New Zealand’s new Labour-led government likely to abolish fees

Following its general election on 23 September, New Zealand waited 26 days for a government to be named. Winston Peters’ populist New Zealand First party won 7 per cent of the vote: enough for the balance of power. For two weeks, while special votes were counted, Peters held us at bay. Then he held court for negotiating teams from the incumbent National Party (which won 44 per cent of the vote) and the opposition Labour Party (which won 37 per cent, but can also count on the 6 per cent won by the Greens). The negotiations were about policy – what policy concessions would win Peters’ favour.

Finally, on 19 October, the verdict was announced: NZF will enter a coalition agreement with Labour. This will usher into the prime minister’s office the charismatic 37-year-old Jacinda Ardern, who was rushed into the Labour leadership only six weeks out from the election to stem bleeding poll results.

In many areas, including tertiary education, NZF had policy alignment with Labour. Both parties want to increase financial support for students. Both want to reduce immigration – in Labour’s case, by reducing international student numbers in low-level tertiary qualifications that have been used as a pathway to residency. Both want to strengthen careers advice. Both propose a national dialogue on the future of education.

National’s policy, on the other hand, was almost an afterthought, released in the days leading up to the election. It wanted to work towards having a university ranked in the global top 50 and to raise the target for the value of international education to NZ$7 billion by 2025 (£3.7 billion) – up from the present target of NZ$5 billion.

So, what can we expect for tertiary education? Likely, the new government will focus on Labour’s comprehensive and detailed policies. Its flagship policy of three years of fees-free tertiary education will start its six-year phase-in in 2018. New students will initially get the borrowing for their first-year fees written off. But, as the policy phases in and fees are no longer paid at all for students' first three years of study, the government will want to strike new funding rates that compensate institutions for those forgone fees.

Given the large variations in tuition fees between institutions, the new fees-free funding rates would see some institutions lose, while others would receive a windfall. Negotiations with the sector – especially with the powerful university lobby – on how to manage this will be…interesting.

The Labour Party expects that its fees-free policy will boost participation. That’s highly unlikely. In New Zealand, everyone who can meet the academic entry requirements for a degree and who wants to study can find a place in the system – if not necessarily in their programme of choice. There may be a small participation response in further/vocational education, and there may be some movement between different types of institutions.  But with a falling school-leaver cohort and a strong employment market, any overall increase in enrolments is likely to be negligible.

And critics will mark the government down because this measure represents dead-weight spending and because fees-free – especially at the degree level – is highly regressive.

Labour has also pledged an extra NZ$50 a week in the living costs component of the student loan scheme, and for those who receive a grant under the targeted student allowances scheme.

That’s also a high cost: under New Zealand’s interest-free loan scheme, lending costs about 40 cents per dollar. But this policy is a response to housing costs, which have risen much faster over the past 10 years than have the borrowing entitlement and the allowance rate, (which are indexed by the consumer price index).

International student visa rules can also be expected to change. For sub-degree students, work rights will go. Requirements for post-study work visas will ramp up, stemming the pathway to residence for those without degrees. These changes are expected to cost providers NZ$250 million a year. Universities will be unaffected, but other providers will suffer.

There will also be an education summit, a requirement for governing councils to have a student member and reviews of both the Tertiary Education Commission and the Performance-Based Research Fund. It will be an exciting three years. 

Roger Smyth recently retired as head of tertiary education policy at New Zealand’s Ministry of Education. He is now an independent consultant and adviser.