I have to hand it to Bill English - it took some balls to come and speak at Victoria University today. The student crowd is generally unpleasant for right-wing MPs, but for a right-wing MP trying to convince them that no interest on their student loan is a bad idea, it was downright hostile. They treated him like... well, like he was Max Bradford, and though he put up a good fight, one man was never going to be able to fight the crimson tide that is sweeping over the campuses.
There's little doubt that Labour's policy has really hit the mark. Just last week, National took a shot at the same thing, trying to create incentives for graduates to stick around and work in New Zealand, but was met with a lukewarm response.
I mean, making student loan interest payments deductible from your income for the purpose of calculating how much you pay in tax? Sure, the policy center may be chewy caramel and the money-in-pocket coating may be delicious chocolate, but when that candyball is being stuck up the tax policy wazoo, the taste gets replaced by an altogether more confused response. And a bribe not understood is a bribe not taken.
Labour aimed at the same spot, but shot a cannonball through National's arrow. It was as clear as it got - no interest, period. It was so clear, in fact, that I had trouble figuring out whether I actually understood it properly. Dumbfounded, I called Mallard's Press Secretary:
Me: "Uh, I just wanted to clarify - does that mean no base interest?"
MPS: "It's all in the press kit."
Me: "Yeah, I just read it. But there is still an inflation adjustment component, right?"
MPS: "No. It says 'no interest', doesn't it?"
Me: "Um... yeah, but... I mean, there's still an inflation adjustment, right?"
I was seriously expecting them to say that there is no interest, just an "inflation adjustment". And beside, who'd be crazy enough to offer an interest free, non-inflation-adjusted loan? After all, such a loan is not a loan in any conventional sense.
And that was the point. The student loan scheme has mutated to the point where it's no longer a loan, it's more like a universal allowance on one end and a 10% graduate tax on the other, with how much you take affecting how much you pay.
How is this different from a loan? Sure, there's a choice to pay more or borrow less, but there are no incentives and no pressure. The system is not governed by price mechanisms, but by government policy alone. I don't have a word to describe what it has become, but it doesn't look like any other loan schemes out there.
It won't behave like any other loan scheme, either, and that's why, even though it breaks the fundamental mechanisms by which loans operate, it's still possible for it to work, via the very visible hand of government, which dictates how much you can borrow and how much you have to pay back.
The real issue, as National points out, is the cost. All the smart money right now says it'll be well above the $300m costing that Labour has put out. John Key has just thrown into the hat a figure of $550m, which, to be honest, still seems quite small. Total student debt was expected to climb to $13b by 2015 anyway; if there was indeed going to be an "explosion", with more people borrowing and voluntary repayments declining, a $15-20b debt wouldn't be unreasonable. And if the current 7% interest rate was applied to a debt of $15b, the government would be missing out on revenue that would, in theory, be just over $1b per year.
It's a curious position that National have found themselves in - they're complaining that this scheme will benefit us soon-to-be capitalist parasites, at the expense of the proletariat running our factories. I wonder how that'll work out for them, especially when they finally launch their tax policy.
Is anybody else slightly perturbed, though, at how hard and fast these first four days have been? If Labour drop a nuke like this for the opening volley, what will they do for a follow-up? For that matter, what on earth have they got stashed away for the end-game?
--
[I was at an Australasian Parliamentary Study Group seminar tonight, featuring Jordan Carter and David Farrar. I'm sure one, or both of them will talk in detail about the contents of the seminar, but I found the contrast in style between the two quite refreshing. David, being the pollster, had a Powerpoint presentation on the typology of blogs, demographics of blog readers, number and trends of readership; Jordan, being the lefty intellectual, expressed his contempt for Powerpoint and talked about blogs as a medium for democratic participation and public debate. They should do joint gigs more often!]