The Smoking Gun

Keith Ng has gone through the student loan papers which Michael Cullen tried to supress, and has found and highlighted what is the real smoking gun. To quote Mr Ng, the Salient news editor, directly:

This is the costing that Labour went public with, and the assumptions are downright dishonest

The focus has been on Treasury’s initial costings, but the real scandal is the second set of costings where Dr Cullen ordered the Treasury to use his assumptions, rather than their own. And his three main assumptions he ordered Treasury to use were:

* voluntary repayments will continue at the rate at which they occur under the current scheme

* the percentage of the $150 [weekly] entitlement for living costs drawn [down] does not increase

* draw down rates increase in the following manner: [a <1% change in fees borrowing over 4 years] Now one can have a sensible debate about the extent of the change to borrowing patterns (such as whether takeup for FT students will move from 69% to 95% or 85% or even 80%) but Cullen ordered them to assume basically no change at all!! The most indefensible of Dr Cullen's instructions is that Treasury should assume there will no change to the rate of voluntary repayments. I dare anyone at all to argue that with interest free loans, there will be *no* slow down of voluntary repayments. If you believe that, then I have a bridge for sale. This is saying that graduates will use surplus cash to pay off a loan on which they pay no interest rather than pay off their mortgage quicker. It is incredibly dishonest. Only slighly less dishonest is the instruction that the amount of money being borrowed for living costs will not increase. And finally you have the instruction on how many more people will take up loans. As I said you can have a rational debate about the extent of any extra uptake, but Cullen instructed that Treasury assume that the increase by only 1%, *over four years*. If this was the united States, the term impeachment would be coming to mind. They lied about whether Treasury had costed the policy, they supressed the advice Treasury did provide, and they then instructed Treasury to use Dr Cullen'as assumptions which are to quote Keith downright dishonest.

I can not beat his summary which is:

In short, it’s been rigged to make the scheme look as cheap as possible, and Cullen specifically asked for it to be like that.

I hope the media pick up the significance of this issue. It is not a case of two sets of reasonable assumptions, where say Treasury is saying 26% more FT students will take out loans and Cullen is saying 15% will, and to be honest who can be certain which is closer. The Cullen assumptions are just nonsensical, basically saying no change at all, and designed to fool the public until after the election. This is the man who was in the 1990 Labour Government which did the same thing with the BNZ and the surplus which wasn’t. Leopards do not change their spots.

The Chief Ombudsman deserves a knighthood for his decision to force Labour to release this information.

Finally please note I have not read the released material myself, and am basing my comments on Keith’s analysis, but I heard John Key refer last night to similiar issues, so if John Key and Keith are agreeing this time, I reckon it is safe 🙂