I intended to respond to the comments of Maryan Street, but I will take even more delight in responding to the comments of Mr Mallard. Before I do so, let me briefly explain to members of the public who are just joining this debate by way of television what this bill proposes to do.
Hon Trevor Mallard: I raise a point of order, Mr Speaker. I think you are probably aware that this member is a relatively new member. We cannot refer to people who are outside the House and are listening in the gallery, watching the debate on television, or listening to it on the radio.
JOHN BOSCAWEN: I am happy to learn the rules of this House from Mr Mallard, a member whose ability and experience I respect.
The way that the Student Loan Scheme (Repayment Bonus) Amendment Bill operates is that it provides an incentive to people to reduce their student loan debt. Essentially, it says that if students pay off a sum of $500 or more in excess of what they are required to do, then they will get a 10 percent discount. They will get a 10 percent bonus, and it will be an incentive for them to make that payment. That is the simple essence of what this bill does.
When Maryan Street rose to speak, she talked about that being a very foolish thing for them to do. Let us say a person makes a payment of $1,000; then he or she would get a $100 reduction. Maryan Street argued that rather than making that payment, they would be far, far better off keeping the money and earning interest, and in that regard she is absolutely right.
What particularly interested me about Mr Mallard’s contribution is that he went on to illustrate that point in even more detail. He is absolutely right. He invited the Minister of Education to confirm that she is working on papers that will roll back the interest rate scheme, but she was not prepared to do that. Mr Mallard then called on Mr Dunne. He said that Mr Dunne is a man of intellect, of financial ability, and he invited him to dispute his calculation. Mr Dunne was not prepared to do that. I say to Mr Mallard that I regard myself as a person of some intellect, and of some intellectual ability when it comes to numbers. If you want to have your calculations confirmed, I am happy to do them for you. You are absolutely correct.
Mr DEPUTY SPEAKER: The member knows he cannot bring the Speaker into the debate.
JOHN BOSCAWEN: I am sorry, Mr Deputy Speaker. I was referring to you, and I should have been referring to Mr Mallard.
Mr Mallard is absolutely correct. The assertion he gave was an example of a person who intends to make a payment over a long period of time. Mr Mallard gave the example of 10 years. He illustrated that if the loan is to be outstanding for 10 years, the person can make a one-off payment and get a $100 benefit, or the person can put that money in the bank, and—for the purposes of simplicity, I say to Mr Mallard, as he did—excluding tax on the interest and excluding compounding interest, that person can earn $700 by banking the money. Alternatively, he or she can have a one-off $100 benefit. I am happy to confirm to Mr Mallard that he is absolutely right.
But the interesting point is that Mr Mallard also went on to say that it makes sense to make that payment only in the last 18 months. Again, he is correct. If a student is coming up to the end of his or her repayment period, then Mr Mallard is absolutely right. Eighteen months out from the time when a person expects to repay his or her loan, that person should take the money out of the bank, stop paying tax on the interest, and pay it off the loan.
Now let us go back to what Maryan Street said. She said that National opposed every single measure that Labour introduced to make education more affordable. Well, was it not right to do so? I do not know about National opposing every single measure, but National was absolutely right to oppose the policy of interest-free student loans. If we want an illustration of that, all we have to do is listen to the debate. Maryan Street and the Hon Trevor Mallard have made it absolutely patently clear to the members in this House and to the people of New Zealand why it is an absolute rort to have interest-free student loans.
Mr Mallard talked about graduates. He said that we do not have a decent education system if graduates cannot not work out, after they graduate, that they should not pay off this money. Well, it is worse than that. Under the previous Labour Government’s interest-free student loan scheme—introduced as a bribe to try to get the Labour Government re-elected in 2005—it does not apply just to graduates. It applies to all university students. The very simple mathematics that Mr Mallard has illustrated this afternoon shows why it will be absolutely foolish for every single student of every tertiary institution, and every parent of every student, not to borrow the absolute maximum. That is what the previous Labour Government did in 2005. It incentivised every single parent. I notice that Mr Mallard is sitting there with his head hanging low. He was happy to comment on what the Minister of Education said, but he is not prepared to deny his assertion.
The reality is that the Labour members are sitting there, knowing that every single student was incentivised to borrow the maximum amount possible. It is actually worse than that. I believe I heard Mr Mallard say that Mr Key opposed this policy when it was introduced in 2005. The tragedy about this policy is that, in a desperate attempt—and I acknowledge it was desperate—National was prepared to put aside its principles and agree with them. In 2008 National went into the election campaign promising not to roll back the scheme.
So National and Labour are both saying that we should have interest-free student loans. We will incentivise every single parent not to make a contribution to their children’s education. If they want to make a contribution to their children’s education, they should put the money in the bank, earn the interest, or pay off their mortgage. They should do all the things that Mr Mallard so simply outlined this afternoon.
I stand as a representative of the ACT Party. In 1984, just on 23 years ago, Government expenditure per person, in 2009 dollars, was $11,500 across the country. Ten years later, in 1995, Government expenditure per person was $11,300. It was $200 less. In other words, there had been no increase in Government expenditure between 1985 and 1995. If we fast forward to 2009 we see that Government expenditure is $18,800. It is a full $7,500 higher, over the last 14 years of combined Labour and National Governments.
I would argue that we have had a huge amount of poor-quality expenditure. Students have been incentivised to borrow the maximum they can to pay their tertiary education fees. The only positive thing I have heard about in the debate this afternoon is Mr Mallard’s secret source, who is now telling him that the National Government looks as if it will wind back the interest-free student scheme. Thank goodness for that, because up until this afternoon I thought that the ACT Party was the only party in Parliament that had the courage and the honesty to say what the situation actually is.
If the National Government wants to roll back the interest-free student scheme, I say that that can not come fast enough. The Labour Party has pointed out why that patently should be the case. It is even more important because, as Mr Mallard said, Mr English is already back-pedalling on the tax cuts that National was elected to implement. If there was ever a need for those tax cuts, it is today. There is a need to trim poor-quality spending. Mr English refers constantly to the entitlement society that Labour paraded, but what we need to do is get rid of interest-free student loans and provide incentives. Maryan Street talked about affordable education. Why did we not just reduce student fees? We should have simply reduced university fees. If we want to make tertiary tuition cheaper and more affordable for families, it is simpler to reduce student fees. Thank you, Mr Deputy Speaker.