Political stalemate leaves higher education exposed

by Andrew Norton

Published by The Drum, Wednesday 29 October

The Senate inquiry report into Christopher Pyne’s higher education reform package suggests that we are at a political stalemate. Labor won’t support any of the package’s major changes. Government senators suggest only one significant concession, which is keeping CPI indexation of student debt.

Everything now depends on the views of over-stretched crossbench senators. All signs to date are that Palmer United will side with the Opposition to block change.

The Labor senators’ report focuses heavily, as expected, on deregulated fees. It assumes that increased fees would be equivalent to a new tax, in which students would pay extra but see no gains in the quality of their education. A key argument for fee deregulation, that in higher education like other markets you can get a better or different service if you pay more, has made little headway.

That argument was always going to be complicated, given the timing of this reform package. Higher education spending has increased rapidly in recent years, up by more than 40 per cent since 2008 in the main tuition subsidy program. In a tight budget, that was always going to attract attention. But the proposed 20 per cent average cuts to per student public spending mean that fees would have to increase significantly, just to maintain existing service levels.

Most university vice-chancellors now support fee deregulation, as noted in the Government senators’ report, but their arguments are often self-referential. They focus on their own difficulties in balancing their books, rather than benefits to students.

The political weakness of the vice-chancellors’ case reflects the intellectual origins of their recent conversion to the fee deregulation cause. It is not because they ideologically prefer private to public funding. Except perhaps in the leading research universities, it is not because vice-chancellors have grand visions for their institutions that require fee deregulation. Instead, support for fee deregulation is a pragmatic political judgment about the consequences for universities if the current system continues.

The Labor senators’ report considers this argument, but it is unlikely to convince university leaders. There was a real increase in per student funding under the previous Labor government, but it never fixed the system’s underlying structural weaknesses.

Funding per student is still largely based on a late 1980s expenditure study, modified by a 2005 increase in student contributions and a few ad hoc changes. It has nothing to do with current costs, nothing to do with the standards universities are expected to meet, and nothing to do with the kind of education students might want. It is vulnerable to arbitrary, budget-driven, cuts, like Labor’s April 2013 efficiency dividend.

In my view, this was the final, fatal blow to vice-chancellors’ support for the status quo. They want something better. Complete fee deregulation is not the only option, but from a university perspective it has a track record in postgraduate and international markets.

Labor’s position on fees is not surprising, as it accords with their policy preferences and political interests. The same cannot be said of their opposition to extending the demand-driven funding system that they introduced when in office. Until recently, the Government allocated government-supported student places to universities, always keeping the total number well below student demand. From 2010 to 2012, Labor phased in abolition of most of these controls on bachelor-degree places in public universities. The huge surge in enrolments this triggered is the main reason why government spending on higher education has increased.

A report I co-wrote for the current Government concluded that while this policy change had generally worked well, it had flaws, especially for lower-ATAR students. The number of students admitted to bachelor-degree courses with ATARs below 60 has steadily increased, but history suggests that 40 per cent or more of them will never complete.

Their prospects are, however, improved by taking a pathway course. This is typically a diploma-level program in a specialised college that leads to a bachelor-degree course in a target university.

Pathway courses are mostly taught in the private higher education sector. As private higher education providers and diploma-level courses are both outside the demand driven system, pathway students must pay full fees. This can double the cost compared to a place at a public university. Pyne’s package would bring these students into the publicly-funded system.

Given the links between low ATAR and low socioeconomic status, Labor’s support for the status quo means that they support full-fee places for students who are both economically and educationally disadvantaged. It is a discordant exception to the equity argument Labor is making, as it is for the Green and Palmer United senators also apparently opposing the Pyne package in its entirety.

The Labor senators’ inquiry report does make some plausible points against arguments from the Government and the vice-chancellors. But Labor’s decision to oppose all major reform means that Australia’s higher education system will be trapped by its history, unable to remedy weaknesses, vulnerabilities and inequities.