Urgent probe on student loan silence

The Ombudsman will urgently investigate Labour's refusal to release papers on the cost of its interest-free student loan policy.

Finance Minister Michael Cullen said last Friday he was withholding information requested by National under the Official Information Act to protect the confidentiality of advice until the policy was finalised.

National made the request after it was revealed Labour asked for further costings from Treasury after officials found the policy would cost $390 million a year if 95 per cent of students took up the interest-free loans.

New figures based on a lower uptake put the cost at $300 million a year.

In a letter to the National Party, Chief Ombudsman John Belgrave said he had considered the party's complaint over Dr Cullen's refusal to release other papers.

"I have decided to undertake a formal urgent investigation," he wrote.

National Party finance spokesman John Key said he was pleased the case would be handled quickly.

Mr Key said the policy encouraged students to borrow more money and take their time paying it back and would be more costly than Labour was saying.

"The Finance Minister has provided only the slimmest of outlines and has still failed to produce any of the written material that would normally accompany such a significant policy," he said.

"Labour is clearly stalling for time."

Mr Key said Prime Minister Helen Clark initially said the policy would cost as little as $100 million but Treasury said it would cost at least $170 million to begin with.

Other commentators have said the long-term cost could be far more than $300 million a year.

"There are far too many unanswered questions about this policy," Mr Key said.

Labour has previously said that as soon as it decided to make interest-free student loans a policy it stopped officials working on it.

Labour has always maintained public servants should not be used to help to develop party policy.

The party has also repeatedly said the scheme's safeguards will prevent widespread abuse.

Money borrowed for course fees goes straight to the tertiary institution, while money borrowed for living costs is paid out in small weekly amounts and is reduced when a student receives an allowance.

A spokeswoman for Dr Cullen said it was the usual process for the Ombudsman to investigate when information was withheld and Labour would co-operate with investigations.

- NZPA