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www.mccully.co.nz - 22 July 2005


22 July 2005 (#214)

A Weekly Report from the Keyboard of Murray McCully
MP for East Coast Bays

Student Loan Deductibility

This week’s announcement of the National Party plan to make interest on student loans tax deductible is a significant component in the Party’s unfolding campaign story. For months, Don Brash has been highlighting the growing exodus of talented New Zealanders to Australia - the inevitable consequence of the growing gap in relative incomes. A key campaign focus will be the need to do more to keep skilled people in this country. And while the soon-to-be-announced tax package will spearhead that programme, the deductibility of student loan interest will play a significant role.

The plan is simple. There are over 461,000 New Zealanders with student loans - a total of over $7 billion in student debt. Those who stay and earn taxable income in New Zealand will have the interest they have paid deducted from that taxable income, with the balance credited to their student loan account.

Anyone who has listened to a Don Brash speech in the past couple of years has probably heard student loans come up at question time. Dr Brash strongly supports the scheme, focusing on the comparison of the student incurring a student loan to earn a qualification, with a plumber or electrician setting themselves up in business. What is unfair, Dr Brash has always asked, with a student being asked to borrow to obtain a qualification, when an electrician needs to take out a bank loan to buy a vehicle and some tools? Hard to argue with.

The difference, of course, has been that the electrician has been able to deduct the cost of interest on his loan from his taxable income. And now Dr Brash is proposing to put both on exactly the same footing. In effect, the National Party is planning to acknowledge that student loans are a cost incurred in the course of securing an income and should be recognised accordingly.

Dr Cullen was quickly out of the box to argue that this was a retrograde step in taxation policy which would see many New Zealanders currently freed from the need to file a tax return, now obliged to complete one to gain the deduction. On which point he is, as usual, just dead wrong. The IRD holds the loan as well as the details of taxable income. They can do the calculation and deduct the balance from the loan account. No paperwork required from the loan holder.

The policy will cost about $70 million a year to start with. So it makes only a minor dent in the capacity to offer meaningful tax reductions. But for those with qualifications confronting a decision as to whether to stay in New Zealand or not, student loans have unquestionably been high on the list of concerns. So this is just one further signal that a National Government is going to go that extra mile to try and keep New Zealand competitive as a place to live and work.

Damning SSC Review

Glossed over by most media this week was the State Services Commission review of the education sector. Undertaken by the State Services Commissioner, the Secretary to the Treasury and the Chief Executive of the Department of Prime Minister and Cabinet, the review is the most damning indictment of the performance of the three key agencies in the sector: the Ministry of Education, the Tertiary Education Commission and the New Zealand Qualifications Authority.

Written by bureaucrats anxious to minimise political fallout for the Government, the report nevertheless conveys the harsh reality: the bloated bureaucracies now managing the education of New Zealanders are simply not up to the job. Individually, each of the three agencies comes in for a hammering. There are questions as to whether NZQA “has become too compliance focused in terms of its regulatory role” (translation: they are a bunch of nitpicking Nazi’s who have completely lost the plot).

In TEC “few of the staff had experience and established relationships with tertiary institutions and are still building the credibility to engage effectively” (i.e. they hired a bunch of wet behind the ears children and impractical policy wonks who know nothing about the sector). Also, TEC’s “governance arrangements appear to have been problematic” (a complete meltdown between the management and board). And the Ministry is held responsible for failing to provide the “more directive or decisive element of leadership” across the sector (i.e. Education Secretary Howard Fancy has been missing in action and should be ashamed to have collected a salary).

Collectively, the judgement is even harsher. There is “a history of tensions and poor relations,” (they hate each others’guts) between the agencies which “do not have the essential capability - at the level required - to support the magnitude of change each is tasked to undertake,” (none of them could organise a lear-up in a brewery) and “the three agencies do not have the capability to take a strategic approach to policy implementation” (they are a bunch of oxygen thieves who should be shot at dawn). Overall there is “disagreement among the three agencies,” and “confusion between the agencies with respect to certain functions and roles” (this is the biggest cock-up since Dunkirk). Get the picture?

The Secretary of Education, Howard Fancy, should be skimming the Situations Vacant columns some time soon. But what, we hear you ask, about the man who has presided over the evolving five year disaster in Education, Minister Trevor Mallard. Well, we are pleased to advise that the consumers of New Zealand educational services will soon find themselves in the most fortunate position of being able to order Mr Mallard’s redundancy in only a few weeks time. Here’s hoping they don’t miss their chance.

Labour Panic?

The decision of Helen Clark and her campaign strategists to throw everything, including the kitchen sink, at National Leader Don Brash, is simply extraordinary. Seasoned politics watchers were searching back as far as the Citizens for Rowling campaign against Rob Muldoon in 1975 to find a decent comparison.

Two conclusions are abundantly obvious from this week’s antics, especially the wild ravings of Education Minister Trevor Mallard (what an outstanding example to the nation’s school children).

First, Labour’s much vaunted focus groups are clearly telling them that Don Brash presents as a real and alternative Prime Minister.

Second, in politics, when times get tough you find out what people are really made of. Clark, Labour and Mallard answered that question this week with bells on, and it isn’t all that pretty.

More Sisterhood Driven Exiles

The Government Statistician was on the job again this week, revealing a growing torrent of talented New Zealanders moving to Australia. The June figures show a total of 33,019 New Zealanders moved permanently to Australia in the previous 12 months - well up on the 26,999 a year earlier. That’s 634 New Zealanders each and every week deserting the land of their birth on the Sisterhood’s watch.

For the purists who prefer the net statistics, the numbers are little better. The net departures to Oz for the June year were 19,277 - a big jump from the 12,422 a year earlier. So a net 370 New Zealanders a week have been leaving. And the trend line just keeps going up. How fortunate that we shall soon have the opportunity to remove the root cause of these appalling statistics, and put into place a government which understands that skilled New Zealanders have choices. And that if we continue to penalise hard work and talent in this country, they will simply vote with their feet.

Press Council Introduces Fast Track

Some readers may recall that over a year ago, the humble and obscure Member for East Coast Bays made a speech criticising editorial standards and professionalism within the nation’s media. In particular, he criticised the Press Council as ineffective due to its operation being so slow that the participants in any dispute had a high chance of being dead by the time any judgement was passed.

The full force and might of the media was turned about said humble Member, who was accused of talking sheer nonsense. The Press Council was perfection personified, and who was he, a minor functionary on the political landscape, to criticise such an august body of editors, senior journalists and other such luminaries of the realm.

How fascinating therefore to receive this week a small missive from said Press Council advising that they will “in the run-up to the General Election, be operating a fast-track procedure for complaints relating to election issues, if it seems that the complaint requires immediate attention.” Oh, so it is possible to improve upon perfection.


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