Government drops study savings plan

The Government has dropped a plan to help parents save for their children's tertiary education even before it got started because of "design problems".

In November the Government trumpeted the idea of help for tertiary savings as one of three planks of a "bold agenda" for a third Labour term.

The idea was reinforced by Prime Minister Helen Clark at the opening of Parliament in February when she referred to policy work being done on savings initiatives - including reducing the need to borrow for tertiary education or training.

The demise of the plan - which would have appealed to families wondering how to finance their children's tertiary studies - will be politically embarrassing.

The office of Finance Minister Michael Cullen yesterday confirmed that the scheme - to have formed part of the May 19 Budget - would not go ahead.

Back in November, then Tertiary Education Minister Steve Maharey talked broadly about the Government's plans, including incentives to save for home ownership and tertiary education.

"We're trying to encourage people to build what you might call a tertiary asset, that is to save some money against the costs that inevitably will come," he told the Herald.

But a spokeswoman for Dr Cullen said yesterday that there had been "some design problems with that area of the package".

She could not say what those problems were.

Work on the other two initiatives - to encourage more retirement savings and help home ownership - is going ahead.

Ballooning student debt has created political pressure to find a way to help fund tertiary studies. More than 400,000 people have student loans, and average student debt is $14,000.

National finance spokesman John Key said the spin machine was working well but the policy design was not: "The Government's clearly been very eager to sell the spin and far less willing to come up with a solution.

"Frankly you have the Finance Minister at odds with the Prime Minister and the Social Development Minister [Mr Maharey]."

A hint of how the tertiary savings scheme might have worked came in 2002 when it was revealed a group of business people and public servants was reporting to the Government on a private savings plan to pay for tertiary education.

Under the plan, money would be put into accounts which families would not be able to touch until their children enrolled for tertiary study.

Diana Crossan, who headed the group behind the concept, told the Herald in 2002 the group hoped that most people would not need to take a loan.

Of the dropped scheme, National education spokesman Bill English said such plans were difficult to devise and there were more direct ways of doing it, particularly through student allowances.

"It shows a habit of the Government to just fire off ideas when they haven't thought it through - anything to get a headline."

But New Zealand University Students Association co-president Camilla Belich welcomed the scheme's demise as it would have entrenched an "American-style" system of funding tertiary education.

"We were never supportive of the idea because it entrenched user-pays and put the responsibility for paying for tertiary education on individuals and not the state."

Greens co-leader Rod Donald said it was a backdown by the Government in the face of student debt now totalling $7.13 billion and climbing.

"Dr Cullen's failure to deliver on the Prime Minister's bold promise in February will make it even harder for young graduates to join Labour's much trumpeted ownership society."

Mr Maharey said last night that the idea of tertiary savings incentives was not necessarily dead.

"It just means that it doesn't fit the savings package as now constructed."

Change of tack

"The Government believes new initiatives are needed."
- Prime Minister Helen Clark on savings initiatives, February 1

"There have been design problems with that area of the package."
- Government spokeswoman yesterday