Finance Minister Grant Robertson announces $1 bln of government spending will be reprioritised in Budget 2019, including $197 mln freed up due to lower than expected tertiary enrolment numbers

Finance Minister Grant Robertson announces $1 bln of government spending will be reprioritised in Budget 2019, including $197 mln freed up due to lower than expected tertiary enrolment numbers

One of the Coalition Government’s flagship policies to pay tertiary students’ fees in their first year of study/training is proving to be less popular than expected.

Delivering a pre-Budget speech at a Wellington Chamber of Commerce event on Tuesday, Finance Minister Grant Robertson said there had been fewer enrolments than forecast so the Government was going to reduce the amount of money allocated to its fees free programme by $197 million over four years from the 2019/20 year.

With a Cabinet paper released shortly after the Coalition Government took office in 2017 showing the Government expected to spend $1.79 billion on the programme over this time, the $197 million reflects an 11% reduction.

Robertson said the Government’s assumption when it introduced the policy, that enrolments would increase by about 15%, was “generous”.

Education Minister Chris Hipkins a year ago also noted the Ministry's costings were deliberately set at the upper limit to ensure sufficient funding was provided to tertiary institutions.

Furthermore, Robertson pointed to the low unemployment rate, and said this typically coincided with low tertiary enrolments.

The Ministry of Education is yet to publish finalised data showing how tertiary enrolments changed in 2018 when the fees free policy kicked in.

Polytech prop-up

Robertson said the $197 million would be redirected towards the implementation of the Reform of Vocational Education, which Hipkins is working on. 

National's Tertiary Education spokesperson Shane Reti said: “Using the underspent $197 million from failed fees free to sustain his disastrous reforms in the polytechnic sector is simply one bad policy propping up another.

"The Education Minister needs to urgently re-evaluate fees-free and at least delay the rushed reforms of the polytechnic sector."

Ambiguity over extension of fees free policy 

Robertson said extending the Government's fees free programme to tertiary students in their second and third years of study/training was still government policy, however a final decision around this would be made closer to the next electoral term when this would actually be implemented. 

“We’re not going to play the ‘not ruling out’ game for 2021 just yet," Robertson told media when pressed on his lack of firm commitment to extending the fees free policy beyond one year. 

"What I’m saying is, it’s still our policy, but clearly we want to make sure that whatever we do in the vocational post-school tertiary education space is appropriate for the future and those decisions will be made nearer to the time.”

$1 billion to be reprioritised over four years

Robertson said that altogether, over $1 billion of government spending over four years would be redirected in Budget 2019, to be unveiled on May 30.

“Most of the focus during the budget process is usually on where new spending will be allocated. But we also have to look at whether existing spending is delivering value for money and aligns with Government priorities,” he explained.  

“During this budget I asked all Ministers to identify 1% of their baseline spending that was the lowest priority in their area. This spending was then assessed on the basis of its effectiveness and alignment with the Government’s priorities.

“Out of this we have identified just over $1 billion worth of spending over the forecast period that is no longer a priority or where the funding allocated is no longer needed."

See Robertson's full speech here

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Where did all those students disappear to?

I've told family members to join trades rather than get a degree. Maybe potential uni students are considering their options more carefully?

I’m confused too. Normally if you lower the price you get increased uptake, I really don’t know why there’s an undershoot. As dictator mentions, maybe were realising the values of many degrees aren’t what they’re sold as?

The introduction also only applies to first year students in the first year. It's likely that many don't qualify and the Government may have allowed for a huge increase in numbers that didn't happen. I guess student loans resolved the old issue of people not being able to afford to study.

That's not a bad outcome.

I recall at the time the policy was introduced that there were howls of protest that every teen and their dog would be rushing to take up useless degrees because costs were lower.

At least people are being educated without being burdened with too much debt, and volumes have not soared out of control as it was protested they would.

But where are they?
Working, or claiming a benefit, or didn't know they could claim fees free, or ineligible, or were they never really there at all?

Solving a problem that obviously didn't exist: The coalition has spent a vast amount of money on primarily middle class welfare for no improvement in uptake. Obviously this was nothing more than a naked attempt to buy votes from people who will on average earn a million dollars more than their non-university peers. The worst sort of pork-barrelling.

Bollarks. It makes zero sense for us to be handing out 50% of our social welfare budget to old folks regardless of need, subsidising property investors and company wage bills via the Accommodation Supplement and WFF, whilst also deciding it's a great idea for NZ's future to burden young Kiwis with significant debt in order for them to enter much of the workforce. It makes far more sense for a country to invest in a well-educated workforce, funnily enough as it used to do.

It makes zero sense to spend (1000-200?)=800 million to gain essentially NOTHING of value in return. We didn't get any more graduates, no higher educated workforce, it is just money flushed down the toilet.

800 million could be spent on a huge array of things that would help the country - eg targeted vocational assistance to marginally employable NEETS.

And the government is more than welcome to start means testing Super, though it will be very difficult to police as there are so many ways of hiding assets and income

Perhaps once these students leave university with less/no debt, they won't all move overseas / Australia to get higher paying jobs because they won't have debts they need to service.

Perhaps if they end up at the end of university not being able to get a job that uses their degree, they won't have the burden of a student loan hanging around their neck stopping them from getting ahead in life.

Perhaps once they end up in the work force without a student loan, they'll be able to save up money for a deposit on a new house faster, and thus will help the economic growth of our country.

If you myopically look at the immediate returns for a policy such as this and insist on looking at everything through an economic "what's the return on investment" approach then it's easy to decide that the policy was a waste of money that achieved nothing.

IMO though they should have started it as 3rd year free, not first year. First, it would have gotten them more votes (since under 18s can't vote and those already at uni didn't gain anything from this policy). Secondly it would ensure that people who are putting in the hard work to stick it out to the 3rd year are the ones getting rewarded, rather than the people who go to uni, have no idea what they're doing and drop out. Thirdly since there is a drop-out rate for uni, there will always be fewer people sitting 3rd year courses than 1st year courses, so the total cost of the policy would have been lower.

Yes, I'd have gone for the final year of an undergrad qualification (some bachelor degrees are 4 years) and then work backwards as you suggest.What a wonderful bonus for those students finishing up their study - less debt than initially anticipated when taking on the study.

Without trying to be too rude, that comment was basically “look how much further ahead people can get if they get things for free.”
What’s free for some is paid for by others sucking money from the economy. So yeah, return on investment is important.

But we do get return on investment in an educated work force, otherwise we wouldn't fund education at all. And it's certainly a better investment than (as noted) over 50% of our welfare spending. And as Kate highlighted, if we're not starting young people off with large debt as soon as they enter the workforce then perhaps more will be able to stay and live and achieve viably in NZ. At the moment they have every incentive to leave and few to stay, hence governments resorting to importing a replacement population instead of making life here more viable for young NZers.

Hi Rick. I disagree about staying in NZ. Quite the opposite, a big part in my decision to come back was because of the interest on my student loan. Now it’s interest free again where as before I was paying a lot to only maintain my debt level while I was in AU.
An educated workforce is great however this has done nothing to improve that so far. And again, taxpayers are paying for it, wouldn’t it be better leaving money in their pockets so they can spend it in the economy? Finally, if what you study doesn’t increase your earning potential to cover the costs of learning it then why the hell are you studying it in the first place?
There’s so many things wrong with this policy and the ideas behind it in my opinion, especially as we have access to loans. Education isn’t the preserve of the rich anymore.

Fair enough, though that's a sample of one. And of course there are other ways we make it unattractive to stay in NZ.

Tertiary education has done nothing to improve the education of the workforce? How would the economy be better with an uneducated workforce? Are there examples of countries with an uneducated workforce doing better in today's tech-basedworld?

The problem with loans is that they saddle people with large debt when entering the workforce. Then we insist they pay all the taxes while capital gets off with a free ride. But to get an idea of where combining loans with running everything as a business gets you, look at the drag it's putting on the economy in the USA: https://hbr.org/2019/04/student-debt-is-stopping-u-s-millennials-from-be...

Add to that the issue of reciprocity: why should young Kiwis have to pay for the 50% of welfare flowing untested to old folks if there's not a measure of reciprocity. In their day those folks benefited from government-boosted housing supply, free or low cost education, and in recent times subsidised rents and wage bills. Education does not exist in isolation. Sure, we can ask people to pay for it but then we need to balance things out. The current situation and the current emphasis on running education as a business whilst forcing young people to accumulate large debt to get into the workforce is not a good balance, all other things considered.

Hi Rick
"Sample of one" - fair enough :) although no doubt there will be more as the interest bills when living overseas were pretty nasty.
"Tertiary education has done nothing to improve the education of the workforce?" - That's not what I said, I said the fees free policy hasn't increased our education levels in the workforce yet it is costing taxpayers more.
"loans is that they saddle people with large debt when entering the workforce." - Again, you study to improve your income potential, if what you study doesn't pay back the loan plus extra for you then why do it and why should taxpayers then pay for it?
"Reciprocity" - I agree wholeheartedly that our taxation system isn't ideal (in fact, thanks to a lengthy convo with you, I opened my mind to a land tax (with provisos)). That doesn't have much to do how ever whether or not we should pay for others educational choices. As above, if you will be worse off after study then don't do it regardless of a fair or unfair tax system. Otherwise we might as well pay people for their hobbies.

I appreciate the sentiment and I would love to see a more educated workforce in NZ aswell however the end does not justify the means. Taking money from one group to better another group is the wrong way to go about it and the method to achieve that goal matters.

Thanks, Withay. Enjoyable discussion.

they should have used the under spend to bring forward fee free for year 2 and year 3. But I suspect it will never move beyond the first year.

I can tell you why numbers are down.

I have a friend in enrolments at Massey.

Students are waiting til all three years are offered free.

So in 2021 we can expect an increase in enrolments.

That sounds exceptionally unlikely.

This sounds like an ideologue making up a reason.

Those who really want tertiary education tend not to sit around doing nothing for years. Some may go and work for a year or two to get a taste of working life before studying but why put your life on hold speculating what actions the Government may or may not take.

Folks, final updates on this story are done. We have a bit more context now around this $197 million figure and the estimates the Govt used to cost its fees free policy in the first place. I have also included comments from Robertson around the policy being extended, as planned, to cover fees of students in their second and third years of study. 

Ambiguity over extension of fees free policy I do hope they restrict this to certain degrees, ie engineering and computer science and heavily index it to performance. ie A grade average or you get nothing!

I don’t understand the old “do a trade” argument. Yes you might make more money at present but I’d take a white collar job over knocking in nails or installing toilets any day. A big part of it is the people you associate with in a job day to day also. It would all get very tiresome fast, however much they might pay. You can’t beat the prestige of a degree from a top Uni and it opens way more doors and gives you many more options.

There is no easier track into entrepreneurship and owning your own business and making $150k+ per year than trades. They also tend to offer a lot of flexibility for lifestyle.

Always wondered why the government chose to cover the 1st years' fee. If I was King for the day, i would have considered paying for the last year of the degree, and only if you passed. No commitment, no payment, no issue.

While I argue for free education, I also (as above) did not want to see massive increases in numbers willy-nilly. I actually think we should be far more stringent about university education (admittance, testing and passing) while also better resourcing primary and secondary education. Treating university as a business and trying above all to increase enrollments and revenue is only leading to grade and degree inflation, devaluing the reputations of the degrees and the institutions in the market.

A lot of commenters talking about degrees. Fees free applies to all tertiary education. I.e. Unis, Polytechs, and PTEs. A lot of trades are covered.

Most of the reason why it hasn't worked, is simply because the "fees" were never inhibiting the study.

A lot of kiwis have lost faith in the old qualifications framework of studying for 4 years then getting a job as the employment landscape is so quick to change often rendering your hard won and expensive quals obsolete in a reletively short time frame. Trades related employment boom is also drawing some numbers away from that framework too get an apprenticeship not a loan balance... If theres spare money lying around why not credit the country's student loan debt disaster to that amount instead?

Agreed. As stupid as it sounds, writing off student loans for existing resident debt holders who have no arrears would result in an immediate cash injection into the economy and increase the standard of living for many. But it would be a hard ask for $9B or so of debt to be covered by all taxpayers - yet we don't blink when we spend many times this in universal welfare for people who reach a certain age.

This is a strange comment from Robertson. The COL did not need to front this issue like this. My guess is that they are laying the groundwork for this program to be withdrawn so that the government have more money to offer to teachers. Now that they need more money for teachers, something needs to go. And this obvious election bribe is the most obvious candidate.

If Robertson bows to the teachers I would expect the nurses to immediately get on their bullhorns - they eventually took an offer the basis of there being 'not much left to go around'.

culture change is hard and takes more than 28 seconds - NZ needs to build value in the stock of human capital, its 2019 - its not about the pine logs anymore - really saddened by this. We should focus more on sports and entertainment and forget about education - build stadiums, get boozed and stoned once the Govt has the referendum cause none of us is as dumb as all of us. What is our culture and what do we celebrate?

It's yet another example of over-optimistic assumptions by a naive Gubmint, which is now sofa-diving for enough coin to fund pre-election giveaways. The lifetime value of many degrees is increasingly being questioned world-wide: it's simply credentialism in many cases. In fact, it is a form of Racket: the raising of a Threat (the need for a certain expensive piece of paper to do such Moon-landing-complexity jobs such as running a check-out in a supermarket), which Threat is then only able to be mitigated by Paying the raiser of the threat........

In the USA, this could be RICO territory.....