Education and skills development

Budget Review 2010-11 Index

Budget 2010–11: Education and skills development

Skills development and vocational education and training

Carol Kempner

Presented under the banner Skills for Sustainable Growth, the vocational education and training (VET) measures in the 2010–11 Budget have been highlighted as a feature. This wide range of new measures has perhaps created the impression that VET has received a significant injection of additional funds. However, as Budget Strategy and Outlook: Budget Paper No. 1: 2010–11 notes, ‘expenses under the vocational and industry training sub-function are expected to decline by 10.7 per cent in real terms from 2010–11 to 2013–14’, a decline that starts with this Budget.[1]

The new measures effectively involve a restructuring of Commonwealth VET programs. Expenditures on these measures are offset by some of the declines in expenditure associated with the cessation or redirection of funding from other programs.

In summary the 2010–11 Budget effectively has three main elements for VET:

  • it maintains the level of assistance to the states and territories for the running of their VET systems at approximately $1.3 billion as prescribed by the intergovernmental agreement that provides for the National Skills and Workforce Development Specific Purpose Payment (SPP)[2]
  • it restructures Commonwealth own VET programs and incentive payments in response to changing economic circumstances. Planned expenses are adjusted to take into account the cessation of some programs and the redirection of funds to others. There is a redirection from stimulus and structural adjustment initiatives that were introduced to respond to the labour market fall-out from the global financial crisis, towards new incentives and programs to deal with the skills needs of a growing economy. The net effect of this is a slight decline in outlays in relation to these programs from approximately $2.1 billion in 2009–10 to $1.9 billion in 2010–11 in nominal terms and
  • it facilitates structural changes to the VET system by providing start-up funding to support regulatory reforms to the national VET system as agreed by the Council of Australian Governments (COAG). It also aims to drive quality improvements in the VET system as well as reforms within individual state and territory VET systems that would increase competition and student provided funding. Though the initial investment in some of these measures is substantial, the Commonwealth expects to recover some of the costs through associated revenue measures.

Commonwealth own VET programs

Funding will be freed up from programs that are ceasing—$300 million from the VET Teaching and Learning Capital Fund which was a one-off injection of funds associated with the 2008 Nation Building Package; and $375.9 million in 2013–14, from the early cessation of the Productivity Places Program (PPP). PPP funding that was provided for structural adjustment places for retrenched workers during the global financial crisis is an example of funding that is being redirected to meet new economic priorities. Following a mid-term review of the PPP and some sustained criticism, it should not come as a surprise that adjustments are being made to this program.[3]

The focus of the new Commonwealth own program initiatives include: restoring, in part, the client reach of foundation skills programs—the Language, Literacy and Numeracy Program and the Workplace English Language and Literacy Program—which has declined in recent years; increasing the participation and completion rates of apprenticeships (for example, through extending the Kickstart incentives for young apprentices and the Smarter Apprenticeship initiatives to fast-track apprenticeships); and addressing skill shortage areas.

The establishment of a Critical Skills Investment Fund is a new budget measure aimed at boosting the number of workers in skill shortage areas. Modelled on the Enterprise Based Productivity Places Program (EBPPP) which has been trialled successfully over the last year, it will leverage industry co-investment by providing 50 per cent of the cost of training for large firms and up to 90 per cent of the cost for small firms.

VET system structural changes

Departmental funding of $105.5 million is being provided over four years for the establishment of a National VET Regulator ($92.3 million) and a National Standards Council ($10.6 million), as agreed to by COAG. The initiative is expected to cost the Commonwealth $55 million over four years—as the initial expenses will be offset by $50.4 million in revenue as the Regulator transitions to full cost recovery by 2014–15. Furthermore, $15.7 million will be redirected from current expenses for the National Audit and Registration Agency and the National Quality Council whose functions will be subsumed by the National VET Regulator.

Another measure—the Quality Skills Incentive— which is potentially controversial in its implementation, aims to improve quality in the VET system. This will make funding available to the 100 largest Registered Training Organisations (RTOs) to reward them for meeting performance benchmarks. Funding of $129.8 million over three years has been provided for this measure.

In addition, incentives such as those that have already been taken up by Victoria, are being offered to the other states and territories to encourage them to reform their VET systems. The incentives include the cashing out of Commonwealth funding for the PPP. More significantly, however, this measure would provide states which engage in reform with increased access to Commonwealth supported income contingent loans (ICLs) known as VET FEE–HELP. The Budget measure is consequently labelled a ‘national entitlement to a quality training place’. With Commonwealth grants assistance to the states for VET remaining static for many years, and the states’ own capacity to increase their training expenditure limited, governments have been exploring other financing options to meet the skills needs of a growing Australian economy. ICLs, which support students in meeting the costs of their own training, have therefore been gaining acceptance in policy-making circles.

The Commonwealth must have a reasonable expectation that other states will follow Victoria down the market-based reform path as annual expenses of approximately $40 million are allocated to this measure, totalling $159.5 million over four years. As loans are repaid, there will be an associated revenue stream to offset these costs, estimated to total $105.8 million over four years. Total annual expenditure on VET FEE–HELP is expected to rise from $34.9 million in 2009–10 to $205.8 million in 2010–11, and $309.6 million in 2013–14. This is despite the lower than expected take-up in 2009–10 when only 25 650 of the budgeted 73 000 students were assisted. Recent reports confirm that although VET FEE–HELP has been extended to government subsidised students in Victoria, there has been a low take-up rate in Victorian Technical and Further Education Institutes (TAFEs).[4] Other reports have also noted that the fee increases associated with the Victorian reforms supported by the introduction of ICLs have led to a decline in enrolments in Diploma and Advanced Diploma courses.[5]

[1].    Australian Government, Budget strategy and outlook: budget paper no. 1: 2010–11, Commonwealth of Australia, Canberra, 2010, p. 6-39. Other figures in this brief are drawn from Australian Government, Budget measures: budget paper no. 2: 2010–11, Commonwealth of Australia, Canberra, 2010; Australian Government, Portfolio budget statements 2010–11: budget related paper no. 1.6: Education, Employment and Workplace Relations Portfolio, Canberra 2010; and Australian Government, Portfolio budget statements 2009–10: budget related paper no. 1.5: Education, Employment and Workplace Relations Portfolio, Commonwealth of Australia, Canberra 2009.

[2].    Australian Government, Portfolio budget statements 2010–11: budget related paper no. 1.18: Treasury Portfolio, Canberra 2010, p. 40.

[3].    J Ross, ‘Low funding and state differences plague the PPP’, Campus Review, vol. 20, no. 5, 16 March 2010, p. 4, viewed 13 May 2010,;query=Id%3A%22library%2Fjrnart%2FSQ8W6%22

[4].    J Ross, ‘Victorian TAFE students reject no-brainer loans’, Campus Review, vol. 20, no. 7, 13 April 2010, pp. 1, 7, viewed 13 May 2010,;query=Id%3A%22library%2Fjrnart%2FI9JW6%22

[5].    F Tomazin, ‘Brumby plan to tackle skills shortage backfires: TAFE fee increases deter students’, The Age, 24 March 2010, p.3, viewed 13 May 2010,;query=Id%3A%22media%2Fpressclp%2FEX8W6%22