Does the budget make us a clever country?

The last Labor budget has seen the top half of the Education Revolution fizzle. The ideals that powered the 2009 Gillard policies are in fragments.

Demand-driven higher education will survive until the election but at a reduced funding rate, deepening the tension between quantity and quality that bedevils the Australian university sector.

Over 2007-2013 Labor has not only failed to complete its much trumpeted tertiary education agenda, in the October 2012 and May 2013 budgets it has reneged on its own prior initiatives. In the last seven months a total of A$3.8 billion has been cut from the forward estimates for higher education and research.

The rationale is the need to fund the Gonski reforms at school level. The bottom half of the Education Revolution will be funded from the top. This is consistent with Labor's political strategy in education. Schools have always been seen as a larger electorate than tertiary institutions. Hence schools collected the largess in the Building the Education Revolution program.

But an education policy in which schools are played off against universities makes no sense. A revolution that spins in opposing directions is getting nowhere fast. This contradiction points to the sorry state of the government, boxed in between rebuilding the electoral heartland and placating the markets by minimising the deficit.

In a contest between two variants of political short-termism, any potential for long-term nation-building policy must vanish. Even Gonski is more symbolic than real and aimed squarely at this year's election. Six year time scales do not get implemented. And the school funding package is scarcely likely to survive Joe Hockey's first round of spending cuts.

Labor's failure is especially apparent in research. Amid the euphoria of Rudd's turn to the intellectuals in the National Summit, who would have predicated that Labor would fail to match the Howard government's Backing Australia's Ability (BAA) package of 2001. That is exactly what has happened.

Howard's BAA doubled Australian Research Council (ARC) and National Health and Medical Research Council (NHMRC) project funding. The phase-in of BAA was incomplete. However Labor's record is weaker. ARC and NHMRC project funding remain almost unchanged in real terms after six years. 2009 saw more than A$1 billionin Superscience grants and generous infrastructure funding.

But Treasury avoided ongoing increases in program funding of the BAA kind. The one solid capacity building decision was former research minister Kim Carr's full research funding plan. But full funding was to be phased in over six years. And it stopped after two years (Gonski supporters take note), frozen at levels well below those of Canada, the US and many other countries.

Nevertheless, Labor has lowered expectations so successfully that there were sighs of relief when no further research cuts were announced on Tuesday night. The government agreed to continue funding nationally significant research facilities (A$186 million) and the Future Fellowship scheme for emerging research talent (A$135 million). There was no increase in postgraduate research awards. The 1,650 new postgraduate and enabling places are earmarked for teaching, nursing and Asian languages.

Labor's final record on undergraduate education will be somewhat more positive. The 2009 reintroduction of near full indexation of subsidies for domestic student places, essential to the integrity of the funding system, has survived. The final Labor budget also retained the open-ended funding of student places, providing A$346 million extra funding, with 30,000 additional places in 2013 and 34,000 more forecast by 2017.

The democratisation of access to university is Labor's strong point. Yet it has been done on the cheap. Labor refused the 2008 Bradley Report's proposal for an immediate 10% increase in the funding of domestic student places, to shore up quality, and shamefully tossed the report of the 2011 Lomax-Smith base funding review.

The result is that we persist with a funding structure with discipline relativities at late 1980s pre-IT levels; some students pay over 80% of program costs and others less than 30%; and half the undergraduate student population is enrolled in programs operating below the level of real costs of provision, as calculated by the Lomax-Smith review.

Labor's mantra is "anything but more public funding for student places". In 2010, the OECD found Australia spends 0.7% of GDP in public funding of tertiary education compared to an OECD country average of 1.1%, a difference of A$6 billion. That gap is about to widen. Tuesday's budget confirmed a 3.5% "efficiency dividend" off the public funding of student places, including A$85 million in 2013-14 and A$228 million in 2014-15. Universities enrolling more undergraduate students under the demand-driven system will lose money on every one unless the floor of quality drops.

The demand driven system cannot long survive a sharpened quantity/quality trade-off. The coalition has already said it will put quality first. But there may be another round of government funding cuts in 2014, and because Labor has lowered expectations the coalition will have a free choice. It can savage public funding and jump student contributions.

The coalition can claim the mantle of the education party for the first time since Menzies in the 1960s (Tony Abbott could call it the "Education Restoration"). Or it can do nothing and let things slowly slide, blaming it all on Labor.

Simon Marginson, Professor of Higher Education, University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.