Opinion & Commentary
Labor may not get the revolution it was counting on
Though universities must usually settle for the loose change from campaign promises, they had high hopes for more this year.
At a higher education conference in April, education spokesman Stephen Smith announced that Labor was considering both across-the-board and targeted new recurrent funding, additional research infrastructure funding, added student income support and HECS remissions for various disciplines.
Before the election, Labor proposed student giveaways in scholarships and HECS remissions, but these do not benefit universities. It also unveiled some additional student places and a handful of targeted grants. Since these initiatives would bring new expenses at least equivalent to new revenue, they won't help universities meet inevitably rising costs for existing programs. Election day arrived without Labor offering additional funding for existing teaching and research.
Even compared with the 2004 election, when no education revolution was on offer, Labor's higher education package looks stingy. Though exact comparisons are difficult to make due to incomplete information from Labor this time around, over a three-year period Labor's higher education-related promises were equivalent to about 30 per cent of its 2004 promises.
This sinks to 10 per cent if we remove spending that provides no gain to universities. There is no net advantage in compensating universities for lost maths and science HECS revenues or declining full-fee student income. Public money will just replace private money that universities receive already.
Of course, it is early days yet for Labor, but universities will be seeing worrying parallels with their experiences since the 1990s.
In 1995, the Keating government decided to index university grants at a rate below real cost increases. Citing budget constraints, when the Coalition came to power the following year it refused to lift the indexation rate and cut student places to save even more money. According to the government at the time, it couldn't afford to give universities more funding.
Fast forward to 2007. Once again, it seems, commonwealth budgetary considerations are driving university policy. It shows that vice-chancellors can win the ideological battle over whether more public funding is desirable but still lose the war against competing budget and political priorities.
To convince voters that he could be trusted with the economy, Kevin Rudd decided that Labor had to promise to spend less than the Coalition. At his campaign launch, the excess of Coalition commitments over Labor commitments was condemned as reckless spending that would drive up inflation and interest rates. And, with that, university hopes that Labor would promise new money were crushed.
With Labor, there is an ideological complication absent from the Coalition's budgetary constraint: a belief that tuition costs are a problem. Shortly before he became Labor leader last year, Rudd was reported as saying ``it makes my heart bleed when I have young kids come into my office in Brisbane and say to me, `I don't think we can afford to go to uni, the HECS is too much.' I think we've got to a stage where that has to be turned around.''
And shortly before he was elected prime minister, he told The Australian Financial Review that there was an affordability challenge in higher education, and that Labor would review the nation's $13 billion in student debt, provided it did not jeopardise the federal surplus.
The Coalition was less constrained by such concerns. It gave universities some fee-income flexibility, first by allowing a limited number of full-fee Australian undergraduates, and then by permitting universities to increase student contributions by 25 per cent in 2005 and keep the money (the 1997 HECS increases went to the government, not the universities).
Labor will abolish the full-fee places and cut rather than increase maximum student contribution amounts. This puts universities in a very difficult financial position. The government will neither permit universities to charge Australian undergraduates higher fees nor increase its own funding. Either one of these policies might be defensible in itself, but not both together. There is no other industry in Australia forced to supply, without any analysis of costs or viability, the same goods and services for less every year.
In the short term, universities need to steer Labor towards spending effectively what money it does make available to higher education.
Study after study has failed to find that charging students for their higher education makes young people from lower socioeconomic backgrounds less likely to go to university. Improving their school results is the only change that can make a significant difference: something for an earlier stage in the education revolution.
In 1997, Australia experimented with the idea that changing relative prices between disciplines might influence demand. Differential HECS increased the cost of some courses by a lot more than others. But demand patterns didn't change, because discipline selection is driven primarily by student interests, not fee levels.
Discounting student contributions redistributes income to graduates but makes no difference to who attends university or what course they take. Universities need to persuade Labor that spending on courses is a higher priority than spending on former students, by reducing future student debt repayments. In the longer term, Australian universities need the freedom to set their own fees. Only then can they escape the ups and downs of the federal budget. Labor won't give them that freedom any time soon, but if universities don't campaign for reform it will never happen.
Andrew Norton is a research fellow at the Centre for Independent Studies.
