Through the looking glass with ACT’s Stephen Whittington, to a world where rich folk form a political party that exists only to help poor folk.

ACT’s future looks bleak this year under the leadership of Don “I’ll just leave the country for a week in the middle of my election campaign” Brash and John “not quite a Lazarus of Epsom” Banks. Judging by the campaign activity documented on ACT’s website, the most profilic ACT campaigner is actually their 7th ranked candidate Stephen Whittington, who is all of 25.

Good on Stephen for being a tireless advocate for a cause he believes in. I was interested to see what direction ACT may take in decades to come, should it survive in some form, so this month I have been reading his speeches. He is very focused on education, and while the rhetoric in these speeches is forceful, the arguments themselves are flimsy.

School choice
Stephen suggests that everyone should get the chance to go to a great school such as Auckland Grammar or Wellington Girls, whether they live in the school zone or not. He says the current system forces many students, most of whom live in families ho cannot afford to buy property in the zones of great schools, to attend lesser schools instead. Imagine we adopt his policy. There are two possible outcomes:

  1. If great schools were not allowed to turn people away for capacity reasons, the result would be overcrowding at good schools, which would make them less good, and tumbleweeds blowing through other underutilized schools, which would become even more downtrodden and stigmatized. That solves nothing.
  2. If great schools could stick to their current capacity, then the situation would be no better than today. Just as many students would attend the lesser schools. The fortunate few, however, would be selected not on the basis of geography but on the whim of the Principal. That solves nothing, either.

There is another, better, way to address the problem Stephen identifies. If the problem is that some schools aren’t very good, then the solution is to make those  schools better! Pretty obvious, really. That solution, however, takes public investment, which is why ACT doesn't like it.  

Tertiary fees and access to University

ACT believes tertiary fees are too low. Stephen argues that the current fees are hurting students from poor communities by leading to higher entry standards favouring (often rich) kids who went to fancy secondary schools with better teachers. The solution, they argue, is to allow fees to go up.

This proposal assumes that the fee rise will deter marginally qualified rich kids from wanting to go to University, but not deter smart but undertaught poor kids. That is how the spaces are supposed to open up for the smart poor kids. Given that the deterrent is a financial one, however, it is much more likely to act on those with limited finances than those with limited talent. The solution doesn’t solve anything.

There is, again, a better solution. Until such time as you can ensure everyone gets broadly the same quality of secondary education (see above), you could make a rule that at least the top 15% of each secondary school is guaranteed entry to a University. That is how California has dealt with the same issue.

 

Tertiary fees and subsidies

Stephen argues that low tertiary fees imply a massive transfer from poor people who work for a living to rich people who go to University instead. That is, of course, nonsense because poor people receive more in services than they pay in tax. Rightly, they do not subsidize anyone. The people who pay for tertiary education are today’s rich, which is fair because they got a heavily subsidized tertiary education a while ago.

Whittington also cites some OECD figures showing that the average lifetime benefit of having some kid go to University is about $70,000. $45,000 of the benefit goes to the kid, and $25,000 goes to society at large. But current (non-medical) undergraduate fees are only about $5,000 each year, or around $15,000 for a first degree. So the proposed solution, again, is for fees to rise.

Problem? The OECD figures are an average only. Why treat everyone as if they were average? The better solution is to wait and see how big the benefit is for each particular individual, and charge them accordingly. We do this through progressive taxes. Take two people who have the same background, same degree, but different salaries. The one with the higher salary has gained more as a result of their learning than the person with the lower salary (using the OECD method for apportioning these benefits). Under a system with low initial fees and progressive taxes later on, the person who receives more benefit pays more. Like we do already. And it works just fine.

Student loan interest

I should note, however, that I do not disagree with Whittington about every aspect of education policy. He thinks the current student loan scheme is a mess because of the absolute zero interest rate. I agree with him. It does not make sense for us to give young professionals financial incentives against paying off a debt to the community. Loans should have some interest on them to change those incentives. The difference is that I would take that extra money and give it back to current students through a better student allowance system, whereas ACT would give it to rich folk as tax cuts.

 

Stephen is a champion debater. Some of his advocacy, like ACT’s more generally, contains rather too much of that staple of debating: Proof by Intimidation. That works pretty well when presented in oral form, and when it only needs to stand up for an hour. It works rather less well as a real world policy prescription.

Comments (13)

by Graeme Edgeler on October 27, 2011
Graeme Edgeler

Stephen suggests that everyone should get the chance to go to a great school such as Auckland Grammar or Wellington Girls, whether they live in the school zone or not. He says the current system forces many students, most of whom live in families ho cannot afford to buy property in the zones of great schools, to attend lesser schools instead. Imagine we adopt his policy. There are two possible outcomes...

You would be well aware that Stephen espouses a third outcome: that great school would set up satellite campuses.

by Stephen Whittington on October 27, 2011
Stephen Whittington

Hi Rob,

 

Thanks for your comments on these issues.  You're right that I regard education as particularly important, and I think that a lot could be done to make New Zealand's education system fairer.  I would just like to make a few points.

 

First, in respect of school choice, I would be happy to continue the ballot system for out of zone students, provided that schools were funded equally for such students.  Currently, roll growth teaching space funding is only assessed on the basis of the number of home zone students.  In other words, if a school wanted to take more students from out of zone, and has the space to expand the number of rooms operating, it will not receive roll growth teaching space funding on the basis of those out of zone students.  This is a disincentive to such schools taking more students through the ballot.  Obviously Auckland Grammar can't take them all.  But many parents would just like the opportunity to send their child to the better school in the neighbourhood just over, but can't, because it has an enrolment scheme.

 

In addition, private and integrated schools would receive significantly more funding under a system of school vouchers, allowing them to direct some of these additional resources to expanding the size of the school.

 

Second, in respect of access to university, I hadn't considered the proposal that you suggest, although an obvious problem is that it would likely reduce the quality of our graduates by placing arbitrary quotas on the number of students who could attend University from a school.  For example, if you were in the 82nd percentile in your school, but the 95th percentile in the country, you wouldn't be entitled to go to university.  As I said in response to answers asked after I delivered that speech, I am not against scholarships being provided to those with low incomes who would be worried about their capacity to pay back a loan if fees were higher.

 

Third, in respect of the subsidies, I think you're missing the point.  To pay for people to go to university the government needs to raise revenue through taxes. If the government reduced the subsidy it gives to university students it would reduce its expenditure and could cut tax rates for those on lower incomes. That would give those on lower incomes more money to put food on the table, pay off mortgages and create a better life for themselves. 

. 

 

by Graeme Edgeler on October 27, 2011
Graeme Edgeler

For example, if you were in the 82nd percentile in your school, but the 95th percentile in the country, you wouldn't be entitled to go to university.

That doesn't follow. They wouldn't be guaranteed entry, but they could fight it out for other places.

The suggestion is that the top 15% of each school, if they gain minimum entrance (what I'd have called three C's), get in. That doesn't mean everyone else misses out.

by Stephen Whittington on October 27, 2011
Stephen Whittington

You're right, I hadn't picked up on that.

I am genuinely unsure, but what is the capacity of our universities, and how many people would be in the top 15% of their schools?  This should enable us to determine how much room would be left.

by Rob Salmond on October 27, 2011
Rob Salmond

Stephen

Thanks for your comment. I have been at the bar, so I will be brief to minimize the likelihood of schpelling errors. Using your numbering system:

  1. The system you outline relies on the whim of the Principal to acept increased enrolment, which is one of the possibilities I considered (Graeme: Note Stephen's chocie here). That does far less to reduce educational inequality than would a determined effort to improve the non-elite schools.
  2. What Graeme said.
  3. I think it is you who is missing the point. The subsidy for tertiary education right now comes from today's rich folk, not from today's poor folk. As I mentioned, there is a good historical reason for that . Also, your own party's philosophy would give any gains from reducing the subsidy for tertiary study not to poor folk as you might wish but to rich folk instead. Your avowed hero Roger Dougles even spoke out in last year's budget debate in favour of reducing rich folk's tax rates but against cutting poor folk's tax rates. I think that is proof enough of ACT's true wishes on this issue.
by Rob Salmond on October 27, 2011
Rob Salmond

You can replace the "15%" with "X%", where X is a percentage such that all the really bright kids from around the country get the opportunities they need, and there is still some space left for not-quote-so-bright kids who are interested and well prepared. In California the nubmer is 4%, but they have a 2- or 3-tier system and a whole transfer apparatus to help smart kids transfer to great institutiona later. The 4% in California only applies to direct access to the top tier. The specific percentage does not matter, it is the principle that is helpful.

by Stephen Whittington on October 27, 2011
Stephen Whittington

We may disagree on where the money should be spent, and indeed it seems likely that we do.  But, as I said above, the opportunity cost of high subsidies for university tuition (for you) is presumably reductions in taxes for those on low-incomes, or some other poverty alleviation plan.  If you support making tax rates more progressive, with a given set of tax rates, why not make spending more progressive?

by Rob Salmond on October 27, 2011
Rob Salmond

@ Stephen: In answer to your last question, I choose not to make spending more progressive in this area becasue I prefer, where practical, to levy charges that go to fund tertiary education on the basis of actual value gained (through taxes on salary) rather than anticipated value gained (through tuition fees). I feel pretty comfortable with that view.

by Andrew Rudolph on October 28, 2011
Andrew Rudolph

".... If the government reduced the subsidy it gives to university students it would reduce its expenditure and could cut tax rates for those on lower incomes. That would give those on lower incomes more money to put food on the table, pay off mortgages and create a better life for themselves."

Wouldn't they be making a better life for them selves by going to University? Also, would those tax cuts for the poor result in them effectively receiving a 'pittance' where as the greater benefit would be to have lower fees? (Give them a dollar now and deny them $5 later on in life).

By raising fees, isn't the perception of the cost greater for poorer students then for richer? E.g. The thought of a raise from say, $5000 to $10,000 greater for a poor person then for a rich?

Is the logic that "If we make it more expensive, then more poor people will go!" Because I don't think that makes sense.

by danniel on January 24, 2012
danniel

No, no, no, I think you got it all wrong from the beginning. Here's how I see things: if great schools would allow everyone to apply for them then they should have the right to make a selection through admission exams, otherwise this whole concept makes no sense. So, that's how bright poor students get the chance to best quality education. I am currently working to get my information technology degree online just because it allows me more flexibility in my schedule and that's how I can keep a job to support myself during study. It's really my only option for higher education.

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