Cancel this odious debt

Writing on Newsroom, Laura Walters makes a case for cancelling student debt:

[A]t the moment, loan debt is hurting the economy, holding back everything from small business formation, to new home buying, and even marriage and reproduction.

So rather than offering interest-free borrowing, or expecting people to refinance their loans, the Government could try something more ambitious.

The Levy Institute, a non-partisan think tank in the United States, makes a strong case for student debt cancellation.

It found positive macroeconomic feedback effects from running simulations through two different models for debt cancellation. It saw average households’ net worth and disposable income increase, driving new consumption and investment spending.

In short, the analysis shows debt cancellation would lift GDP, decrease the average unemployment rate, and result in little inflationary pressure, while interest rates increased only modestly.

That's the economic case. Walters also mentions the values-based case about free education, and I'll throw in another: the student loan scheme is odious debt. It violates the government's own lender responsibility principles set by the Credit Contracts and Consumer Finance Act 2003: the government exercises no care or diligence and makes no inquiries as to whether loans can ever be repaid; the sub-minimum wage repayment thresholds make the agreement inherently oppressive; the government exercises its powers as a lender in an oppressive manner, with border arrests and threats; and they induce young people to borrow by oppressive and downright fraudulent means, on a promise of benefits from tertiary education that turn out to be substantially overstated (and an implied threat that without this, you have no hope of a decent job or a future). If they were a normal lender who induced people to borrow in this way, on such terms, we would prosecute them and ban them from lending.

Or we can put it even more simply: the student loan scheme was a massive act of intergenerational theft by Boomers against everyone younger than them, which has burdened successive generations. And rather than perpetuating it any further, we should end it, lift that burden, and cancel the debt.

People who went through the system, were gouged by oppressively high interest rates, and paid off their loans anyway may feel hard done by by this. But their having suffered in the past is no reason to continue to make people suffer in future. The struggle to make a better society inherently means that people in the future are going to have better lives than us if we succeed. We don't begrudge them that. So why begrudge this? If you want to be angry at anyone over your suffering, be angry at Lockwood Smith and Phil Goff, who inflicted this misery on us and are still swanning around as if they didn't do anything wrong, and who haven't even pretended to apologise. Or at the Boomers, on whose behalf they looted the state and gouged us. Or at the entire class of 1980's and 1990's NeoLiberal politicians, who wrecked the country and fucked us over, and whose ideology of greed and selfishness is still governing the state today, despite being completely debunked and officially denied by their political successors. Be angry at the people responsible, not your fellow victims.

And when you're done being angry, use that anger, and make Aotearoa a better place, by cancelling this odious debt.

(Disclosure: Like Walters, I still have my student loan. I do not intend to repay it).

Debt isn't support

Today the government announced a new "support" package for students: more debt! With universities shut, and their part-time jobs locked down, they can borrow more money! Employers get a wage subsidy. Home-owners and landleeches get a mortgage holiday. From the sound of it, businesses are about to get a rent holiday. But students have to borrow to get through this crisis.

This isn't "support". As an easily-implementable quick measure, sure. But real support would be grants and allowances, not more debt. But it makes the government's books look good (it goes on them as a capital asset, not as spending). We're supposed to All Be Socialists Now. Except I guess for students, who still get NeoLiberalism rammed down their throats, same as always.

Priorities again

Newsroom this morning has an interesting piece on IRD's enforcement priorities:

IRD collected just $10,000 in unpaid tax from people living in Australia last year, but netted $1.7 million in student loan repayments from Australia.

The IRD made just eight requests for assistance from the Australian Tax Office (ATO) in the 2017/18 tax year to net the $10,777.44 in unpaid tax, according to information released under the Official Information Act.

A 1995 tax treaty with Australia, updated in 2009, allows the IRD and ATO to share information and request assistance in collecting tax.

The low take is especially surprising the IRD collected $1.7 million in student loan debts and $45.2 million in child support debts over the same period.

Terry Baucher, director of tax consultancy Baucher Consulting, filed the OIA request and told Newsroom he was “shocked” at the tiny amount of unpaid tax collected from Australia, especially given how many New Zealanders live there — including some who move to escape tax owed here.

As with the previous piece on the different levels of enforcement for students and property speculators, the message is clear: IRD is tough on students, but soft on tax cheats. Given that student debtors are just that - debtors, a civil matter - while tax cheats are actual criminals who undermine the integrity of the tax system, surely it should be the other way round?

Priorities

Last month, Newsroom revealed that the bright-line test for taxing property speculators had a compliance rate of just two-thirds. But despite widespread tax cheating by wealthy property speculators, IRD isn't actually doing anything about the problem:

In spite of the bright-line test having an incredibly low compliance rate, Inland Revenue has no full-time staff chasing property investors who fail to pay what they owe.

[...]

Nearly one in three eligible property investors fails to comply with the test and documents released to Newsroom under the Official Information Act show the compliance rate is worsening. A report given to Revenue Minister Stuart Nash in May estimated bright-line test compliance could be lower than 50 percent.

Despite this, the IRD has not, in the three years since the bright-line test was implemented, established a team for chasing non-compliance and recovery.

Information released under the OIA to Newsroom said the IRD did not have dedicated teams for bright-line recovery nor did it have a separate budget for bright-line recovery activity. Instead existing staff were used to track down people who had not filed a return for possible tax due under the bright-line test.

Instead, they're targeting overseas student loan borrowers. Which tells us everything we need to know about IRD and the government's priorities.

But its worth noting that student loan debt is just that: debt. Whereas failing to comply with the bright-line test is a serious crime. IRD's refusal to enforce the bright-line test undermines both government policy and the rule of law, while setting clear incentives encouraging further tax-cheating by property speculators. And that is not something we should tolerate.

Election issues: Student debt

Student loans have been with us for 25 years, and over that period ex-students have been burdened with billions of dollars of odious debt. Currently almost three-quarters of a million of us are carrying $15 billion of this unjust debt, and billions more have been repaid (at the cost of people delaying homes and families to pay off the government for the privilege of being denied a basic standard of living). The debt is odious in a legal sense because it is effectively coerced and extracted under false pretences. People at the beginning of their lives are told they must incur it to have any chance of a decent job: "get a loan or flip burgers". The reality is that NZ workers are underpaid and overqualified, meaning that the promised reward is a lie. There's also a huge intergenerational justice issue, in that the people extorting these loans benefitted themselves from free tertiary education when they were students.

Now, finally, we're seeing a move to end this. But it doesn't come from Labour (whose senior leadership all protested against student debt when they were at university). Instead, it comes from New Zealand First:

New Zealand First is promising to wipe student loans for new students who stay and work in the country for five years, and it says that it will only cost $4.6b a year.

People who bond themselves to regions in need of workers or study for less time could wipe theirs even faster.

The "Up Front Investment" announcement was made at the party's regional conference this weekend, along with the promise of a universal student allowance, instead of the means tested benefit currently in place.

But there's a catch: they'd impose full fees (not the current subsidised ones) on anyone who left the country. This would increase the size of the debt five- or six-fold (to about the size of a house deposit in Auckland). So, its nowhere near as good as it looks, and unnecessarily punitive. Kiwis overseas already face an excessively punitive regime, and this sort of sudden imposed "debt" is not going to encourage compliance (except possibly in the form of strategic bankruptcy, which really looks like a good idea if the government sticks you with that sort of burden).

Still, this is forcing the issue onto the agenda, and Labour looks uncomfortable on this. As noted above, their senior leadership are all veteran protesters against student debt. But they're opposing NZ First's scheme as "unaffordable" (compared to their half-measures). I guess that's how much a Parliamentary salary changes things.

But NZ First is right: something needs to be done. It is unjust to impose this odious debt on the young. It is unjust to effectively force people to borrow to pay for food. And it is unjust to continue to burden victims of this scheme with a lifetime of debt they will never repay. Political parties need to have policies not just to end student loans, but also to relieve this odious debt. And we should judge them on those policies in September.

Against student debt-slavery

What is it with the right and debt-peonage? Not content with turning ex-pats into permanent exiles with their border arrest scheme, they now want to turn them into debt-slaves by reintroducing interest on student loans:

A proposal to reintroduce interest on student loans has been shot down by the Government before it reached final report stage.

The proposal is one of a raft of recommendations put forward in a draft report by the Productivity Commission, released this morning, which is heavily critical of the current model of tertiary education and how it's funded.

[...]

The funding model also comes in for criticism. The commission says the Government should charge interest on future loans at a rate that covers the cost of the Student Loan Scheme.

The Government currently writes off about $600 million of student debt every year, it said - or around 39 cents for each dollar lent.

As noted, the government has already said "no" (because it knows it will be de-elected if it tries). Good. Because student debt is odious debt. It is pushed on students on false promises of economic gain, and students are effectively forced to take it if they want any hope of not being a burger-flipper for the rest of their lives. Charging interest magnifies that crime; there are former students today who still carry the burden of illegitimately charged interest from the 90's, last time the right got its way.

Restoring interest on student loans would be exactly the wrong direction to take. At the moment, student debt is a huge burden, causing people to defer children, locking them out of the housing market, and preventing them from starting businesses or pursuing employment overseas (at least if they ever want to see their families again). It is the root of many of our current social problems. We should be forgiving it, not making it worse.

An expensive mistake

Back in January, IRD arrested Ngatokotoru Puna at Auckland Airport for supposedly failing to meet his student loan repayment obligations, then extorted $5,000 from him to be allowed to return to his family. Now, it looks like that is turning into an expensive mistake:

Mr Puna lives and works in the Cook Islands. The Cook Islands along with Niue and Tokelau are dependent territories. This means that those who are citizens of these countries are also citizens of New Zealand, and that MrPuna was never an overseas based borrower to start with.

IRD have belatedly acknowledged this – his alleged $120,000 loan was reduced to $30,000, now further less the $5000 he was forced to borrow from his family in order to be released from his imprisonment at the airport.

Higgins is appalled at the complete lack of due diligence in this case “If MrPuna was living within New Zealand territory why was he being charged interest? This is a massive failing from IRD. They have failed to do their job properly.”

"It's clear that MrPuna was not an Overseas-Based Borrower, it's not clear that he had not actually met his full obligation under the student loan scheme since New Zealand-based borrowers pay through the PAYE scheme. He may in fact have been arrested despite not being in default at all – even ignoring that IRD were sending reminder letters to an incorrect address."

Which looks like a pretty solid case for violation of freedom of movement and the right to liberty. I wonder how much that will cost IRD? But sadly, given the way this usually works, the incompetent staff who made this mistake will face no sanctions whatsoever, despite being responsible for a false arrest, $90,000 of student loan writedowns, and yet-to-be determined legal costs.

And OTOH, IRD won't care, because they've apparently gained an extra $7 million in repayments since the arrest as fearful borrowers pony up to avoid the same fate. Which looks an awful lot like proceeds of crime from where I'm standing...

Joined-up government

Last month, we learned that the government had considered refusing to renew the passports of student loan debtors. People were naturally curious about this, and so someone used FYI, the public OIA request website, to request all advice from the Department of Internal Affairs about the proposal. As the body responsible for issuing passports, you'd expect them to know something about it. But apparently not:

The information you have requested is more closely connected to the functions of the Inland Revenue Department. I have therefore transferred your request to IRD for consideration...

So, the department you'd expect to be responsible for the policy doesn't know anything about it. I think that speaks for itself about the seriousness of the proposal.

Disproportionate and stupid

So, the government has considered refusing to renew the passports of student loan debtors:

Yesterday appearing before the finance and expenditure committee, Dunne was asked if he had considered going so far as to refuse to renew passports.

"The issue has been considered," Dunne said.

"No firm decisions have been reached on that. There are some obvious potential advantages.

"There are also some disadvantages about what you might describe broadly as human rights issues - the rights of New Zealanders to a passport, but it certainly has been looked at, yes."

No shit. Effectively it would deny freedom of movement - including the right to leave New Zealand, and by implication their right of residency in their host nation - from these people. While that right is subject to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society, that's a very high bar in this situation. How high? Currently the government only claims the right to cancel or refuse to issue passports on the grounds of national security (and that requires an actual case, not just suspicion). Those powers have been used just once in twenty years. Applying them to student loan debtors would be grossly disproportionate.

...not to mention stupid. The existing policy of threatening to arrest student loan debtors at the border already risks turning ex-pats into permanent exiles. I can't think of a better way of cementing that process, of getting them to renounce their citizenship and become permanent citizens of another nation, than to threaten to remove their passports.

National: Turning ex-pats into exiles

Once upon a time, when National Party Ministers were young, being a student was easy. You'd go to university, get an education, and get a decent job as a result. And because the state believed in the social benefits of education, it cost next to nothing.

Enter Roger Douglas and Phil Goff. Education became a "private benefit", which people had to borrow to pay for (Lockwood Smith simply applied the DHB scam to it so fees were charged by perpetually underfunded universities rather than government). But thanks to degree inflation and an austerity-induced recession, that benefit was rather less than what people were expected to pay for it (and its not as if they could "choose" not to pay: middle-class expectation and qualification inflation meant it was a life of debt or a life flipping burgers). For some, the gamble of education failed: either university was too much for them, or the promised decent job failed to materialise at the end of it, or simply life happened, and so they ended up burdened by unrepayable debt. Inevitably, due to the long tradition of the kiwi OE and the sudden incentive to exploit the exchange rate to repay education debt, some of those people were overseas.

Labour's interest-free policy made things easier for those still in New Zealand - at least their debts wouldn't grow. But those overseas were left out. And since then National has increased foreign repayment obligations, making them even more unrepayable and creating a stronger incentive to ignore the loan and get on with your life. And now, they've gone a step further, proposing to arrest student loan debtors at the border.

National thinks this will encourage those debtors to come home, or better yet, encourage them never to leave in the first place. I think it will do the opposite. While people may go overseas on a lark, they don't stay there for trivial reasons. These overseas borrowers will have lives, jobs, and families where they are - anchors overseas which keep them from coming home. And what National's policy will do is make sure they can never come home ever again. They can't come home for christmas, because they'll be arrested. If a New Zealand family member gets sick, they'll have to choose between their family and their freedom. They won't be able to come home for funerals. All of that is inhumane, vindictive and punitive, but it gets worse: they won't be able to do business here, because they'll be arrested. And they won't even be able to move back home, because if they come back for a job interview, the government will throw them in jail.

National likes to talk up the value of our ex-pats. But this stupid, inhumane, vindictive policy will turn them into permanent exiles. Way to go, National.

For progressive student loan repayment rates

The government's hike in student loan repayment rates has highlighted one of the injustices of the scheme. Repayment kicks in at a mere $19,000 a year - substantially lower than the minimum wage (which is ~$26,000 a year for a full-time job). So graduates who have not benefited financially from their education (by for example being stuck in work which does not require their degree and is therefore remunerated as such) pay as if they had.

There's an obvious solution: progressive repayment rates. Australia does this, with repayments kicking in at 4% at A$49,000 and the rate increasing to 8% at A$91,000. We could do the same, with a stepped scheme with a low repayment rate at the current threshold, and rising sharply at higher incomes. This means that young families won't be squeezed by student loan repayments, but it also fulfils the scheme's underlying bargain: only those financially benefiting from their education pay for it.

Discouraging education

Today's attempted distraction from John Banks: the government is hiking the student loan repayment rate. So all those former students earning minimum wage by flipping burgers now get to face an extra 2% graduate tax. I bet that'll make them feel their education was worthwhile.

Student allowance income thresholds are also being frozen for four years. FYI has the figures on this, and it will save a mere $11 million over four years. In other words, its penny-pinching, while making life more difficult for those in need.

But the real problem is the cut in student allowance entitlements, from five years to four. This means that students will no longer be able to pursue a double degree or a Masters on a student allowance (it may also mean problems for law students). Unless they have rich parents, of course. So, National is chopping rungs out of the ladder of opportunity, making it more difficult for those at the bottom to access the qualifications needed to better themselves. I guess their rich kids just can't stand the competition.

Legislating by press release

Stuff reports that some changes to the student loan scheme, involving a shorter repayment holiday for students travelling overseas, have taken effect. But as pointed out by the Greens' Holly Walker, the bill hasn't passed the House yet. So how can it have taken effect?

The answer is that it can't. Even though the bill is retrospective, it still doesn't take effect until it is passed. Any Minister pretending otherwise is engaging in

the pretended power of suspending of laws or the execution of laws by Regall Authority without consent of Parlyament

which is explicitly made unlawful by the Bill of Rights 1688. In this country, you cannot legislate by press release, and you cannot prospectively implement retrospective legislation. Fitzgerald v. Muldoon settled that back in 19736; I'm surprised the government has forgotten.

The government welches on 530,000 student loan contracts

Went to university? Paid for it with a student loan? The government is about to welch on your contract, with no negotiation or consultation, and in a way which could significantly financially disadvantage you.

The idea behind the student loan scheme, falsified every day on this blog, is that education is a private benefit. If you go to university, you will supposedly earn a higher salary. The loan contract reflects this by not requiring any repayments until your income is above a certain threshold. In practice, that threshold has been set so low to make the idea of a education as a private benefit laughable - it has always been below the minimum wage. But the general idea seems valid. And if you really got no real economic benefit from your university education, and work part-time or irregularly and don't meet the threshold, then you don't - and shouldn't - have to repay a cent.

The government's new Student Loan Scheme Bill changes that. The bill moves repayments from an annual system to a pay-period one, meaning that deductions will more closely reflect repayment obligations, and borrowers won't be stuck with the icky problem of never quite knowing when they've repaid their loan. This is a generally good idea, but a side effect is that people who work part-time or irregularly and earn less than the annual repayment threshold - people who are at the bottom of the heap and need every dollar they can get - will be forced to make repayments in violation of their contract. And rather than refunding people at the end of the year, the government will just keep the money.

This problem could have been easily removed by continuing the current practice of allowing borrowers to indicate that they did not expect to meet the repayment threshold (something they allow in the case of students). The government chose not to do that, and change a significant term of 530,000 student loan contracts. Coming from a right-wing government which has put compliance with fundamental common law principles (which includes the keeping of contracts) at the heart of its regulatory programme, its a bit odd. But the victims are poor and powerless - and therefore in National's eyes, clearly in need of a good kicking.

The take-home message for student loan borrowers is that the government's word is valueless, and that they will violate your contract whenever they feel like it, for no apparent purpose other than sadism (the change adds very little to expected annual repayments). But its not just student loan borrowers who are affected. The same message is being sent to everyone who has ever signed, or is thinking of signing a contract with the New Zealand government: Wellington's word is not its bond. They are welchers. And that's not exactly a good image for the government to be presenting.

A disaster

Stuff reports that John Key has called the student loan scheme a disaster. He's right, but not for the reason he thinks he is. The problem isn't that the government is only getting 53% of its money back, but that half a million kiwis (and the number is growing every year) have been saddled with over $11 billion of unnecessary debt, which many of them have no chance of repaying.

This is an economic, social, and political timebomb. Economic, because as Key admits, the "debt" cannot be repaid (and therefore won't be) - meaning that at some stage the government is going have to admit this and confront a large hole in its books. Social, because pervasive indebtedness among our best and brightest is forcing them overseas, to defer having children, and putting the kiwi dream of home ownership out of their reach. And political because those half-million debtors and their worried families are a constituency and a growing one, who will increasingly start agitating for their unrepayable debt to be forgiven. Reimposing interest on student loans won't change that; instead it will just make matters worse (and as Key admits, result in the de-election of any government which tries).

The scheme exists because the government in the 90's chose to underfund education to pay for tax cuts for the rich. And that is why it continues to exist today. In this Budget, the government gave away enough money to fully fund student fees in tax cuts for the rich. Priorities, I guess - John Key would rather continue to force students to borrow to eat than forgo the opportunity to enrich himself and his rich mates. But it can't continue forever. A smart government would be working towards that day, rather than trying to pretend it can continue to steal from the young to fund the greed of the old.

Bad advice

Bill English has released the second part of Treasury's Briefing to the Incoming Minister [PDF] - the part focusing on the specifics of National's policies. He's released it on a Friday - the traditional time to bury bad news - and I can see why. There's a lot in here people should be interested in, either because it calls the government's programme into question, or because it raises significant questions about what exactly they plan to do. And our politicians and journalists should be asking those questions now.

On the first front, Treasury is surprisingly in favour of Labour's R&D tax credits and "Fast Forward" fund, both of which it sees as making a positive contribution to innovation (National has scrapped both to pay for its tax cuts to the rich - something which promotes only holidays in Hawaii for the few). They oppose National's changes to KiwiSaver on the grounds that there is no evidence that the 4% payments are a barrier to access, while reducing them could lead to inadequate retirement savings and lead to people's balances simply being eaten up by fees. And they oppose National's plans to "fund" infrastructure by having the Cullen Fund purchase government-issued infrastructure bonds is simply a financial merry-go round in which the government would be both the issuer and holder of debt. In other words, it is a way of effectively reducing contributions while disguising the fact that they are doing so - a pure PR scam. Treasury frowns on such Enron-style accounting, and the rest of us should too.

On the second front, Treasury continues in the vein of its triennial ideological burp, recommending more market fundamentalism in response to the economic crisis. So we have the usual calls for tax cuts for the rich, poorer working conditions for the rest of us, and no increase in the minimum wage. Then they get worse.

They recommend "fiscal consolidation" (spending cuts), to be achieved by setting a GDP target for government spending or revenue, "a commitment not to change the allocation once set during the Budget cycle", or just slashing departmental budgets and leaving chief executives to sort out the mess. At the least, they recommend the return of the "sinking cap" which caused so much damage to our public services under the last National-led administration in the 90's.

They recommend higher student loan repayment rates for those on higher incomes - a shockingly progressive move, but one which would effectively claw back National's tax cuts for (recent) university graduates. Then they suggest lowering the repayment threshold. It's already well below the full-time minimum wage - a situation which makes a mockery of the claim that it is repaying the private benefit of education - and they want it lower? This is simply madness.

In places, the advice is almost comical. They recommend against "opening the books on waiting lists" because this could create "unrealistic expectations" that the health system would be properly funded to deal with basic demand, and create a risk that "ministers could become responsible for fixing every vulnerable service or unmet need" (hint to Treasury: they already are, and we punish governments who evade that responsibility). And in response to National's plans for a "crime tax", they suggest replacing it with "targeted support for the 13% of victims (particularly victims of serious violent crime) currently reporting dissatisfaction with the support they receive". I believe that's what Treasury would call "creating an incentive"...

But the worst bit is their proposed response to the international financial crisis. Their proposal? Nothing. Treasury thinks the market is best left to sort itself out. A fiscal stimulus package could upset the markets and "work against the unwinding of imbalances in the economy that need to happen". In English, that means stop firms from going bankrupt and people being thrown out of work. Furthermore, the effects are not predicted to be that bad - we're only expected to see 6% unemployment, "which until this decade was seen as the lowest rate of unemployment before inflationary pressures emerged". I'd like to see them tell that to the 75,000 families they're saying we should do nothing for. Assuming they can see them from their corner office fifteen floors up on the Terrace, that is.

It's appalling advice, both in its laissez faire attitude (the financial crisis apparently not having done anything to Treasury's religious belief in rampant capitalism) and its sheer inhumanity. And it makes me wonder: if Treasury's advice on any significant issue is inevitably "do nothing; let the market sort itself out (oh, and give tax cuts to the rich)", couldn't we get that advice a lot cheaper? Currently, we pay them about $40 million a year for policy advice. Couldn't we save all that money and spend $10 (once!) for a "Treasury says..." sign on the Minister's wall?

Humour aside, we should be asking the government how much, if any, of Treasury's recommendations they plan to implement. They publicly rejected the other proposals in the BIM, and we should make sure they do the same here as well.

Gazump

Labour has announced its big policy for the election: a universal student allowance, to be introduced gradually over the next four years by raising the parental income threshhold. This will be expensive - $210 million a year eventualy - and some may argue that we can't afford it at present. But the current arrangements, which deny assistance to the vast majority of students, are fundamentally unfair. No-one should have to borrow to eat in this country, and erasing that obscenity is well worth the price.

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.