The 2014–15 Budget has two major new initiatives in the skills training area—the establishment of an Industry Skills Fund and the introduction of Trade Support Loans. However, the cost of these measures ($915.0 million) is more than offset by the cessation of a wide range of programs, resulting in total spending under the Building Skills and Capability Programme being reduced by more than 20 per cent, from $2.8 billion in 2013–14 to $2.3 billion for 2014–15.
Industry Skills Fund
The Budget provides $476.0 million over four years to establish the Industry Skills Fund from 1 January 2015. The Fund is designed to meet the training needs of small to medium sized enterprises, with targeted industries including: health and biomechanical products; mining, oil and gas equipment technology and services; and advanced manufacturing, including defence and aerospace. It is expected to deliver some 200,000 training places and training support services over four years.
The Fund is designed to streamline training provision. It is accompanied by the cessation of 10 programs currently delivering skills training and, as such, has been received positively by training providers. While the simplification of the multitude of programs operating in the skills training area is welcome, the total savings through the cessation of these programs is over $1.0 billion over the forward estimates, creating a net reduction in funding for training provision of more than $0.5 billion.
Many of the programs that will end are targeted at disadvantaged groups. These programs include the National Partnership Agreement on Training Places for Single Parents, the Australian Apprenticeships Access Program and the Workplace English Language and Literacy Programme (WELL). There is no mention of support for disadvantaged job seekers in the proposed new program, whereas the focus of the new program is supplying the requirements of smaller enterprises in emerging industry areas. The Australian Industry Group has raised concerns, particularly about the cessation of the WELL program, noting that ‘over four million working Australians do not have adequate literacy and numeracy skills for the modern economy’. 
The cutback in training provision and, in particular, the cessation of programs supporting disadvantaged job seekers to enhance their employment prospects, appears to be at odds with other budget initiatives for young people to ‘earn or learn’. The Australian Manufacturing Workers Union has also noted that these cuts are being implemented at a time when there has been ‘an increase in 457 visas being issued to supposedly “plug skills shortages”’.
Trade Support Loans
The introduction of Trade Support Loans delivers on an election commitment to provide income-contingent loans for living costs to apprentices. Up to $20,000 will be available over four years to apprentices undertaking Certificate III or IV qualifications leading to an occupation listed on the National Skills Needs List. The loans will be similar to those in the Higher Education Loan Program (HELP) in that repayment will be through the tax system once a threshold income level is reached. Students who successfully complete their training will receive a 20 per cent discount on their debt.
The cost of establishing the loan program is $439.0 million over five years, of which $310.3 million will be provided in the first four years. This represents a very significant increase over the election commitment costing of $85.0 million over the same period.
It is unclear how the loan will be delivered. The budget papers state that the Australian Apprenticeship Centres will initially administer the loan payments for 2014–15, but consideration will be given to the scope for the financial services sector to administer them from 2015–16. It is not apparent whether this has contributed to the higher implementation costs than originally envisaged.
However, it is not all good news for apprentices. The new loan arrangements will replace the Tools For Your Trade program, which currently provides up to $5,500 in tax exempt cash payments over four years to support training, the purchase of relevant tools and other associated costs. Tools For Your Trade was also available to some apprentices undertaking agricultural and horticultural qualifications who will not be eligible for Trade Support Loans. The abolition of this program will save $914.6 million over the forward estimates, resulting in a net saving of nearly $0.5 billion in support for apprentices over the period to 2017–18.
While replacing cash payments with income-contingent loans places less pressure on the budget, there are concerns about the growing amount of these debts, their treatment as assets in the Government’s budget and the risk of non-repayment. There may also be a concern about the likely lower repayment rate of the proposed new Trade Support Loans compared to HELP loans, given that those with trade qualifications have lower average incomes that those with degrees.
Governments have previously resisted providing students with HELP-style loans to cover living expenses, with the existing HELP schemes largely covering tuition costs. The 2013–14 Budget did seek to convert Student Start Up Scholarships, which are designed to help with the costs of text books and equipment for those receiving income support payments, into income contingent loans. It will be interesting to see whether future budgets will increase the trend to student-related loans.
For copyright reasons some linked items are only available to Members of Parliament.
© Commonwealth of Australia
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to firstname.lastname@example.org.
This work has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Parliamentary Library, nor do they constitute professional legal opinion.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Entry Point for referral.