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June 6, 2017 | by  | in News |
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The 2017 Budget — what it means for students

The 2017 Budget was revealed on May 25 and contains a range of initiatives aimed at “delivering for New Zealanders.”

Students will be impacted by a number of the measures, including the central initiative in the budget, the Family Incomes Package.

The $2 billion package takes effect from April 1, 2018, and makes adjustments to the personal income tax brackets, abolishes the Independent Earner Tax Credit, and increases the Family Tax Credit, the Accommodation Supplement, and the Accommodation Benefit.

The Budget also includes a modest increase in funding for the Tertiary Education sector, focussing on Research Initiatives and government subsidies.

However, it has been criticised by the New Zealand University Students’ Association (NZUSA) and VUWSA for not doing enough to support students. Although he saw it as significant that “the Government has at least recognised that student poverty exists,” VUWSA President Rory Lenihan-Ikin was skeptical about whether the changes would significantly improve the quality of life and education for tertiary students.

 

Accommodation Benefit

The Government confirmed that the maximum amount available under the Accommodation Benefit will increase from $40 to $60, with increases being regionally targeted. The Accommodation Benefit is available to those students who are eligible for Student Allowance — currently 33% of New Zealand tertiary students.

Estimated new rates for Student Allowance recipients living in Auckland, Wellington, and Christchurch will be $60 per week. Dunedin students will be eligible for an $11 increase to $51, Hamilton students will be eligible for a $9.50 increase to $49.50, and Tauranga students will be eligible for an $18.50 increase to $58.50.

There is no expected increase for eligible students in the Wairarapa or Rotorua. It is estimated that Palmerston North students will receive a $0.50 increase.

NZUSA President, Jonathan Gee, has criticised the increases for not going far enough. “More than three quarters of students will see no change to their living situation as a result of this Budget. This contrasts with our recommendations, calling for a housing grant for all students.”

“It also denies the Auckland rent crisis, when the cap of $60 will be mirrored in Christchurch and Wellington. In Auckland, students are paying $70 more on rent than in Christchurch, yet they will get the same level of support through the Accommodation Benefit.”

Lenihan-Ikin has also been critical of the changes. “There are roughly 400,000 tertiary students in New Zealand and this so-called budget ‘increase’ is set to benefit 41,000. The Government should not expect students to see this as a win.”

 

Accommodation Supplement

The maximum rates available for the Accommodation Supplement have also increased.

Approximately 3500 tertiary students currently receive the Accommodation Supplement, a means-tested weekly payment available to some students who are not eligible for the allowance. The Supplement is not specific to students, unlike the Allowance, but is being increased as part of the Family Incomes Package. Under the 2017 Budget a two person household will see an increase of $25–$75 per week, and larger households will see an increase of between $40 and $80.

The Government stated that the changes to the Accommodation Supplement will benefit around 136,000 households that currently receive the maximum rate. They will benefit by an average of $36 per week.

Students who are most likely to qualify are sole parents and those undertaking postgraduate study, according to the Minister for Tertiary Education, Paul Goldsmith. The Accommodation Supplement areas will also be updated to reflect 2016 rents.

Gee has criticised the gap between the increase in the Supplement, which is inaccessible to most students, and the Benefit, which is more student-focussed. “There’s a gap between the two that is widening as a result of the Budget,” reflected Gee. “It fails to address the reality of student poverty.”

Labour leader Andrew Little said he was “broadly supportive” of the Budget’s increase to the Accommodation Supplement as an interim solution to the housing crisis, but he said that the Labour Party would release their alternative budget in coming weeks.

 

Tertiary education investment

The Government is also investing $132.1 million in tertiary education to “develop the skills and knowledge needed for a stronger and more internationally connected New Zealand economy,” according to Goldsmith. The investment is part of a $372 million Innovative New Zealand programme, which also devotes funds to Science and Innovation and Economic Development.

$69.3 million over four years will go towards tuition subsidy rates. This amounts to around a 1% increase which, according to Gee, is not enough. “They say it’s an increase, but taking into account the Consumer Price Index, the change isn’t as significant as it first appears.”

The Government will also make an investment in the international education sector of $6.8 million over four years to support “sustainable growth” in the sector and to “strengthen the net benefit to New Zealand and its value to our regions.”

Goldsmith underlined the contribution of international education to the New Zealand economy, saying it is our “fourth largest export industry at $4.28 billion in export earnings in 2016.”

The Tertiary Education Union (TEU) has criticised the Budget for shifting funding away from the public tertiary education sector to private tertiary education providers.

TEU National Secretary, Sharn Riggs, said that the Government would “cut more than $15.5 million in funding to our public universities and polytechnics, while increasing funding to private providers by almost $24 million.”

Riggs called it a budget of “ideological choice, not of necessity,” and claimed the Government was showing an “ideological preference for for-profit tertiary providers.” Riggs instead called for “a public education system that suits the needs of the students it serves and the staff who deliver it.”

 

Research, Learning, and Teaching Initiatives

$52.5 million over four years will be invested in the Performance-Based Research Fund (PBRF), the tertiary education funding process which assesses the research performance of tertiary institutions and funds them on the basis of their performance, to “incentivise and reward high-quality research in tertiary education.” Gee has criticised the Budget’s failure to address learning and teaching initiatives in addition to performance-based research. When asked why learning and teaching initiatives had not received funding under the Budget, Goldsmith said “the PBRF supports excellent research-led teaching by recognising the quality of research outputs, supervision of research degrees, and external research income.”

 

Income tax

Adjustments to the tax brackets will affect students who are working alongside their studies, and the adjustments to the Family Tax Credit will benefit those with dependent children under 16. The maximum credit for the first child under 16 will increase by $9, and for subsequent children by $18–$27 per week — a “a significant change,” according to Minister of Finance Steven Joyce in his parliamentary Budget speech.

The changes to the tax brackets will see $1–$14,000, the lowest bracket, changed to $1–$22,000. The next bracket, currently set at $14,001–$48,000, will change to $22,001–$52,000 and the following bracket will change from $48,001–$70,000 to $52,001–$70,000. The top tax bracket on incomes of $70,001 and over will remain the same.

The rationale for changing the tax thresholds is that as incomes rise the marginal tax rates that people face also increase, with the average wage having risen from $49,500 to $58,900 over the last seven years. The Government claims that increasing the bottom two tax thresholds increases the rewards for lower and middle income earners.

The Independent Earner Tax Credit (IETC), an entitlement for individuals who earn between $24,000 and $48,000 (after expenses and losses) a year, will be abolished. The IETC provides a maximum of $10 per week, or $520 per year, to individuals who are not eligible to receive benefits, New Zealand Superannuation, or Working for Families. Reasons for removing the IETC include lower than expected uptake, with only 32% of eligible potential recipients actually claiming it during the year, and a desire to simplify the system.

 

Housing

Housing received $120 million in funding in the Budget — $100 million for the Vacant or Underutilised Crown Land Programme to “unlock” land for 1500 houses in Auckland, and $20 million to support more people into Emergency Housing. The programme will see 20% of the houses being available for social housing and a further 20% priced as affordable, that is, no more than the KiwiSaver HomeStart cap.

The $20 million investment in Emergency Housing is in addition to the changes to the Accommodation Supplement, and provides “emergency and transitional housing to help families in need of a warm, safe place to stay while we find them more suitable housing,” according to Amy Adams, the Minister responsible for Social Investment.

The Government will invest more than $2.72 billion in housing over the next four years, including the first phase of the Auckland housing programme, which will build 34,000 houses in Auckland over the next decade.

The investment in housing is part of a $4 billion infrastructure investment which, according to Steven Joyce, “takes New Zealand infrastructure investment to another level.”

However, Labour leader Andrew Little was critical of the Government’s approach to housing, saying the Budget forecasts house prices will rise at three times the rate of wages, “locking in the housing crisis for years to come.”

“After nine years, all National can offer is a continuation of the housing crisis.”

Little argued that National’s housing policy in Auckland will see only one house built for every 100 new Aucklanders, and claimed the budget offered “no solutions to the housing crisis.”

“The investment needed in housing, health, education, and infrastructure has been sacrificed to pay for National’s $2 billion election bribe.”

Gee said that although the Budget’s investment in housing goes some way to addressing the housing crisis, it does not fix the problem of rising rents. “The government might argue that this, and the accommodation benefit, go far enough; but I don’t see that it’s going to immediately provide relief for students.”

 

Health

The Government is also investing $150 million into health facilities. In his Budget speech, Steven Joyce claimed that “DHBs will benefit most, with an extra $1.76 billion over four years to invest in services, improve access, and help meet cost pressures and population growth.” Pharmac will receive $60 million in the Budget, and the pay equity settlement for care and support workers has been allocated $1.54 billion. Other areas to receive investment include disability support services, ambulance services, pharmaceuticals, elective surgery, and primary health care.

Mental health will receive an additional investment of $224 million over four years, including $124 million in “new innovative approaches,” according to Health Minister Jonathan Coleman.

Minister responsible for Social Investment Amy Adams said that mental health is “a social investment priority for this Government.”

“It’s one of our most complex social issues, and it is having big impacts across the employment, housing, health, and justice sectors.”

However, spokesperson for the Maternal Care Action Group (MCAGNZ) Kristina Paterson says the 2017 Budget announcement was packaged so as to mislead the public that gaps in mental health will be addressed.

She said the Social Investment approach was good in theory, as it will benefit the vulnerable families that MCAGNZ represents, but “it will not increase access to mental health services if they’re under-resourced or non-existent.”

“When you are quoting hundreds of millions or even billions of dollars over a four year period, it sounds good — it sounds like there is spending going in the right direction — but that is not the case. There has been a 60% increase in people needing mental health services, but funding to mental health has not kept up with demand.”

The Royal New Zealand College of General Practitioners President, Tim Malloy, said the Budget failed to deliver on many pressing issues and does not adequately provide funding for primary healthcare services, reflecting that “there was nothing of substance in this Budget for primary care.”

“There’s nothing in it […] I’m not surprised — I’m disappointed and seriously underwhelmed. It just means the whole conversation around shifting services closer to home remains as rhetoric only.”

Despite the $60 million in funding for Pharmac, Medicines New Zealand General Manager Graeme Jarvis says the funding fails to keep pace with population growth and will do little to fund much-needed drugs that the Pharmacology and Therapeutics Advisory Committee (PTAC) has recommended for funding.

With population growth of approximately 2.1%, the 1.5% increase in investment represents a shortfall, while also failing to account for the ageing population and an increase in chronic diseases.

The Budget does not provide funding for a range of medicines which have been recommended by PTAC but remain on the waitlist for funding. These include medicines for conditions such as diabetes, cancer, and mental health — many of which, according to Jarvis, have been on this waitlist for upwards of three years.

 

What we didn’t get

Gee told Salient that the Budget was “disappointing” in that it failed to address issues of access to education for young people. Prior to the Budget’s release, NZUSA proposed changes to improve access to tertiary education such as a national First in Family Scholarship, restoring postgraduate student allowances, and ending age discrimination in allowance and loan access. None of these initiatives were considered in the 2017 Budget. “In its Budget the Government is wilfully ignorant in failing to address the needs of those locked out of tertiary education,” Gee concluded.

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