3 December 2003 Media Statement

New measures to protect export education industry

Education Minister Trevor Mallard today announced new measures designed to increase protection for export education providers and their international students.

“The Education (Export Education Levy) Amendment Bill tabled in Parliament today will allow export education levy funds to be used where necessary to reimburse students and recover any costs that taxpayers incur as a result of the failure of private education providers,” Trevor Mallard said.

“This move is essential to protect this billion dollar industry and, importantly, New Zealand’s reputation as a high quality destination for international students.”

The export education levy supports a range of industry-wide development and risk management activities including professional development, research, quality assurance and promotional activities on and offshore.

Trevor Mallard said the fee that is levied against private training establishments will rise from 0.45 per cent to 0.7 per cent of international student tuition fees in 2004 to help protect students against the effect of closures.

The current flat fee for all providers will remain at $185 (ex GST) and the percentage component of the levy will remain at 0.45 percent of tuition fees in 2004 for all providers other than private training establishments.

“The Code of Practice for the Pastoral Care of International Students and the New Zealand Qualifications Authority require that student fee protection mechanisms are in place,” Trevor Mallard said.

“But despite this, in the case of some private businesses, students have been left out of pocket, and with nowhere to turn. Unfortunately these sorts of events impact not only on the welfare of our international students, but they also tend to generate negative publicity overseas. The government has had to step in to help students left in the lurch, using taxpayer funds.

“This bill will now allow the government to recover any past and future costs that taxpayers incur as a result of the actions or inactions of this type of private business.

“The levy fund should only need to be called on as a worst case scenario.

“The legislation will also mean that students can be reimbursed directly from the Export Education Levy Fund for financial losses they suffer if a private business fails to deliver the tuition they paid for.

“Export education has become a key industry for New Zealand and currently generates around $1.7 billion a year.

“The increased demand from international students for a New Zealand education has led many providers to expand their operations and many new ones to open their doors.

“There is a need to ensure this rapid growth does not expose New Zealand’s export education industry to the risk of negative publicity,” Trevor Mallard said.

Private training establishments will pay the levy at a rate of 0.45 per cent as per regulations from 1 January 2004, but once the bill becomes law, they will be required to pay the difference between 0.45 per cent and 0.7 per cent backdated to 1 January, on one or more dates decided upon by the Minister.

The bill will be referred to a select committee for public submissions and it is expected to be enacted during 2004.

Trevor Mallard said the current requirement for fee indemnification arrangements would remain in place.

”But we are currently reviewing criteria with the aim of strengthening these arrangements to further protect students.

“In particular, it is likely that arrangements will be required which will provide students with refunds and an unencumbered choice of alternative providers.

“We are also looking at the types of trust accounts that should be used, and the security underpinning all arrangements. Decisions on this will be made by the end of the year,” Trevor Mallard said.

Questions and Answers are attached.

Questions and Answers

Why does the increased levy rate for 2004 apply to private training establishments (PTEs) only?
The levy rate has been increased for PTEs in 2004 to recover costs associated with the emergency relief that has been given to students as a result of private training establishment failure.

The government believes that it is appropriate to have its expenditure repaid from the group to which such private training establishments belong.

Will private training establishments have to pay the higher levy rate from 1 January 2004?
Yes. The increase in the percentage component of the levy rate (from 0.45 per cent to 0.7 per cent) for private training establishments will apply from 1 January 2004. However, this increased rate will not be required to be paid by PTEs until after the Education (Export Education Levy) Amendment Bill is enacted.

When the bill comes into force, and if one or more of the payment dates for the percentage component have passed, then the difference between the 0.45 and 0.7 percent will be required to be paid on one or more dates appointed by the Minister by notice in the Gazette.

Why was the Education (Export Education Levy) Amendment Bill introduced?
It was always considered appropriate by government that the cost of bailing out students of failed PTEs would be recovered through increasing the levy rates prescribed in the Education (Export Education Levy) Regulations 2003, and relevant sector bodies were consulted on this basis in September 2003.

The bill also enables past and future levy funds to be used to repay costs incurred to protect students and safeguard the industry’s reputation in the event of provider failure. It also allows for some minor technical irregularities in section 238H of the Education (Tertiary Reform) Amendment Bill 2002 to be addressed.

When will the regulations for 2004 be gazetted?
The Education (Export Education Levy) Regulations 2003 which apply to 2004 will be gazetted tomorrow (Thursday December 4, 2003). They will stipulate no increase in the levy rate in 2004 for any provider but the new Education (Export Education Levy) Amendment Bill once enacted will override the regulations.

This means the increase will be backdated, regardless of when the bill is enacted, to 1 January 2004.

Will the increased levy rate for PTEs apply in future years?
The new levy rates will apply to 2004 only. The levy rate(s) for 2005 will be determined and set by regulation next year, following consultation with provider groups.

ENDS

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