Opinion & Commentary
Uni reform package to benefit students
In most political controversies, the Government exaggerates the benefit of its policies, and the Opposition exaggerates the drawbacks. In the current higher education debate, the Opposition is playing its role exactly as we would expect, but strangely the Government is underselling one of its key reforms.
As is now well known, under Dr Brendan Nelson's university reform package students in government-subsidised places could pay up to 30% more than now. These places would come under the "HECS-HELP" scheme.
Both sides seem to assume that HECS-HELP charges are just burdens on students, and that the only possible effect of the 30% premium is that students are $2,000 a year worse off. The issue between the Government and the Opposition is the "fair" distribution of expense between students and the general community.
This kind of debate made sense in 1989, when HECS was introduced by Labor, and again in 1996, when the then newly elected Howard announced "differential" HECS, different charges depending on course. It made sense because these two policy changes did just change the ratio between student and community expense. Any increase in HECS was a direct benefit to other taxpayers, and a direct loss to students.
The policy announced on Budget night abolishes this kind of trade-off, and renders analysis based on it irrelevant. The proposed radical change is not that students might pay more, it is that students pay universities, not the Commonwealth.
Instead of the Commonwealth paying universities the full nominal cost of each student place, the Commonwealth will give universities a subsidy per student based on discipline, and then let universities charge an amount they set, between $0 and 30% above existing HECS level. As with the current HECS system, students could borrow this money and repay it through the tax system.
University setting and receiving fees can benefit students. Letting universities set fees means that cost-cutting need not win every cost-cutting/quality trade-off, as it must when the Commonwealth is the sole financier of Australia undergraduate education. If the Nelson package is implemented, some universities will halt or reverse the rise in student:staff ratios, or do other things to improve the learning experience. Others are likely to stay at the low cost end of the market. Students will have a choice; pay more for a better service, or make do with less.
A market exists for more expensive education. Nearly 40% of Year 12 students attend private schools, because there was some aspect of the cheaper government service they or their parents did not like. In the already deregulated postgraduate coursework market we see wide variations in what universities offer, and similarly wide variations in prices. It is highly unlikely that, uniquely among educational services, undergraduate students really prefer the one-size-fits-all within disciplines and between universities model we have now.
Squabbles over the last week or two about what percentage of nominal tuition costs students pay or will pay miss the point. What really needs debating is whether students and universities should perpetually be at the mercy of Commonwealth Budgets, as they have been since the mid-1970s. The Government has the only prudent answer to that question-no, they should not-and their public case for reform would be stronger if they said so.
Though the fee-setting part of the Nelson package is an important step forward, one proposed reform is seriously flawed and will have to be modified. This is the planned tightening of the current quota system.
Under the existing quota system, each university gets a set number of Commonwealth funded HECS students. With current policy settings, there is a small reward of $2,700 per student per year for universities which go over their target number. Under the proposed policy, universities will be penalised rather than rewarded for going more than 2% over target. Instead of the Commonwealth paying the universities, the universities will pay the Commonwealth.
This is going to cause major problems. In 2002, every university exceeded their target by more than 2%. Regardless of 'desirable' over-enrolment levels, a 2% limit is simply impractical. Aside from deliberate enrolment policies, two important variables, offer acceptance rates and student attrition rates, affect universities' student numbers.
Offer acceptance rates are affected by many factors, such as job prospects for prospective students, and the relative attractiveness of each university compared to its rivals. In 2002 compared to 2001, RMIT University's acceptance rate went up by 7.4%. Victoria University had a similar experience. Unexpectedly high acceptance rates could send universities over their 2% margin, despite offer numbers that seem prudent based on historical acceptance rates.
Not every student who accepts a university place completes his or her degree. This means that to target their total student numbers accurately, universities must estimate what proportion will leave early. Over the period 1992-1999, an average of 14 universities a year had attrition rates vary by 2% or more on the previous year. So a university could estimate an attrition rate that turns out to be too high, leaving them more than 2% above their target by the end of the year.
The Government appears concerned about quality in heavily over-enrolled universities, and wants to prevent large shifts in student numbers. Neither goal would be compromised by moving to a maximum over-enrolment of between 5% and 10%, because the reforms will bring in added revenue for quality anyway, and because total demand for student places is still likely to exceed total supply.
Lifting the 2% limit would mean fewer students missing out on places, avoid penalising universities for innocent enrolment mistakes, give universities more scope to respond to shifts in student demand, and would cost the government little or nothing, since universities would only get what the student paid, with no subsidy. It meets Government policy objectives. It just doesn't match current policy. The sooner it is changed the better.
Andrew Norton is a policy analyst at the Centre for Independent Studies. This article is extracted from a longer analysis available from www.cis.org.au
