Education package needs to be changed to succeed

by Andrew Norton

Published by The Drum, Wednesday 21 January

Last December the Senate rejected Christopher Pyne’s ambitious higher education reform package. Its most controversial proposal was university fee deregulation, but it also included unpopular cuts to per student teaching subsidies. Now the government is reconsidering those cuts as it tries again to change higher education policy.

In the original package, the government was attempting several things at once: subsidy reductions, fee deregulation and system expansion. Each has a distinct source, and its own political problems. Unpacking the policy agenda could help the politics of reform.

The subsidy reductions came from the overall budgetary strategy. These were always likely regardless of other policy plans. Higher education spending has increased rapidly in recent years, driven largely by big increases in student numbers (my Mapping Australian Higher Education report has details on both). This was never going to escape Treasury’s attention.

Fee deregulation is not a necessary consequence of less government spending per student. Labor and the Coalition, in 1989 and 1997 respectively, have cut the student public subsidy and replaced it with a regulated student charge. Fee deregulation is something else again. It would allow public universities to transform their teaching and research. While some universities had lobbied for fee deregulation, nobody expected it until just before the May Budget.

System expansion comes from a report I wrote with David Kemp. It is the unfinished business of Labor’s demand driven higher education funding system, which removed most previous enrolment restrictions on undergraduate places at public universities. Our review recommended that higher education diploma and associate degree students be included in the demand driven system, and that higher education students in private education providers and TAFEs become eligible for tuition subsidies.

Per student subsidy reductions complicated the fee deregulation argument. If higher fees financed a better student experience that might appeal to some students, especially if low-cost alternatives were available. We see a wide range of fees in the private higher education sector, and in the already largely deregulated postgraduate coursework market in public universities. But with average proposed tuition subsidy cuts of 20 per cent, and more in some disciplines, fees would have to increase considerably just to maintain existing undergraduate services.

As a result, the fees debate has re-run the public versus private spending controversies we have had since HECS was introduced in the late 1980s, such as the government’s controversial claim that it would still fund 50 per cent of course costs. The almost complete failure of university leaders to articulate clearly what they would do with any extra money has not helped. This fuelled suspicion that fee increases would just be added costs without added benefits.

Dropping or reducing cuts to tuition subsidies would allow a clearer argument that there can be benefits from fee deregulation. But it is hard to see how removing the tuition subsidy issue would change enough votes in the Senate to get fee deregulation through. It will be seen as a tactic, with cuts only temporarily off the agenda. Labor and the Greens, for both ideological and strategic reasons, will continue to reject fee deregulation. The Palmer United Party (PUP) is also opposed, although Senator Zhenya Wang supports deregulation. Even if Wang defects from PUP, the Coalition is likely to be three cross-benchers short of a majority on fees.

Independent Senator Nick Xenophon is pushing for a small fee increase while a major review is conducted. University leaders seem sceptical, given there have been many such reviews in the past. Still, a review could do some good. Whether or not fee deregulation is the solution, there are many problems with the current funding system. Funding rates are based on historical and political factors, not on educational standards or student preferences.

A review could help with policy issues in university funding, but it would not of itself solve the political problems. That requires some co-operation between the Coalition and Labor. Even if Christopher Pyne manages a miracle Senate victory, his reforms will not work unless Labor keeps them. Some kind of regulated fee flexibility, based on clear objectives and empirical evidence, is likely to be the only politically viable policy.

Expansion of higher education subsidy entitlements, in isolation from funding cuts, probably could pass the Senate. No cross-bench Senator clearly opposes more students benefiting from government assistance. While Labor is resisting this part of Pyne’s package, I doubt it would repeal it if in office. As I have written before, there is a strong equity angle to expanding the higher education system. Labor would have trouble explaining why it thinks low socioeconomic status students should pay full fees.

For the government, a review plus expansion of the demand driven system would give them real progress. Whatever its policy merits, an unchanged reform package faces a second Senate defeat.