Deborah Coddington: Inept ploy to limit cost of student loans lolly

Dr Michael Cullen can be grateful his tantrum alleging personal bias in the reporting of tax cuts by Press Gallery journalists distracted attention from another braindead Budget item: From January next year, students studying for a tertiary qualification which is not government subsidised (Eft - equivalent fulltime student, or SCF - student component funding) will not qualify for a student loan.

It's not directly aimed at private training establishments (PTEs) but since very few publicly owned providers have non-subsidised courses, Cullen might just as well have trained both barrels of his shotgun at the private tertiary sector and said, "bang".

In just six months' time, students (or their parents) who are willing and able to pay the full price for a tertiary qualification, as opposed to having half paid by taxpayers, will not be eligible for a student loan to do so. Yet these are the very people who need student loans more than those whose courses are subsidised, so why is the Government denying them access?

It's the law of unintended consequences. Labour's biggest lolly tossed in the election scramble was interest-free student loans. Cullen, as both tertiary education minister and finance minister, must now prove this policy won't provoke a massive increase in the amount of money borrowed. A spokesman for the Tertiary Education Commission has already admitted that certain providers will be banned from the student loan scheme because the Government wants to "prioritise its spending now that student loans are interest-free" and this would prevent an "explosion" in the amount of funding.

The Government has implicitly sent two interesting messages here. One is the use of the words "prioritise spending". Labour has more or less admitted the loans will never be repaid, otherwise why not say "prioritise lending"?

Secondly, the Minister writes off the New Zealand Qualifications Authority's accreditation system. Affected courses are presumed to be of a standard too low to merit government-backed loans or subsidies. But they've already been approved by the NZQA as being well written and having good training systems. So who's correct, Minister?

It's true the funding system has been abused, but most rorts were pulled off by polytechnics and wananga, not PTEs. And where was the monitoring from Treasury, the department that continued to pour good money after bad? In New Plymouth a PTE grew from a budget of $4.8 million to $46 million in just two years. Didn't any alarm bells ring?

Cullen's policy is a kneejerk and embarrassed reaction to exposure by National of the huge amounts of money wasted on hare-brained courses. But instead of insisting on a rigorous regulatory system, where budgets are set and targets reached, Labour will punish all PTEs. About 50 providers have already signalled they may close down.

The Maori Party, in particular, should be outraged. Studies show that flexible hours and close geographical proximity offered by private training organisations have proved an attraction to Maori and Pacific students, often from low income families.

But these students will be denied choice. If a public institution is offering a similar course, then the private trainer will be deemed not "strategically relevant" and will fail to qualify for EFTs funding, ergo student loans.

Which in turn puts at risk future courses. For example, the international computer-animation gaming industry, I'm told, is two-and-a-half times bigger, in terms of income, than the film and television industry combined. In this country we already have PTEs equipped and capable of offering such courses, but how many students will manage the $10,000 to $13,000 annual course fees with no subsidies or student loans?

University students, the majority of whom come from middle-class to wealthy families, will not be affected. So much for a Labour Government giving those at the bottom of the socio-economic pile a chance to improve themselves.

The Government, it seems, is more intent on obliterating the private sector and protecting incompetent polytechnics from competition. In less than a decade taxpayers have bailed out various polytechnics to the tune of $120m. If they were privately owned, they'd be floating around like deceased goldfish.

The Ministry of Education has twice reported to the OECD on the success of private training establishments in New Zealand, stating their "use of technology and capital structure have often led to better cost structures than that of public providers". In other words, they cost the taxpayer less.

And in particular, computer graphics and trades training were singled out as examples of success. You'd have thought, then, the minister would come down hard on providers milking the system and duping students, then rewarded the PTEs identified by the ministry as responsive to business.

But you know what Cullen thought. He thought the tax-cut debate was the personal campaign of just four Press Gallery journalists.