Government unveils fees-free cost to taxpayers

The Government will spend $2.5b on its fees-free tertiary education package over the next five years.

That cost does not include the reinstatement of post-graduate allowances, Education Minister Chris Hipkin's office has confirmed. That's because the policy hasn't come before Cabinet yet.

The cost of resinstating post-graduate student allowances will have to come out of the $21.7b operating allowance set aside by the Government.

The predicted cost of fees-free post-school education package will go from $342m in 2017/18 to $628m in 2021/22. That includes the cost of fees and increased allowances.

Most of the cost comes from subsidies of fees. The first-year free will cost $303m in 2017/18, increasing to $397m in 2021/22, when the second free year is due to kick in.

The cost of increased student allowances is projected to increase from $50m in 2017/18 to $134m in 2021/22.

There is a small additional offset in the cost of student loans.

Because students will borrow less money, there will be a $25m reduction in the operating costs of student loans in 2017/18, Mr Hipkins says.

"The overall total has been offset by a $434 million reduction in capital spending over the next five years, as students borrow less overall, even as student loan living cost payments increase."

National's finance spokesperson Steven Joyce says all the money from cancelling National's planned tax cuts has gone into tertiary education.

"It is wrong to take $1060 off average wage earners to give a year free tertiary education to lawyers and accountants," he said.

Labour campaigned on not introducing National's planned tax cuts, which would have entitled average-wage earners to a $1060 tax cut each year. It promised 1.3 million families would benefit by $1350 a year.

Instead, Labour's introduced its fees-free package and its families package, which will see about 384,000 families receive an average of $75 extra per week - $3900 a year.