Thursday, July 17, 2008

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about "subsidising privilege" (as clear a case of pre-emptive accusation as ever I saw), this relies on a rather outdated view of who participates in tertiary education.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!