MAIN ISSUES FROM THE EVIDENCE
The measures in the Bill attracting significant comment in evidence to
the Committee were:
- the new income thresholds for repayment of HEC debt;
- the three-tiered contribution system for HECS (also known as differential
HECS); and
- the provision both for full-fee paying for domestic undergraduates
and for charges by the Open Learning Agency of Australia for delivery
of units.
Before examining each issue in detail, the Committee notes that the Bill
needs to be viewed in the wider context of public policy management in
Australia. The measures proposed in the Bill are intended to not only
achieve major objectives in the higher education sector but are also an
element of the Government's strategy of stable fiscal management.
The Committee also wishes to set the record straight on the claim that
aspects of the Bill are tantamount to a bolt out of the blue, insofar
as they have not been subject to public debate. [1]
Issues such as a differential HECS have been rehearsed in public previously
(for example, in the 1989 report by the Committee on Higher Education
Funding headed by former premier, Mr Neville Wran), [2]
while the provision for undergraduate fees has also been part of the higher
education debate for some time. [3] The
Committee shares the view of the Department of Employment, Education,
Training and Youth Affairs (DEETYA), which stated that 'the changes are
more evolutionary than radical' (emphasis added). [4]
The Bill introduces three changes to the Higher Education Contribution
Scheme: lower income thresholds for repayment of accumulated HEC debt;
an overall increase in contribution levels; and three levels of HECS charges
differentiated by course of study instead of the current universal flat
charge. In other respects, key elements of the existing HECS are retained,
notably its basic nature as an income-contingent interest-free loan.
The underlying philosophy of HECS also remains: it is designed to ensure
that the public and private benefits derived from higher education are
reflected more faithfully in the apportionment of public and private contributions
to the costs of that education. According to Professor Bruce Chapman,
Director of the Centre for Economic Policy Research:
HECS is a cost recovery model. Its philosophical basis was essentially
along the following lines: all taxpayers pay for higher education; only
some people get direct benefits from higher educationand they are graduates;
so it seemed to be a fair thing, and it seemed to be good economics,
to have some of the direct beneficiaries of the system pay back some
parton paper, just over 20 per cent of the direct public costs but
only when and if they were able to do so. [5]
The Bill seeks to extend this philosophy in two ways. First, the Bill
alters the balance between public and private contribution to tertiary
education with increased contribution levels for the latter. Second, the
differential HECS bands take this one step further by also aligning student
contributions with the expected income graduates will attain in their
private careers. The three tiers of HECS charges reflect different average
likely earnings for different careers, in addition to different course
costs and levels of demand for courses. [6]
The rationale for incorporating likely private benefits into the fees
tertiary students pay acknowledges the commonly accepted point that graduates
generally enjoy higher incomes, improved employment prospects and higher
standards of living than non-graduates. [7]
It is also in line with growing international recognition that graduates,
as direct beneficiaries of higher education, are in a position to help
sustain the financial basis of public higher education. For example, a
recent World Bank report concluded:
The financial base of public higher education can be strengthened
by mobilising a greater share of the necessary financing from students
themselves, who can expect significantly greater lifetime earnings as
a result of attending higher education institutions and who often come
from families with ample ability to contribute to the costs of higher
education. [8]
In some quarters, the purpose of the Bill appears to have been misunderstood.
The new HECS is not, for instance, a rationing device designed
to curb growth in student numbers. Any suggestion of using differential
HECS as a rationing measure was rejected by the Department when asked
by the Committee if this was the case. According to Mr Burmester, Assistant
Secretary, Funding Branch in the Department's Higher Education Division:
'I do not think the connotation of rationing came up in discussion or
the [Department's] advice'. [9]
Another unjustified claim is that the increased charges would elevate
Australia into the top echelon of countries charging for costs of public
tertiary education, possibly second only to South Korea in terms of international
comparisons. [10] No credible evidence
was cited in support of this.
The differential HECS was also criticised for exceeding the World Bank's
prescription that student fees not exceed 30 per cent of course costs.
[11] This criticism is wrong on two
counts. First, the World Bank has not prescribed a 30 per cent
ceiling for private contributions to the costs of higher education. The
World Bank recommends as an 'indicative target' that universities cover
about 30 per cent of recurrent costs from non-government sources. Furthermore,
rather than set 30 per cent as a cap, the World Bank suggests that some
countries may wish to achieve a higher degree of non-government
funding for public higher education. [12]
Second, neither is the new level of HECS charges on average above 30
per cent of course costs. Certain courses in the higher differential HECS
bands appear to be recouping costs in excess of 30 per cent. But it should
be remembered that the new HECS charges are based not only on course costs
but also on expected average future income and levels of course demand.
Moreover, the Department stated that under the new system the average
contribution would be about 27 per cent when discounts, such as the interest-free
deferral and discount for up-front payments, are taken into consideration.
[13]
It also needs to be borne in mind that there is no definitive answer
to the question of the appropriate ratio of student charge to course costs.
This reflects the difficulty in assigning a value to (or 'pricing') the
public good or social benefits derived from higher education, the other
factor in the cost-benefit equation. Professor Bruce Chapman explained
that since there is no precise method for calculating the social benefits
generated from education, determining the proportion of the costs students
should pay is problematic:
I do not know what the right number is. I am convinced that it
should be more than nought and I am convinced it should be less than
100 [per cent], but beyond that one has to make a judgement which is
an extremely difficult one, and it always has to be done in the context
of not deterring the socially disadvantaged... [14]
The problematic nature of determining relative public-private contributions
notwithstanding, it appears to be common practice internationally to set
private charges at roughly a quarter of total course costs. Professor
Chapman stated that, for countries which charge for public higher education,
the level is about 15 to 30 per cent. [15]
The National Tertiary Education Industry Union also referred to the conclusion
of a recent education review in New Zealand that the private benefit of
higher education is about 23 per cent of total public-private benefits.
[16] The Committee notes that the average
level of the new HECS charges (27 per cent) conforms to the general benchmarks
accepted internationally for private contributions to public higher education.
The likely impact of the new HECS regime for access to higher education
by low socio-economic status (SES) groups (that is, equity groups) was
a common point of criticism in the evidence to the Committee. The standard
contention was that the cumulative effect of higher HEC charges and lower
income thresholds for repayment of HECS debt would in general deter equity
groups from participating in higher education, while the differential
HECS would in particular deny equity groups access to privileged careers
because relevant disciplines are in the top HECS bracket.
However, there is no conclusive statistical basis to prove that fees
and participation rates by equity groups are inversely related. Both the
Department and Professor Chapman concurred that the introduction of HECS
did not deter student participation in higher education. [17]
The Department also stated that there has been minimal change in the relative
numbers of different socio-economic groups participating in higher education
over the last twenty years, despite the changes to tertiary fees
and introduction of HECS during this period. [18]
Indeed, certain equity groups, such as Aboriginal students for instance,
have recorded continuous increases in participation rates during the 1990s.
This has led the Higher Education Council to conclude 'that HECS has had
no impact on discouraging Aboriginal participation since its introduction
in 1989' (emphasis added). [19]
The move to different charges for different courses was also criticised
on the grounds that it will distort the course choices and career options
of students. Whereas the flat universal charge for all university disciplines
under the current HECS has not affected course choices noticeably, it
is alleged that the differential HECS will introduce fundamental shifts
in student enrolments.
Some critics pointed to preliminary evidence of a fall in university
applications for 1997 in the sciences; [20]
in New South Wales applications for engineering, applied sciences and
cognate disciplines are reported to have declined by close to 50 per cent.
[21]
The Department, on the other hand, stated that these trends may not be
indicative. While data disaggregated by course on enrolments for the 1997
academic year were unavailable, the Department stated that '[o]verall,
the picture is rather mixed':
In Victoria the total applications appear to be down, but they
include applications for TAFE as well. Interestingly enough, the numbers
of year 12 applications for universities have actually gone uponly by
a small amount. In Queensland it appears that applications are slightly
higher than last year, but only by a very [small] amount. They do include
TAFE and I am not aware of the split-up there. In Western Australia
it does appear that they are down a little bit. In Tasmania the number
of applications appear to be lower, even though my understanding is
that applications from Tasmanians actually have not changed much at
all. There has been some sort of drop in the applications from interstate
applicants. [22]
Over the longer term, the Department's view was that the differential
HECS and other measures introduced by the Bill would have minimal impact
on student participation rates in higher education:
We are looking at a period where the demographics are very flat,
indeed, for the target group where most students come from. The actual
rEducations to the number of undergraduate places...relative to 1996
levels, is very little. So in terms of the change in participation rates
I would anticipate that there would be very little change. [23]
In view of the uncertainty surrounding the impact of the new HECS, the
Committee believes it is crucial that the effects of the measure are monitored
and analysed closely by relevant bodies. This analysis needs to take into
account not only the overall impact of the new measures but also the effect
on different socio-economic groups. Such disaggregated data analysis is
performed by the Higher Education Council which, under its statutory obligation
to report on the impact of HECS, monitors and evaluates data on participation
by equity groups.
The Department indicated to the Committee that high priority had been
given to systems development for the collection and evaluation of data
on demand by discipline. [24] The Committee
considers it important that high priority also be given to monitoring
of access and participation trends according to discipline and socio-economic
status. It is therefore essential, in the Committee's view, that the Department's
evaluation of the impact of the new HECS pays careful attention to any
changes in these trends, in particular taking account of the Higher Education
Council's reporting on the operation of HECS.
Representatives of science, engineering and technology interests were
prominent among critics opposed to the allocation of certain disciplines
to the higher HECS bands. Their concerns were advanced along several fronts.
- There will be a serious disincentive for students to undertake science-related
units at a time when scientific and technological literacy is at a premium
in terms of generating national wealth and protecting the environment.
- There appears to be a lack of coherence between science policy as
articulated within the DIST portfolio, and the HECS policy in the DEETYA
portfolio to the extent that it impacts upon the development of science
in Australia, especially with respect to the employment of scientists
in universities, in private enterprise and in government research.
- The salaries of science graduates are demonstrably lower than other
graduates as they proceed along their career path.
- Teachers trained in science will incur significantly higher HECS debts
than their humanities trained colleagues, while their salary opportunities
will remain identical:
I suspect that a more serious potential effect is to exacerbate
the already very serious shortage of teachers properly qualified to
introduce people to science and mathematics in our secondary and primary
schools, particularly since education programs are graded in the lowest
band and therefore presumably deemed by the government to have a higher
proportion of public to private benefit, but those who choose to take
particular units in mathematics or science to strengthen their ability
to teach effectively are penalised in HECS but receive no salary incentives
in the teaching systems. [25]
Data about student enrolments in science-based courses cannot be adequately
assessed at this point in time. However, preliminary indications from
a number of sources indicate that inquiries about science courses and
science enrolments are down on previous years.
Where it is possible to make some comparative enrolment analysis at individual
institutions it seems that science enrolments are declining in relation
to other disciplines, as in the following case:
Enrolment inquiries are down on last year by 13%. The enrolments
in science as a co-discipline with other courses is down by 19%, and
this is indicating a clear trend away from students who wish to mix
science with another course like arts, law or economics, because there
is a differential charge for the science component. [26]
The Committee is of the view that there may be a case for science units
to be assigned to a lower HECS band than is currently proposed.
| The Committee RECOMMENDS that, in relation to the allocation
of science units to HECS Band 2, such allocation be adjusted in the
event of there proving to be an adverse impact on the demand for science
as measured by enrolments. |
FULL FEE PAYING FOR DOMESTIC STUDENTS
The Bill opens the way for universities to offer full fee paying places
to Australian students. This measure addresses the current anomaly which
allows for universities to offer places to foreign full fee paying
students but prohibits universities offering full fee paying positions
to domestic students.
Fee-paying places are additional to the number of government-funded
places being made available for Australian students, and there is no sense
in which fee-paying places will replace government-funded places. Moreover,
there are constraints on the number of full fee paying places universities
can offer domestic students. Universities can only enrol fee paying students
once they have fulfilled their HECS quota, and within any course, the
number of fee-paying students cannot comprise more than 25% of the course
enrolments.
This ceiling on the proportion of full fee paying positions is a check
on private-funded enrolments crowding out public-funded enrolments in
universities. Any university which enrols a full fee paying student without
first fulfilling the 75 per cent HECS-liable student quota per course
faces an automatic penalty of $9000 for each full fee paying student.
The Department stated that the 75 per cent HECS-load prerequisite and
$9000 penalty should prevent universities sacrificing public funded positions
for the sake of increasing revenues via greater full fee paying enrolments.
[27]
Complementing these measures is an incentive for universities that enrol
HECS-liable students above target levels for HECS-funded load. Extra funding
for above-target enrolments will come in the form of a government payment
direct to the university of the equivalent amount of the minimum up-front
HECS payment for each HECS-liable student enrolled above target levels.
[28]
The provision for full fee paying for domestic students will provide
an opportunity for the higher education sector to respond more closely
to market forces. Revenue from private-funded students is expected to
not only increase the supply of places in higher education, but should
also expose the sector to a greater degree of demand pressure as students
will have increased scope to choose among universities. Increased funds
from full fee paying students should also see an increase in the quality
of higher education from which all students, private-funded and HECS-liable,
will benefit.
Some opponents of the measure, nonetheless, fear that it might stratify
the university sector further than it is already. As full fee paying students
are likely to want to buy the best degree in the tertiary education market,
the measure is expected to favour established 'prestige' universities
at the expense of more recently established campuses. [29]
Notwithstanding the advantage some universities may enjoy initially, demand
from full fee paying students for the best course money can buy should
serve as a competitive pressure forcing all universities to strive to
improve the quality of their courses. This will arguably also reduce the
degree of hierarchy among universities as institutions compete to attract
full fee paying students.
The major concern over this measure is that it will privilege the well
off who can afford to pay full fees up front and, correspondingly, disadvantage
low-SES equity groups who already face obstacles to accessing higher education.
If this were to occur, the wider implication is that it might sharpen
divisions among different socio-economic groups as family background and
means, not ability, would determine educational attainment and career
prospects. This line of criticism was exemplified by Professor Bruce Chapman:
...[A]llowing universities to charge for 25 per cent [of student
enrolments] must mean unambiguously that the composition of university
places moves towards the rich, or people whose parents or partners are
willing to share family income, and away from people who do not have
access to finance. [30]
One of the grounds for these equity concerns is the belief that the abolition
of tuition fees in 1974 led to increased participation in tertiary education
by equity groups, whereas the introduction of up-front fees in 1987 was
detrimental for such groups. [31] Studies
of participation rates over the last two decades indicate, however, that
while participation for all socioeconomic groups has increased as part
of an overall growth in tertiary students, there has been little change
in the relative balance of socioeconomic groups among tertiary students.
[32] If this is correct, then the number
of low-SES proportionate to other SES groups among tertiary students is
not related directly to fees.
As for other equity implications, the Department predicts that the full
fee paying measure will help relieve pressure on HECS-funded university
places, possibly to the advantage of students from equity groups. This
stems mainly from the expectation that as well-off students elect to buy
their first-choice course, they will free up HECS-funded places elsewhere
in the system which, in turn, will be filled by students from other SES-groups:
There certainly has been, from time to time, a fair amount of
pressure from Australians who have missed out on places for the same
rights as overseas students. But in terms of the effect on Australians,
I think if there is an effectand we will have to wait and seeit is likely
that those who are better off will be able to buy their place rather
than a government place.
This will tend to be in high demand courses, and the effect basically
will be to push the government available places down the queue. I would
have thought that, if there is an effect on equity, it will actually
be that there will be more opportunity for people at the bottom, without
resources, to have places. [33]
The Government also expects equity groups to increase their take up of
university places as part of an increase in undergraduate positions over
the next three years. [34] As all socio-economic
groups have tended to benefit equally from increases in university places
over the last two decades, [35] it is
reasonable to expect a growth in participation of equity groups in public
higher education during this next phase of expansion. To the extent that
there is a shift by well-off students into full fee paying places (as
indicated by the Department above), then the representation of equity
groups in the government (ie, HECS) funded component of higher education
may in fact improve as these groups fill HECS-liable places hitherto filled
by more advantaged students. [36]
It should also be noted that the Bill addresses equity concerns directly
with the introduction of Merit Equity Scholarships. These scholarships,
which will rise to 4000 equivalent full-time student units by the year
2000, are for Aboriginal people, people with disabilities, people from
low socio-economic backgrounds, people from rural and isolated areas and
people of non-English speaking backgrounds.
OPEN LEARNING AGENCY FEES
The Open Learning Initiative was implemented in 1992 by a consortium
of universities led by Monash University. Commonwealth funds were made
available over three years (1993-95) to assist in establishing the Initiative,
with Monash agreeing to implement the Initiative for ten years. It was
intended that Open Learning Australia be financially self-supporting after
1996, with its income deriving from student fees and the provision of
other services such as the sale of videos and education exports.
At present the OLA is tied by an agreement with the Commonwealth to charge
fees below the level of the proposed differential HECS levels (and therefore
less than the cost of delivery of units of study). The new arrangements
will allow the OLA to determine the fees it charges.
The OLA has announced a set fee of $425 per unit for 1997. While this
represents a rise on current fees, the new fee falls well short of predictions
that the OLA could charge as much as $700 for units such as computer science.
[37] These predictions are based on
a concern that the deregulation of OLA fees gives the OLA carte blanche
to set commercially-driven fees regardless of the equity implications
of such a move.
This view has been refuted by the OLA. According to Mr Pritchard, Chief
Executive Officer of the OLA:
Because of the cessation of government financial support and
the rising costs of producing and delivering high quality education,
OLA's unit fees will rise; the rise will not reflect a 'what the market
will bear' approach, but rather the agency's continued commitment to
make education as accessible as possible for everyone. [38]
A more serious concern about the changes to the OLA as embodied in the
Bill relates to their wider implications. Several bodies see these
changes as a prototype or pilot scheme for applying a fee system more
broadly across the higher education sector. [39]
The arrangements governing the OLA system are quite different from those
for campus-based full fee paying students. Eligible OLA students can defer
their charge under the Open Learning Deferred Payment Scheme (a HECS-type
loan scheme for non-government funded positions), [40]
whereas there is no loan scheme envisaged for full fee paying undergraduate
students who must pay up front for courses.
The Department rejected the contention that the new OLA fee system is
a trial model intended for wider application across undergraduate higher
education, noting the difference between the unfunded OLA system and the
government-funded undergraduate system. [41]
| The Committee RECOMMENDS that the Higher Education
Legislation Amendment Bill 1996 be passed without amendment. |
Senator John Tierney
Chair
Footnotes
[1] See, for example, National Union of Students,
Submission No.6, p.1.
[2] Transcript of Evidence, p.122 (Mr
Burmester, DEETYA) and p.131 (Professor Bruce Chapman, Director, Centre
for Economic Policy Research, Australian National University).
[3] Transcript of Evidence, p.121 (Mr
Burmester, DEETYA).
[4] Transcript of Evidence, p.115 (Mr
Burmester, DEETYA).
[5] Transcript of Evidence, p.131 (Professor
Bruce Chapman, Director, Centre for Economic Policy Research, Australian
National University).
[6] Transcript of Evidence, p.116 (Mr
Burmester, DEETYA).
[7] For an elaboration of this rationale, see
Transcript of Evidence, p.122 (Mr Burmester, DEETYA).
[8] The World Bank, Higher Education: The
Lessons of Experience, 1994, p.41, cited in Transcript of Evidence,
p.? (Senator The Hon. Amanda Vanstone, Minister for Employment, Education,
Training and Youth Affairs).
[9] Transcript of Evidence, p.116 (Mr
Burmester, DEETYA).
[10] See Transcript of Evidence, p.107
(Ms Nicholls, National Tertiary Education Industry Union). See also National
Union of Students, Submission No.6, p.12.
[11] National Tertiary Education Industry Union,
Submission No.5, p.12.
[12] The World Bank, Higher Education: The
Lessons of Experience, 1994, p.44, cited in answer to question on
notice No.4.4 (28 October 1996), DEETYA.
[13] Transcript of Evidence, p.118 and
p.263 [8 Nov] (Mr Burmester, DEETYA).
[14] Transcript of Evidence, p.133 (Professor
Bruce Chapman, Director, Centre for Economic Policy Research, Australian
National University).
[15] Ibid.
[16] National Tertiary Education Industry Union,
Submission No.5, p.13.
[17] See Transcript of Evidence, p.118
(Mr Burmester, DEETYA). See also Transcript of Evidence, p.132
(Professor Bruce Chapman, Director, Centre for Economic Policy Research,
Australian National University).
[18] Transcript of Evidence, pp.121
(Dr Karmel, DEETYA).
[19] Higher Education Council, 'Tenth Report
to the National Board of Employment, Education and Training on the Operation
of Section 14 of the Higher Education Funding Act 1988 and the
Higher Education Contribution Scheme', May 1996, p.27.
[20] National Union of Students, Submission
No.6, p.15.
[21] National Tertiary Education Industry Union,
Submission No.5, p.12.
[22] Transcript of Evidence, pp.115-6
(Dr Karmel, DEETYA).
[23] Ibid.
[24] Transcript of Evidence, p.118 (Mr
Burmester, DEETYA).
[25] Transcript of Evidence, p.123,
28 October (Mr Webster, Institution of Engineers Australia)
[26] Transcript of Evidence, p.242,
8 November (Dr Baldwin, Science Policy Committee, Federation of Australian
Scientific and Technological Societies)
[27] Transcript of Evidence, p.121 (Mr
Burmester, DEETYA).
[28] Second Reading of the Bill, House Hansard,
p.5022.
[29] National Tertiary Education Industry Union,
Submission No.5, p.7.
[30] Transcript of Evidence, p.134 (Professor
Bruce Chapman, Director, Centre for Economic Policy Research, Australian
National University). See also Bruce Chapman, 'Understanding the 1996/97
Budget Changes in the Funding of Australian Higher Education', October
1996, pp.6-7.
[31] National Union of Students, Submission
No.6, pp.8-9.
[32] Transcript of Evidence, pp.121
(Dr Karmel, DEETYA).
[33] Ibid, p.122. See also answer to question
on notice No.2 (28 October 1996), DEETYA.
[34] Transcript of Evidence, p.259 (Senator
The Hon. Amanda Vanstone, Minister for Employment, Education, Training
and Youth Affairs).
[35] See Transcript of Evidence, pp.121
(Dr Karmel, DEETYA).
[36] Transcript of Evidence, p.259 (Senator
The Hon. Amanda Vanstone, Minister for Employment, Education, Training
and Youth Affairs).
[37] National Tertiary Education Industry Union,
Submission No.5, p.16.
[38] A.B. Pritchard, 'OLA fees provide for
all', The Australian: Higher Education Supplement, 5 November 1996.
[39] National Union of Students, Submission
No.6, pp.16-17; Transcript of Evidence, p.102 (Dr Allport, National
Tertiary Education Industry Union).
[40] See Transcript of Evidence, p.117
(Mr Burmester, DEETYA).
[41] Ibid.