Coalition Senators' Dissenting Report

Introduction

1.1Growing the nation’s economy by fostering the development of new, innovative businesses, underpinned by the next wave of Australian entrepreneurs and visionaries, is a key part of the Coalition’s vision for Australia.Startups and other entrepreneurial activity are a critical driver in generating high value jobs of the future, in transforming clever ideas into great businesses, and in commercialising research.

1.2A major initiative of the Coalition, when in government, was the $2.2 billion University Research Commercialisation Action Plan, which we pleasingly note has now been adopted by the Government, including the $1.6 billion Economic Accelerator Program, about which the Business Council of Australia said will:

… significantly improve Australia’s ability to commercialise our best ideas and innovations, scaling them up to create exciting new industries, new exports and new highly skilled jobs for Australians.[1]

1.3During this inquiry into the Education Legislation Amendment (Startup Year and Other Measures) Bill 2023 (the Bill), while most key stakeholders in the university sector were supportive, in principle, of any measure which contributes to the development of the next generation of entrepreneurs, Coalition Senators are deeply concerned about the numerous and significant defects with the Startup Year program, the main feature of the Bill.

1.4Coalition Senators are deeply concerned that this income contingent loan program is a far cry from the Government’s promise that it will:

… build a pool of knowledgeable new entrepreneurs and potential new companies to drive innovation and job creation in Australia and grow much‑needed links between higher education providers, industry and the startup community.[2]

1.5Some of the evidence provided to the committee about the defects of the Startup Year program was scathing.Central Queensland University, in response to a question on notice about whether the Startup Year program offers a clear value proposition for regional universities, contended:

… the program is too light on detail to provide a detailed response … [but there is] …no real value proposition for regional universities that might need help setting this up.[3]

1.6It is embarrassingly clear that the Labor Party, in making this election commitment prior to the last federal election, had not done its homework.Even worse, despite running a consultation on the proposed Bill in late 2022 (Consultation) which elicited wide ranging, damning criticism, the Government has refused to remedy most of these defects, even to date declining to release the guidelines which underpin how the Startup Year program will operate.This frankly demonstrates a profound lack of respect to both the higher education sector and students considering a Startup Year accelerator course.

1.7A common theme among many submissions to the Government’s Consultation was that the Startup Year program did not offer a clear value proposition to students or universities. This is a very considerable issue yet to be addressed by the Government.

1.8We note that Universities Australia (UA) is still recommending that a working group be established to provide advice to the Government regarding the purpose, value proposition, funding arrangements, and other implementation issues associated with the Startup Year program,[4] such is the breadth the university sector’s concerns.

1.9The Government has not sufficiently explained how it will test the efficacy and effectiveness of the Startup Year program, nor has it addressed how it will ensure students who participate in Startup Year programs get value for money.

1.10We reiterate there is no guarantee of success with a startup and, most concerningly, a Startup Year student loan. Ninety-seven per cent of startups exit or fail to grow. However, unlike angel investors or large companies which invest in startups and other entrepreneurial ventures, students do not have deep pockets. They cannot afford to be plunged into debt, particularly under circumstances where the Startup Year program imposes such high risks on students with absolutely no certainty that students will receive any real benefits.

1.11This is particularly concerning given that so many students are burdened with debilitating cost of living pressures such as skyrocketing rent, food and power prices, exacerbated by the Government’s failure to deliver an economic plan which combats high inflation and very significant rises in the cost of living.The Government’s determination to saddle students with so much debt for completing a full-fee university accelerator course, with no certainty of any tangible outcomes, demonstrates a callous disregard for the long-term welfare of students.

1.12Like the university sector, Coalition Senators support effective measures which back Australia’s best and brightest student entrepreneurs.Some of our nation’s most remarkable innovations – the electronic pacemaker, penicillin, the black box flight recorder, Wi-Fi, and cochlear implants – stem from the incredible research efforts of our universities.This is precisely why the Coalition invested so heavily in the University Research Commercialisation Action Plan.

1.13In stark contrast to this initiative, the result of detailed policy work and extensive consultation by the former Coalition government, we consider this Bill cannot be passed in its current form. We urge the Government to seriously consider the wide-ranging concerns expressed about this Bill, address the Bill’s many defects and design a Startup Year program which delivers appropriate safeguards and real outcomes for students, not just more debt.

Key concerns

1.14The problems associated with the Startup Year program are amply demonstrated by the continuing concern expressed by many key stakeholders regarding its feasibility, its value proposition for students and universities alike, and various issues relating to the way in which funding is allocated under the program.

1.15For example, in evidence to the committee, Dr Matthew Brown, representing the Group of Eight, said that ‘there’s lots more work to be done’ on the Bill and the Startup Year program,[5]in particular because ‘there is a little bit of a mismatch between the educational model [proposed in the Bill] and what accelerators typically offer.’[6]Dr Brown went on to say that ‘it’s going to be a challenge to get programs up and running for Startup Year by July [2023]’, because:

… accelerator activity is not aligned with delivery of an accredited model, so it’s not just a matter of rebadging what’s already on offer to become accredited courses; it’s going to be a lot of work, even by established accelerators, to get up and running with the Startup Year program.[7]

1.16Dr Brown also highlighted that the $11,800 Startup Year loan is ‘probably less than the EFTSL being delivered’ and that ‘there are questions there about whether that level of support is going to be enough to support students from underrepresented groups’.[8] This concern was echoed by Ms Narelle Pearse, representing Central Queensland University, who gave evidence to the committee that one of the risks associated with the Startup Year program was:

… the financial viability of the $11,800 mark. That needs to be considered, in terms of how we make this financially viable. We don't want to start something in markets that we have to pull out of because we can't make it work due to low student numbers.[9]

1.17The Government appears to have determined the Startup Year program loan amount without any consideration as to whether this amount is sufficient to cover the costs of delivering an accelerator program or whether it bears any relation to the needs of students and universities participating in the Startup Year program.

1.18Another common theme from many submissions to the Government’s Consultation, reflected in evidence provided to the committee, was that regional universities, especially those without existing accelerator programs, would not be able to take advantage of the Startup Year program, whose funding model overwhelmingly favours larger, better resourced, metropolitan universities with existing accelerator programs. As Mr Peter Chesworth, representing UA, conceded in evidence:

It’s simply a statement of fact…that there are always going to be programs in any part of public policy where some potential applicants are probably better placed to access the program than others. We have 39 universities in this country. There is a question, or perhaps an issue, for government as to whether they wish Startup Year to be rolled out across all 39 universities or whether it is something that should be located within a fewer number of universities, based on the fact that that fewer number of universities may have had a stronger track record in this area. … There is quite a lot of diversity in Australian universities, … [a]nd so with something like Startup Year it’s just a statement of fact, without any negative associations to it, that, because of its scale and the amount of money being provided, there will be some universities that will be able to access the program more than others.[10]

1.19Given the design of the Startup Year program, it is evident that the Government has disregarded the needs of students living in regional areas and those from low socio-economic backgrounds, as well as students who do not happen to attend a university with an existing accelerator program. Central Queensland University gave evidence that there was a risk the program would contribute to ‘regional drain’, where students leave the regions in order to access Startup Year accelerator courses.[11]This makes a mockery of the notion that the Government is serious about encouraging young Australian entrepreneurs who reside and attend a university in regional Australia.

1.20One of the most pressing concerns about the Bill is that the $11,800 loan amount represents a significant amount of additional debt for a student to carry.The Bill, in fact, provides that students may take out two $11,800 STARTUP-HELP loans over the course of their participation in a Startup Year program, to a total of $23,600. It is entirely unclear as to why prospective students would take on such significant additional debt when the Startup Year program provides them with no assurance whatsoever that their participation will lead to any concrete result. While the Bill provides for Startup Year programs to be accredited, this did not enjoy broad support from stakeholders, who expressed some concern that a traditional accreditation model would be inappropriate for programs of this kind which typically focus on skills delivery rather the provision of formal qualifications. The Government has failed to articulate any satisfactory response to this important concern.

1.21It is regrettable that the Albanese Government abolished the 10 per cent HECS discount, particularly as students only needed to pay a minimum of $500towards their course fee to receive the discount. In contrast to the Government’s approach which drives up student debt indexed to inflation, the Coalition when in government was focused on helping students to pay down their debt as fast as possible.

1.22Finally, the Government’s proposed ‘pilot’ for the Startup Year program is not fit for purpose. The Government is proposing that universities bid for an initial 1,000 STARTUP-HELP places which will be made available from 1 July 2023, rather than running a properly resourced pilot with a dedicated cohort of students at one university. The Government’s proposed ‘auction’ of these student places will provide unreliable data, and will favour larger, richer, universities which can afford to outbid their smaller, mostly regional competitors.

1.23These problems are compounded by the fact that the Government is yet to release its guidelines which will govern important matters such as how the Startup Year places will be allocated and the criteria to be used in determining whether a Startup Year loan will be provided to a student. In evidence, the Department of Education was unable to provide any clarity as to whether the guidelines had been drafted, let alone when they would be released.Given the guidelines set out the how the Startup Year is to operate, this lack of crucial detail at such a late stage of the Bill’s progress through Parliament is most concerning.

Conclusion and recommendations

1.24We reiterate that, in general, the Coalition strongly supports the development of programs for the commercialisation of entrepreneurial ideas. The Coalition has a proud record of supporting such initiatives.

1.25Notwithstanding, we are very concerned with this Bill. It is poorly thought out, short-sighted, offers no clear value proposition for students or universities, and burdens students who are already struggling with significant cost of living pressures with even more debt. We wholeheartedly endorse the concerns of many stakeholders who gave evidence to the committee that there is much more work to be done on this program, and do not believe that it is fit for purpose in its current form.

1.26The Bill with respect to the Startup Year program should not be passed by the Senate in its current form.

1.27The Albanese Government must seriously consider the acute cost of living burden that its policies are imposing on Australian higher education students, and urgently deliver an economic plan which combats these cost of living pressures on students.

Senator the Hon Sarah Henderson

Shadow Minister for Education and Participating Member

Liberal Senator for Victoria

Senator Matt O'Sullivan

Deputy Chair

Liberal Senator for Western Australia

Senator Kerrynne Liddle

Member

Liberal Senator for South Australia

Footnotes

[1]Business Council of Australia, ‘Accelerated industry-university research collaboration is critical’, Media Release, 1 February 2022, https://www.bca.com.au/accelerated_industry_university_research_collaboration_is_critical (accessed 28 April 2023).

[2]Department of Education, ‘Startup Year’, 22 March 2023, https://www.education.gov.au/higher-education-loan-program/startup-year (accessed 28 April 2023).

[3]Answers to written questions placed on notice by Senator the Hon Sarah Henderson to CQUniversity, 26 April 2023 (answers received 27 April 2023).

[4]Universities Australia, Submission 1, p. 1.

[5]Dr Matthew Brown, Deputy Chief Executive, Group of Eight, Proof Committee Hansard, 17 April 2023, p. 4.

[6]Dr Matthew Brown, Deputy Chief Executive, Group of Eight, Proof Committee Hansard, 17 April 2023, p. 3.

[7]Dr Matthew Brown, Deputy Chief Executive, Group of Eight, Proof Committee Hansard, 17 April 2023, p. 4.

[8]Dr Matthew Brown, Deputy Chief Executive, Group of Eight, Proof Committee Hansard, 17 April 2023, p. 5.

[9]Ms Narelle Pearse, Chief Operating Officer, CQUniversity, Proof Committee Hansard, 17 April 2023, p. 13.

[10]Mr Peter Chesworth, Deputy Chief Executive, Universities Australia, Proof Committee Hansard, 17 April 2023, pp. 3-4.

[11]Ms Narelle Pearse, Chief Operating Officer, CQUniversity, Proof Committee Hansard, 17 April 2023, p. 14.