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Laila Harre Speech to NZUSA Debt Summit 2003

Hon Laila Harre


Speech Notes
July 23 2002


Speech to NZUSA Debt Summit 2003
AUT


Two years ago I co-hosted the first student debt summit in Wellington.

We had just received an Auditor General’s report into the student loan scheme. It confirmed what many of us had been saying for some time. That was that the scheme was put together without any consideration of its social impacts on generation debt, and it was wider impact on New Zealand.

At the first student debt summit we were also waiting with very high hopes for the report of the Science and Education Select Committee into student loans and allowances. We hoped for the green light we had been waiting for – cross-party consensus that the student loans scheme was a policy error - and finally we would have some action.

Many of the people who were there two years ago are here today. And like me, many of these people thought these reports, and the many, many others that have come through in the past two years would have been the catalyst for turning the tide on student debt.

Sadly, while I believe there is a clear consensus among New Zealanders that the student debt policy is deeply flawed, there is not yet a consensus among their various political representatives.

Now, just days out from an election, when you might expect to elicit real pledges to reform the deeply discriminatory student debt scheme, there is mainly silence.

We have commitments to writing off $1000 here, a scholarship or bonding programme there, a bit of gradual this and that, and a lot of promises to act “when economic conditions allow”.

Only the Alliance has put our hand up for free tertiary education.

We have also made it clear that a much bigger education budget, and especially an assault on student debt, is the price for Alliance participation in a second term coalition government with Labour. We will support Labour in government, but we will only join them formally if we can make a difference on this issue.
In government we have frozen interest during study and raised thresh-holds. At the Alliance’s insistence we have held the interest rate at 7 per cent and negotiated fees freezes with the institutions each year.

These achievements have given relief.

But the core issues remain the same today as they were two years ago.

I’d like to set the scene for today’s discussion by putting student debt into a broader context.

Let’s start with the birth rate.

New Zealand has a declining birth rate. Women are having fewer children, and starting their families later in life. There is much anecdotal evidence that student debt, and the desire to make headway on loan repayments before starting a family, is a factor for many in the decision to wait.

When our babies are born, they are more likely to be born in our least resourced families and communities than our best resourced ones. Yet these are the children we are expecting to pay the pensions of our generation and take New Zealand back into the top half of the OECD.

They are also the children least likely to go on to tertiary education.

This is shown by an NZUSA study that explodes the “Myth of Equal Opportunity” that has for some time existed (and was actually used to promote the student loans scheme by its architects) around tertiary participation in New Zealand.

The writers measured tertiary participation on the basis of wealth of school district, and found that school leavers from the wealthiest 20% of schools are five times as likely to attend university as school leaves from the poorest 20% of schools.

This is 44% of students (or 1 in 2) compared to 9.2% (or 1 in 11).

When it comes to polytechnic participation, the study found that students from decile 6-8 schools are 50% more likely to go to polytechnics as students from the poorest deciles (1 & 2). This is 17% of students (1 in 6) compared to 11% (or 1 in 9).

If there’s one thing the student loans scheme has been good at it must be its ability to show up the deep-set inequalities that in New Zealand society, particularly those that exist along ethnic and gender lines.

Let’s take the average repayment time for bachelor degree graduates on the basis of ethnicity and gender. The longest average repayment time is 33 years for a Pacific woman, compared with the shortest of 13 years for a Pakeha man.

This means Pacific women are stumping up another two thirds of their initial borrowings by the time they repay their loans, compared with Pakeha men.

On an average debt of $21,000 Pacific women pay $25,413 in interest, compared with the $11,511 paid by Pakeha men – a difference of $13,902 or two thirds of the total amount borrowed.

Where’s the equality in those figures?

We have to face up to the fact that women, and particularly Maori and Pacific women pay more for their tertiary education.

We rely doubly on women in this way – we want them to have children and to parent well and we want them to increase their skills and knowledge and remain in the paid workforce. Yet we make it too difficult to do both well. The same inconsistencies exist at all levels when it comes to education and debt.

At the same time we have set ourselves the awesome task of getting back into the top half of the OECD and have created an most awesome barrier to achieving it – student debt.

But it’s a barrier that can be lowered, even removed.

Are those who say we can’t afford free tertiary education right?

Next year, while we’ll be congratulating ourselves on a $2.3 billion surplus, more New Zealand students will be getting into serious debt to put food on the table and pay their rent.

Just half the surplus would pay for a completely free tertiary education system.

The means testing of student allowances gives young people the message that until they are 25 they are not whole people, and redefines “childhood” beyond any defensible boundary.

It also has a huge effect on labour market participation and the long-term workforce planning that can be done.

New Zealand now competes with the rest of the world for skilled labour when our focus should be on retaining and developing our own skill base.

The student loans scheme is having an effect on our workforce before our students have even got into debt to buy their books. The simple fact is that while debt can be either repaid more quickly or evaded more effectively our highly skilled workforce will continue to leave the country.

We need to make New Zealand an attractive location for research, development and excellence, not just a nice place to settle in once your loan debt is out of the way.

We must also remember that individual cases don’t tell us much about structural inequality.

For every person that is in a position to work overseas to clear their debt, there are many, many more back in New Zealand for whom the interest just keeps on accruing. These are the people we need to start focusing on.

A good example is women returning to education and then paid work after they have raised their children.

What might seem tenable to a twenty year old will simply not be possible for a forty year old newly trained childcare worker or registered nurse. These women will not repay their debt and for their whole working life they will pay a penalty tax rate of ten per cent

So what are we being promised, or not being promised in terms of action on student debt?

The glaring omission on Labour’s second pledge card is the one that should read “we will turn the tide on student debt by reinstating universal student allowances, removing fees and scrapping the student loans scheme”.

Neither the commitment nor the will exists to do this, and without the Alliance it just won’t happen.

The $400 million already promised to tertiary education over the next three years is nowhere near enough, and it does nothing to attack down the student loans scheme and the negatives that flow on from it.

National and Labour have both pledged to introduce loan breaks to encourage people into professions and sectors where we have a skills shortage.

This approach risks deepening the inequalities that exist within the loans scheme already.

Education must be New Zealand’s first investment priority.

One in 10 New Zealanders already has a debt, predicted to rise to one in four if we don’t act now.

The level of debt will climb from $5 billion to $20billion by 2020 if we don’t act decisively now.

Despite changes made by us in government, the debt mountain has grown by $2 billion in the last three years.

The third student debt summit was scheduled before the election was called but it is timely.

After weeks of campaigning around the edges of the real issues it gives people the chance to look at the biggest question facing us as a country. How do we not only maintain our current growth rate but increase the size of our economy by a third? What role does education play in this? Do we value equality or are we satisfied with a system that deepens existing inequalities?

Once again this summit will update us on the research around the impact of student debt and the individual experience of debt. Importantly it will also challenge all parties to explain their positions on debt and the priority they give to dealing with it.

For my part I am nailing the Alliance’s colours unequivocally to the mast of free tertiary education.

We will remove the right of institutions to set fees and reduce them to zero over three years. We will scrap the student loan scheme. We will stop charging interest on all loans immediately and work with the public to devise a mechanism to write off debt.

We will reinstate a universal student allowance at the rate of the unemployment benefit, and reinstate the emergency unemployment benefit for students who can’t find work over their summer break.

We will improve by $300 million the funding for public institutions, including regional polytechs.

These are the benchmarks we have set for a quality public tertiary education system.

Once again I am sure this debt summit will demonstrate why we need to do so.

I hope you enjoy the day.

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