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Insights 34: 9 September 2016
Read our latest report: Decade of Debt: The Cost of Interest-free Student Loans
 
Dr Eric Crampton in The Spinoff - Vancouver's tax on foreign buyers
 
Jenesa Jeram on MSD's latest poverty and inequality stats

Are skills debts the new interest-free loans?
Dr Eric Crampton | Head of Research | eric.crampton@nzinitiative.org.nz
Last month, we launched a report on the government’s interest-free student loan policy.

To summarise briefly, the scheme has had no particular benefits in improving access to tertiary study, but has been rather costly both for the government and for the tertiary sector. 

It is nonsense, and costly nonsense at that. But free money gifts to the richer cohorts that attend university can be electorally appealing: poorer people, and especially poorer people with less education, are less likely to vote.

We recommended shifting from universal subsidies under interest-free loans to targeted support of students and graduates facing hardship, and far better support for tertiary preparation. 

New Zealand First this week proposed putting some stilts under the loans’ scheme’s nonsense. Students currently get loans to cover tuition charges and living expenses, then pay it back if they earn enough after graduation. 

Under New Zealand First’s scheme, students would receive a universal allowance during study and face no tuition charges.

When prices do not ration access to a scarce good, something else must take their place. Interest-free loans on their own required a raft of other controls being placed on the system to avoid cost blow-outs. 

Under New Zealand First’s scheme, that rationing would come instead through central planning of labour markets. Industry Training Organisations and others would need to develop workforce plans with forecasts out to 20 years. Having determined how many positions the country needs, the government would fully fund that many places. 

Funded students would pay back each year’s study by spending a year working in New Zealand after graduation. Those students leaving the country would have to be matched with an equivalent foreign replacement, who then would be allowed in while the Kiwi were out on OE. 

But nobody really has the crystal balls that would be needed to forecast future skills demand that accurately. 

There is a good case for getting better information to students to help them to make the choices that are right for them. But the ‘right’ number of lawyers, accountants, plumbers or construction workers doesn’t come out of a spreadsheet. It comes instead from the interplay of individuals’ hopes and dreams for their futures with those individuals’ expectations of whether their dreams mesh with their abilities and others’ needs. 

And that works best when prices can help to coordinate things. One of the biggest costs of free is losing the information prices deliver.


Is sugar the new tobacco?
Jenesa Jeram | Policy Analyst | jenesa.jeram@nzinitiative.org.nz
If sugar is the new tobacco, then soda drinkers must be the new smokers. So what can we expect next in the war against sugar?

The first step of any ‘compassionate health policy’ is normally around social acceptability. Soda should not be a “cool” activity. I’m imagining mass campaigns to remind people of their social responsibility: good friends don’t let their friends get fat.

Next step: make it really, really inconvenient to drink soda. Basically, soda drinking should never be enjoyed indoors. Or in semi-enclosed spaces where they can be protected from the wind and cold. To be sure, ban healthy alternatives like diet soda too in case they renormalise regular soda drinking.

To get traction, all the public health campaigners would need to do is remind people that “it worked for tobacco”. Any further research is just icing on the cake.

Consider the latest calls for the plain packaging of soda. The policy recommendation came from an online survey of young people’s perceptions of ‘coolness’, ‘interestingness’, taste and quality.  These preferences were used to predict the respondents’ decision to buy soda. 

The researchers found that young people would be less likely to buy soda if it had a graphic warning label. This is groundbreaking stuff: pictures of rotting teeth reduce the ‘coolness’ of that drink. 

To think, policy recommendations can be made from online surveys on totally hypothetical scenarios. Or worse, from perceptions of coolness. Incidentally, perceptions of healthfulness only decreased incrementally between the branded and ugly bottle versions, health misperceptions is not a motivating factor behind the policy.

Besides, the claim ‘it has worked for tobacco’ is itself questionable. It is more accurate to say ‘it has been tried for tobacco’. Plain packaging hasn’t been implemented in New Zealand yet. While Australia was the first to implement the policy overseas in 2012, the evidence of effectiveness isn’t yet clear. 

A similar comparison was made for sugar taxes. But given the tobacco tax rate is now around 150 percent, it is hard to believe that a 20 percent sugar tax (what most campaigners are advocating for) will have anywhere near the same effect. Just as the Labour Party is rethinking their position on sugar taxes, despite a lack of supporting evidence, perhaps graphic warnings on soda bottles won’t seem so crazy in the near future either.

In the meantime, I’m practising my disapproving glares in preparation for the next time someone cracks open a bottle of Fanta in front of me.


Is icing sugar the new cocaine?
Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz
A health minister caught snorting cocaine would be news. A health minister seen snorting fake cocaine might be news. 

But a health minister spotted at an event where others may have snorted fake cocaine is no news at all.

And so I was surprised by the New Zealand Herald’s ‘Breaking News’ alert on my phone on Tuesday morning linking Jonathan Coleman to fake cocaine. 

What sounded dramatic, and briefly topped the news on the Herald’s website, deflated faster than a punctured soufflé once you read the article.

So this is what had happened: The school, which the Minister’s children attend, held its annual fundraising ball. It was a Las Vegas themed event. Icing sugar, mirrors and razor blades were among the props used to create the right atmosphere.

By all accounts, it must have been a successful event. It raised $30,000 for Northcote Primary School. Well done.

In any case, none of the reports hinted at anything illegal in connection with the ball. It was an event for adults for the benefit of the school. And pictures posted online show a creatively themed event for a good cause.

There is only one thing that is disturbing about this incident, and that it is the media coverage it has sparked.

First of all, a news story is being created out of the fact that a Minister attended a school fundraiser. However, it was not any fundraiser but one held for his own children’s school. In my view, that means that Coleman was attending first and foremost as a parent, not as an official.

Second, there was not a shred of evidence that the Minister had snorted icing sugar or was even aware of others doing it.

And third, as far as I know snorting icing sugar is still legal in this country (although I would not recommend it).

So unless you are worried that sugar is the new cocaine, there just is no story in the whole Coleman affair. None. At all.

When I get a ‘Breaking News’ notification on my phone, I would prefer it to be on something newsworthy. I’d settle for something semi-interesting like a former Conservative politician’s text messages to his press secretary. Or even the latest Auckland house price data.

But, dear New Zealand Herald, could you please spare us from sensationalising stuff that makes ‘Dog bites man’ look like a thrilling news story?
 
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