Um, WTH? I'd be in so much crap if I told a student "I'm not prepared to discuss this", and I've wanted to many a time. What's wrong with: "I'm sorry, it's government policy and I'm not too sure of the reasons behind it. You'd be best to contact X if you want to discuss that."

Honours is a really funny thing though, particularly due to it's lack of equivalencies overseas. I know a lot of students have issues getting funding.