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Capping uni funding would be a lose-lose for everyone

Melbourne University’s Vice-Chancellor Glyn Davis has called on the federal government to reform the university funding system and allow universities to “decide their own student profiles within the funding…

Australia’s universities places are increasing rapidly but students could get caught between the universities and their budget bottom line. University image from www.shutterstock.com

Melbourne University’s Vice-Chancellor Glyn Davis has called on the federal government to reform the university funding system and allow universities to “decide their own student profiles within the funding envelope”.

“Decide student profiles” sounds better than “restricting access” and “within the funding envelope” certainly sounds more agreeable than “cutting higher education funding” but they amount to the same thing.

If Davis’ suggestion is taken up by the government, there will be significant consequences with regards to who will be able to get into university and what they will be able to study. The current uncapped system, where there are no set limits on how many student places the government will fund, has many benefits, including increasing the supply of graduates to Australia’s economy, greater student choice, and improving access to higher education for disadvantaged groups.

Despite these significant achievements, the new Coalition government is looking to review the system. But returning to the previous, supply-driven model, where the total number of places was set by the government, would immediately curtail this progress.

Davis claims his proposal is not about capping places, rather capping funding. This means one of two things. Either the current student fees structure remains, in which case the result is the same (you say tomato, I say tomato). Or second, we move to full deregulation of fees in the sector to fund any future expansion of places.

The new proposal goes even further. Under the old system, the government not only controlled overall student numbers, but to some degree what courses universities could enrol them in. This is important: we need good government policy to ensure we get the right graduates at the right time. This is why previous governments have directed additional university places for nurses, or reduced the student fees for maths teachers.

In fact, previous federal governments have used their power in this regard far too lightly, which is why we are experiencing a surplus of law graduates, to take just one example.

Under Davis' proposal, the federal government would provide taxpayer money to universities without having any say over what courses they offered. But the Government will share the blame with the universities if the sector starts producing the wrong graduates. This being the case, it’s hard to imagine the Government making a rod for its own back.

Certainly, maintaining the current demand-driven system of funding does require the federal government to spend more on higher education than it would under a capped system — but let’s put this into context. As a percentage of GDP, Australia spends only 0.8% of its public funds on tertiary education, putting us sixth from the bottom in the OECD.

Australia needs to be spending more, not less, on higher education. We could also be more effectively recouping what we do spend, by establishing income contingent loans for international students and/or bilateral agreements with countries to recoup loans from emigrants in both directions.

The significant long-term economic advantages to increasing access to higher education are well-established and understood. People with higher education tend to have higher earnings and pay more income tax, which ultimately returns to the government. On average, OECD countries get more than three dollars back for every dollar they spend on public higher education. People with more education also tend to have better health outcomes.

Davis' proposal reveals the complicated nature of how higher education is funded in Australia. If it were a private good, then it would be for the universities and students between them to decide what courses to offer and how much they would cost. We would then get the economy and society some of us want but not necessarily what we all - as a nation - need.

If it were a public good, then it would have to be freely available to all and entry determined only on ability, not on ability and competition. Neither of these facts have ever been true. Higher education is an imperfect, or quasi public good. That didn’t stop previous governments from both sides of the political divide from enacting good public policy in this area, much of which has helped improve access and opportunity.

Rather than return to a capped funding system, universities should be exhorting the benefits of maintaining the current system. If any changes should be made, it should be to more strictly direct universities to enrol students in the courses that will give Australia the graduates it needs, when and where it needs them.  

Join the conversation

16 Comments sorted by

  1. Lincoln Fung

    Economist

    Surely both demand and supply factors need to be taken into account, as opposed to only one of them is used in the determination of university education.

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  2. Andy Cameron

    Care giver

    "As a percentage of GDP, Australia spends only 0.8% of its public funds on tertiary education, putting us sixth from the bottom in the OECD."
    The link from this sentence does not work.

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  3. Andy Cameron

    Care giver

    "We would then get the economy and society some of us want but not necessarily what we all - as a nation - need."
    Could you explain this please? How are *you* able to distinguish what *we* 'want' versus 'need'?
    "If any changes should be made, it should be to more strictly direct universities to enrol students in the courses that will give Australia the graduates it needs, when and where it needs them."
    Again, how are public servants superior judges of "need". A lot of this article reads like it is advocating Soviet-style Five Year Plans decided by government bureaucrats, rather than individuals, universities, and employers.

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    1. Tim Pitman

      Senior Lecturer at Curtin University

      In reply to Andy Cameron

      Hi Andy. I didn't say "I" and it is not Soviet to look to a democratically-elected government to provide direction in terms of educational priorities. In a democracy a government is elected on a platform and then it enacts that platform (or not as the case may be). Voters in democracies don't micro-manage every government decision, they look to the Government to lead and have the opportunity to hit or stay at the next election. To take one example in Australian HE, the national research priorities the previous Labor Government set out were (i) An Environmentally Sustainable Australia (ii) Frontier Technologies for Building and Transforming Australian Industries (iii) Promoting and Maintaining Good Health and (iv) Safeguarding Australia. The new Coalition government may stick with those, or they may choose other ones and direct funds accordingly. Whatever the priorities are, they are informed by public servants but the buck stops with our democratically-elected reps.

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  4. Gavin Moodie
    Gavin Moodie is a Friend of The Conversation.

    Adjunct professor at RMIT University

    I agree with the author that by far the best policy for students and for the country would be to retain the uncapped system. However, if the Government wanted to limit the growth of the capped system it could restrict each university's increase to, say, 5% above its average student load for the most recent 3 years. This would allow institutions and the system to respond to student demand thru moderate growth and would limit the system's overall growth to about 1% per annum since not all universities would want to grow by the maximum amount.

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    1. Tim Pitman

      Senior Lecturer at Curtin University

      In reply to Gavin Moodie

      Hi Gavin , there are certainly concerns that rapid growth has had a negative impact on student outcomes: prior to the Federal election the previous minister, Kim Carr, made suggestions in this regard and the current minister, Christopher Pyne, has stated "there is some evidence ... that quality is suffering to achieve quantity". Until the Government releases the data though, it is only conjecture. However if it is the case, the answer is not necessarily to restrict supply but rather to better support students. Part of the answer could be as you suggest, 'hastening slowly'.

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    2. Gavin Moodie
      Gavin Moodie is a Friend of The Conversation.

      Adjunct professor at RMIT University

      In reply to Tim Pitman

      Thanx Tim

      I think Pyne would be more worried about increased expenditure, which seemed to be Davis' most recent concern. UNSW's Hilmer expressed concern about standards, but I think that was cover for a complaint that increases in research funding had been slowed while funding of student places was still increasing.

      At its root this is a disagreement between comprehensiveness and selectivity, and between teaching and research.

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    3. Tim Pitman

      Senior Lecturer at Curtin University

      In reply to Gavin Moodie

      Agreed and when I said there were two options under Davis' proposal (i.e. to cap places or deregulate fees) I didn't go into detail about a third option that is a currently reality and that is that prior to the uncapping of places several (notably Go8) universities have sidestepped the problem - and increased their exclusivity - by moving to a generic undergraduate degree and then creating full-fee paying postgraduate options. So for example here in WA you can either do a three undergraduate year…

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    4. Gavin Moodie
      Gavin Moodie is a Friend of The Conversation.

      Adjunct professor at RMIT University

      In reply to Tim Pitman

      When the University of Melbourne introduced its full fee paying graduate entry law degree demand for Melbourne law fell noticeably and demand for Monash's undergraduate law degree increased. (The University of Adelaide experienced a similar fall when it introduced only graduate entry to law in the 1990s.) After a few years the U of M guaranteed entry to law to students who had an entry score of > c 90, which resulted in its demand rebounding and now the U of M's graduate entry programs are firmly…

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  5. Lasantha Pethiyagoda

    teacher

    Education at both secondary and tertiary levels has gradually evolved from being a free service that is any government's obligation to the young generation of its citizens, to a user-pays commodity that is now fast becoming a gamble that is only open for consideration, to the highest bidders at auction. This is neither liberal nor conservative but blatant greed...

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  6. Paul Felix

    Builder

    It was Melbourne Uni that invited my daughter to attend, and when she was being given her tour was informed, apparently with a straight face, there were only 3 Universities in Victoria, one in SA and two in WA. ANU was given a grudging acceptance, and when she asked about RMIT she received a frown.
    When she, sort of, politely told them she wasn't interested, the reply was (approx) that was a good choice because she would not have a lot in common with most of the students. She had an equivalent to VCE of 99. So clearly being an intelligent and well performed student is not enough there.
    So what else can we expect from them other than elitist crap.

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  7. John C Smith

    Auditor

    Do we have a national human resources policy? How many lawyers and how many clerks do we need?

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    1. John C Smith

      Auditor

      In reply to John C Smith

      These days lawyers do clerical work that was done by school leavers @ year 10 in the old days. Uni cost should be a part of total cost of the development Human resources. It is a waste of money as well as human life to put one through the halls of academia to drive a taxi or pull down a coffee.
      What about the money for vocational and technician educations?

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  8. Andrew Norton

    Program Director, Higher Education at Grattan Institute

    The current market for law graduates does seem very bad. But up to 2011, census data suggests that the profession was surprisingly good at absorbing the large increase in graduates: http://andrewnorton.net.au/2012/10/30/is-law-the-new-arts/

    Despite the difficulties recent law graduates are having finding legal work, the question for them remains what is the best choice among their realistic options. If you are a bright person whose skills are in language more than quant, law remains a better employment option than likely alternatives such as arts or journalism. Law graduates not practising law have reasonable chances of getting a job that uses graduate-level skills.

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    1. Tim Pitman

      Senior Lecturer at Curtin University

      In reply to Andrew Norton

      Hi Andrew that is a very good point - one look at the 2010 House of Reps validates your point entirely (I am looking at 2010 because I haven't analysed the data for 2013 but I suspect it will be similar). Of the 150 reps, 107 had university degrees - including by my count 43 Law degrees.

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