Rushed reform benefits no one in the end

For students and universities, the 2016-17 budget held few surprises. “Full deregulation” is dead and the budget provided a one year deferral on the cuts to teaching which have not yet passed parliament.

The government has signalled its intention to pause, though not retreat, on changing the system.

The education minister, Simon Birmingham, released a discussion paper which provides a wide range of options for future and presumably more popular change to achieve the “savings outlined in the budget”.

What is clear from the paper is that the government will expect structural budget savings from whatever comes next.

Trade offs

The reality of the system is that to achieve large savings they must come with either a significant reduction in public funding for either research or teaching.

Both options come with significant trade offs.

On the one hand, reducing research funding will almost certainly shrink the total Australian research output. This would be a bad look at a time when the prime minister loudly pursues an innovation agenda.

On the other hand, without seriously sacrificing quality, reducing teaching funding can only be mitigated through an increase in student contributions.

This could come either directly as fees or through a less generous higher education loan program (HELP) which asked students to pay back their debt on a lower salary.

In achieving this goal, the options explored in the discussion paper reveal the difficult trade offs in the absence of additional public funds.

While full deregulation is off the table, its presence still lives on in the idea for fee flexibility for a limited number of “flagship” courses at each university. This proposal is similar to that put forward following Jane Lomax-Smith’s Base Funding Review in 2011.

This is in effect an opt-in version of partial deregulation for some courses, and as the paper makes clear would need careful thinking to ensure that it achieved the diversity in student choice that the government intends.

A concentration of specialist “flagship” courses in a few high demand and high margin courses where universities could maximise revenue is not in anyone’s long-term interest. If designed poorly it will distort incentives for universities and not deliver the desired innovation in quality education. Does Australia need 41 flagship commerce or law degree courses?

The rules matter here.

The paper also signals options for change to HELP. As the Grattan Institute’s work has recently shown, reform of the loan system is not simple but may be politically necessary if the growing costs are to be met.

The discussion paper also indicates the possibility of changing the way we publicly fund postgraduate coursework degrees.

How should we fund undergraduate and postgraduate courses?

This revisits the difficult question of how to design a system for postgraduate courses – that are supported by public subsidy – which both promotes diversity and choice, but is coherent across the whole sector.

We currently have demand driven public funding for bachelor level education but not government supported postgraduate places.

The compounding impact of keeping funding for the sector as a whole static without indexation quickly erodes its real value. This was all too evident in the mid 1990s when the amount of funds for universities did not keep up with inflation, meaning ‘no cuts’ actually meant less real funding for teaching and research.

The government has said it is open to ideas, and the paper signals the establishment of an expert group to oversee proposals for the next phase.

The paper only provides discussion points, and claims no preferred options as such. The onus is now on students, universities and the wider public to make clear what they want from higher education. This means also deciding where they stand on the inevitable trade offs, even if they reject some of the base premises.

Disclosure

Gwilym Croucher is Principal Policy Adviser in the Chancellery at The University of Melbourne and Senior Lecturer in Melbourne Centre for the Study of Higher Education.