A policy that failed by its own metrics
Winston Peters announced on Newstalk ZB on 9 May that fees-free tertiary study would be scrapped in the upcoming Budget, calling it a “Budget leak” with characteristic theatrics. Finance Minister Nicola Willis confirmed the decision the same day, stating plainly: “This is the last year in which students completing their studies will be eligible for fees free.”
The political noise will focus on Peters’ showmanship and the coalition’s ideological preferences. The substance tells a different story. This is a policy that failed its own participation goals, became less equitable every year it ran, and was recommended for full removal by the Ministry of Education before the government even touched it.
The numbers the defenders cannot explain
In 2024, only 230 students from EQI 7 schools – the most socio-economically disadvantaged in the country – used fees-free for university. That was the lowest figure in the scheme’s six-year history. The proportion of fees-free university students from EQI 5-7 schools combined fell from 15.9% in 2020 to 14.3% in 2024. A policy sold as an equity measure became progressively less equitable.
Education Counts data shows new fees-free learners totalled 42,740 in 2024, down 13% from 2023. Workplace-based fees-free learners collapsed by 69% in the same year, shedding 8,220 learners. The scheme designed to support workforce development in the trades was being overwhelmed by macro conditions it had no power to influence.
The Ministry of Education’s regulatory impact analysis in early 2024 found the policy achieved one of four objectives: reducing student debt, which officials described as “self-fulfilling.” The three failed objectives were increasing participation, expanding access, and supporting lifelong learning. The ministry’s preferred option was full removal.
Fees are not the barrier
Tertiary education consultant Roger Smyth offered the sharpest summary in January 2026: “It’s a tremendous way to spend a lot of money to no effect.” The real drivers of participation, he argued, occur in early childhood and through schooling expectations.
Infometrics chief executive Brad Olsen was equally direct in January 2026 analysis: “It wasn’t lifting participation rates or anything like that. It wasn’t helping people who would not have otherwise gone to university.” His diagnosis pointed to living costs, not tuition, as the actual barrier. “If they can’t find somewhere to live, if they can’t pay for themselves while they’re living there… none of that matters.”
The Budget 2024 savings from switching first-year to final-year alone were $893 million across four years. Full removal frees up substantially more.
What businesses should actually watch
Peters framed the redirection explicitly: “We are going to reshape and repurpose it for the trades and all sorts of industries where we do need it and where we can get a far better payback for our money.”
That is a direct signal to construction, engineering, and manufacturing firms. But signals are cheap. Training providers flagged in January 2026 that the existing scheme was not “employer-friendly,” creating barriers and inefficiencies for employers trying to develop their workforce through tertiary training partnerships. The TEC’s 2024 learner snapshot shows work-based training enrolments at 112,900, down 12% from 2023. That is the segment under structural pressure.
The risk is straightforward. Universal subsidies failed because they were designed around learner eligibility, not employer need. If the replacement is another scheme built around bureaucratic criteria that do not map to how businesses actually hire and train people, the money will be wasted again, just in a different category.
The real test comes in Budget week
Fees-free deserved to die. Its own ministry said so. The data said so. The question that matters for every business owner struggling to find a qualified tradesperson, engineer, or technician is whether the replacement will be designed with them in the room, or for them from a distance.
Sources
- ‘Budget leak’: Winston Peters confirms fees-free university scheme to be scrapped (2026-05-09)
- Fees-free university scheme to be scrapped in upcoming Budget, Nicola Willis confirms (2026-05-09)
- Final year of Labour’s fees-free saw lowest university uptake among the disadvantaged (2026-01)
- Students can now claim $12,000 but is it money well spent? (2026-01-15)
- Vote Tertiary Education – Statement of Initiatives | Budget 24 (2024-05)
- The failure of the fees-free policy and how the Government reset might worsen equity (2024-01-01)
- Fees Free scheme not ’employer-friendly’, training providers say (2026-01-20)
- Tertiary learner snapshot 2024 | Tertiary Education Commission (2024)