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Sacred cows

Written By: - Date published: 9:02 am, December 20th, 2012 - 38 comments
Categories: class war, newspapers, tax - Tags: ,

Interesting anonymous editorial in The Herald yesterday:

Sacred cows fair game as Govt clings to surplus

A$66 million surplus in 2014-15 is, as Bill English noted yesterday, “not large”. But, in the interests of avoiding embarrassment, it is one the Finance Minister is clearly very keen to protect.

As much was apparent as he used the release of the half-year economic and fiscal update to indicate that spending on the Government’s biggest programmes is now under the gun. “Long-term drivers of costs in areas such as welfare, health, education and law and order” were mentioned as Mr English outlined his plan to retain the surplus in the face of a threatened further deterioration in the global economy. …

The universality of the likes of Working for Families, as well as the generosity of interest-free student loans, have previously been deemed out of bounds. The Government has, unfortunately, not been prepared to take tough decisions, whatever their rationality and reasonableness.

The wealthy, therefore, continue to be eligible for Working for Families benefits. Student loans have been subjected only to tinkering, aimed mainly at reclaiming loans. Mr English’s gaze should be directed at tailoring welfare to those who genuinely need it, and reining in the benevolence of the loan scheme.

Why is it, that on any editorial list of sacred cows the Nats’ tax cut bribe for the rich never seems to feature? Rolling back those tax cuts would raise much more revenue than tinkering with student loans, and is much fairer besides, but strangely this particular cow is never offered up for sacrifice.

In unrelated news, it’s a fair bet that the anonymous scribe waxing lyrical about the “benevolence” of the student loan scheme (1) received a free education themselves, and (2) benefited greatly from the tax cut bribe. Mmmm – funny that.

38 comments on “Sacred cows”

  1. r0b 1

    And on that somewhat grumpy note, I’m off for a bit. Back in January some time. Have a good Christmas all. Be careful on the roads, and have a great summer.

  2. rosy viper 2

    I’ve been thinking lately that it will be interesting to see how well Tony Ryall does if more pressure is put on health spending. It looks like he better be preparing himself.

    So far he’s remained off the list of incompetent ministers despite DHB and PHO mergers and reduced funding for primary care access for vulnerable populations. Whatever pressures there are seem to have remained ‘in house’. I’d go so far as to say that by keeping away from the headlines he’s on the list of top performing ministers. I’ll be interested to see if he can maintain that when the pressure to cut goes on.

  3. fatty 3

    .In unrelated news, it’s a fair bet that the anonymous scribe waxing lyrical about the “benevolence” of the student loan scheme (1) received a free education themselves, and (2) benefited greatly from the tax cut bribe. Mmmm – funny that.

    True, and we should not forget that Bill English got two unrelated degrees at two different universities. A Commerce degree at Otago and then an English degree at Victoria in Wellington. He would have been paid to study back then.

  4. Off topic, and only because I know the author will be too modest to link to it himself:


    Well done.

  5. “as well as the generosity of interest-free student loans,”

    Yeah this really pisses me off. New Zealand appears to be importing educated people, due to a lack of them in this country and at no time does the sacred cow of the failure of the student loan scheme ever get addressed.

    Rather we get cowards, who can’t even sign their name to the memes they are propagating; writing crap about “the generosity of…”.

    Yeah, sure, thank you Masters for providing a whacking great debt to those who are going to provide society with a much needed service, I mean, free education used to be factored as an investment, however now that mindless-market-mania-mentality has taken over all sense has walked out of the equation. And forethought, or analysis of the effects of certain policies appears to have become a sacrilege to be replaced by mindless “proverbs” mentioning “generosity” and “debt creation” in the same sentence as though they are synonyms.

    • Lanthanide 6.1

      Higher education is both a public and a private good. I don’t think it is unreasonable that there should be some level of private investment in it. I think the SL scheme we have at the moment is a good compromise.

      What I would like to see is the diploma mills shut down (private institutes selling entry-level courses on hype and misrepresentation), as well as stopping people from going to university and racking up debt if it’s clear they’re only doing it because they have no idea what else to do, or people who eventually drop out with no qualifications and a load of debt. I believe the government has added some requirements that 2nd year onwards SL requires passing marks for 1st year, which is a good step in this direction.

      I also wouldn’t be opposed to a very low rate of interest, no more than 1-2%, as well as the 10% bonus brought back for voluntary payments over $500 in fiscal year (government has scrapped them for next year). At the moment most people are just letting inflation eat away at their debt.

      • blue leopard 6.1.1

        What isn’t factored in Lanthanide, is the people who are capable of university level study who have backgrounds that are not flush with money and how agreeing to tens of thousands of dollars worth of debt, is really a whole lot more difficult for one in that position, than for someone who has more financial abundance in their background. This holds true whether the wealthy parents are generous or not.

        To put it a wee bit callously
        This means that many people who could be very active members of society, may end up being non-active and costs to society.
        This also means that the majority of people with educated careers are those with certain flush background and have very little idea of how to address the problems of different stratos of society.

        This is entirely inefficient system and I think you would find, if any studies were done, the least of our problems would be people who are going into education and failing their courses. I agree about the “diploma-mills”. Education is becoming more and more about funding for educational institutes and less about imparting useful knowledge effectively. This is another by-product of turning educational institutes into business-models. The main focus is not there anymore.

        • DS1

          Agree completely.

          It also discriminates against students who come from a non-university town who can’t therefore live with their parents. My loan would have been far smaller had I been able to live with the folks.

        • Lanthanide

          “This means that many people who could be very active members of society, may end up being non-active and costs to society.”

          I didn’t voice the other side of this policy bent of mine: student allowances would be made more available, which would in turn likely help those of lesser financial backgrounds more than the other changes I suggest would hurt them.

          The thinking behind that is that generally my proposals would lead to a higher calibre of students, so there would be fewer of them, therefore the money can be concentrated amongst them more.

          • blue leopard

            Thanks DS1
            Lanthanide, I don’t understand. As far as I know, student allowances are available to all, although only for about 5 years study, therefore, how could they become “more available”?

            • McFliper

              Income thresholds, individual and parental.
              5 year restriction.
              Length of study.
              Study workload.
              Achievement requirements.

              All have or are little tweaks that help make students ineligible for part or all of the allowances. And cost fuck-all compared to loss-making highways, bailing out incompetent money managers, or giving key tax cuts and pay rises.

              Fuck, part time students can’t even borrow to pay for course related costs.

              • Ah, cheers, I had forgotten about the income thresholds for those with wealthier parents.

                Yes, cost fuck-all, **with more benefits** than loss-making highways, bailing out incompetent money managers, or giving key tax cuts and pay rises too!

                It would be interesting to know what Universities and Polytechs costs and expenditures are. I’m guessing the amount that students are charged is likely to be higher than what it costs to supply the education, I realise there are many costs involved, over the pay of the lecturers, including up-dating knowledge and equipment to convey the information, however, I have been in lectures with 100s of students, and these students’ fees, I would guess, subsidize the later year classes, where there are fewer students. Unsure about this, however, seems this must be the case?

                • McFliper

                  Universities are crown entities, so their accounts are online.

                  Basically, they usually have internal accounting policies so they “pay” for lecture theatres, IT, labs, all that good stuff from university central services. Large lectures need larger buildings, smaller tutorial rooms are cheaper by the hour. And they transfer those costs to the students through fees.

                  ISTR that student fees (incl the govt portion) are a large component of uni income, but only around half of it.

                  • Take Otago University as an example.

                    They say they have about 18,000 full-time students

                    For arguments sake, lets say they are all taking first-year BA papers which amounts to approx $5,000p/a (of course some courses cost a whole lot more than that, and overseas students are paying more again)

                    This amounts to $90,000,000 per year to cover all the expenses.
                    If the University is a Crown entity, they are paying rent to whom? The Crown?

                    I have my doubts as to what the real costs of a course of study are, and suspect that there is a fair amount of profit being made in these institutes for the Government.

                    It appears that the Government is being “generous” in supplying students with loans in order to get profit now and then further profit later (in the form of higher taxes).
                    Very generous indeed.

                    • McFliper

                      Any profit goes to the university, not the government central coffers. The rent is an internal university accounting thing so each department has to meet its own costs on an annual basis (although they do rent extra facilities where needed). Personally, I think that sucks a bit because it makes departments focus as degree factories filling supply/demand fads rather than education as an esoteric good. Oh, and department heads become as obsessed about an artificial bottom line as small business owners.

                      The 2011 annual report gives domestic tuition income as $91mil (nice estimate :)). Total income was $592,394,000. Ah, ok “government grants” was $200mil, and the bulk of that would be student-related funding, so that’s about 50% of total income related to teaching.

                      The net surplus was $27mil, or about 5 or 6% of income. Not exactly a huge margin, but responsible for contingencies (i.e. expected enrollments vs students who turn up on the day, getting shafted unexpectedly by Marsden Fund grants, etc).

                      My opinion on government double-tapping is that they want students to pay for the “private good” value of their education, which to me reduces the incentive to actually get an education that will provide the public good of an educated population. Universities exist to exist, rather than as direct revenue generators, but I know of a few people who got a long term degree and all the while their schoolmates were getting a modest but healthy income in jobs that required good performance and little more than operators’ certificates, e.g. forklift driving.

                      A couple of them regret getting an education, which is what we don’t want in this country. They get better paying jobs, but spend years playing catchup particularly on compounding retirement savings. Hell, I’m down multiple tens of thousands of dollars on that alone, let alone the loan itself.

      • blue leopard 6.1.2

        ” I don’t think it is unreasonable that there should be some level of private investment in it. I think the SL scheme we have at the moment is a good compromise.”

        People who are educated, not only provide a much needed service to society, they are also usually in a higher tax bracket. I do not think this “income generating” quality of education is factored into the “good compromise” conclusion.

        • Lanthanide

          Effectively you’re saying that when you earn in the higher tax bracket, all of that tax you’re paying there goes back to paying for your education at that point.

          Ok, even if we accept that: how are you going to deal with people getting an education on the state who skip off overseas and therefore don’t pay any of this tax?

          • blue leopard

            I’m saying that when some bright spark came up with the idea of making people go into debt for their education, I don’t believe ALL the costs were factored in. I believe if they were, then this approach wouldn’t be pursued, let alone called “generous”.

            What is the Government doing now about the students going overseas and not paying back the debt they owe?

            • Lanthanide

              If you go overseas, your student loan starts accruing interest at 7%. There used to be a 2 year honeymoon period and they’re dropping it to 1 year.

              They’ve also been hitting up ex-pat students with overdue debt recently and apparently it has been pretty successful, targeting people who live in Oz.


              “Every dollar spent on the pilot scheme has returned $11.40 of taxpayers’ money.

              In the next 2 years, the IRD will extend the campaign to about 57,000 other borrowers, with the focus mainly on Australia and the United Kingdom.”

              • McFliper

                I have two issues with this. Beyond the fact that people are expected to pay for their education before they know if there’s a “private good” factor at all.

                Firstly, all this means is that people have an incentive to go somewhere that their debt isn’t as legally enforceable as Aus.
                Secondly, accruing the interest and delivering a bill increases the incentive to disappear overseas and never return.

                If there’s no cost to pay, there’s not that particular fiscal barrier to returning.

                I’d like people to get experience overseas for ten years or so and then return as very well qualified and experienced NZers. Help with the doctor shortage. A massive public good in that.

                • Lanthanide

                  Yes, but at the same time it’s a good little lever to encourage graduates to stay in NZ.

                  Certainly it’s much better than the ridiculous right-wing whingeing about “middle-class welfare”, where they suggest putting interest back on student loans. If that was the case, I would likely be in Australia already and my Phd boyfriend definitely would be.

                  • McFliper

                    I reckon we win when graduates go off on an extended OE and then come back with new skills and ideas we don’t have here.

      • Plan B 6.1.3

        Higher education can be paid out of a progressive taxation system. Putting children in debt is a crime against our children one for which they will not forgive us for.

  6. Why 7

    Why not roll back the tax cuts twice?
    Just to get things moving in the right direction.
    I also agree with the idea that higher incomes via higher education will pay back to society via paying more tax.

  7. Don’t know if this has been suggested above?
    But how about taxing the biggest sacred cow – financial transactions?

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