More Thoughts on the Federal Budget

I started writing this blog post a couple of weeks ago whilst on leave. I was reading the Australian news while overseas and saw that Minister Pyne, in introducing the Higher Education Reform legislation into Parliament, described it as “some of the greatest higher education and research reforms of our time”. I would agree that the proposals are the most significant, whether they are the greatest or not remains to be seen.

The proposals are now in Senate Committee and I thought it was worth setting out a few thoughts as the process of putting these proposals through the Parliament begins, as well as giving my view on what should happen.

If you read the history of Higher Education, one almost constant theme is that of a sense of crisis so I don’t want to overuse that word. However, we really do have a fork in the road in front of us with the proposal to deregulate fees. I would like to highlight a number of themes from the proposals and work through each of them:

  • Cost sharing between government and students
  • Fee deregulation and price competition
  • HELP Interest Rates
  • The Commonwealth Scholarships fund proposals
  • Market imperfections and how to address them

Cost sharing between government and students

I commented in a previous post on whether the proposed level of cost sharing was fair and I won’t rehash that again. A major point of debate has been whether increasing student fees is likely to deter people from Higher Education. The Minister has referred to the UK experience to suggest that it will not. The European Commission recently released a report on cost sharing:

http://ec.europa.eu/education/news/2014/20140623-cost-sharing_en.htm

I would recommend everyone to read this because it is a very thoughtful analysis of long-run responses to cost shifting to students. It does suggest that in the long run, it’s difficult to put students off higher education and that a well targeted loan scheme takes a lot of the sting out of it. However, the UK experience is still very fresh – graduates, with their larger debts, are only just emerging. I understand from UK sources that the impact on graduates’ ability to borrow is already being felt and that will feed back into student decision making. Also, there has been a large drop-off in part-time and mature age students (around 50%). There may be more than one explanation for this but we know in Australia that these students are more cost conscious than school leavers. This has not been talked about very much, but for graduates the effect of these changes will be tantamount to a significant tax slug until they pay off the additional costs of their study. For students already working they may well feel it immediately. We might expect that this will affect CSU more than others as we have a high proportion of mature age students. Given the importance of these students to maintaining viability for regional institutions, this could be a very big problem indeed.

Having said all that, it is very plain from talking to people in Canberra that if we do not have students accepting a greater share of the cost burden, the only politically realistic alternative is ongoing cuts and/or putting caps back on the sector. I don’t think either of those is a good solution. That is why I grudgingly accept that some modified form of this package is probably the most sensible way forward.

Fee deregulation and price competition

You only need to read the media, and see which Vice-Chancellors are pushing hardest for this, to understand who are going to be the big winners. It will undoubtedly be the Group of Eight universities because they on average have the wealthiest students and the most elite brand value based (wrongly in my view) on research intensivity. The Minister has asserted that price competition will keep fees down. For most products, given equal quality, consumers will choose the cheaper option. So far, I have been able to find zero instances in the literature where students choose a higher educational option because it’s cheaper. They may choose less expensive options because that’s all they can afford but this is not the same thing. As far as I can tell, education is a Veblen good where the more expensive it is, the more attractive it is. You only have to look at the behaviour around chasing ATAR scores to see the truth of this – this is the biggest price that school students pay in terms of their time and a very real one at that. We know that students ‘ATAR shop’ for courses based on the most prestigious course they can get into, not necessarily what they really want to do. I think it is unfortunate that in higher education we have created a lot of this ourselves through our obsession with research esteem. I think it is up to universities such as ours to make a different case around educational value-add. I think this is one of the potential benefits of fee deregulation – we can stop talking about why everything is the same and start to celebrate difference.

The opportunity to think about something other than equivalence may be particularly useful in relation to blended and distance learning. Most of the discussion we have had up to now has been about whether distance education is as good as face-to-face teaching. We have also tended to see any increase in staff-student ratio as a bad thing. It seems to me this has unnecessarily restricted our thinking and has made it difficult to talk about innovation. Most other industries have used technology to improve the customer experience whilst reducing the human labour required. We have in fact used technology to increase work for staff whilst delivering a better service for students. Noting the point above that society is not willing to fund ever-increasing costs for higher education, this is not sustainable. Therefore I believe we have to start examining how we can use technology to improve outcomes for students whilst reducing the amount of effort required from university staff. Universities have done this brilliantly in research where we doubled productivity over about 15 years and I believe this was largely due to effective use of technology for literature searching, data analysis and publishing. We have not bemoaned this as a loss of quality and we have to get into the same mindset around teaching.

HELP Interest Rates

The proposal to impose real interest rates on HELP debt seems to be the one that has the psychologically biggest impact because of the idea of debt that just keeps getting bigger. I think there is general acceptance that we need compromise on this, and I don’t think we should accept the reform package unless we get it. As noted above, I am concerned that education markets do not work like other markets, particularly where there are loan schemes to support the costs. I believe a progressive interest rate above a threshold provides the best mechanism to retain pressure on costs whilst also being equitable for lower income graduates.

Commonwealth Scholarships

Again, I covered my objections to this scheme in an earlier post. I can see the political necessity for this fund because the selective research-intensive institutions are often accused of social as well as educational elitism and there need to be mechanisms to address this. However, I do believe that if the scheme is implemented as proposed it will impose an immediate market distortion by forcing the most selective urban institutions to chase students they would not otherwise try to recruit. On modelling we have done, and using low SES as a proxy, on quite modest fee increases the Group of Eight could end up with at least 10 times as much money per equity students as regional institutions. I believe it would be more appropriate to make the proportion of money that institutions have to set aside proportional to the number of equity students they currently recruit with perhaps a cap and a floor. This would avoid any immediate market distortions but still provide a mechanism by which institutions can support equity students as they grow their numbers, if that is what they choose to do.

Market Imperfections

Overall, as the Minister has pointed out, this scheme shifts costs to students and the Minister has linked this to the ability of universities to compete in the global research rankings. Clearly then, universities’ ability to compete is going to have far more to do with the ability of their students to pay than the relevance of their mission to their communities or even their competence in research. Given the spread of wealth across the regions, this is likely to undermine the ability of regionally based institutions to support their communities. This is a perverse outcome and I think it is essential that there is a source of funds which redresses this imbalance.

We will continue to work with the Government, Universities Australia, the opposition parties and the independents to get appropriate modifications to the Government’s proposals. I think it is essential that we develop policy settings which are reasonable and which can last into the longer term. In our strategic risk assessment last year we identified government policy change as our most significant risk which we could not mitigate effectively and so it has proved. We have a clear plan for how we would like to develop the university and we know what we want to achieve for our communities and our students. I would love to have a period of policy stability when we could actually get on and do the work we want to do. This in fact is the ‘masterly inactivity’ that Tony Abbott suggested would be the best approach when he spoke to the Universities Australia conference in 2013. Clearly, we have not had that but even so we must push on with trying to do the best job for our communities and our students irrespective of government policy.

August Update

I have made the comment to a few meetings that the period following the Federal Budget has felt a bit like starting a new job – weeks seem to have lasted for months and there has been a lot crammed into a short space of time. What has not been crammed in has been an update through this blog, although there have been a couple of all-staff e-mails about how we are handling the expected fallout from the reforms. If you have been following the press, you will have seen that the Government appears ready to compromise on the reforms, particularly on the interest rate on the debt. However, we also hope for compromise on the level of cuts to government support which will force fees up significantly if they go ahead as planned. Stay tuned on this as we have a Universities Australia plenary meeting this week at which the Minister is speaking so I hope to get an update there.

For this blog I wanted to concentrate on some positives in the last month or two. Firstly, and very importantly, we have announced that the next Chancellor of Charles Sturt University will be Dr Michele Allan. Dr Allan has a long background in rural and regional industries and in education, and has significant experience with boards. She will take up her appointment in December following the retirement of our current Chancellor, Lawrie Willett AO. I am really looking forward to working with Michele but will be equally sorry to lose Lawrie who has guided and supported me during my first two and a half years as Vice-Chancellor. We will have the opportunity to say farewell to Lawrie and to welcome Michele later in the year.

To continue that theme, we also inducted new Council members over the last month. This includes Associate Professor Lyn Angel as the newly elected academic staff representative, replacing Dr Sue Wood, and Rowan Alden as the newly elected student representative, replacing Saba Nabi. This blog post is a good opportunity to acknowledge the work of both former and current Council members. The University Council has overall responsibility for the direction and governance of the University. This means that it approves the University’s strategy and major decisions and policies about our activities and locations. The Council also monitors how well we are doing academically, financially, culturally and in our service to our communities. As well as elected representatives, the Council includes members appointed by the NSW Government, and members appointed by the Council including graduates of the University or its forerunner institutions. We have a great range of experience on the Council from business and education, and Council plays an extremely important role in supporting University management in navigating challenging times.

I also wanted to note the Staff Excellence Awards which started two weeks ago in Bathurst, continued in Dubbo last week and will finish in Wagga Wagga in early September. These are an opportunity to recognise the efforts of staff across the institution and it is a very rewarding process to understand the great work that people are doing. Chika Anyanwu, Head of School of Communication and Creative Industries, did an outstanding job of MC-ing the Bathurst awards and, as I noted at the time, I reckon a gig MC-ing the Oscars beckons for him.

We have been discussing, along with the rest of the University, what we can do at the SEC level to improve communication in response to the Voice Survey. My intention is to write more frequent blog pieces as part of this. I have also been learning to use Adobe Connect with the help of Milena Dunn and I am looking to run a session for as much of the whole university as wants to take part in the next month to explain what’s happening with the Strategy refresh. We are trialling this with Vice-Chancellor’s Forum participants first.  As per my comments at the start, I’m hoping we will get a clearer sense of where the Government’s reform proposals are likely to land in the closing part of this year so I will write updates as that information becomes available.