The country is facing recession, galloping inflation, the public cupboard is nearly bare and Labour is considering a $728 million student election bribe to give students a universal allowance.
The policy would enable about 47,000 fulltime students now ineligible for an allowance to receive taxpayer support and would be the biggest single boost to student incomes since the allowance scheme began.
Tertiary Education Minister Pete Hodgson said yesterday that in January this year he instructed Education Ministry officials to cost a universal student allowance.
But the subsequent paper produced by officials “should not be construed as a signal the Government intends to introduce such a policy”.
“The paper was prepared in order to get a better understanding of what the real costs of a universal student allowance would be,” he said.
The paper shows that removing income tests on the allowance and providing it to all fulltime students would cost a total of $2.09 billion over four years.
The net extra cost of such a plan is $728 million after the existing costs of the scheme are removed, along with a forecast plunge in borrowing under the student loans scheme that might accompany such a plan.
There are inequities in the current scheme which is based on parents’ incomes. But a universal allowance is not the most pressing need in an overstretched education system.
Students have long campaigned for a universal allowance and such a scheme is party policy for both NZ First and the Greens. UnitedFuture backs extending allowance payments to all students aged 20 and over.
The students campaign has been based on several misaprehensions including their claim that they are the only ones who have to borrow to live.
Many people in owner-operator businesses borrow to live. Dairy farmers receive monthly payments but sheep, beef and cropping farmers pay for all their inputs then wait months to get any income, borrowing seasonal finance to get them through until they sell their stock, wool or crop.
It is understood Labour has also considered increasing the allowance to as much as $350 a week, but this has been ruled out as too expensive.
And $728m is not too expensive?
A universal allowance would echo Labour’s king-hit, interest-free student loans policy in the 2005 election campaign, which was credited with turning around the party’s polling and sending thousands of voters to Labour.
Only 57 per cent of students receive the allowance, which is $122 a week for those under 25 and living at home, $153 a week for those living away from home, and $184 for those aged over 25.
That is because the allowance is means-tested on personal income and, for students under 25, their parents’ income.
It is ridiculous that people under 25 can claim a benefit regardless of parental circumstances while students needs are judged on their parents’ income. But why not lower the age to which students have their allowances set by what their parents earn and offset the cost by increasing the age at which beneficiaries are regarded as independent?
Measures announced in this year’s Budget included a 10 per cent increase in the parental income threshold, lowering the age for parental income testing to 24 and increasing the amount students can borrow for living costs from the student loans scheme by $5 to $155.
Under Labour, the number and value of allowances paid to students have continued to fall.
Ministry documents show that since 2001 the number of students eligible for an allowance has plummeted by 32 per cent as parents’ incomes have risen sharply, pushing many above the threshold for the allowance.
There could be a case for raising the parental income threasholds.
A study by market researcher TNS Conversa revealed average student debt has risen by 54 per cent since 2004 and is now $28,838.
The ministry says a universal allowance would lead to a substantial reduction in borrowing under the loans scheme.
No doubt it would but that still doesn’t justify spending $728m to do it when the case for universal allowances is far from compelling and there are many more pressing needs for the money.