Editorial: Labour's loan move smacks of desperation

Cynicism and desperation abound in equal measure in the Labour Party's $300 million-a-year pledge to abolish interest on student loans. This is political bribery at its most base. It bodes ill for what is to come during this election campaign.

Only two months ago, New Zealanders were told that, despite a higher-than-expected surplus of $7.4 billion, economic circumstance did not permit the lavishness of across-the-board tax cuts and the like. "The message of Budget 2005," said Michael Cullen, "is that such large one-off packages [as Working for Families] will be rare over the foreseeable future unless accompanied by expenditure cuts or efficiency gains elsewhere within the state sector."

For good measure, the Finance Minister delivered an epithet on the dangers of greed. "Too much jam now," he said, "is likely to lead to only crumbs later." Given such utterances, it is ridiculous for the Government to claim that the financial wherewithal now conjured up for students - and more besides - was noted in the Budget. The whole tone of that document warned against extravagance of this very nature.

Desperation can, of course, lead politicians to accord such contradictions a trifling status. Momentum lies with the National Party and once a lead in the polls, no matter how narrow, has been established, it can have a profound effect on the decision-making of the party coming second. The fear is that swinging voters tend to gravitate towards the party perceived as the likely victor. Labour needed a big policy hit to win back the initiative. This it may have achieved, no matter how shameless its approach and how ill-directed its policy. The student vote has been shored up, and the attention of students' fathers and mothers, and grandfathers and grandmothers, has been grabbed.

Yet only the cynical, the irresponsible and the scornful could contemplate a policy so out of tune with six worthy years of fiscal rectitude. To expect the wider electorate to accept this without demur suggests a high degree of contemptuousness. And a disinclination to accept that those not party to the loan scheme, either directly or indirectly, will see only the most disagreeable of bribes.

National, of course, helped point Labour along this path with its own tepid policy. The danger now is that its response will dive into the realm of fiscal irresponsibility. National is under pressure to deliver a sizeable tax cut. The temptation will be to pitch this higher than the level a slowing economy can sustain. To put the country on the very course, in fact, that Dr Cullen was warning about two months ago.

Such consequences will not be concerning Labour. Its sole focus is a third term. And it would rather be accused of prodigality, and much else besides, than lose the student vote. It will not be thinking of the price to be paid. Voters should, however, contemplate the policy's unfortunate impact on other, more appropriate, areas of tertiary education funding.

Labour's approach is also highly flawed. The absence of interest payments will surely increase borrowing and encourage students to pay off loans at the minimum rate. The irony is that the less extravagant parts of its policy - particularly increasing parental income thresholds so that at least half of full-time students receive an allowance - contain the seed of a reasoned response.

Bribes are, of course, part of the landscape of every election campaign. Few, however, are so obviously calculated to buy votes, or delivered so early in the piece. Democracy will be poorly served if this is a harbinger of policies to come.