KEY POINTS:
Labour says National leader John Key's backdown from vigorous opposition to the interest-free student loans scheme smacks of desperation, describing it as yet another Labour policy National has adopted.
Yesterday, the National Party said it would keep interest-free loans if it became government and has added an extra cherry on top by promising a 10 per cent top-up on any voluntary repayments of more than $500.
Mr Key said it would keep the interest-free policy despite its previous opposition because it was unfair to play ping-pong with student loan holders by changing the rules every election.
He also outlined the extra bonus in which a 10 per cent government top-up would be added to any voluntary repayments greater than $500 for 10 years after a borrower first started making repayments - expected to cost $10 million to $15 million a year.
The scheme was in line with Australia where there was also a bonus for early repayment of student loans, "and it will help get that monkey off their back as quickly as possible".
National denounced the interest-free loans scheme in 2005, predicting it would lead to a surge in borrowing and saying borrowers were unlikely to pay off the loans as quickly as they would if they were paying interest.
Mr Key said the difference now was "we lost the election" - an indication that while National would not have initiated the policy, it was now too embedded to remove. He said the scheme had cost the Government about $3 billion - which would be loaded back on to borrowers if interest was reinstated.
"We have to accept the reality with over 500,000 New Zealanders having these loans. If we change the rules, that has a traumatic impact. Quite frankly, we lost the election and we have to accept these things are in place. We can't, I think, let student loan-holders play a game of ping-pong where every time there's a change of government, interest is back on or back off."
The change of heart by National has been welcomed by the Auckland University Students' Association, but the Minister of Tertiary Education, Pete Hodgson ,said he was "scathing of the intent" of the promise because of the previous opposition to it.
"It smacks of desperation, especially when National has spent the last eight years opposing every step we've taken to reduce the impost of the loans scheme on students."
Mr Hodgson said the 10 per cent top-up scheme would favour the high-earners who could afford voluntary repayments.
Mr Hodgson was also sceptical about whether National would stick to the interest-free loans in the long term, querying why anybody would use surplus cash to pay off an interest-free loan early when the money could be better invested.
"Only returning the interest to the loans would make that sort of discount for early repayment a good proposition, so I'm sceptical about whether we've heard all the policy."
Mr Key said the initial concerns were justified because the data showed that the number of borrowers and size of loans taken out had increased. He said the bonus for voluntary payments would help with the other issue of borrowers taking longer to pay off their loans.
It is not the first time Mr Key has backed down from National's initial stance on issues in a clear bid to deplete Labour's armoury, rather than face the possible electoral cost of going against popular policies.
He has also agreed to continue the Superannuation Fund, and reversed the position on charging state house tenants market rents.
HOW THE PLAN WORKS
* Interest-free loans will stay in place under the same rules as before.
* A National government will top up voluntary repayments by adding 10 per cent to lump-sum voluntary repayments of more than $500.
* The top-ups will apply for 10 years after repayments begin - usually after a borrower has started working - and only to people living in New Zealand.
* It will also apply for 10 years from the date the policy comes into effect for existing loan-holders.
KIWISAVER 'WORK IN PROGRESS'
The National Party is staying silent on its position on the new KiwiSaver savings scheme except to say its policy is still "a work in progress", despite calls for it to make a decision to provide some certainty for workers joining it.
John Key announced yesterday that it no longer opposed the interest-free student loans scheme, saying it was unfair to change the policy because more than 500,000 people had made financial plans based on the interest- free nature of the debt.
But he would not be drawn on whether the same reasoning would apply to KiwiSaver.
The numbers for KiwiSaver were growing rapidly - by December more than 300,000 employees had signed up - and Finance Minister Michael Cullen has repeatedly called for National to review its position to provide certainty to savers.
The issue was discussed at the National Party's three-day caucus retreat but Mr Key said its policy remained a work in progress.
But he indicated National would refine the scheme, rather than completely axe it.
"I think it's important to take a step back on our position on KiwiSaver. We fundamentally support savings schemes, we recognise New Zealand has a savings problem but the question has been in recent times that KiwiSaver doesn't have a reach across a big enough number of New Zealanders."
The scheme worked better for high-end wage earners "and we think there's something we can do there. So we are looking at it".
National was also being careful with its books and would make promises in a responsible manner. "We don't think the election is going to be some massive lolly scramble."
