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More spin than substance in loan costings

More spin than substance in loan costings

National Party Associate Finance spokesman Bill English says Michael Cullen continues with attempts to deceive the public on the true cost to the taxpayer of Labour’s ‘no interest’ student loan policy.

“Today he’s released yet another set of costings for this hugely expensive policy and he has confirmed an immediate hit to the balance sheet of more than $1 billion, with a best guess of ongoing costs put at more than $400 million per year.

”The costs for this policy have been all over the place (see table), and the latest estimates are even higher than the last Treasury estimate

“This is a policy that will immediately cost the taxpayer more than $1 billion. It’s exactly like giving away a significant state asset for zero return.

“The papers predict there will be 44,000 more student borrowers, and 27% more new debt will be racked up each year. The Government is also expecting voluntary repayments to drop by 80%.

“Labour has been extremely sensitive about the real costs. The fact that they tried to withhold Treasury costings before the election, and were recently forced to patch up a major borrowing loophole, shows how poorly planned this policy was.

"A small number of people with large loans will get most of the benefit from this hugely expensive policy.

"The public knows that this desperate policy was hatched in the lead-up to the election in a bid to counter National’s popular plan to provide better incentives through the tax system.

“But Labour’s ‘no interest’ loans policy encourages students to borrow the maximum and repay only the minimum, and it comes at a time when even Dr Cullen says personal debt is a problem for the economy,” says Mr English.


Annual impact on the operating balance ($m)

Initial costings released pre-election New costings
Cullen Treasury
2005/06 171 179 1,649
2006/07 209 237 369
2007/08 257 311 416
2008/09 302 390 442
2009/10 273 397 415

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