Key says impact of student loan policy huge

John Key

The impact of interest-free student loans is comparable to giving away a state-owned enterprise, National Party finance spokesman John Key said today.

"It a $2 billion reduction in our assets," he said.

"If we stood up as a country and gave away Landcorp or gave away Solid Energy I think the people of New Zealand would say 'wow that's a pretty expensive exercise'."

Mr Key said the second impact of the policy was its ongoing cost.

Labour have put it at $300 million a year but National and Treasury have made higher estimates; $500m a year in five years time and $900m in 10.

Mr Key said the Government had been "deceitful" about how much the policy cost.

"There's the ongoing cost of these assets every year, they will cost an enormous amount to run," he told National Radio.

Mr Key said the Government was borrowing money, paying interest, and then lending it for free.

"I think it's time (Finance Minister) Michael Cullen stood up and told the truth which is this is a 'what ever it took' policy by Labour, they didn't care what it cost, didn't care about telling the public the truth," he said.

"They've won, let's get out there and tell the country what it costs in terms of the write down, what the future write down will be and what the ongoing cost of the programme will be."

Dr Cullen said the cost of the loans policy was half the annual cost of the tax cut policy National had campaigned on.

He said while there was a write down the context was the net worth of the Crown was forecast to rise by $6.5 billion this year.

The policy would mean people could pay get an education, pay off loans faster and be able to buy their own home sooner.

Dr Cullen projected lower tertiary enrolment rates and lower take up of student allowances would offset the cost of the loans.

He said the annual cost was being finalised and would go to Cabinet next week. He said the Government had been open with the figures it had.

The Government yesterday tabled the Taxation (Annual Rates and Urgent Measures) Bill would be passed before the House rose in mid-December so the changes can take effect when the tax year begins in April.

The legislation details how the policy will work with the interest-free student status applying to existing and new loans, but students will have to be in New Zealand to qualify.

"As a further inducement to encourage people back, non-resident borrowers who are in default for non-repayment of their loans will have their penalties cancelled under a special amnesty," Dr Cullen said.

- NZPA