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Treasury confirms National's fear on loans

John Key MP National Party Finance Spokesman

14 September 2005

Treasury confirms National's fear on loans

National Party Finance spokesman John Key says the Treasury costings released on Labour's last-minute student loans promise confirm National's worst fears.

Features of the paper:
* Treasury paper says that they "may be understating the true total cost".
* Annual operating cost rises to $390m by third year, and to $500m after six years, and by 2019 will be $924m.
* Impact on gross debt is a rise of $2.4 billion by third year, rising to $5.1 billion after six years, and rising to over $10 billion after only 11 years.
* Overall student debt INCREASES under Labour's policy. So much for Helen Clark kicking the 'debt monster' to death. Student debt blows out to $19.8 billion by 2020 verses $14.2 billion under the current student loan scheme.

"Labour wants hard working kiwi taxpayers to fund all of this otherwise Government debt will rise by nearly 5% of GDP.

"It is a complete scandal that these costings were withheld from the public. No wonder Michael Cullen refused to release these damaging documents.

"It is also a scandal that Labour attacked the integrity of market economists who made very similar estimates on the total cost of this scheme, which it now turns out were in line with the advice from Treasury.

"The alternate costings that the Minister requested, using his own political assumptions, are simply preposterous and defy belief.

"He wrongly believes that the decision to offer interest free debt will lead to almost no increase in borrowing behaviour.

"The tattered remnants of the finance minister's credibility have been incinerated by this report," says Mr Key.

When Labour launched the loans policy, Helen Clark's release stated: 'The total cost of this policy is expected to begin at around $100 million in its first year, rising to around $300 million per annum.' And the Q&A said: What does it cost?

The cost of this policy will grow through time through to a maximum of around $300 million. The cost in the first year will be around $100 million.' Later in Parliament Trevor Mallard said 'The maximum is $302 million in 2008-09'.

Mr Key says "even using Labour's own flawed assumptions, the cost goes way beyond $300 million per annum".


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