The Higher Education Base Funding Review‘s blanket dismissal of all possible arguments supporting varying the level of government subsidies across disciplines, as happens now, is the “single weakest aspect of the report”, a leading analyst said.
The Review, which calls for domestic university students to be charged a uniform 40% of the cost of their course, described the current system of varying the ratios of student fees to government funding from course to course as having “no rational basis”.
Yet, the Grattan Institute’s higher education program director, Andrew Norton, said that a range of rational arguments could be in favour of differential subsidies, and that these revolved around how much a student is charged for a course, how much public good their subsequent work involved, and how much they were likely to earn performing it.
“There’s the 'market failure’ argument, where people like teachers or nurses are regarded as important to society but the financial returns they get are not that high,” Mr Norton said. Their relatively low level of their pay in the public sector - often under demanding conditions - could be seen as justifying subsidising more of their courses, “because the government won’t pay higher salaries,” Mr Norton said. “Instead they pump huge numbers of students through [university], knowing that many of them won’t last that long.”
The chair of the Review panel, Jane Lomax-Smith, said that the idea of lowering fees to meet market needs held no water because there was no indication that students were price sensitive when the costs were deferred. Market failure was not a problem of attracting students, Dr Lomax-Smith said, “it’s a problem of retention in the industry.”
Furthermore, Dr Lomax-Smith dismissed the idea that some graduates were more useful than others, saying that the public benefited from them as a whole in terms of many “intangibles, such as lower crime, better health, civic engagement; those benefits are spread across all graduates. Graduates from particular courses are not like differentiated stem cells - they often move into other fields and do different things.”
If the Review’s recommendations were followed through, nursing courses would see their fees rise by almost 30%, while bills for commerce or law would fall by more than 50%.
The original designer of the deferred student contribution system which premiered in 1989, Professor Bruce Chapman, said the original plan was for a uniform ratio of “cost recovery” from students, and that the idea of varying the ratio for workforce, social, or other reasons was introduced by the Howard Government in 1997.
“They took into accounts expected benefits like lawyers are supposed to be high income and nurses are supposed to be low income, so they included that - but I don’t think that’s a very good basis for charging, because many, many people who study law don’t have a high income,” Professor Chapman said.
“The idea of anticipating future private benefits is an error, and it’s been an error in the system for a long time. What the funding review has come up with is much more consistent with good economics,” said Professor Chapman, who is the Director of Policy Impact at the Australian National University’s Crawford School of Economics and Government.
The Review can be found in full here.