Reuniversalising the student allowance

I've long been in favour of restoring a universal student allowance. While the right finger-point about "subsidising privilege" (as clear a case of pre-emptive accusation as ever I saw), this relies on a rather outdated view of who participates in tertiary education. As any glance at the statistics will show, we are now in an age of mass tertiary education: 36.5% of 18-24 years olds were enrolled in a tertiary course in 2006, compared with 26.2% in 1997 (sadly I can't find earlier statistics on tertiary participation rates, particularly in the 1980's, but that gives a good example of the trend). Student allowances aren't about "middle class welfare", they're about supporting opportunity for all. But even if they weren't, the fact remains that under the current policy, many students who want to focus on their studies are forced to borrow for food. And that is simply intolerable in a civilised society.

So, it's good to see that the government is at least costing the option of reuniversalisation. What's not good to see is how quickly they're trying to back away from it. In an election campaign where they're struggling to win a fourth term, Labour desperately needs to give people a reason to support them. It can only do this by showing us a clear left-wing vision and going places National can not and will not go on worker's rights, equality, and social services. If they can't or won't do that, then they have only themselves to blame when they lose.

So would reuniversalisation be affordable? The upfront cost is $2 billion over four years, which would make it a hefty policy indeed. However, much of that money is spent anyway (at least on a cashflow basis) through the student loan scheme, and once this is accounted for, the cost shrinks to $728 million, or about $180 million per year. In good times, this would be significant, but perfectly affordable. But these aren't good times. More importantly, in their budget earlier in the year, Labour spent all the money, leaving them with a cap of about $750 million a year for new spending once health-sector growth is accounted for. This was intended to be a poison pill for a future National government, sabotaging their claim that they could afford massive tax cuts for the rich without either service cuts or more borrowing, but it also constrains Labour. $180 million is less than $750 million, but there will be other spending demands (not least the need for departmental budgets to keep pace with inflation); it could probably be done, but it would be the only significant thing they could do, their "one big idea" for an election campaign or a budget. So, in the short-term, Labour's incremental approach seems to be the best we can hope for (and the costing can be seen as a way for labour to make the case for this to its potential coalition partners, all of whom want to see the reintroduction of a universal student allowance).

Of course, none of this would be an issue if Labour hadn't cut taxes - and on this front I can't help but notice that the $180 million a year cost of a reuniversalised student allowance is only slightly less than the $184 million a year the rich gain due to Labour's shifting of the 39% tax threshold. So, when given a choice between funding opportunity for all and giving money to the rich, Labour chose the latter. Some "left-wing" government!

National accepts the inevitable - but can they be trusted?

National has finally accepted the inevitable and endorsed the government's interest-free student loan policy. They're even offering an early-repayment bonus (though a fairly miserly one, which is asking to be gazumped). But their reasoning for this leaves a lot to be desired. They're not accepting it because its good policy which lifts the burden of debt from the young, but because

"We lost the election."

Of course, if they're so quick to flip-flop when they lose an election, you also have to wonder whether they'll be just as quick in flip-flopping if they win.

Time to increase student allowances

Tertiary education Minister Pete Hodgson has hinted that he might increase student allowances in the budget. Good. As the story points out, it hasn't been adjusted for many years, and desperately needs to be. But while increasing payments will improve the lot of those students lucky enough to receive them, it won't do much to reduce those staggering debt levels, due to the simple fact that very few students are eligible for assistance. According to the Ministry of Education [XLS], almost half a million people participated in tertiary education in 2006, 307,000 of them full-time or full-year (and thus meeting the most basic eligibility criteria of being a "full-time student" in one sense or another). But of those, only 59,000 - one in five - received any form of assistance. And that number has been dropping steadily as incomes have risen while eligibility thresholds have remained static.

So, while a Good Thing, increasing allowances won't do anything at all to help the 80% of students who don't receive them, and who are responsible for most student debt. If we want to do that, we need to significantly broaden eligibility. Adjusting income thresholds so they reflect the current economic situation, rather than that of 1992, would be a start. But ultimately, re-universalisation should be the goal. No-one should have to borrow for food and rent in this country, and I'd have thought a Labour government would recognise that fact.

Something I should have said yesterday

Happy interest-free student loan day!

Labour's policies have removed an enormous burden from the backs of tens of thousands of mainly-young New Zealanders, giving them a chance to share in the Kiwi dream. Because of this, getting an education will no longer be incompatible with buying a house or having kids. It will also no longer be incompatible with saving for retirement. People will still pay for their education, but through a mechanism more akin to a capped graduate-tax than an actual loan, and which is a lot less of a burden. And that is I think something we should thank Labour for. They may be cowards on climate change, they may lack the backbone to make a proper stand for human rights on the international stage, they may wilt at the slightest sign of displeasure from the business community or the "hang 'em high" brigade, and fold at the first allegation of "political correctness" from rednecks who would never vote for them anyway, but they have at least managed to deliver in this area.

Not at all unreasonable

The Ombudsman's decision to force the government to release the initial Treasury costings of its student loan policy is clearly a victory for open government - and, to the extent that those costings are higher than those given by Labour, for the National Party. But there seems to be an effort by some parties to paint Cullen's decision to withhold them as being a meritless attempt to suppress embarassing information. IMHO, this is wrong. While Labour clearly didn't want the costings released before the election (because then it would have to explain why it was disagreeing with its own officials), the initial decision to withhold them was not at all unreasonable, and complied with longstanding convention.

For those who don't spend their spare time prodding the government for embarassing details, access to government information is covered by the Official Information Act 1982. Section 5 of the Act establishes a general principle that

information shall be made available unless there is good reason for withholding it.

Some reasons are conclusive, others may be outweighed by a public interest in access to the information concerned. One of the latter is

Maintain[ing] the effective conduct of public affairs through...the free and frank expression of opinions [...] to Ministers of the Crown

This is expressly designed to protect policy advice to Ministers. However, it isn't conclusive, and access to such advice is the very point of the OIA. The convention seems to be that policy advice may be withheld while the policy is still under consideration, and released only when the Minister or Cabinet have made up their mind(s). This is relevant to the student loan costings because they were prepared as part of the government's Long Term Review of Tertiary Education Expenditure, which is still ongoing. They would thus normally be withheld, and Cullen didn't do anything unusual in refusing the National Party's request. John Key didn't do anything unusual in appealing the matter to the Ombudsman, either, and the end result of that process was a decision that the public interest in seeing the cost of a policy before the election outweighed the normal interest in protecting "free and frank advice". While I think this is a Good Thing, and I look forward to using the precedent in future election campaigns, it's not at all obvious from the law that that is where the balance of public interest lies, and Cullen's initial decision doesn't look at all unreasonable or devious.

As for the costings themselves, it's pretty much what you'd expect: Treasury is staffed by economists, and so they naturally assume things that have been disproven by the empirical evidence. Which is why Cullen based his publicised figures on a second set of costings based on more reasonable assumptions about uptake. OTOH, having read Keith Ng's latest, the other assumptions seem less reasonable; and while Labour is already attempting to justify them as reflecting wider access to allowances and capped fees, they should make such assumptions explicit in their model. Otherwise, it looks suspiciously like a strapped chicken...