Demand driven university funding system should stay

Despite significant student loan debt, the government should continue the uncapped university funding system. Shutterstock

The government commissioned review of the demand driven funding system of universities, undertaken by David Kemp and Andrew Norton has been released today. As many commentators speculated, it is broadly supportive of the current framework for funding undergraduate education, supporting the continuation of the system. It also advocates extending demand driven funding in important ways that could have a dramatic implication for Australian higher education.

Extending the system

The report supports extending the system to undergraduate sub bachelor places. Universities currently offer a variety of courses at the sub bachelor level, such as associate degrees and advanced diplomas, although the number of places was capped by the previous Commonwealth government. This was in part to address the fear that costs to the Commonwealth in a demand driven system could blow out if universities took students away from non university providers or largely state funded ones such as TAFEs. The report recommends the caps on the number of bachelor-level places not be re-imposed.

More significantly, it recommends a potentially wide-ranging change in how, and by which institutions, undergraduate education is offered in Australia by extending the system of public supported places to private and other non-university providers. The report suggests all higher education providers should be eligible for Commonwealth supported funding under certain conditions. It recommends they be allowed to offer these places on the same basis as Australian public universities, a policy that, if adopted, could dramatically expand the number of providers that have access to public funding, and hence the total public funding going into higher education.

In expanding the number of institutions able to access public funds, the report is firm that the Tertiary Education Quality and Standards Agency needs to approve the courses, holding these institutions to a consistent standard. It also recommends greater information for prospective students of non-university higher education providers, such as through extending the University Experience Survey to them.

The challenge around post graduate places

Where the report advocates further policy work is on the difficult issue of public subsidy for post graduate places. At present in Australia, universities can offer masters courses to domestic students on a full fee basis. However, the number of Commonwealth supported post graduate places they are granted is capped, with each university having a different allocation, based in part on history, and in the case of the University of Western Australia and the University of Melbourne, on their model of offering a number of professional degrees at post graduate level while restraining their undergraduate numbers.

To achieve better overall system coherence at all levels of higher education, there is an argument that Commonwealth support should be extended to all postgraduate courses. If we agree there is a case for any amount of public subsidy of higher education, it stands to reason this might be extended to higher level, post graduate courses.

This presents a serious public policy challenge. Doing so in a blanket manner could inflate the public funds needed for higher education, if demand driven CSP masters degrees prove widely attractive for students in addition to a three year bachelor degree. It also risks furthering ‘credential creep’ as a post graduate qualification becomes the minimum level expected and a bachelor degree is not seen to be enough (though there is an argument that this is already happening and Australia has little choice but to follow international trends).

The report acknowledges more thinking needs to be done on how to fund post graduate places but does advocate that the demand driven system be extended to post graduate courses where there is a combination of clear community benefit and modest financial rewards. However, it says that other postgraduate courses should be offered on an entirely full-fee basis.

The report is careful to acknowledge the complexity of current arrangements and how they might be extended in the future.

Targets and transparency

The review recommends that there should be no higher education attainment targets and that government should not set enrolment share targets for low socio-economic status students. This is in line with the government’s pronouncements, and the Minister declared last year that he is “not obsessed with percentage quotas.” As universities are still working towards ensuring access and equity, and as far as has been announced government funds will still support these goals, dropping the targets per se may mean little for outcomes.

The report also makes a number of other recommendations to ensure continued transparency in the system. It says enrolment data systems should be updated so they provide detailed and timely information on enrolment trends, and that an annual report on higher education policies be requisite, with summary information on performance trends. It supports the intent behind the MyUniversity website but says it should be replaced with an improved version with greater information on attrition and completion by university entry. Other recommendations include discontinuing the increasing funding for engineering and health disciplines in light of cost pressures, and removing the HECS-HELP benefit for graduates in designated occupations.

Overall, a report that will start some significant conversations about the future of Australian higher education, even if it was unable to fully address some important areas.

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