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No more tinkering with tertiary education funding

20 June 2002

Alliance Leader Laila Harré and Alliance Education Spokesperson Liz Gordon today released the Alliance’s tertiary education policy, with a very strong message to Labour that its time to get serious about investing in education.

“Lets be very clear. The cost of tertiary education to students is out of control. Three more years of tinkering with funding is not going to do anything to address the fact that New Zealand students now owe $5 billion to the government for the cost of their education,” said Laila Harré in Wellington today.

“At what point do we draw a line and say no to increasing debt? Do we say $5 billion is too much or $20 billion or beyond? It’s much easier to tackle a $5 billion debt than a $20 billion debt, which is where we are heading to in 2020.”

Liz Gordon said that the average graduate debt of $21 000 is “crippling individual students. Student debt is a festering sore that the Alliance wants to heal now.”

“This election, as with the last, the Alliance will be the only party committed to a free, high quality public education system and a universal student allowance. Social investment is our bottom line.”

“One in ten New Zealanders has a student debt. If this debt isn’t written off, the social an economic impact on individuals and the country as a whole will be catastrophic. We will look at ways to write off existing debt as quickly as possible. You could, for instance, write $1000 a year off exisiting debt.

“You can talk all you want about the knowledge economy but good education costs. It is also the best investment we can make in economic growth and by far the best way of ensuring that our future workforce can guarantee superannuation to all 65 years olds at current levels.”

“Free education and a universal student allowance, adequately funded public tertiary education institutions and better wages and conditions for staff have always been a high priority for the Alliance.

“We don’t have a real surplus when young people are having to borrow for the cost of living and for fees. Money should only be transferred from the surplus to the superannuation fund once we have paid the bill for a first class education system.”

Laila Harré and Liz Gordon said that people thinking of supporting Labour in this year’s election should look very clearly at Labour’s commitment to tertiary education.

“Over the last 2 and a half years Labour wanted to increase the interest rate on student loans twice. The Alliance stopped them twice. If Labour voters want to make sure that there is a party with backbone in the next Government, with a genuine commitment to free education, they will need to give the Alliance their party vote,” Laila Harré said.

“A vote for anyone else is a vote for $5 billion plus on the shoulders of young New Zealanders.”



A fundamental shift is needed in tertiary education policy, to restore equal access to education without user charges, and to protect and develop our public tertiary education institutions. Free tertiary education is an important part of our commitment to social justice and to economic development. High participation in tertiary education brings a variety of social benefits to individuals and communities – from better parenting and a more participatory democracy to a richer culture. Without a highly skilled and educated workforce New Zealand will not be capable of the kind of growth that we need to take us back into the top half of the OECD. Economic development will arise out of social investment, not the other way round.

The Alliance is committed to removing all barriers to this social and economic development – whether they be costs to students, lack of research funding, unnecessary private competition or inadequate wages and conditions for our academics and tertiary teachers.

 Universal allowances for all students
 Removal of tuition fees
 Scrapping the student loans scheme
 Increased funding for public tertiary institutions, especially to support regional polytechnics
 Better wages and conditions for tertiary staff
 Cut funding to private education providers

Paying for Free Education

Whatever system of tertiary education we have, somebody has to pay for it. Between 1989 and 1999 successive governments shifted more of this cost onto students. This was paid for by tax cuts for higher earners and has resulted in young New Zealanders owing $5 billion to the Government. Young people from lower decile schools are still underrepresented in tertiary education and too many young people are leaving New Zealand to escape their debt, leaving worrying gaps in vital areas of the workforce.

The Alliance estimates that the amount of money that we need to spend to implement our policy of free tertiary education, including a universal student allowance, is $1.15 billion.

Fully funding a free, high quality public education system must be part of government’s basic spending. The Alliance supports real surpluses being transferred to the Superannuation Fund. However, a real surplus does not exist as long as our young people are borrowing for living expenses and fees. We will not put any more money into the superannuation fund until free tertiary education, including a universal student allowance, is once again a reality and public tertiary institutions are adequately funded.

We will continue to guarantee superannuation at 65% for 65 year olds. Backing the development of a high skilled future workforce who see themselves as having been well-supported by their country will be essential to paying our future superannuation bill.

Free Education and Student Support

The Alliance has attempted to hold down costs to students within the coalition government. We have been successful in some respects, in particular with student loan interest rates.

We have successfully resisted attempts in each of the past three years to increase student loan interest rates. They have been frozen at 7%. Without the Alliance in government loan rates will increase.

But the Alliance’s education policy has not been progressed. Our efforts to undo small injustices, like the refusal to pay an emergency unemployment benefit to most students and the non-inflation adjusted levels of means testing on parental income, have fallen on deaf ears.

Labour has made it clear that it does not prioritise further measures to remove debt from students. The Alliance intends to fight, as a key policy priority, for a reduction in debt and a huge increase in government funding for public tertiary education.

We will encourage students to enter tertiary study by:

 Introducing a universal student allowance paid at the level of the unemployment benefit, and an unemployment benefit for students who can’t find work over summer.

 Reducing tuition fees substantially each year so they are set at zero within three years.

 Increasing funding for quality public education to reduce teachers’ workloads and improve staff:student ratios, in universities, polytechnics, wananga and colleges of education.

The current debt burden should be lightened by immediately removing all interest payments. The Alliance strongly believes that outstanding debt should be written off. If in government, the Alliance will examine the best way to do this. Our principle will be that existing debt should be written off as quickly as possible to remove the incentive for young New Zealanders to go overseas and to eliminate the social and economic impacts of this debt.

Other key policies in tertiary education include:

 The removal of most funding from private tertiary education institutions. The Labour-Alliance government stopped privatisation of ACC and prison management, but despite Alliance opposition, greater amounts of funding than ever before have gone to private tertiary education providers. The proliferation of private providers has led to harmful competition with public providers, particularly polytechnics, and an unnecessary duplication of resources.

The Alliance will not extend the privatisation of tertiary education. We unashamedly think that public provision is important and will seek to prioritise funding to our public institutions.

However, we do recognise that a minority of private providers, particularly iwi and mana pasifika providers and not-for-profit community providers, have a role to play. Therefore we will introduce two ways in which a private training establishment may get public funding: a public good package (up to $25 million in a given year) and a community economic development category focussed on areas of greatest need.

 Tertiary Education Commission
The Alliance supports the establishment of the Tertiary Education Commission and the development of a Tertiary Strategy, though we do have some serious concerns about their direction.

We believe that the Tertiary Education Commission should be a more publicly accountable group with provision for staff and student representation. We are also concerned that the current strategy is too focused on aligning tertiary education with business. We will reintroduce public and social concerns into these processes, to make them more fair and balanced.

 Free Trade in Education
The Alliance will oppose incorporating key services such as education into free trade agreements and GATS. We believe that New Zealand providers should be prioritised over multinational education providers such as the University of Phoenix, and we will resist attempts to have these providers set up in New Zealand.

The Alliance tertiary education policy is based on a massive reinvestment into a key area for social and economic development. It is expensive. However, three years of tinkering on the edges of tertiary funding has only led to a $2 billion growth in student debt. It is clear that more radical change is the only sensible alternative.

We will fund this policy before transferring surpluses to the superannuation fund. It is better to use this fund first to invest in the future of New Zealanders and only then to invest it overseas.

Fact Sheet
The Alliance, tertiary education, surpluses and the Superannuation Fund

 The Alliance accepted the establishment of the superannuation fund as a condition of governing with Labour

 The Fund was not the Alliance’s own superannuation policy. Our analysis shows that NZ Superannuation is sustainable despite the aging population

 There is no doubt at all that if New Zealand achieved the growth rates required to restore our place in the top half of the OECD over a similar time frame to the expected time-frame for drawing on the Superannuation Fund (late 2020s) no tax increases at all would be required to maintain superannuation payments

 It is also clear that filling the gap through the super fund relies on the performance of overseas stockmarkets

 The best way of ensuring that we have the levels of growth needed to pay our superannuation bill is to invest in domestic economic development and the most urgent investment we need to make is in tertiary education. This would greatly enhance our chances of not just achieving average growth rates, but the 30 per cent extra that is needed to restore us to the top half of the OECD

 The Alliance believes that the first call on any surplus should therefore be tertiary education funding, rather than investment in mainly overseas shares through the Superannuation Fund

 The cost of free tertiary education is estimated at $ 1.15 billion per year

 The 2002 surplus was $2.3 billion, with the 2003 surplus projected to be $2.28 billion

 In 2002 $600 million was paid into the superannuation fund and $1.2 billion will be paid next year

 Budget 2002 allocated just $400 million extra over 3 years to tertiary education. This will not allow for any reduction in the cost to students

 Compare this to the $2 billion increase in student debt over the last three years

 If we had to choose in any year between paying the full amount into tertiary education or making the full government contribution to the superannuation fund the Alliance would prioritise tertiary education

 We believe this is a sounder investment and an urgent one

 S44 of the Superannuation Act allows the government to pay less into the fund, subject to reporting how the difference will be made up over the 40 year life of the fund

 With an operating surplus the government might not have to borrow to make payments into the super fund. Students are doing the borrowing for us

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