Goff sees merit in tax on graduates

Press, 29 June 1988, Page 11

Goff sees merit in tax on graduates

By (

OLIVER RIDDELL

in Wellington

Taxing graduates after graduation to provide more education income has been seen by the Associate Minister of Education, Mr Goff, to have merit.

He told a Planning Council seminar yesterday that funding was a main constraint in education. His address in a downtown Wellington building was picketed by about 10 representatives of a radical group, Action Committee Against Dole Cuts. Mr Goff said that during the last three years education expenditure had increased in real terms 20 per cent. Education as a proportion of gross domestic product had gone from 4.5 per cent to 5.3 per cent, and as a proportion of net Government expenditure had gone from 11.3 per cent to 13.5 per cent. “Increases of that dimension cannot continue indefinitely,” he said. Debt servicing now con-

sumed $5OOO million a year — almost twice the total expenditure on education — and that debt had to be reduced. The Government would not and could not go back to huge deficits and borrowing to meet the difference. Nor was further raising of taxation to fund expenditure an easy answer if account were taken of the unemployment costs of squeezing out private sector investment and consumption, said Mr Goff. While education expenditure would continue to get priority, extra funding on the scale needed was not readily available, said Mr Goff. He rejected a call from some quarters that the only other answer was to restrict educational oppor-

tunities. The universities, for example, while under genuine pressures from enrolments well above forecast levels, had along with the Government to consider the full range of options available. Some directions had been provided last year from the Watts committee as well as the recent Wran committee in Australia, said Mr Goff. The Wren committee had proposed a graduate tax payable at 2 per cent of income a year to cover 20 per cent of course costs, with payment beginning once the graduate was earning more than the average wage. “There is some equity in that proposal, which has the merit of not adding financial pressures to

students at a time when they are unable to meet them, and of making available money to be reinvested in education,” Mr Goff said. A higher level of private sector financial support for universities was justifiable. The private sector employer was the direct beneficiary of highly skilled employees whose education had been provided at the expense of the taxpayer. Levying employers who benefited directly from State-provided training was an alternative option, although its practicality was uncertain and the Wran committee had made little progress on it, said Mr Goff. Another option was to encourage educational in-

stitutions to be entrepreneurial in providing services for which full fees were payable. Selling educational • services to overseas students and contracting research work for the private sector were examples. No area of Government expenditure should be exempt from scrutiny as to its effectiveness, he said. Restructuring to achieve year-round use of capital equipment and buildings needed to be considered. The option of contribution by students towards the cost of their education had to be considered too, Mr Goff said. This recognised the substantial private benefits as well as social benefits from increased education.