Higher education reforms still needed

by Andrew Norton

Published by The Australian, Wednesday 3 December

The Pyne higher education reform bill was always ambi­tious. It would have deregulated undergraduate fees, opened universities to more competition and cut per student subsidies. Yesterday it became apparent this package was too radical for the Senate. The policy status quo will survive, with all its problems.

The most controversial issue was deregulating undergraduate university fees, ending a 40-year-old system in which the government effectively sets the charges students pay. Most vice-chancel­lors reversed their opposition to deregulation and supported this reform. The reason was unhappiness with their per student commonwealth subsidy. In April last year, Labor announced an arbitrary efficiency dividend cut to this subsidy with no compensating increase in student charges.

This policy shift shattered vice-chancellors’ confidence in the current policy settings. They now regard government budget panics as an intolerable business risk. Labor’s cuts were without regard to university costs, the legal standards universities must meet or the preferences of students. And now universities are stuck with this unsatisfactory system.

We need a better way of deciding how much universities receive for each domestic undergraduate. The system is based on a late 1980s study of university costs and a 2003 Senate compromise on student contributions. Since Labor removed most controls on bachelor degree student numbers in 2012, a dysfunctional funding system has new dangers. Universities no longer have to enrol specific numbers of domestic students or maintain all their disciplines. They can close courses that are uneconomic or favour international over domestic students. Neither would be a good outcome.

Fee deregulation was not the only solution to this problem. But it was the only remedy with a track record. Public universities have successfully deregulated markets for international students and domestic postgraduates. Some people suggested a new regulator to set fair, efficient student fees, but nobody has offered detail on how this would work. Perhaps this idea will now be developed.

The system does not meet the needs of all students. Lower-ATAR students directly entering a bachelor degree have a high risk of not completing their courses. Dip­loma courses in specialised pathway colleges help these students build study skills for subsequent success in a bachelor degree. The Pyne reform would have extended funding to these colleges, mostly in the private sector. Ironically, while Labor and the Greens ran hard on keeping student fees down, they opposed support for students in private colleges. Yet it can cost twice as much to attend a pathway college as take a bachelor-degree place at a public university and about 15 per cent of pathway college students are from low socio-economic backgrounds.

It is possible that opening the public funding system to these students, in isolation from other elements of the Pyne package, could have secured a Senate maj­ority. The crossbench senators’ concerns were mainly about costs to students, which would be reduced by increasing eligibility for commonwealth-supported student places. Possibly this reform could be reintroduced some time.

The macro-level budget problems that coincided with the Pyne reforms made a difficult political task near impossible. Spending on higher education has increased rapidly in recent years, with the budget aiming to stabilise expenditure on tuition subsidies. But forecast growth in student numbers meant an average 20 per cent cut to public funding for each student place was needed to keep overall spending roughly the same. This meant that fees would have to increase considerably under deregulation, just to maintain university income.

The danger now is the government will find other ways to cut spending. It could freeze student numbers from 2017 without Senate approval. This would have negative effects for students by reducing competition between universities. When last decade’s baby boom children reach early adulthood in the 2020s an enrolment freeze would affect them badly.

In the face of yesterday’s setback Pyne has said he would try again next year. The sector certainly needs reform.