CHAPTER 2
Key issues
2.1
Successive governments have taken steps to deregulate and reform the
higher education sector. Consequently, the student contribution to the cost of
higher education has risen steadily since the 1980s, when the then-Labor
Government initiated the transition to a user-pays system for Australian
university students.[1]
2.2
Many years and many small steps later, this is the crux of the dilemma
facing decision-makers: Australia's higher education system has served the
country well, but growing demand and budgetary constraints mean that the status
quo is unsustainable. Higher education providers now operate in a partially
reformed, overregulated system which discourages innovation and diversity and
stymies the nation's competitiveness in a rapidly evolving global market. To be
among the best in the world Australia must ensure excellence in higher
education—we either evolve or we get left behind.
2.3
The government's vision for a high performing, innovative and globally
competitive higher education and research sector has been outlined in detail by
the Minister and in the committee's report into an earlier iteration of the
Higher Education and Research Reform Bill 2014 (the bill), the Higher Education
and Research Reform Amendment Bill 2014 (the former bill).[2]
Although the government was disappointed by the defeat of the former bill in
the Senate, its pursuit of excellence in higher education remains undiminished.
The government therefore listened to stakeholders and took their concerns on
board, and the resulting bill is a clear reflection of this. It preserves the
core elements of the government's reform package whilst introducing a number of
changes.
2.4
It is not the committee's intention to re-analyse the principal elements
of the proposed reforms—this analysis was comprehensively achieved by the
committee's report on the former bill—but rather to examine the new elements of
the legislation. This report will therefore limit focus primarily on new
measures proposed by the bill.
Fine-tuning higher education reforms
2.5
The challenges faced by Australian higher education policymakers are not
unique to this country:
[T]he major issue confronting political systems across the
world is to devise a policy framework which ensures the long-term financial
sustainability of the higher education system given its central importance in a
knowledge-based economy.[3]
2.6
Submitters recognised these challenges, as did the committee's report on
the former bill, which identified a number of tangible ways of improving the
reform package:
Recommendation 1
The committee recommends that guidelines for the Commonwealth
Scholarship Scheme seek to address some of the financial barriers faced by
students from low SES backgrounds and regional communities in accessing higher
education.
Recommendation 2
The committee recommends that the government explore the
provision of a structural adjustment package to assist certain sections of the
higher education sector transition to a fully deregulated system.
Recommendation 3
The committee recommends that the government examine HELP
indexation measures in light of evidence presented to the committee,
recognising unforseen impacts of the proposed reforms on students.
Recommendation 4
The committee recommends that the government explore avenues
to recover HELP debts of Australians residing overseas.[4]
2.7
The government listened to these recommendations, as well as to
proposals from cross-bench senators, and has achieved what one submitter
described as 'a remarkable level of consensus across the higher education
sector'.[5]
Following this committee's report on the former bill and extensive
consultation, the government has:
-
incorporated safeguards to ensure domestic student fees are lower
than international student fees;
-
withdrawn the proposal to amend the rate at which student HELP
debts are indexed;
-
provided for a pause on student debt indexation for primary
carers of children under five while they are earning under the minimum
repayment threshold;
-
proposed a structural adjustment fund designed to help
universities—particularly regional universities—transition to a more
competitive market; and
-
proposed a new scholarship fund for universities with a high
proportion of students from low socioeconomic backgrounds.
2.8
The new measures would promote equitable treatment of all students,
irrespective of where they study while at the same time improving the financial
sustainability of HELP. Key changes to the proposed legislation are examined
below.
Indexation arrangements
2.9
The indexation of student HELP debts was a key point of contention
during the committee's inquiry into the former bill.[6]
The government's decision to drop plans to charge higher interest on student
loans therefore received strong support from submitters to this inquiry.[7]
2.10
As put by the Go8:
Keeping CPI as the indexation factor for HELP loans means
graduates who take longer to pay won’t pay more in real terms. This is an
important protection for lower income graduates and those who take time out of
the workforce (and a key element of the design of HECS).[8]
2.11
Victoria University added:
This restores the idea of Bruce Chapman and his fellow
architects of HECS that income-contingent loans provide some insurance against
risk for those investing in their education, and is a move which Victoria
University applauds.[9]
2.12
As well as retaining the CPI as the indexation rate for HELP debts, the
bill would also introduce relief measures for primary carers of children under
five when they are earning under the minimum repayment threshold. This too
received strong support from submitters.[10]
Committee view
2.13
The committee notes that its report on the former bill, tabled in
October 2014, recommended that the government re-examine its plans to change
indexation arrangements for student loans, and is pleased that this
recommendation was heeded. The committee is of the view that continuing to
index student debt in line with CPI will mitigate any potential unintended
consequences a change of arrangements may have had.
Supporting disadvantaged students
Commonwealth Scholarship Fund
2.14
Establishing a new Commonwealth Scholarship Scheme to help disadvantaged
students is a key component of the government's higher education reforms. The
measure would require institutions with more than 500 students to put 20 per
cent of additional revenue raised through any fee increases towards improving
student access and participation.[11]
2.15
The committee's report on the former bill offered detailed analysis of
the proposed Commonwealth Scholarship Fund.[12]
It is not the intention of the committee to re-visit this proposed measure,
save to acknowledge diversity in views on how money from the fund can best be
allocated.
The University of Wollongong, for example, whilst supportive of
the establishment of the fund in principle, proposed a progressive alternative
to the flat 20 per cent of revenue.[13]
The University of Wollongong also suggested that the money should perhaps not
be pooled for allocation:
[The fund] is an important component to address the
inequality in access to education, particularly for students from low
socioeconomic backgrounds. The University is also proposing that the
Commonwealth Scholarships Fund be allocated at the institutional level rather
than from a centrally funded pool.[14]
Committee view
2.16
The committee notes the above suggestions, and supports further
examination of their viability in the future.
Structural adjustment fund
2.17
The bill introduces a $100 million structural adjustment fund to assist
institutions with higher proportions of disadvantaged students, such as those
from regional areas and newer metropolitan universities.
2.18
This was welcomed by many submitters, however some were concerned that
the fund may not ' provide explicit support for Australia's regional students
and universities' and may 'therefore dissipate the quantum accessible by
regional providers.'[15]
To ameliorate this risk, Federation University Australia proposed establishing
a complementary regional fund:
...to offset systemic competitive inequalities that divide
metropolitan and non-metropolitan tertiary education provision. This will have
the effect of addressing the urgent needs of regional providers (regional
adjustment fund) while easing competition for funding by other providers
(structural adjustment fund). A regional adjustment fund could be incorporated
within the structural adjustment fund.[16]
2.19
The committee notes that the bill would give the Minister discretion
over the awarding of grants from the new structural adjustment fund, and notes
calls for increased clarity on how regional providers' interests would be
ensured.
Expanding opportunity to more students
2.20
Much of the debate surrounding the proposed reforms has focused on
universities, specifically, university fees. A very high profile scare campaign
conducted by political opponents of the reforms has unfortunately also had the
effect of drowning out discussion about measures pertaining to non-university
education providers, which are likely to have a very positive effect. As put by
the Australian Chamber of Commerce and Industry (ACCI):
Extending the uncapped demand driven system to
non-universities in the higher education sector will even further enhance
competition and will most likely lead to private institutions lowering the fees
paid by students in response to competition and as a reflection of subsidies.[17]
2.21
For a variety of reasons, not every prospective student will want to
pursue an education through a public university. Many enrol with alternative
institutions '...because they deliver better outcomes for particular students,
often in niche areas or through smaller teaching cohorts.'[18]
2.22
Students choosing private providers, for example, represent ten per cent
of higher education enrolments, but currently do not enjoy many of the benefits
extended to their peers at public universities:
To continue to discriminate against them surely goes against
the principle of equitable access that underpins our higher education system,
and indeed, civil society.[19]
2.23
As Mr Dean Warwick, studying through distance education at Tabor
Adelaide, stated:
[I]f I complete my studies and graduate and leave with a
similar degree that someone from a public university gains, and end up working
with the same young people that the person from the public university is going
to work with, why should I be disadvantaged and have a larger debt because I
chose to study the degree that I thought would be more applicable to work with
youth than a different degree that had youth work subjects thrown in?[20]
2.24
The Council of Private Higher Education (COPHE) illustrated the inequity
of the current system with the following table:[21]
2.25
COPHE posited that the extension of Commonwealth Supported Places (CSPs)
to non-university higher education providers (NUHEPs) and students at private
universities is critical to addressing this inequity. Given that many students
from disadvantaged and low socio-economic backgrounds are enrolled with these
providers, the question of fairness and equity becomes even more salient.[22]
2.26
The committee noted that support for extending the demand-driven system
to all bachelor and non-bachelor courses is widely supported, and that the
flow-on benefits are recognised, as is the contribution made by private
universities. As put by the University of Notre Dame, discussing the
contribution of private universities:
The current system of funding, first introduced in 2012, is
not a true “Student Demand Driven system” in so far that neither the government
subsidies nor the HECS-HELP scheme flow to those students who choose to attend
a university other than a historically defined public university (with some
exceptions). Government invests in higher education because there is clear
evidence that there is a public benefit from having an educated population. All
universities in Australia, public or private, are not for profit organisations,
which meet the same quality standards, engage in the same functions (teaching,
scholarship, research, community engagement) and contribute the same level of
public benefit to the wider community. As such, the justification for providing
government subsidies is equally applicable to all universities.[23]
For similar reasons expressed in the point above, The
University of Notre Dame Australia is supportive of the amendments in the Bill
which will extend the current Demand Driven system to all bachelor and
sub-bachelor courses at non-university higher education providers (NUHEPs)
which are registered at TEQSA [Tertiary Education Quality and Standards Agency].
We believe that this will increase competition, diversity and real choice for
students and that quality will be maintained through the requirement of TEQSA
registration.[24]
2.27
The argument for increasing equity was succinctly put by the Australian
Council for Private Education and Training (ACPET):
The reforms will not only address the fundamental inequity
faced by some 100,000 higher education students enrolled with non-university
higher education providers but open up new opportunities for more students to
undertake higher education that best meets their needs and circumstances and
those of industry and the broader Australian economy.[25]
Committee view
2.28
The committee agrees that students studying with non-university or
private providers have been largely overlooked in the discourse around these
reforms. This is regrettable. The committee concurs with assessments made by
COPHE and ACPET, and believes that the potential benefits to these students, if
the reforms are enacted, are immense.
2.29
It is easy to assume, incorrectly, that higher education equals an
education through one of the well-known public universities. It is important to
remember, however, that a large number of students pursue different
alternatives, and it is unfair to treat them less favourably. These are
students who are gaining valuable skills which they, their communities and the
nation will reap great rewards from.
Concerns about fees
2.30
Fees have, arguably, been the focal point of debate the government's
higher education reforms.
2.31
The committee's report on the former bill examined fee deregulation and
noted that a) increased competition should serve to keep costs manageable, and
b) the benefits of increasing access to higher education, particularly the
economic benefits to individuals and the nation, far outweigh any slight
increase to some course costs.[26]
Furthermore, given that there is no reliable evidence to suggest that fees will
rise unacceptably high, and that students will not be asked to contribute to
these costs until they can afford to, the committee concluded that the spectre
of skyrocketing course fees was little more than a politically driven scare
campaign.[27]
2.32
Over the course of this inquiry the committee noted suggestions aimed at
addressing concerns about fee increases. One such proposal came from Professor
Bruce Chapman, an academic economist and one of the architects of HECS in 1988.
Professor Chapman posited that the government could curb increases by reducing
subsidies to universities as fees increase. The operational terms were
described thus:
For each subject cluster the government allows a price to be
charged (let’s label this x) and at this price all the revenue charged to the
enrolling student is received by the institution (and is registered as a normal
HECS debt owed by the student). Universities still have complete price
discretion, but unlike the current Budget proposals, if the price imposed on
the course exceeds x, there will consequently be a reduction in the
government’s overall grant to that university. Further, to make sure that there
are likely to be significant and unambiguous effects on university price setting,
the reduction in grants will become increasingly more severe the higher the
prices are set.
Thus the scheme is designed to limit the imposition of high
prices in a HECS-type world, but with parameters to be chosen by the government
that achieve this objective without excessively reducing university autonomy to
charge the sorts of prices that make sense in their particular educational,
geographic and socio-economic environments. It is essentially a conditional
market-based reform, very similar to proposals suggested by David Phillips in 2012
and the Browne Report provided to the UK government on fee deregulation in
2010.[28]
2.33
Professor Chapman also noted that that this instrument is commonly used
by governments and provided some other examples:
- To meet the immunisation requirements for the Family Tax Benefit Part A supplement
parents need to have their children immunised during the financial years that
each child turns 1, 2 and 5 years old (unless a case is made against this on conscientious
grounds);
-
Many governments private higher education subsidies to students studying
abroad, but these subsidies have to be repaid in the event that graduates
choose not to return and work for the funding agency (the government) for given
periods; and
-
Whilst not about behavioural change, it is commonplace for governments
to reduce social security if recipients increase their income from paid work,
for example with respect to eligibility for and the level of Youth Allowance.[29]
Committee view
2.34
The committee acknowledges that a persistent fear of rising course fees
is distorting discourse around the reform package, but has not, during this or
its previous inquiry, seen reliable evidence suggest unreasonable increases
might eventuate.
2.35
The committee noted with interest Professor Chapman's proposal, aimed at
ensuring that fee increases are kept reasonable. The proposal is not
incompatible with the reform package currently before the Senate, and the
committee considers it might be worthwhile for its content to be examined
further.
Should we undo the demand-driven
system?
2.36
One of the alternatives to the reform package is "re-capping"
places, essentially scrapping the demand-driven system.[30]
2.37
The committee notes the historically bipartisan approach to the
demand-driven system, which has served the sector well and brought considerable
benefits to the students and education providers. As put by Ms Belinda
Robinson, Chief Executive of Universities Australia, the demand-driven system
'was one of the tremendous reforms that came out of the Bradley Review from the
previous government.'[31]
Ms Robinson added:
It has enabled many more people with the ability, the
aptitude and the desire to have a university education to go to universities.
It does mean that all of those, in fact, who have the aptitude and desire to go
to universities are able to do so. It has opened up enormous opportunity. It
has opened up the opportunity to really transform people's lives. We are very
strong supporters of the demand-driven system. The bill that we are talking
about at the moment does not propose any change to that. We would be very
strongly opposed to any change to the demand-driven system.[32]
2.38
The committee understands that undoing the demand-driven system is not a
widely supported, viable—or even desirable—alternative. As put by Professor
Peter Dawkins, Vice Chancellor and President of Victoria University:
I am opposed to recapping...Victoria University's mission is
about transforming the lives of students from diverse backgrounds, and we see
the transformational effect that a tertiary education has on students from
underprivileged backgrounds and students who do not always do that well at
school, for example, yet can end up doing brilliantly at university. And I
think this demand-driven system has opened up opportunities for tertiary
education for many students who would not have had that opportunity, and it is
just great to see that happening. Our major focus with those students who have
come into the system who might not have come in before is focusing on making
them successful and I think that is they key issue for government policy—not
excluding them from the system. And there are some students who are being
extremely successful but who if you recapped the system would not enter the
system.[33]
Committee view
2.39
The committee notes the benefits of the demand-driven system, as
outlined in its report of 2014,[34]
and has received no compelling evidence to support "re-capping" places.
The committee is therefore not of the view that places should be capped, as
this would only serve to reduce the equity of access which the demand-driven
system has made possible.
Domestic student fees
2.40
Addressing genuine stakeholder concerns about domestic student fees
relative to overseas student fees, the bill proposes to amend guidelines so
that Commonwealth supported students are not charged more than non-Commonwealth
supported students. This will be achieved by ensuring that:
...the tuition fee for a non-Commonwealth supported student for
a unit of study must not, except in exceptional circumstances, be less than the
sum of the tuition fee a Commonwealth-supported student pays and the
Commonwealth contribution amount.[35]
2.41
Because non-Commonwealth supported students are generally overseas
students, this measure will exert downward pressure on fees for domestic
students.
Doing nothing is not an option
2.42
This inquiry unfortunately unfolds in a highly politicised environment.
This has obfuscated the fact that deregulation of the sector has long been
recognised as desirable by both major parties.[36]
It is also regrettable that politically-inspired derailing of the debate and
reforms will primarily affect students.
It concerns the Go8 that the need for bold reform is being
viewed by some as a political whim rather than a necessity for the benefit of
future students and through them Australian society and the Australian economy.
It would be courageous to consider that defeat of this
legislation, or even any compromise position, can deliver a lasting solution
for the sector and, importantly, its students.
As a result, future Governments will still have to deal with
the problem as will all future members of the Senate.[37]
2.43
The Regional Universities Network (RUN) stated:
Run has welcomed the debate on higher education over the last
12 months. It has prompted broader public discussion about the role of
universities and the university system's contribution to Australia's economic
and social progress at a national and local level.
However, we are very concerned if this higher education
debate remains highly charged, overtly partisan and unresolved. This
uncertainty is particularly detrimental to 'non-traditional' students, who may
lack the confidence and familial history – but not academic capacity – to
embark on university studies.[38]
2.44
It is a fact that successive governments have signalled that they cannot
continue to meet the financial requirements of a demand driven higher education
sector. The system is simply unsustainable. Without deregulation and in the
absence of adequate government resourcing the only other way to maintain
adequate funding for the system would be through increased taxation. The
committee is aware that there is little public appetite for raising taxes.[39]
2.45
It is also a fact that, as demand for higher education grows, so too
will costs.
While demand for University places is currently fairly flat,
demographic growth will drive a large increase in demand early in the next
decade. The Go8 estimates that total demand for tertiary places will rise by
563,000 to 2030 (including 160,000 in Bachelors places). Therefore, the costs
of maintaining a high quality, demand-driven higher education system can only
increase.[40]
2.46
The Innovative Research Universities stated:
Current revenue from Government and students does not support
the high quality university education that universities wish to provide and
that students and the public expect.
...
There is a well-established gap between the resources
available to universities and the resources required to meet long term outcomes
for higher education.[41]
2.47
The Australian Technology Network stated in its submission:
The ATN is a strong advocate of the demand driven system as a
significant reform, which ensures access for all students who qualify to attend
an Australian university. However, the ATN recognises that the cost of that
reform has been significant and is not sustainable in the current economic
climate of strong fiscal restraint across all portfolios.[42]
2.48
The Go8 concluded there are several choices open to our political
leaders, including that Government (the taxpayer) increase its funding per
student, in addition to funding the critical research mission of our
universities; increase the percentage of the costs carried by graduates; or do
nothing and settle for the status quo, noting:
This simply transfers the challenges of higher education
sustainability to the next generation. It would lead to a decay of the quality
of our higher education and would represent a failure in our duty of care to
the nation. It would also put at risk one of Australia’s most important export
industries.[43]
2.49
The committee noted that the "do nothing" approach did not
receive strong support from the sector. It is clear that the status quo is
unsustainable as demand for higher education continues to grow.
2.50
Put simply, more money is required if the system is to continue to
perform. As put by Professor Peter Dawkins:
I would say that we are under a fair degree of financial
stringency in seeking to achieve our objectives, and that we need to invest
more and more. It is becoming tougher as we expand tertiary participation, but
it is right to expand it, and we just need to invest more to make the students
successful. We are determined to improve the quality of teaching and learning.
We are determined to improve the student experience, and various reviews of
funding suggest that, in order to achieve world-class standards in teaching and
learning, particularly with a broad participation, students need additional
funding. So that is what we are anxious to ensure happens.[44]
Conclusion
2.51
The committee is pleased to see that extensive consultation by the
government has refined the former bill. The committee is satisfied that the
core of the government's world-leading higher education reform package remains
while improved provisions are made for disadvantaged students.
2.52
If enacted through this bill, the government's higher education reforms
will expand choice for students, remove impediments to competitiveness directly
caused by longstanding overregulation and secure the financial sustainability
of the system. In turn, this will translate into more control for students over
their education, a renewed vigour and opportunity for our universities to excel
in the global arena, and on ongoing commitment to one of the fundamental
principles of the Australian higher education system: that no student,
regardless of background, is required to pay upfront costs to access the
education of their choice. That principle, in its simple elegance, is the
premise for this reform package.
2.53
Australia needs these reforms. The committee urges decision makers to
see through politically motivated scare campaigns and focus instead on the long
term benefits of the proposed measures.
Recommendation 1
2.54
The committee recommends that the Senate pass the bill.
Senator Bridget McKenzie
Chair
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