of this—very supportive. “The message very clearly” she said “is that our young people will be debt-free sooner” which was going to be the result of this bonus repayment scheme—this absolute rort that the Ministry of Education has pointed out has resulted in an increase in the number of people who borrow for 1 year and pay it back straight away so that they can benefit from the repayment bonuses.  
I think it is a good thing that the Government is doing away with this particular piece of very bad legislation which it rushed through in 2009 as part of its effort to look like it did care about students. Well of course we know it does not care about students now because of all the other mean nasty things it has done to students like trimming their allowances— 
Louise Upston 
: So how much more money are we putting in education—do you know the figure? 
CHRIS HIPKINS 
: What was that? 
Louise Upston 
: How much more are we putting in education? 
CHRIS HIPKINS 
: Not much more into student support; in fact probably less into student support—far less into student support. I am willing to wager that the growth in tertiary education funding is less than the growth in the overall tertiary student population and the rising cost of tertiary education. I would say overall in real terms per student it is going down. I would be willing to bet that and suddenly the Government is very very quiet. Their heads are down and they have nothing to say about that—nothing to say about that. Doing away with this very half-baked scheme cooked up by Steven Joyce back in about 2007 is a good thing. It is a good— 
Grant Robertson 
: Actually I think it might have been Anne Tolley. 
CHRIS HIPKINS 
: It might have been Anne Tolley. It is funny you should mention that because Anne Tolley said: “We estimate that this measure will reduce repayment times of those who take up the bonus by 1.5 years and we believe that it will decrease the upfront cost of new lending to 39.4c. How could anyone vote against that?”. And now she is going to do exactly that. She is going to vote against it by voting to repeal it. It was a stupid thing to put in place in the first place.  
The Labour Party pointed out all of the flaws with it when it was first introduced. The Government ignored us and now it has finally come round—it has finally come round. I think I will give credit where credit is due: it is a good thing that it is doing away with this repayment bonus. It does not make any sense and it was a ridiculous thing to do in the first place. 
GRANT ROBERTSON (Deputy Leader—Labour) 
: 
 It is a pleasure to rise this morning to speak on Part 3 of the Taxation (Budget Measures) Bill. Mr Hipkins has just been discussing the folly of the Government in bringing this particular proposal forward. I note in the regulatory impact statement around Part 3 the following statement: “The voluntary repayment bonus is part of a wider student support package and is not a stand-alone policy.” Never a truer word has been said in a regulatory impact statement because the Government’s overall student support package in this Budget is one where the message is very very clear indeed: if you are from a low-income background this Government does not want you undertaking postgraduate study. That is the message from the student support package in this Budget.  
To be absolutely clear about what the Government did yesterday it said that student allowances will not be available for anyone studying postgraduate qualifications—anyone at all—from 2013. If we look at this measure as part of that package as the regulatory impact statement tells us to do we can see quite clearly that in fact Mr Joyce’s answer to the people who say “I cannot get a student allowance. How am I going to be able to do postgraduate study?” is for them to take on more debt through the student loan scheme which is the very thing that the Government told us it did not want. The very thing that is meant to sit at the heart of the so-called student support package is that there will actually now be more debt for students if they are going to be able to carry on. 
 A very important point on that is that students who currently receive an allowance for postgraduate study will in most cases be getting far more than the $171 a week that is paid out in the student loan scheme living costs component. So the overall package of student support which this voluntary repayment bonus repeal is part of is actually a package of declining support. It is actually restricting access to allowances and meaning that many people who would have been undertaking postgraduate study will not be doing so. That is a great shame. It is something that is going to limit the potential of many New Zealanders and add to the debts that they and their families have. It is a retrograde step and as part of this wider package of student support it is simply not on.  
This particular measure in Part 3 is designed we are told by the regulatory impact statement to “encourage greater contribution to tertiary education costs from students who can most afford to pay and who are more likely to receive higher levels of private return from their study; and reduce unnecessary borrowing.” Well the very thing this package of student support will do is increase borrowing and the notion is that a greater contribution to tertiary education costs comes from students who can most afford to pay. That is what this regulatory impact statement says—“students who can most afford to pay”. The students who are on student allowances now are people who cannot afford to pay for their postgraduate qualifications and this Government is saying to those people: “We will not support you into postgraduate study.”  
We need more people going into postgraduate study. We want more people qualifying with master’s degrees and PhDs to help grow the economy but because there is nothing in this Budget about growing the economy anyway this Government has said: “Well we are not going to bother with actually supporting people into those postgraduate qualifications.”  
The voluntary repayment bonus was as my colleague Mr Hipkins said brought in by the National Government in 2009. It decided that this would be a good way of getting borrowers to pay off their loans more quickly. I just want to note at that point John Key and Steven Joyce’s recent conversion to the idea that the thing that will allow people to pay off their loans more quickly is the interest-free nature of the student loan scheme. That is something the Labour Government was heavily criticised for by National. John Key said he would oppose that policy with every bone in his body but now he has realised that that is actually what is allowing people to pay off their loans quicker because the scheme that National put up to try to get people to pay off their loans quicker actually did not work. In fact the one thing that did work was the interest-free nature of it but that was the goal of this.  
The regulatory impact statement tells us that despite the fact that the goal of this policy was for people to pay off their loans more quickly many borrowers who undertook it were actually already the very people who were paying off their loans quickly. The bonus it says is also encouraging some students to borrow when they do not need to do so. So the policy actually had exactly the opposite effect of what the Government said it wanted to do. The regulatory impact statement tells us: “In 2011 2611 borrowers repaid their student loans in the same year they borrowed” so actually they were gaming the system which is what the Labour Party told the National Government would happen.  
If the National Government wants people to pay off their loans more quickly it should make tertiary education more affordable. It should actually support students to study. It should make sure that fees do not go up. It should give more people access to student allowances if it wants to make tertiary education more affordable which is what it said was the goal of this policy. Instead what it did was run up a policy that was doomed to failure.  
It was not as Mr Hipkins said just Anne Tolley Peter Dunne and Louise Upston who were hugely behind this policy. John Key trumpeted it in a press release on 31 January 2008. He said he was announcing “a plan to help student loan holders get out of debt quicker.” Well that did not work out very well. He said: “We will keep interest-free student loans”—good on you John that is well done. “Many have made long-term financial decisions on the basis of the current policy and”—this is what Mr Key said—“we want to ensure they can plan with certainty.”  
That is what John Key said in 2008. He said that this policy would be introduced so that students and their families could plan with certainty. Well here we are 3 years later. Certainty is out the window because the policy just did not work but John Key said he wanted students to plan with certainty. That is not what happened. He said: “What I’ve announced today is aimed at helping borrowers get out of debt sooner”—that did not happen—“and give them certainty so they can plan.” That did not happen.  
Then we have the following statement from John Key: “National has no intention of doing anything that impedes people from realizing their own educational ambitions.” Let us read that again: “National has no intention of doing anything that impedes people from realizing their own educational ambitions.” There are words for that that I am not allowed to use in this Chamber but we can look at the Budget and it tells us for sure that the impeding of people achieving their educational ambitions will be happening as a result of this Budget if allowances are taken away from anyone trying to do postgraduate study. That impedes educational ambition.  
I have had students contacting me via social media and via email over the last 24 hours— 
Hon Tau Henare 
: Prove it. 
GRANT ROBERTSON 
: I can table them if you like Mr Henare. 
Hon Tau Henare 
: Go and get them. 
GRANT ROBERTSON 
: I will. I will do it for you later. I would like you Mr Henare to go and talk to some constituents—you do not have an electorate any more—and actually ask them about how this is going to impact on them. What this means for the students who have contacted me is that people part-way through master’s programmes are now not going to be able to carry on. These are people who have families and who have planned for this. They are halfway through a master’s programme or a third of a way through a PhD programme and they will not be able to get the allowances to allow them to carry on.  
Mr Key tells us that National has no intention of doing anything that impedes people realising their own educational ambitions. This Budget impedes people realising their educational ambition. It increases the repayment rate on student loans. It says that student allowances are only for rich people to do a postgraduate qualification. That is what the message is from this Budget. Part 3 of this bill is part of a student support package that is actually about limiting the number of people who can go into tertiary education. Steven Joyce’s goal from day one as Minister of Tertiary Education was to “dampen demand”—those were his words “dampen demand”—for tertiary education. That is the opposite of what this country should be doing. This country should be encouraging more people into tertiary education more people into training and more people into postgraduate qualifications but instead this Government is determined to take money away from supporting students to do that. That is a great shame.  
Part 3 of this bill repeals something the Government should never have done. It was a silly part of its package. But what it should really do is put forward proposals that actually enable participation and enable people to carry on with the study that they want to do so that they can get qualifications that will get them higher incomes that will support their families and that will add to economic growth for New Zealand. We have seen none of that in this Budget from the Government. What we have seen is simply a proposal to get rid of a silly policy it had in the first place. I want to see a commitment from this Government to encouraging more people to do postgraduate qualifications. That will not happen. 
ANDREW LITTLE (Labour) 
: 
 I suppose we should be thankful that this is a Government that even 2 or 3 years after it introduced a meaningless provision has had the fortitude to step up and say it got it wrong and is going to change it back. But the fact we are doing this—here we are less than 24 hours after the introduction of this great game-changing Budget spending time now having to undo the unnecessary things that were done some years ago—is symbolic unfortunately not only of what this Budget overall represents but of what this Government represents. It is tinkering around and faffing around the edges rather than doing anything meaningful and substantial. And if there is anything that is needed in our country today particularly in tertiary education it is to attract as many as we can to get there.  
If there is one thing that New Zealand needs like so many other countries in the grip of recession and in the grip of world-changing times we actually need to be focusing on and investing in our young people and building up our skills base our education and the talented people we have got. But what we have got is a Government that is not interested in that. It fiddles around the edges. It has introduced the other measure in terms of the student loan scheme that is going to put pressure on those at the lower-income end of the spectrum who are repaying loans. It was foreseen from the outset that this measure here would never have the effect or the impact that was claimed of it and now it has to be undone. 
 But of all the challenges facing this country and after yesterday’s Budget what do we find ourselves—on this bright cheery Friday morning—talking about? We are talking about undoing another of this Government’s mistakes. Sadly there are many more of them. There are many more mistakes that we should be undoing. But actually it takes away from what is most important and that is doing the genuine heavy-lifting work of making economic policy and social policy. That work is about rebuilding this nation and its people so that we can thrive and prosper in the future.  
There is nothing in this part of the Taxation (Budget Measures) Bill that is going to address the very serious issues that we have got. So what is left to do in the time of this Parliament? It is to undo the measures that were brought in but were never going to have any meaningful or substantial impact at all. That is what we are reduced to doing now. It is not as if there are not issues that are crying out for attention. It is not as if this is not a country that is crying out for a decent Budget. We have yet to see it. Yesterday’s Budget does not cut the mustard and barely passes mark. It does nothing meaningful or substantial.  
We have some big challenges ahead. Education and tertiary education lie at the heart of a programme that is about building a future for New Zealand and retaining our young people here. We look at the unprecedented numbers of people leaving the country—53000 or 54000 a year now—and so many of them are our talented young skilled people. They take with them offshore the skills that we as a community have invested in. Whereas 20 or 30 years ago those people would have come back here with their international level of skills the tragedy now is they are not coming back. We need a student loan scheme—if we need one at all—that does not create further incentives to lose our young people overseas. Instead of dealing with the real issues about tertiary education funding and financing both of the student and of the institution and instead of talking about the real issues of how we are going to improve or maximise tertiary education provision we are left here in this mighty Parliament of Parliaments to talk about undoing measures—silly measures—that this Government knew at the time would not work. We now have to backtrack and get out of them. That is a tragedy. It is a travesty. It is symbolic of so much of what happens and passes for good lawmaking under this Government.  
We welcome this measure but we understand the symbolism of it. It is disappointing that we have to spend our time and Budget time at a time when this country is looking for genuine policy leadership and economic leadership diverting our attention to these sorts of things. We support the measure but let us not obscure the fact that it was pointless to begin with and it now has to be undone. 
Dr MEGAN WOODS (Labour—Wigram) 
: 
 I am happy to take a call on the Taxation (Budget Measures) Bill. As my colleagues have said we are happy to support this because this was legislation that was wrong from the outset. This was legislation that did not do anything to encourage tertiary education in this country. This was legislation that did nothing to improve us and lead us on the path to being an economy that was truly based on legislation. We see this as one small beacon of light in this legislation that we are debating this morning—this very important legislation that we have come back under urgency to debate which is about how we are going to fix our great nation. 
We are talking about the scrapping of a half-baked scheme that was doomed to fail. We are doing a fix-up here but we are not seeing any great vision from National in this Budget to actually do anything to encourage education and the creation of an economy that is truly based on innovation. Instead what we are seeing is some money put into the front end of science while we are treating the back end—the people our greatest resource in terms of innovation—as an extractive industry. 
Apparently what we do not want in this country now is postgraduate research. This is something that is not going to be encouraged. Actually what we are going to do is set up a student allowance scheme that explicitly rules out doing that. We would not want to be educating the masses too much! That might lead to actually raising incomes creating more jobs and getting an economy that works! 
Louise Upston 
: You missed the fact that we’re putting more money into the PBRS scheme. 
Dr MEGAN WOODS 
: I have not missed the purpose of this bill because what we are doing here is playing fix-up on legislation that was wrong-sighted that was wrong from the outset. We will be back here soon playing fix-up on other legislation being introduced from this Budget that is going to do nothing to improve this country.  
 This is a half-baked bill. It is a total failure. I do note that the member opposite Louise Upston talked lyrically at the time of the bill’s introduction about what a great piece of legislation this was. I am looking forward to her call on why it is that we need to get rid of it now. We are back here only 3 short years after it was introduced so how long will it be until we are back here having to play fix-up on the other short-sighted measures that we are seeing in Budget 2012 from the National Government? 
Dr David Clark 
: They don’t even care. 
Dr MEGAN WOODS 
: Will we be back giving the money back to the paper boys? You are quite right there David Clark. Will we be back saying that we are actually killing innovation in this country we are not backing our young people and we are doing nothing to create a brighter future? In fact all we are doing is filling Air New Zealand’s planes over to the Gold Coast. There is nothing in this Budget to keep people here. This is too little too late—a U-turn on what was a mistake 3 years ago. It does nothing to fix our economy. Thank you. 
The CHAIRPERSON (Eric Roy) 
: I call the member Andrew Little—sorry Andrew Williams. Sorry it is an early morning.  
ANDREW WILLIAMS (NZ First) 
: 
 Thank you Mr Chairman and I am not Mr Australia either. It is nice to stand and take a call on behalf of New Zealand First on Part 3 of the Taxation (Budget Measures) Bill in relation to the student loan scheme and the bonus payment programme. It was introduced by the National Government only in 2010 and now it is planning to remove it. It is symptomatic of basically a Government that is blundering along muddling along and really just not in charge of the train. And this train wreck seems to be just coming off the rails everywhere it turns. In this particular instance the Government brought in something in 2010 without much thought and it did not really work it was not a great result and now the Government overturns it. It is symptomatic of so many other things that this Government is doing. If the people of New Zealand the public of New Zealand were to analyse much of what this Government is doing they would see the same thing time and time again. It is bringing in policies and trying out policies and it is real hit-and-miss sort of stuff. As a result there are big U-turns being taken left right and centre. This sends a very poor message I believe to the young people of New Zealand. Basically how can they have faith in the Government of New Zealand—or the National Government of New Zealand—when it can bring in a policy one year and a year or so later it just dumps it because it did not quite work out where there has not been much analysis of it and it has not really resulted in what it was expecting it would?  
New Zealand First has had a policy for some time now that would actually resolve the whole student loan problem. We put it out at the election and it was greatly supported by young students all over New Zealand who saw real merit in it. That was the dollar for dollar student loan scheme where we would incentivise students and say that for every dollar they pay back the Government would match them with another dollar. At the present time when there is more than $12 billion in student loans sitting out there on the Government books and when very very little of the money is being recovered—something like only a fraction is being recovered—the New Zealand First scheme would ensure that we actually started to get most of that money back. Students would have an incentive: they would know that basically they can get rid of half of their loan if they get on and start paying it on a dollar for dollar scheme. It came with some caveats. It came with the caveat that when you completed your degree you would have to stay in New Zealand and work and repay that loan. You could not just wander off; you had to stay and work here to get that dollar for dollar scheme.  
What that would do is ensure that our students and our graduates did have an incentive to stay in New Zealand—we would keep their brains keep their knowledge keep their expertise in New Zealand—and work in New Zealand. And—and this is the win-win part of it—of course if they are working in New Zealand and they are paying tax the very dollar that the Government would be providing to subsidise them in the student loan scheme the very dollar that the Government would be helping them with on a dollar for dollar repayment scheme would actually be coming out of the very taxes that they would be paying as a new working person within the New Zealand working environment.  
The CHAIRPERSON (Eric Roy) 
: Just come back to Part 3.  
ANDREW WILLIAMS 
: Well no it is very important because what we are saying is that this is failed policy. This is failed policy and it is proven that the Government has failed on this and what we are saying is that this whole Budget is full of failed policies again.  
It is a shame that this Government has not had the foresight to bring in some policies with vision which would actually solve the problems. We could have vision in some of our policies which would actually get on top of the problems such as the policies that New Zealand First was expounding in terms of the student loan dollar for dollar scheme. Here we have students now marching in the streets in Auckland in relation to this barricading Symonds Street and up in arms. It is a sad thing in this world that we have now got to the stage where a Budget can result in young people marching in the streets because they are so dissatisfied with it. New Zealand First does not support this latest move by the Government. Again it is an attack on our young people. It is not too different to the attack on the young paper boys and paper girls of this country. Basically this Government is going for the lowest form of resistance that it can. It is going after anybody it can attack and who cannot fight back: so it goes after the students after the young people after the families after the elderly—after all of those. But it leaves the Government’s wealthy rich friendly mates exempt.  
Hon ANNETTE KING (Labour—Rongotai) 
: 
 I had to get to my feet when I looked at this part of legislation that we are passing today under urgency. I had to do it because this is the bright light of the Budget! This is the light at the end of the tunnel for us all this particular clause and that is why we are sitting here on Friday morning under urgency changing a major mistake by National. This was the dopey idea of Steven Joyce his dopey idea that was going to see wonderful things happen for students. They were going to pay back their loans faster and New Zealand was going to be much better off. So I could not avoid speaking on it when it is such a significant piece of legislation. Actually it is one great big fat U-turn by this Government. I mean Anne Tolley the then Minister of Education said “How could you vote against such a measure?”. Then you read some of the other comments. I would like to read Louise Upston’s. I am sure it has been read many times but it does deserve another reading. She said: “This bill is a significant step to encourage student loan repayment and more important to reduce the overall repayment times. The message very clearly is our young people will be debt-free sooner”. Well is that true? Has that happened? Of course it has not and Labour told National at the time that it would not happen.  
As for the Minister in the chair the Minister of Revenue who has been sent here to clean up Steven Joyce’s mess this is what he had to say: “I say to the House that this is a significant incentive for students to pay their loans earlier. I cannot fathom why anyone would oppose the introduction of such an incentive.” Well I hope Peter Dunne has had the good grace to stand up on his hind legs and tell this Committee he made a mistake. I know that it would be rare for that Government to admit a mistake but perhaps Peter Dunne would like to do that on behalf of Steven Joyce.  
You see the sad thing about this Budget is that this is the bright spot of the Budget because when you look at everything else you might as well say “Kiss your kids goodbye Kiwis.” I have to say that that is not just a slogan because last night up in Kaikohe 600 people gathered for a meeting the biggest meeting in 40 years to see what jobs were available—where? In Australia. Six hundred people gathered to see whether they could get a job in Australia. And there are three more meetings to be held: two up in Kaitaia and one just north of Whangarei. So people are looking to go elsewhere. Why? Because they are not getting a good deal from this Government. They are lining up to go to South Australia New South Wales Queensland and Western Australia. Why? Why stay and study here? If you do not believe what we are saying why not look at some of the response today from young people around New Zealand.  
What really gets to me is the fact that we are told that this Budget is called “Investing in our future”. It is not a brighter future now; we are now investing in our future. [ 
Interruption 
] Well where do you start Sam? Where do you start? You start with your kids. You start with your young people and you invest in those young people to ensure they have the skills to build a great country. That is what our grandparents did. That is what our parents did. They invested in us and that is what we as parents have done for our kids. But not this Government! They have penalised young people. And what do people want to do? They want to go to Australia because they will get a better deal there. I think it is a real shame that this Government cannot recognise that when you look to the long term you would have been investing in young people’s education from early childhood. You do not freeze early childhood education; you invest more into it to give them a good start. You invest in good class sizes not small sizes for private schools only where some of our members send their children. You invest in all children and you invest in their tertiary education.  
Some of us were lucky enough to get tertiary education where we were paid to study. Some of us were lucky enough to go to university where it did not cost as much at all. We would have thought if you were going to invest in a brighter future or just even invest in a future you would invest in our young people and our students. So I have to say this is the only bright spot. This is the light at the end of the tunnel. Well done! You made a mistake and now you are admitting it. 
A party vote was called for on the question  
That Part 3 be agreed to. 
Ayes 98 
New Zealand National 59; New Zealand Labour 34; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 21 
Green Party 12; New Zealand First 8; Mana 1. 
Part 3 agreed to. 
The result corrected after originally being announced as Ayes 97 Noes 21. 
Clauses 1 and 2  
A party vote was called for on the question  
That clause 1 be agreed to. 
Ayes 64 
New Zealand National 59; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 55 
New Zealand Labour 34; Green Party 12; New Zealand First 8; Mana 1. 
Clause 1 agreed to. 
The result corrected after originally being announced as Ayes 63 Noes 55. 
A party vote was called for on the question  
That clause 2 be agreed to. 
Ayes 64 
New Zealand National 59; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 55 
New Zealand Labour 34; Green Party 12; New Zealand First 8; Mana 1. 
Clause 2 agreed to. 
LOUISE UPSTON (Junior Whip—National) 
: 
 I seek leave to amend the votes for the Maori Party in the last two votes cast before this; they should be three instead of two. 
The CHAIRPERSON (Eric Roy) 
: Leave is sought. Is there anyone opposed to that course of action? It appears not. Leave is granted. 
Hon PETER DUNNE (Minister of Revenue) 
 on behalf of the Minister of Finance: I move  
That the Committee divide the bill into the Taxation (Budget Measures) Bill and the Student Loan Scheme (Budget Measures) 
Amendment Bill  
pursuant to Supplementary Order Paper 31. 
A party vote was called for on the question  
That the motion be agreed to. 
Ayes 64 
New Zealand National 59; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 55 
New Zealand Labour 34; Green Party 12; New Zealand First 8; Mana 1. 
Motion agreed to. 
Bill reported without amendment. 
Report adopted.