Purpose of the bills
In his second reading speech, the Assistant Minister for Vocational Education, Training and Apprenticeships, the Hon Steve Irons MP, noted that the package of bills is intended to expand the Tuition Protection Service model for international students, to domestic students. Collectively, the three bills would provide tuition protection for domestic students accessing a VET Student Loan (VSL), a FEE-HELP loan, or a HECS-HELP loan with a private education provider, or TAFE. Assistant Minister Irons explained the purpose of the bills, noting that the new tuition protection arrangements would commence from 1 January 2020:
These tuition protections will ensure that students are supported if their education or training provider stops teaching or closes entirely. Students protected under these new arrangements will be assisted to complete their studies in a similar course with another provider and gain a qualification, or may have their loan removed for the parts of their study they have commenced but were not able to complete.
It makes sense to expand the TPS model to domestic students accessing government loans. Since its inception in 2012, the TPS has proven to be successful for students and providers and contributes to the strong reputation of Australia's international education sector.
Current tuition assurance arrangements for domestic students
The tuition protection arrangements for domestic students in the vocational education and training (VET) sector are provided for in the VET Student Loans Act 2016 (VSL Act), with many of the detailed requirements set out in the VET Student Loans Rules 2016 (the Rules).
The Department of Employment, Skills, Small and Family Business (Department of Employment), has policy oversight of the VET sector, while the Australian Skills Quality Authority (ASQA) is the national regulator for this sector.
The tuition protection arrangements for domestic students undertaking one or more units of study with a higher education provider are outlined in the Higher Education Support Act 2003 (HESA).
The Department of Education has policy oversight of the international and higher education sectors, while the Tertiary Education Quality and Standards Agency (TEQSA) is the national regulator for the higher education sector.
Tuition protection for the vocational education and training sector
The VSL Act was passed in December 2016 and replaced VET FEE-HELP with VSL from 1 January 2017. Prior to 2018, tuition assurance was provided by one of two tuition assurance operators:
the Australian Council for Private Education and Training (ACPET), or
TAFE Directors Australia (TDA).
The transitional approval for ACPET and TDA as Tuition Assurance Operators expired on 31 December 2017. From 1 January 2018, interim tuition assurance arrangements were put in place, which were managed by the then Department of Education and Training. In May 2019, the management of the interim arrangements for the VET sector was transferred to the Department of Employment. Of note, these arrangements only apply to students with a VSL or VET FEE-HELP loan.
The Secretary may approve a body to be a course provider under the VSL Act if the Secretary is satisfied that the body meets the course provider requirements. The Secretary can exempt a provider from these requirements.
Tuition protection is available to VSL and VET FEE-HELP loan students, in the event that their provider closes or stops delivering their course. In these cases, the VSL Act requires the course provider to find a replacement course for the affected student. If it is impractical for the student to finish an equivalent course, the course provider is required to repay the balance of the student's fees. This would require the course provider to re‑credit the student's FEE‑HELP balance for an amount equivalent to the tuition fees required for the course.
Tuition protection for the higher education sector
Currently, the minister can approve a body corporate as a higher education provider under HESA if it can provide at least one accredited course of study that leads to a higher education award and fulfils the tuition assurance requirements or is exempt from those requirements.
Table A lists the providers that have been exempt from the tuition assurance requirements, which are primarily public universities. Other providers may also be exempt from the tuition requirements with written approval from the minister.
The tuition assurance requirements are set out in chapter 2 of the Higher Education Provider Guidelines 2012 (the Guidelines). A non-exempt higher education provider that does not adhere to the tuition assurance requirements may be subject to a civil penalty of 60 penalty units.
Students who are enrolled in a course of study which the provider ceases to provide as planned can choose between:
an offer of a place in a similar course of study with a second provider, without any requirement to pay the second provider; or
a refund of the student's up-front payments for any unit of study that the student commenced but did not complete. If a student chooses this option, a corresponding reduction will be made of their HECS-HELP debt or their FEE-HELP balance will be re-credited.
It should be noted that these arrangements allow students of higher education providers to choose between replacement courses or a refund of course fees. In contrast, the tuition protection arrangements for VSL students give priority to replacement courses, with course fees being refunded only if a suitable replacement course is not available.
Tuition protection model for international students
The Tuition Protection Service (TPS) was established on 1 July 2012.
In its submission, the TPS advised that it acts as a 'placement and refund service of last resort' for the international education sector. It explained the scope of its jurisdiction:
The TPS is a universal scheme, hence, all Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS) registered education providers are covered by the TPS and contribute to the TPS Levy. However public providers (Table A universities, TAFEs, schools that receive recurrent public funding) are exempt from paying the Risk Rated Premium component of the TPS Levy.
The TPS is industry funded. All providers of education to international students are required to pay an annual levy. The TPS levy is used to assist students where a provider defaults and is not able to meet their obligations, as well as to contribute to the operational costs of the TPS.
The organisational structure of the TPS is as follows:
TPS Director – is responsible for overseeing the operation of the TPS, including ensuring tuition protection for overseas students, managing the long term sustainability of the Overseas Student Tuition Fund and determining the amount of the annual TPS Levy.
TPS Advisory Board – is responsible for advising the TPS Director on the settings for the Risk Rated Premium and Special Tuition Protection components of the TPS Levy. The Risk Rated Premium component of the levy is set annually by the TPS Director, on approval by the Treasurer, by 31 December each year, and is set by legislative instrument. The TPS Advisory Board is currently made up of 10 members—five from an Australian government agency and five other members.
TPS Operations team – provides policy and administrative support to the TPS Director, secretariat support for the TPS Advisory Board and undertakes the TPS Levy collection. The TPS Operations team is provided by the Department of Education.
TPS Administrator – assists the TPS Director to manage and assess student claims through the TPS online claims management system. The TPS Administrator is an external service provider.
The TPS explained that where a provider defaults (that is, they fail to start a course on the agreed starting date or ceases operating a course before it is completed), the provider must either, place the student with an appropriate alternative provider, or refund students their unspent tuition fees, within 14 days of the default. Where a provider is not able to meet these obligations, the TPS acts in the place of the provider.
Overview of the bills
The Education Legislation Amendment (Tuition Protection and Other Measures) Bill 2019 (Tuition Protection Bill) is the principal bill which would establish the new tuition protection arrangements, modelled on the TPS scheme for international students. The Tuition Protection Bill would repeal all tuition assurance provisions from the VSL Act and HESA.
The following two bills are complementary to the Tuition Protection Bill and would establish the corresponding levy arrangements:
VET Student Loans (VSL Tuition Protection Levy) Bill 2019 (VSL Levy Bill)
Higher Education Support (HELP Tuition Protection Levy) Bill 2019 (HELP Levy Bill).
The provisions of the bills are discussed in detail below.
Provisions of the Tuition Protection Bill
The Tuition Protection Bill contains three schedules:
Schedule 1 would amend the VSL Act by repealing provisions related to tuition assurance and replacing them with a new VSL tuition protection scheme. In addition, minor consequential amendments are made to the Education Services for Overseas Students Act 2000 (ESOS Act).
Schedule 2 would amend HESA by similarly repealing provisions related to tuition assurance and replacing them with a new Higher Education Loan Program (HELP) tuition protection scheme.
Schedule 3 would make minor amendments to the VSL Act concerning the Secretary of the department revoking approval of a VSL provider at the request of that provider.
The new tuition protection arrangements would commence on 1 January 2020.
Which providers are covered by the new tuition protection arrangements?
The new tuition protection arrangements would apply to all approved course providers under the VSL Act and all approved higher education providers under HESA, other than Table A providers or providers who have been exempt.
Subsection 16-15 of HESA lists the Table A providers, which are predominantly Australian public universities.
Proposed paragraph 66A(1)(b) and 166-5(1)(b) respectively, exempts other providers of a kind prescribed by the Rules and Guidelines from the new tuition protection arrangements. This would allow a class of providers to be exempt from the tuition protection arrangements 'should it become apparent that the risk of another class of providers defaulting is also low and they have adequate processes and procedures in place to provide tuition protection to their students'.
In addition, with respect to higher education providers, the minister may also determine, by written notice, that the tuition protection arrangements apply or do not apply to a particular higher education provider.
The Tuition Protection Bill would appoint a VSL Tuition Protection Director and a HELP Tuition Protection Director. The bill specifies that these positions are to be held by the same person who holds the office of the TPS Director. The TPS Director will be required to manage the Tuition Protection arrangements relevant to each specific sector, including:
managing the placement of students where the course provider has defaulted;
paying amounts out of, or reducing the balance of the respective VSL Tuition Protection Fund or HELP Tuition Protection Fund;
reporting to the minister on the operation and financial status of the corresponding schemes and funds;
managing each of the funds;
making legislative instruments in relation to the VSL Levy and HELP Levy; and
recommending that the Secretary take action against a provider that has defaulted in relation to a student or has not otherwise complied with the Act.
A VSL Tuition Protection Fund Advisory Board and a HELP Tuition Protection Fund Advisory Board would be established and comprise the same members as the TPS Advisory Board. This would include the Chair and Deputy Chair of the TPS Advisory Board also being the Chairs and Deputy Chairs of the VSL Advisory Board and HELP Advisory Board. Like the TPS Advisory Board, the role the VSL and HELP Advisory Boards is to provide advice and make recommendations to the corresponding Director in relation to setting the VSL Levy and HELP Levy.
Establishment of Tuition Protection Funds
Two new separate accounts will be established—a VSL Tuition Protection Fund and a HELP Tuition Protection Fund. The purpose of each fund relates to its corresponding sector and includes, for example, making payments in connection with tuition protection, paying the respective director and Advisory Board including costs associated with the performance of these functions, and reducing the balance of the Fund (and therefore the available appropriation for the Fund) without making a real or notional payment. The Tuition Protection Bill also provides that the Rules and Guidelines may make provisions concerning the making of payments in connection with tuition protection, including in relation to the following:
the circumstances in which payments may be made;
the amounts of different kinds of payments;
the methods for calculating different kinds of payments.
Certain credits must be made to the fund, as listed at schedule 1, proposed section 66K and schedule 2, proposed section 167-5. These include amounts relating to the corresponding tuition protection levy, penalties for late payments of the levy, and other amounts related to the fund.
What are the tuition protection requirements?
Approved providers are required to comply with the new tuition protection arrangements proposed by the Tuition Protection Bill, pay an annual levy as set by the corresponding VSL Levy Bill or HELP Levy Bill, and pay any late payment penalty. The requirements for the tuition protection arrangements are set out in new Parts proposed by the bill and would include:
Notification obligations to the relevant director and affected student in the event of the provider defaulting; and
Provision of information to the relevant director to enable the director to assist affected students to find a replacement course or have their VSL, FEE‑HELP or HECS-HELP balance re-credited.
The Tuition Protection Bill also provides that relevant Rules and Guideline may make provision for a range of matters relating to the relevant tuition protection levy and penalties for late payment, as listed in schedule 1, proposed subparagraph 49A(2), and schedule 2, proposed subparagraph 19‑66A(3).
Requirement to inform the relevant director and student of the default
Where a course provider defaults on a student, the course provider must notify the VSL Tuition Protection Director within 24 hours of the default. Within 3 business days of the default, the provider must inform the VSL Tuition Protection Director of specified details relating to the student, the course and the tuition fees. If requested in writing by the VSL Tuition Protection Director, the provider must give the director specified documentation relating to the parts of the course that the student has completed. The Tuition Protection Bill also provides that the Rules may prescribe requirements relating to these notices.
Course providers must also notify the affected student of the default within 24 hours of the default, as well as comply with any notice requirements as prescribed by the Rules.
A course provider who does not comply with the requirements and fails to notify the VSL Tuition Protection Director or the affected student may be subject to a civil penalty or an offence of strict liability, each of 60 penalty units.
Equivalent provisions apply to higher education providers.
Definition of 'default'
A provider is determined to have defaulted in relation to a student under the following circumstances:
the course or unit of study does not commence as scheduled and the student is still enrolled in the course; or
the course or unit of study, or part thereof, ceases before it is completed and the student is still enrolled in the course.
Additionally, in relation to VET course providers, the student must have had a VSL approved or have a HELP balance of greater than zero on that day. With regards to higher education providers, the students must have been entitled to FEE-HELP assistance or HECS-HELP assistance for the unit of study. One of the eligibility criteria for FEE-HELP and HECS-HELP assistance is that the student must have applied for the assistance. The effect of these provisions is that students who have paid their course fees upfront will not be covered by the tuition protection arrangements.
Suitable replacement course
Where a provider has defaulted, the relevant director must decide whether or not there is a suitable replacement course for the affected student. Proposed subsection 66E(2) of schedule 1 and proposed subsection 166-25(2) of schedule 2 lists the matters that the director must have regard to when determining whether a course is a suitable replacement course, and includes any other matters prescribed by the Rules and Guidelines.
The director may require an approved course provider to provide information to inform a decision in relation to whether there is a suitable replacement course. Failure to comply with a director's request for information would give rise to a civil penalty and is also recognised as an offence of strict liability of 60 penalty units each.
If the director determines that a suitable replacement course is available, the director must inform the student in writing of certain details relating to the course, the new provider, the tuition fees, and information concerning the student's right to request a reconsideration of the director's decision within 28 days of the notice.
Obligations of replacement provider
The Tuition Protection Bill imposes a number of obligations on the replacement provider when a provider that has made an offer for a replacement course or unit of study and the student accepts the offer. These obligations include:
providing written notice of the acceptance to the director within 14 days of the acceptance;
granting the student the course credits completed by the student;
ensuring that tuition fees for the replacement component of the replacement course are not changed if tuition fees have been paid for the original course; and
enrolling the student in the replacement course as soon as practicable.
Approved providers who do not comply with these requirements may be subject to a civil penalty or a strict liability offence of 60 penalty units each.
Moreover, replacement higher education providers must also keep up to date records in relation to the student concerning the matters listed in proposed subsection 166-32(1) of schedule 2. A failure of the replacement provider to keep these records may be subject to a strict liability offence of 60 penalty units.
Re-crediting students fees
In relation to VSL Act course providers, where there is no suitable replacement course available, the VSL Tuition Protection Director must inform the affected student in writing of the decision, including the matters the director had regard to and information concerning the student's right to seek a reconsideration of the decision. Where a decision is not reconsidered or is confirmed, the director is required to indicate in writing that an amount equal to the student's loan amount used to pay tuition fees will be re-credited to the student's HELP balance.
The VSL Tuition Protection Director must also give written notice to the Secretary and the course provider of the default, including the director's decision that there is no suitable replacement course for the student. The notice to the course provider must also state the fee amount to be re‑credited to the student's HELP balance, noting that the course provider will be required to pay this amount to the Commonwealth, and inviting the course provider to make a written submission to the director within 28 days about the re-credited amount.
With regards to HESA higher education providers, the student's fees are re‑credited if the HELP Tuition Protection Director is not satisfied that there is a replacement course, or if the student elects to have the fees re-credited to their HELP balance. The amount re-credited is equal to the amount of the FEE-HELP or HECS-HELP assistance that the student received for the affected unit. Like the VSL Tuition Protection Director, in the event of the student's HELP balance being re-credited, the HELP Tuition Protection Director must also notify the Secretary and the higher education provider.
The tuition protection arrangements proposed by the Tuition Protection Bill will not apply to course providers already approved at the time the changes come into effect, or if prior to the commencement of the bill, the course provider had made an application for approval which had not been decided.
Review of the Tuition Protection Service and the new scheme
The Tuition Protection Bill would require the minister to commence a concurrent review, before 1 July 2021, of the TPS scheme, the operation of the provisions of the Tuition Protection Bill, and the VSL and HELP funds. A report must be prepared of the review, which the minister must table in both Houses of Parliament within 15 sitting days of the completion of the report.
Schedule 3 – arrangements for revoking VSL provider status
Schedule 3 of the Tuition Protection Bill proposes minor amendments to the VSL Act relating to the Secretary revoking the VSL provider's status at the request of the provider. Currently, under section 38 of the VSL Act, an approved provider can require that the Secretary revoke the provider's approval. Items 2 and 3 of schedule 3 propose to amend section 38 to allow the Secretary to refuse to revoke the approval if the suspension or revocation of an approval is already in progress under another section of the VSL Act. The explanatory memorandum sets out the rationale for this amendment:
The intention is to strengthen the Secretary's rights regarding revocation to prevent a provider requesting that its approval status is revoked voluntarily to circumvent compliance action being taken against it.
Provisions of the VSL Levy Bill and the HELP Levy Bill
The VSL Levy Bill would establish the levy arrangements for VSL providers while the HELP Levy Bill would establish the levy arrangements for FEE‑HELP and HECS-HELP providers.
The levy bills have three core purposes:
to impose the corresponding VSL or HELP tuition protection levy;
to specify the amounts that are payable by various classes of providers; and
to prescribe the levy components and the manner in which, and by whom, they will be determined each year.
Part 2 of the levy bills sets out the three components of the tuition protection levy, as well as the method of calculating these amounts. The three components are:
the administrative fee component;
the risk rated premium component; and
the special tuition protection component.
The factors used in the calculations of the three levy components will be set out in legislative instruments made under the corresponding bill. The minister will make the legislative instrument in respect of the administrative fee component, while the Tuition Protection Director will make the legislative instrument in respect of the relevant risk rated premium component and the special tuition protection component.
The explanatory memorandum to the VSL Levy Bill set out the reasoning behind this method:
The approach of using legislative instruments gives the minister and the [VSL Tuition Protection] Director flexibility in setting the various components of the levy to ensure the VSL Tuition Fund fulfils its purpose and that leviable providers pay an amount which reflects the current state of the Fund, the risk rating of each provider and its level of exposure in the VET Student Loans program.
The explanatory memoranda to the levy bills notes that the approach will provide the minister and the relevant tuition protection director with flexibility in setting the various components of the levy to ensure the corresponding Tuition Protection Fund fulfils its purposes, and that leviable providers pay an amount which reflects the current state of the Fund, the risk rating of each provider and its level of exposure in the program.
The explanatory memoranda to both levy bills stated:
The mechanism of setting components of the levy that reflect the costs of operating the tuition protection scheme and particular providers' risks of defaulting, by enabling flexible year-on-year adjustments through legislative instrument, is consistent with the successful and industry-accepted mechanism for the TPS Levy established under the Education Services of Overseas Students (TPS Levies) Act 2012.
Further detail on each of the components is set out below. The individual clauses mentioned refer to the clauses in both the VSL Levy Bill and the HELP Levy Bill which are identical.
Administrative fee component
The administrative fee component is intended to cover the ongoing administrative costs of the tuition protection arrangements, such as the remuneration of the respective Director, members of the corresponding Advisory Board and any consultants engaged by the director to assist and support the performance of his or her role and functions.
This component of the levy is payable by all leviable providers, although a new provider only pays part of the component in their first year.
Clauses 8 specifies that a leviable provider's administrative fee component for a year is the sum of:
the amount determined in an instrument under section 9 for the purposes of paragraph 8(2)(a) for the year; and
the amount determined in an instrument under section 9 for the purposes of paragraph 8(2)(b) for the year, multiplied by the total VSL students for the provider for the year.
The explanatory memoranda note that by factoring in a provider's total VSL or HELP students for the year into the equation, the provider's degree of exposure in the respective programs can be taken into account.
Clauses 9 sets out that the minister is responsible for making the legislative instrument setting the amounts used to calculate a leviable provider's administrative fee component.
Clauses 10 provides for the indexation of both the administrative fee component, and also the upper limits of the amounts of the administrative fee component prescribed in subclause 9(3) of the bill.
Risk rated premium component
The risk rated premium component is intended to cover the risk of each provider defaulting. It is payable only by private providers; that is, it is not payable by TAFEs or by providers which are owned by the Commonwealth, a State, or a Territory.
Clauses 11 provide the method statement for how the component is to be calculated. The calculation is based on the provider's level of exposure under the corresponding VSL or HELP program, in terms of total student numbers and VSL or HELP loan amounts, as well as the provider's risk of default based on certain risk factors.
Clauses 11 also state that if a leviable provider is a new provider for the year, the amount of the provider's risk rated premium component for the year is zero.
Clauses 13 sets out that the relevant Tuition Protection Director is responsible for making the legislative instrument that is necessary to calculate a leviable provider's risk rated premium component.
Special tuition protection component
The special tuition protection component is intended to be imposed on providers to allow the relevant tuition fund to grow. For example, it may be imposed in instances where the levy funds are below the 'target fund size' or to insure against future systemic shocks. It is payable only by private providers.
The explanatory memorandum to the HELP Levy Bill provided detail on the circumstances in which it could be imposed:
For example, it might be imposed in the early years to allow the [HELP Tuition Protection] Fund to grow to its target size. Alternatively, it might also be imposed in years of growth of the HELP program to build up contingency amounts in the Fund for future years.
Clause 12 of the HELP Levy Bill states that a leviable provider's special tuition protection component for a year is an amount equal to the total amount of assistance paid to the provider under sections 96-1 and 110-1 of HESA in the previous year, multiplied by the percentage determined in an instrument made under section 13 of the bill for the purposes of subsection 12(2) for a year.
Clause 12 of the VET Levy Bill states that a leviable provider's special tuition protection component for a year is the total loan amount paid to the provider under section 19 of the VET Student Loans Act 2016 for the previous year, multiplied by the percentage determined in an instrument under section 13 of the bill for the purposes of subsection 12(2) for a year.
The VET Levy Bill explanatory memorandum stated:
Factoring in a provider's total VET student loans amounts for the previous years allows for each provider's contribution to be fair and proportionate to their participation in the VET Student Loans program.
Clauses 12 also provides that if a leviable provider is a new provider for a year, the amount of the provider's special tuition protection component for the year is zero.
Clauses 13 sets out that the tuition protection director is responsible for making the legislative instrument that is necessary to calculate a leviable provider's special protection component.
Senate Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee) considered the bills in its Scrutiny Digest 7 of 2019.
With regards to the Tuition Protection Bill it raised three matters:
that significant matters would be set out in delegated legislation;
that broad discretionary power would be provided to the minister; and
that the directors would be provided with broad delegation of their administrative powers.
Significant matters in delegated legislation
In relation to significant matters being set out in delegated legislation, the Scrutiny Committee noted that the Tuition Protection Bill would allow the Rules and Guidelines to include matters relating to the tuition protection scheme, including when tuition protection levies are due and payable, penalties for late payment of the levy, and any other matters relating to the collection and recovery of the tuition protection levy. The Scrutiny Committee noted the justification provided in the explanatory memorandum, namely, that the matters 'are primarily matters of administration and process regarding the collection and recovery of levy amounts, and do not impact on the setting of the levy amounts payable by the providers'. While acknowledging that some matters proposed to be included in the Rules and Guidelines may be administrative or procedural in nature, it noted that it was unclear why all the matters would be appropriate for inclusion in delegated legislation. The Scrutiny Committee drew this scrutiny concern to the attention of senators.
The Scrutiny Committee also noted that the Tuition Protection Bill would also allow the Rules and Guidelines to exempt classes of providers. The Scrutiny Committee acknowledged the need for flexibility to allow the tuition protection arrangements to develop responsively. However, it did not consider this to be a sufficient justification. It explained:
…the committee notes that it does not generally consider flexibility, on its own, to be sufficient justification for including significant matters (including broad exemptions) in delegated legislation. Further, while noting the information in the explanatory memorandum as to when providers may be exempted from the tuition protection scheme, the committee remains concerned that there appears to be no guidance on the face of the bill as to the circumstances in which exemptions may be appropriate.
The Scrutiny Committee sought further advice from the minister.
In response, the minister noted that it would not be desirable or necessary to include explicit guidance as to the circumstances in which providers may be exempt from the tuition protection arrangements. The minister explained the reasons:
This is because the circumstances and classes of providers for which it may be appropriate to exempt are not certain and cannot necessarily be foreseen. Specifying this detail in the delegated legislation may avoid the need to amend the primary legislation in order to exempt a class of provider not currently contemplated for an exemption.
The minister also explained that the use of delegated legislation would allow for greater flexibility; allow for the administrative and technical details of the scheme to be amended quickly; and also provide for appropriate parliamentary scrutiny.
The Scrutiny committee concluded by drawing these concerns to the attention of senators and the Senate Standing Committee on Regulations and Ordinances.
Broad discretionary power
The Scrutiny Committee noted that the Tuition Protection Bill would allow the minister to determine that the proposed tuition protection arrangements in schedule 2, part 5-1A, to not apply to a particular higher education provider. The Scrutiny Committee expressed concern that the provision would allow the minister to determine whether and how the tuition protection requirements apply to specific providers with 'little or no guidance on the face of the bill as to how the power is to be exercised'. Moreover, that the minister's determination would not be subject to tabling, disallowance and sunsetting requirements that applies to legislative instruments under the Legislation Act 2003. The Scrutiny Committee sought further information from the minister in relation to the following matters:
… why it considered necessary and appropriate to permit the minister to determine, by non-legislative instrument, individual providers to which the tuition protection scheme in proposed Part 5-1A of the Higher Education Support Act 2003 applies.
The committee also requests the minister's advice as to the appropriateness of amending the bill to:
• provide that determinations made under proposed subsection 166-5(2) are legislative instruments; and
• provide at least high-level guidance as to how the minister's power to make such determinations is to be exercised.
The minister advised that the determination by non-legislative instrument would enable the minister to 'react to changes in a dynamic sector, while retaining the discretion to consider the relevant and unique circumstance of individual providers'. Additionally, the minister's determination by non‑legislation instrument would give certainty to providers as the minister's decision will not be subject to disallowance.
The minister also addressed the suggestion of amending the bills to provide the determinations to be legislative instruments and to provide high-level guidance as to how the minister's power is to be exercised:
On the question of the appropriateness of amending the TP Bill to provide that determinations made under proposed subsection 166-5(2) are legislative instruments, the overarching purpose of the Bill is to ensure that students are adequately protected in the event of provider failure. It is essential that changes in provider circumstances can be responded to rapidly and with certainty for students, as well as for the HELP Tuition Protection Director. This purpose can be achieved by retaining the current proposed subsection 166-5(4).
On the question of the appropriateness of amending the Bill to provide guidance on how the Minister is to make determinations under proposed subsection 166-5(2), it is impractical and restrictive to anticipate the factors that the Minister may take into account when considering whether to make a determination, and therefore, it is not appropriate to amend the Bill.
The Scrutiny Committee drew its scrutiny concerns to the attention of senators and left the appropriateness of amending the bill to the Senate as a whole.
Broad delegation of administrative powers
The Scrutiny Committee explained that the Tuition Protection Bill would provide the VSL Tuition Protection Director and the HELP Tuition Protection Director, with 'relatively significant functions' relating to the tuition protection arrangements and the management of the corresponding tuition protection funds. Moreover, the bill would allow the directors to delegate the majority of these powers or functions to a person holding or performing the functions of an Australian Public Service (APS) Level 6, or an equivalent or higher position. The Scrutiny Committee stated:
The committee has consistently drawn attention to legislation that allows the delegation of administrative powers to a relatively large class to persons, with little specification as to their qualifications or attributes. Generally, the committee prefers to see a limit set either on the scope of the powers that may be delegated, or on the categories of people to whom delegations are permitted. The committee's preference is that delegates be confined to holders of nominated officers, and/or to members of the Senior Executive Service (SES). Where broad delegations are provided for, the committee considers that an explanation as to why these broad delegations are necessary should be included in the explanatory materials.
The Scrutiny Committee acknowledged the rationale provided in the explanatory memorandum, that the delegation to an APS 6 officer has been included because it is currently unclear the level of staff that will be assigned to assist the directors and, in the event of an unexpected increase in work, it would allow for affected students to receive assistance as soon as practicable. However the Scrutiny Committee noted that 'it has not generally accepted operational or administrative flexibility as sufficient justification' and sought the further advice from the minister.
While acknowledging these concerns, the minister insisted that it was necessary and appropriate for the Tuition Protection Directors to be able to delegate their powers and functions to officers at the APS 6 level for the following reasons:
A key role of the directors is to provide support to students when their provider defaults, which can cause significant disruption and stress to students. A delegation to only a SES level will not ensure that affected students are supported in a timely manner.
It is likely that, in the event of a default, the volume of workload will be significant.
Most of the functions and powers of the directors are more administrative and process driven, whereas the critical functions of the directors in relation to making legislative instruments have not been delegated.
Provisions in the Tuition Protection Bill will ensure that delegates exercising powers or functions under the Act must comply with the directions of the relevant director. This ensures the director will maintain overarching oversight of any exercise of their power.
The minister also explained that it was not necessary for the delegates to possess expertise particular to the delegated power or function as these powers and functions are general in nature.
The Scrutiny Committee concluded by drawing its concerns to the attention of senators and leaving it to the Senate to determine the appropriateness of these matters.
Charges in delegated legislation
In relation to the VSL Levy Bill and the HELP Levy Bill, the Scrutiny Committee noted that one of the 'most fundamental functions' of the Parliament is to impose taxation, and that consequently it was consistently of the view that it was for the Parliament, rather than the makers of delegated legislation, to set rates of tax.
The Scrutiny Committee explained:
Where it is proposed to include rates of tax in delegated legislation, the committee considers that, at a minimum, some guidance in relation to the amount of tax that may be imposed should be included in the enabling Act.
With regard to these matters, the committee notes that the bill provides that a percentage determined by legislative instrument under clause 13 may be zero, and that a risk factor value must be a number between one and 10. The committee also notes that, in making an instrument under clause 13, the Directors must have regard to the advice of the relevant advisory board, and must consider the sustainability of the Funds. Before an instrument under clause 13 is made, the Treasurer would also be required to approve the instrument in writing. The explanatory memorandum asserts that this 'provides an additional measure of scrutiny'.
However, the committee is concerned that, despite these requirements, there appears to be nothing on the face of the bill that would expressly limit the amount of the risk rated premium and special tuition protection components of the levy. By contrast, the committee notes that subclause 9(2) would expressly limit the dollar amount of the administrative fee component.
In response to these concerns the minister advised that the levy bills provide for an upper limit that the administrative fee cannot exceed which was determined in consultation with the Australian Government Actuary (AGA).
The minister noted that the methodology to calculate the risk rated premium component was also developed by the AGA. The methodology takes into consideration, for example, 'the provider's level of exposure under the relevant loan scheme in terms of total student numbers and loan amounts as well as the provider's risk of default based on certain risk factors such as volatility in student numbers, course completion rates, [and] length of operation'. The directors will follow the same process as the TPS Tuition Protection Director when determining certain amounts necessary to calculate a provider's risk rated premium. Furthermore, the minister and directors will consult with the sector as part of the annual levy setting process.
The Scrutiny Committee requested that the key information provided by the minister be included in the explanatory memorandum and made no further comment on this matter.