Universal Student Allowances

Colin Espiner is now speculating that rather than increase student allowances to $350 a week, the Government may pledge to make existing allowances universal – or in other words remove parental means testing.

I have long supported getting rid of parental means testing as 24 year olds should not be assessed on parental income instead of their own.

The main reason it has not happened to date is competing fiscal priorities. The interest free loans policy is incredibly generous and costly, and it is hard to say that more money for tertiary rather than early childhood is the priority.

The gross cost of universal allowances is $2b over four years but this reduces to $728 million over four years when you take account of reduced borrowing. I’m a bit suspicious of those figures though as it sounds like one is contrasting expenditure and borrowing and they are not the same thing. Only the reduction in interest writeoffs should be counted not the reduction in borrowing.

If the net effect on the fiscal surplus is around $180 million a year then it is relatively affordable. If it is $500 million a year then in the current financial squeeze it would be quite irresponsible. That of course means it can’t be ruled out as Labour’s plan seems to be to wreck the Government’s books on the way out.