BY SENATORS CARR, CROWLEY AND STOTT DESPOJA
on the Higher Education Legislation Amendment Bill 1996
The Higher Education Legislation Amendment Bill 1996 has the potential
to radically change the provision of higher education in Australia. The
proposed changes have serious implications for equity, access and quality
in Australian universities.
The bill was introduced into the Senate with the purported claim that
it would expand access, widen equity and improve diversity and quality
in higher education. The evidence presented to this Committee conclusively
discredits these claims and reveals the bill as an attack on higher education.
The government's higher education policy and so called 'commitment to
quality, diversity and innovative change' [1]
is an abandonment of the principle of fairness that has been the hallmark
of higher education in Australia.
The basic tenet underlying this system is that access is based on merit.
This bill attacks this principle. Through a host of measures, it enhances
opportunities for the rich and decreases them for the disadvantaged.
According to the Second Reading Speech for the Bill, it will 'introduce
additional opportunities and choice for Australian students' and 'enable
Australian students to have a greater chance of obtaining the higher education
course of their first preference'. Poor students are not going to be in
a position to take advantage of many of these purported additional opportunities.
The measures introduced by the Billup front full fees for domestic undergraduates,
the dramatic increases to the base level of HECS, the lowering of the
repayment thresholds and the imposition of differential charges all these
are likely to have the effect of raising the bar to entry for less well-off
students
What is particularly disturbing about this Bill is that it introduces
far-reaching changes before the Higher Education Review has been established,
let alone had a chance to consult, to formulate its findings and provide
considered advice to the Minister. In short, the Bill is preemptive in
the extreme. Moreover, it presents those conducting the Review with a
financial fait accompli which itself may require untangling before a coherent
regime can be established. This conveys the impression that the Government
has little interest in undertaking a serious examination of higher education,
in thoroughly assessing its needs and carefully defining a vision of Australia's
higher education future. The sense of urgency attached to the measures
in this Bill suggests that it is driven by budget concerns, by the Government's
deficit rEducation plan and not a well-defined philosophy of higher education.
In the context of Senate examination of estimates, the Department reported
to the Committee cuts to the Higher Education System (Programme 2.1) for
1996-1999 of $1.956 billion. [2] The
overall cuts to higher education for this period amount to $1.821 billion.
[3] There is a receipt offset of $1.130
billion essentially generated by the modified HECS arrangements. As the
Department stated with respect to Programme 2 Budget Estimates:
Programme 2 [Higher Education] includes savings measures to increase
HECS with differential rates depending on course and to lower the compulsory
HECS repayment threshold. These measures represent a net
increase in receipts offset within outlays rather
than a rEducation to expenditure. [4]
Again, this reveals that the real intention behind the changes to HECS
is to raise revenue to fund the government's deficit rEducation plan. In
other words, this Bill is not so much a statement on education policy
but rather a vehicle for the government's budget cutting.
The changes provided for in this bill cannot be viewed outside the context
of the Government's overall higher education policy, in particular, its
decision to reduce operating grants to universities by one percent in
1997, three per cent in 1998 and a further one per cent in 1999. Translated
into rEducations in target numbers, these cuts will result in a rEducation
of 17,055 Commonwealth funded student places over the next three years.
[5] The changes to the level of operating
grants, at least for 1997 and 1998, do not require legislative amendment
as the new levels of the grants are lower than the amounts already provided
for in the Higher Education Funding Amendment Act (No.2) 1995. [6]
They are, nevertheless, germane to any discussion of the implications
of the Higher Education Legislation Amendment Bill 1996.
The introduction of up front fees to Australian undergraduates
The amendment that has the greatest potential in the long term to change
the provision of higher education in Australia is that relating to section
13(1) of the Act. As it currently stands, Section 13(1) of the Act provides
for the charging of fees for postgraduate courses. If this bill is passed,
the section will read
13. (1) The Minister may issue guidelines in relation to the
provision by institutions of undergraduate or post-graduate courses
for which fees may be charged.
With the insertion of a mere two words, 'undergraduate or', the government
will fundamentally alter the character of a higher education system that
has been widely accepted in the community for its perceived fairness.
Access to universities has been largely based on merit not on a student's
capacity to pay.
Many witnesses expressed grave concerns about this amendment. One witness
described it as the 'most fundamental, inequitable and grave of the entire
package of policy measures announced in the 1996-97 Federal budget'. [7]
Another declared it to be the 'most significant potential for change in
this debate'. [8]
The concerns generated by this amendment centre on two issues, namely
the impact on equity and the potential of the amendment to allow an unregulated
and unlimited expansion of fee paying places.
Equity considerations
The principle equity concern relating to the proposal to introduce up
front fees is, as expressed by the NTEU, a simple one. 'Only some people
can afford to pay up front fees'. [9]
It is, they argue, 'contrary to the egalitarian ethos of Australian society
that something as fundamental as education might be available only to
those who can afford to pay it'. Other witnesses, including the AEU, supported
this view. 'To sweep away the fundamental equity for access to higher
education and allow places to be again bought by those who can afford
to pay is socially unjust'. [10]
Although the government presents the proposal as a measure that effectively
increases access to universities and provides greater choice, it overlooks
the fact that this is only the case for those who are in a sufficiently
comfortable financial situation to take up the offer. Such opportunities
have nothing to do with equity. What is equitable about a situation in
which a rich student can buy a place in a university despite having a
lower TER score than another who cannot afford to buy a place? What is
equitable about a situation in which a rich student can turn down their
second or third preference and opt instead for their first preference
in the course or the university of their choice when a poorer student
must accept what is offered? If there is a correlation between
socio-economic status and TER Score, as many believe, it could be argued
that students from higher socio economic backgrounds are already more
likely to get higher TER scores and be offered government funded places
in courses of their choice. Why double the advantage to such students
by giving them, in essence, a fall back position of being able to buy
the places they may not achieve through merit? What is equitable about
a system 'where those who can pay fees have greater options and choice
than those who do not?' [11]
The introduction of extra places for those who are rich enough to afford
full fees contradicts the justification for HECS. Professor Chapman, a
leading academic expert in the economics of education, addressed this
point in some detail.
The current HECS system was designed not to favour the rich.
This is because when higher education financing policy is one in which
access is increasingly determined by the ability to pay, and decreasingly
determined by the capacity and motivation to learn, many able but poor
prospective students are likely to be excluded.
This wastes talent and is thus poor economics. Moreover, moving
towards up-front fees also means a greater entrenchment of the nexus
between one's socio-economic background and future life opportunities.
Those who believe in equality of opportunity should judge this to be
poor policy. [12]
As the Australian Dental Association noted, this will have an unfortunate
flow-on effect for the social profile of future practitioners.
It is in the interests of the community that the dental profession
be drawn from all sectors of the community and not biased to an entry
from those sections who are most privileged. With up to a quarter of
this entry available for those paying for it, the composition of the
undergraduate body will be altered and, hence, the composition of the
future practitioner. This is considered to be undesirable. [13]
In discussing the diversification of funding of public institutions,
the World Bank report refers to the need to 'provide support to qualified
students unable to pursue their studies for reasons of inadequate family
income' and assistance measures to enable 'poor students to make the same
choices as those with more financial resources'. [14]
It argues that
Cost-sharing cannot be implemented equitably without a functioning
student loan program to assist students who need to borrow for their
education and without scholarship programs that guarantee necessary
financial support to academically qualified poor students unable to
absorb the direct and indirect (forgone earnings) costs of higher education.
[15]
The Labor Senators note Australia's success in introducing cost sharing
in public higher education through HECS and identifies the existence of
this comprehensive student loan system as enabling a significant expansion
in enrolments without a dramatic increase in public subsidies. The essential
feature here is the income contingent nature of the deferred loan scheme.
This has allowed students, who might not have the financial resources
to pay up front fees, to participate in higher education and pay back
their HECS loan when they are financially able to do so. As the majority
report notes, participation by Aboriginal students in higher education,
for instance, has increased throughout the 1990s.
The basic flaw in the government's proposal to introduce full fee paying
places is that it fails to provide in any way for 'students who do not
have the financial capacity to pay'. [16]
The proposal to depart from the wholly income contingent repayment principle
that underpins HECS is, according to Professor Chapman, a radical move.
I will tell you what is really radical. It is going away from
a system of undergraduate charging which is comprehensively income contingent
repayment to one which allows 25 per cent of up-front fees with no discussion
of a loans model, let alone an income contingent loans model. The conceptual
basis of HECS is really not that hard to understand if you are a little
bit interested in or familiar with the economics of education.
If you charge up-front fees, poor students will not get in. They
will not be able to borrow without a guarantor or without assets, and
the reason they will not be able to borrow is that banks will not give
loans where essentially there is no saleable collateral. We do not have
slavery. You might like to introduce slavery and you would solve that
problem. But, in the absence of slavery, banks will not lend because
they cannot sell what it is if you default on a loan. It is not like
a house. The bank is annoyed if you default on a mortgage, but it can
always sell the house, so there is a transaction cost. But they cannot
sell your human capital. [17]
The introduction of a scheme which favours the financially advantaged
is untenable. The equity implications demand that the proposal to introduce
up-front fees for undergraduates be rejected.
Merit equity scholarships
It is important to put into perspective the government's claim that it
is 'further encouraging the participation of equity groups in higher education
by introducing up to 4,000 merit equity scholarships between 1997 and
2000'. [18] This equates to 1000 merit
equity scholarships per year to be distributed between 36 universities.
One university described the number of scholarships offered as 'derisory'.
[19] The reason for this is abundantly
clear when the number of merit equity scholarships is compared with the
expected number of student enrolments over the next four years. Of the
600,000 students expected to be enrolled in universities by the year 2000,
4000 or 0.006% will have HECS exemption scholarships. [20]
The government's claim, in the light of these statistics, is risible.
Of the Merit Equity Scholarships proposal, Professor Chapman stated:
In terms of its overall impact, it is not
going to encourage people who would otherwise not be there in the first
place, and its empirical magnitude is too insignificant
to believe that it is going to have any effect at all. [21]
It is also interesting to put the proposal into some historical perspective.
According to the National Union of Students, the 1996 HECS is 'roughly
equivalent in real terms with the tuition fees charged to university students
prior to the abolition of fees in 1974'. [22]
In 1973, 41.4 per cent of full time students had their fees paid by Commonwealth
scholarships. (An additional 38.8 per cent had their fees paid by State
teachers' studentships). [23] Viewed
in the light of such figures the current government's merit equity scholarships
initiative reveals itself to be tokenism of the worst sort.
The de-regulation of fees for undergraduates
The amendments to Section 13(1) of the Act de-regulate fee paying arrangements
for undergraduates. Importantly, the parameters within which fees operate
are not specified in the legislation but are governed by Ministerial guidelines.
According to the NTEU this
allow[s] the Minister complete discretion, through the formulation
of guidelines, over matters including the level of fees, the conditions
under which institutions could charge fees, which and how many students
could be obliged to pay upfront tuition fees and safeguards to underpin
the principles of access to higher education. [24]
The amendments have the potential to seriously undermine Australia's
commitment to an accessible, equitable higher education sector, and have
aroused strong concerns from many quarters. The fears range from the amendments
heralding a 'progressive substitution of full fee-paying students for
HECS paying students in the more sought after courses' [25]
to a situation sometime 'in the future for all students to be charged
tuition fees'. [26] While the current
government may protest that this is not its intention, there is certainly
nothing in the proposed legislation to stop the current or any future
Minister from implementing drastic changes.
The government's stated intention is to limit the number of fee-paying
places available to Australian students to twenty five per cent of domestic
undergraduates in any course. By refraining from enshrining this limit
in legislation, the government is very clearly reserving the option to
change the proportions at any time in the future. The point warrants repetition
- if this amendment is passed there will be no legislative impediment
to prevent the Minister from so acting.
The Minister's explanation to the Committee for not specifying the 25
per cent ceiling in the bill was that 'the proposal was put and accepted
that this is a clean way to do this. It is neat'. [27]
The Opposition and Democrat members of the Committee are not satisfied
that such a reason justifies its exclusion. Legal tidiness should not
take precedence over sound policy making.
The Opposition and Democrat members of the Committee suggest that it
would require a leap of faith to believe the government will maintain
the twenty five per cent ceiling in the long term. The following extract
from an interview with Senator Hill in February 1996 is an indication
of the credibility of the government's stated intention.
Sarah MacDonald: "Why can't you just make that
simple guarantee [ruling out the introduction of up front fees for undergraduate
students in excess of government funded quotas]?"
Senator Hill: "Ah, because that is not a current
issue. As you know, universities can't fill their places. There is no
question, at this moment, of universities seeking to charge fees above
quota, because no student is going to pay fees when they can get a HECS
subsidised place."
Sarah MacDonald: "Well why not make the guarantee
then?"
Senator Hill: "Because how far do we have to
move into the hypothetical, how far into the future do we have to try
and work out what the system is going to be?" [28]
The experience of post graduate students since the de-regulation of fees
demonstrates how swiftly the absence of specific prohibitions in the legislation
enables a shift in the balance between government funded and full fee
paying places. Fees for postgraduate coursework were introduced in 1989
and in 1994 all regulations were removed in the postgraduate coursework
area. Although this was followed by a substantial increase in the number
of fee-paying courses, according to the Council of Australian Postgraduate
Associations, 'a substantial core of HECS-liable places postgraduate courses
remained.' [29] However, in the absence
of any legislative prohibitions, a change in policy such as the cuts in
operating grants (which are to be primarily translated into cuts in government
funded postgraduate places), can overnight alter the postgraduate landscape.
CAPA sketched the immediate impact of these changes to the Committee.
Figures provided to CAPA by DEETYA show that a number of universities
will have no government funding for postgraduate coursework by 1998
and in total about a third of all government funded (HECS-liable) places
will be removed by 1998. The cuts will be felt most heavily by those
course and universities most reliant on government funding. Thus by
1998 13 out of the 36 unified national system universities will have
very low levels (less than 150 EFTSU) of government funded places. [30]
In the absence of any legislative prerequisites and restrictions, it
is possible to imagine a change of government heart about the twenty five
per cent ceiling drastically altering the provision of publicly funded
higher education for Australian undergraduates.
Access to education
In presenting the case for the introduction of full fee places the government
has made a number of assertions. One of these concerns access to education.
In evidence before the Committee, the Minister asserted:
This government is intending to quite dramatically expand opportunities
for Australian students for their first bite at higher education, firstly,
by increased government-funded undergraduate load; and secondly, on
top of that load and only when that load in each course is filled, allowing
universities to sell places. [31]
According to the Minister, children of parents who 'may not have the
money to be able to fully fund a place for one of their children in universities'
will also have increased opportunities.
There are two increased opportunities for children of those people,
two increased opportunities; first, to get in the normal course of events
as they would under the system that [Labor] implemented and support
- that is, the existing system, where we plan to have I think it is
about a five per cent increase in undergraduate places. So increased
access for that group because there would simply be more government
funded places available and they would take the normal share of those
increased places, I would expect, as they would have of the other government
funded places. [32]
The Minister later corrected the amount by which the undergraduate places
are to increase and identified that in 1997 there would be an additional
6000 undergraduate places above 1996 levels. This means that for 1997
the budget cuts will result in no loss in undergraduate places against
forward estimates. Nor, it should be noted, will there be any increase.
By 1998 there will be an additional 10,000 government funded places above
1996 levels. Here we start seeing rEducations in undergraduate places against
forward estimates. Although in 1998 there will be an increase of 10,000
government funded undergraduate places, this represents a rEducation of
approximately 2000 government funded undergraduate places against forward
estimates. [33]
The second opportunity of increased access for less well-off people to
higher education, according to the Minister, will come from rich students
buying full-fee places and leaving vacant HECS-liable places for other
students, including those from less well-off backgrounds, to fill. [34]
The extent to which less-advantage students will benefit from this is
open to question. It would be realistic to expect vacant HECS places being
filled by a cross-section of socio-economic groups, including students
from well-off backgrounds and equity groups. Given that the socio-economic
profile of university students has, as the majority report notes, barely
changed over the last two decades, equity groups are unlikely to be the
major beneficiaries of any shift in well-off students to full fee places.
The other problem with the claim that lower socio-economic groups will
take up HECS places left by the rich is that it ignores the impact on
equity of the new differential HECS and related measures. As we detail
later in the minority report, the Opposition and Democrat Senators have
grave concerns over the ramifications for equity groups of the government's
new HECS regime. These changes effectively introduce new hurdles to access
for equity groups (the three HECS bands, the 68 per cent overall increase
in HECS charges and the lowering of the income threshold for debt repayment
below the average weekly wage).
It is worth noting also that this Bill deals with higher education provision
as a whole. As described earlier in this discussion, the operating cuts
will lead to a rEducation in approximately 17,000 places against
forward estimates in 1998. This is the equivalent of 4 per cent cut in
places overall. It is in the context of total figures that one should
evaluate government claims that access will be expanded.
Over-enrolled students
The government has argued that additional HECS places are likely to eventuate
because the government will pay direct to institutions the minimum upfront
HECS payment for any HECS-liable students enrolled above the target load.
The Opposition and Democrat members of the Committee question the extent
to which this is likely to happen. Universities which meet HECS target
loads are more likely, in the first instance, to offer places to full
fee paying students than they are to enrol further HECS-liable students.
It could be argued that institutions which have filled courses' twenty
five percent quota of fee paying places may be encouraged to offer additional
government funded places to enable them to take in additional fee paying
places. However, given that for every additional fee paying place it offered,
the institution would have to take in three extra HECS-liable students,
the financial incentive would not be great.
If the degree to which institutions have over enrolled students in the
past is any measure, indications from DEETYA suggest there is little interest
in this practice. The Department has advised that in the last three years
there has been virtually no instance of over-enrolment. Nor was the issue
referred to in any submissions received by the Committee from universities.
The government insists, however, that this is a real incentive:
This is a real incentive, Mr Chairman for universities who in
particular courses have some space10 or 15 more seats in a lecture seat,
don't need another lecturer, no real extra costs in taking on more students.
We think that will be an incentive. [35]
The Opposition and Democrat members of the Committee argue that if the
measure does lead universities to squeeze another 10 or 15 students into
a course, there are issues that need to be considered. An additional 10
or 15 students may be able to be absorbed into a lecture theatre. An additional
10 or 15 students, however, also represents another tutorial group that
has to be provided for, another set of essays and examinations to be marked
and so forth. There are serious implications here for quality, particularly
in terms of class sizes and teacher workload.
The Opposition and Democrat members of the Committee believe that every
Australian award course should have legislative protection guaranteeing
that domestic students are not charged up front fees.
| The Opposition and Democrat members of the Committee
recommend that the proposed amendment to section 13(1) of the Act,
which allows for the charging of upfront full fees to domestic undergraduates,
be rejected. |
The amendments to the Bill include a number of changes to HECS. The three
most significant include increases to the level of HECS, the lowering
of the thresholds for repayments and the introduction of differential
charges.
Lowering of the HECS Repayment threshold
In outlining the essential elements of the HECS, the Wran Committee recommended
[A] higher education contribution scheme that is based on users
paying a proportion of the cost of their higher education through the
tax system, only if and when their personal incomes
reach the level of average earnings of all Australian workers
The fundamental advantage of this approach is that contributions depend
on an individual's capacity to pay. [36]
(emphasis added)
The government's proposal to lower the threshold represents a considerable
departure from this philosophy. The new lowest threshold has been lowered
to the second income taxation threshold. The changes have been justified
on the grounds that students start to pay when they reach average earnings,
as at present, and at that point they are in fact earning above what most
other taxpayers earn. [37] A further
explanation was offered by the Department in answer to a question about
the basis for the new threshold.
That aligned the bottom threshold with the second taxation step,
where it is considered appropriate to increase the tax rate. So it aligns
it with that point. The argument about a tangible benefit from a degree
has been used in the past to explain the average weekly earnings one,
but there are other benefits that include graduates even before they
meet that threshold. One is better employment prospects after graduation.
[38]
These arguments must be considered in the light of the consequences that
flow from them, particularly their impact on low income earners. The following
tables, comparing the current thresholds with the proposed thresholds,
were provided to the Committee by NUS.
| Current HEC fees repayments (1996-97) |
Current rate applied to total HEC repayment
income |
| $28,494 - $30,048 |
3% |
| $30,049 - $32,380 |
3.5% |
| $32,381 - $37,562 |
4% |
| $37,563 - $45,334 |
4.5% |
| $45,335 - $47,717 |
5% |
| $47,718 - $51,291 |
5.5% |
| $51,292 and above |
6% |
| Proposed HEC fees repayments (1996-97) |
Proposed rate to be applied to total HEC
repayment income |
| $20,701 - $21,830 |
3% |
| $21,831 - $23,524 |
3.5% |
| $23,525 - $27,288 |
4% |
| $27,289 - $32,934 |
4.5% |
| $32,935 - $34,665 |
5% |
| $34,666 - $37,262 |
5.5% |
| $37,263 and above |
6% |
As NUS points out, the new threshold is only 74 per cent of Average Weekly
Earnings and 94 per cent of average workers earn in excess of it. NTEU
claims that, in effect, the new threshold 'will require students living
well below the poverty line to actually start repaying their debt'. [39]
Similarly the University of Queensland noted that the 'proposed threshold
is below the recognised "poverty level" which is described as
$24,000 in the guidelines relating to Workers Compensation'. The University
of Queensland is so concerned that it 'has forwarded a protest to the
Government about the lowering of the threshold for HECS repayment to taxable
earnings of $20,701 and has asked the Government to reconsider this matter'.
[40]
Figures from NUS substantiate the claims from NUS and UQ.
Poverty lines & the new HECS threshold (d)
| |
poverty line ($) (b) |
% of HECS threshold (c) |
| couple (a) |
297.87 |
106.21% |
| couple + 1 |
358.06 |
88.35% |
| couple + 2 |
418.24 |
75.64% |
| couple + 3 |
478.43 |
66.12% |
| couple + 4 |
538.61 |
58.74% |
| |
poverty line ($) (b) |
% of proposed HECS threshold (c) |
| Single person |
222.67 |
142.07% |
| Single parent + 1 |
285.67 |
110.66% |
| Single parent + 2 |
346.01 |
91.43% |
| Single parent + 3 |
406.20 |
77.88% |
| Single parent + 4 |
466.38 |
67.83% |
The following comments from NUS bring these figures to life.
To put these figures in some contexta single parent with two
children could be living in poverty and paying off their HECS. Similarly,
a young couple in which one partner is working and the other taking
care of a child could be living at 88% of the poverty line, and paying
off their HECS. It is worthy of note that when the non-cash benefits
are added in, unemployment benefits are higher than the poverty line.
Indeed, all social security payment (as opposed to AUSTUDY) are at least
105% of the Henderson poverty lines. [41]
Many witnesses expressed concern that the lower threshold would act as
a deterrent to some potential students from participating in higher education.
The University of Southern Queensland noted that applications for external
study (70 per cent of its students study externally) were 30 per cent
lower than at the same time last year. They considered the proposed amendment
to the repayment threshold a 'major contributing factor'. The implications
for the university are serious: 'USQ will find it difficult to meet its
1997 undergraduate intake targets in the circumstances, and the consequences
to this institution of not meeting these targets are significant'. [42]
The ANU thought that it would act as a significant deterrent to part-time
students, low income earners and single parent families. [43]
The NTEU also thought that it would particularly affect all of the designated
equity groups.
[It] is going to be quite clear that large numbers of people
will feel that they cannot access higher education because they will
be asked to repay their debt at a time in either their family formation
or their own occupational choices when they will have almost no capacity
to pay. I think that will particularly affect all of the designated
equity groups and it will most severely impact on those students from
low SES backgrounds, for whom the system is just beginning to be able
to promote accessibility to higher education. [44]
It is to be hoped that graduates do have better employment prospects
after they graduate. But the essence of HECS as originally conceived was
to seek repayments from graduates when they had the capacity to
pay. The Opposition and Democrat members of the Committee consider
that the lower thresholds will require many graduates to start repaying
their debt well before this time.
It should also be noted that the lowering of the threshold affects all
current HECS debtors. In introducing this Bill the government made the
following assurances:
the amendments ensure that no existing student will have an unanticipated
increase in the cost of their current course. The Government will not
be increasing the HECS charge or debt levels for existing debtors or
for HECS-liable students in their current courses. [45]
In giving evidence before the Committee, Professor Chapman challenged
these claims. According to Chapman, 'the effective financial cost for
all current debtors, so long as they pay back any part of it, is higher
than it was'. The following example illustrates his point:
for someone earning $38,000 who paid a HECS debt this year, they
pay $1,520, which is 5.23 per cent of after-tax income - obviously higher
than the rates as set down and paid after tax. Next year they will be
paying $2,280, which is 7.9 per cent so the increase is about 3.5 per
cent. You could say, "But on paper, the total HECS debt repaid
for all current HECS debtors will be the same". That is true but
it misses the fundamental point that if you pay it back more quickly
you get less advantage from the interest free nature of the debt. [46]
| The Opposition and Democrat member of the Committee recommend
that the repayment threshold for HECS remain at the level of average
weekly earnings. |
Increases to the Level of HECS Charges
The current HECS is based on principles of cost sharing and cost recovery.
It was designed to reflect the public and private benefit from higher
education. The Wran Committee recommended that students be required to
contribute twenty per cent of the cost of their higher education. [47]
Under the proposed changes, the 'weighted average proportion contributed
by students, when the 25 percent discount, implicit interest rate subsidy
and course enrolments are taken into account, is estimated to be 27 per
cent'. [48]
This Bill proposes to increase the level of HECS contributions
by an estimated 68 per cent. [49]
The rationale for this is 'the government's assessment that the private
contribution through HECS is about one-fifth of the cost of the course.
Most data would indicate that the private rates of return are somewhat
higher than that'. [50]
The ANU argued the increases make the proportion of the cost borne by
the student high by world standards and expressed concern that this sends
a message to the 'best brains of the next generation that it [the community]
does not place a particularly high value on the public benefit to be gained
from their further education'. [51]
The ANU added that any short term gains may not be in the country's long
term interest in terms of its investment in its future intellectual capital.
Many submissions and witnesses expressed concern that the increased charges
would serve as a disincentive to students.
NUS made the observation that the increase in HECS is 'predicated on
the belief that the current system of HECS has not discouraged significant
numbers of students from studying and would therefore cause no harm to
equitable participation'. NUS argued that this is 'an untested and illogical
hypothesis which if taken to its logical conclusion suggests that the
level of fee is immaterial, so long as payment can be deferred'. [52]
The Committee heard claims from the Minister, the Department and others
including Professor Chapman that the introduction of HECS has not acted
as a deterrent for students from lower socio-economic backgrounds. [53]
While accepting this evidence, the Opposition and Democrat members of
the Committee sense that the justification for the changes to HECS is
framed by a perception that most students in universities are from non-government
schools and wealthy backgrounds. In presenting evidence to the Committee
about the relative advantage of students in private schools, the Minister
selected three schools and identified the percentage of students in those
schools that went on to higher education. The three schools chosen were
Knox Grammar in Sydney (90%), Canberra Boys Grammar (80%) and Korowa Anglican
School in Melbourne (85%). The Minister's stated intention in showing
these figures to the Committee was to underline 'when we are talking about
HECS contributions, what sort of students we are talking about'. [54]
The Opposition and Democrat members of the Committee suggest that many
students do not fit this description. Rather than using evidence
about the continuing low participation rates of students from lower socio-economic
backgrounds as a justification for altering HECS, the government should
focus on finding ways to improve participation rates of these students.
A dramatic increase in HECS accompanied by the lowering of the threshold
is likely to exacerbate rather than ameliorate disadvantage.
Differential HECS Contributions
According to the government, differential HECS contributions strike 'a
better balance between the public and private funding of higher education'
by linking students' contribution to the cost of their education more
closely 'to both the actual cost of the course undertaken and the likely
future benefits to the individual in terms of increased life-time earnings'.
[55]
A proposal to have a differential HECS, based on the cost of courses,
was considered and rejected by the Wran Committee. The current proposal
is a more complicated model and introduces two more factors as determinants
of the charge, namely the likely future earnings of graduates and demand
for those disciplines. [56] It is, as
explained by Professor Chapman, a hybrid system.
According to DEETYA, future earnings are calculated on the basis of ABS
data on the median income of graduates in various years following completion
of their studies. [57] The presumptions
involved in this method of calculating future earnings make it, according
to one witness, overly simplistic.
The most important data in labour markets, depending on your
profession, is not the average; it is the variance. There is a huge
difference between various people who have studied various courses.
I will just take law as an example... A lot of people who study law
go into government. They do not have law degrees. Even if they have
degrees they become teachers, spend periods of unemployment, or work
in the area of legal aid, for example. So there is a very large variance
and the idea that you can reasonably characterise someone's benefits
on the basis of the studying of a unit is one that I think reflects
an unsophisticated view of how the Australian labour market works. [58]
The Committee heard strong criticisms of the differential HECS model.
Prominent among critics were representatives from science, engineering
and technology interests. Their very valid concerns are described in the
majority report which recommends that there is a strong case for assigning
science units to a lower HECS band than currently proposed.
This recommendation is problematic in that it implies that the inappropriate
classifications apply only, or more, to science than to other disciplines.
The Committee heard other examples of units of study being placed in the
higher HECS bands but which are part of courses that lead to very ordinary
salaries. For example:
Under the differential HECS proposals, many of the subjects in
the police courses offered by the University are classified within the
'justice' discipline group and will result in a band three HECS liability
attaching to police courses, despite the fact that police are relatively
poorly paid and the police courses are relatively inexpensive to mount.
A similar situation prevails for ambulance personnel in the University's
pre-hospital care and paramedic courses. The HECS liability attaching
to these courses will be at or near the maximum for the second band,
despite the fact that ambulance staff are no better paid than nurses.
The University also believes that the present categorisation of agriculture
in the second HECS band, has the potential to adversely affect enrolments
in its agriculture programs in general. However, it is particularly
concerned that the large number of aboriginal students in its park management
courses (classified within the agriculture discipline) could be dissuaded
from enrolling by the new HECS costs. [59]
The differential HECS will introduce further anomalies that undermine
the very philosophy on which the government has based the new model. Under
the new system, there will be cases where school teachers on the same
salary will be saddled with different levels of HECS debt because of the
different disciplines in which they majored. For example, a maths-science
teacher will have a significantly higher HECS debt than a humanities teacher.
This is because maths and science are in a higher, more expensive HECS
band than humanities subjects.
The Minister, in response to the Committee when this anomalous situation
was put to her, stated:
There is never a perfect world, Senator. I could ask you, "What
is the equity in charging a doctorwho gets a high contribution from
the taxpayer and who gets a very high personal benefitthe same contribution
as a teacher who gets a lower contribution from the taxpayer and a lower
personal benefit from having participated?" If you have the capacity,
Senator, to design a perfect system where there is not anything that
someone looking for trouble could point to and say, "I'm not happy
with this", then we would be happy to look at it. [60]
This response highlights the anomalies the differential HECS will introduce.
For a doctor, it is a case of repaying HECS for a high-cost course which
generates a high private benefit. For a humanities teacher, it is a case
of repaying HECS for a low-cost course which generates a relatively low
private benefit. In these two cases, there is at least some degree of
correspondence between course costs and private benefits. For a maths-science
teacher, however it is a case of repaying HECS for a high-cost
course which generates a relatively low private benefit. In other
words, the HECS debt of a maths-science teacher reflects an inverse relationship
between costs and private benefits. This is an example of some graduates
being penalised for not only their choice of courses but also their choice
of career.
This example also exposes how the new system works at cross-purposes
to its own rationale. HECS is supposed to be about striking a balance
between public benefits and private benefits, in addition to balancing
public costs and private benefits. The considerable public benefits that
flow from maths-science graduates working as teachers do not figure in
the calculations behind allocating maths-science units to the higher HECS
bands.
Furthermore, this example highlights the difficulty in using future average
incomes as a factor in allocating subjects to HECS bands. This is because
it is highly presumptive to tie a student's choice of course to his or
her future career. The Department admitted that it has no data that links
units studied by students to their ultimate profession. [61]
This means that under the new HECS regime there are going to be some graduates,
such as maths-science teachers or lawyers working with community-based
organisations, for whom HECS will represent a very high cost relative
to the private benefits that they can expect to receive.
In a private briefing to the Committee, the NSW/ACT Higher Education
Network explained that many Aboriginal and Torres Strait Islander graduates
prefer to work in community enhancement areas. These are not highly paid
positions. Although the community needs Aboriginal and Torres Strait Islander
workers with training in health, dentistry, medicine, law and legal studies,
the Network is convinced that the combination of the differential HECS
and the lowering of the thresholds would discourage many Aboriginal and
Torres Strait Islanders from enrolling in university courses.
Other witnesses concurred with the view that a differential HECS will
act as a deterrent. It will not only deter many students from undertaking
whole courses such as law, medicine and engineering but will influence
the selection of individual units. Academics from the University of Newcastle
noted that the placement of economic history in a high HECS band would
discourage many arts students from studying economic history. [62]
The ANU suggested that many students in social and behavioural sciences
will refrain from including legal and paralegal units; arts and humanities
students will be less likely to include computer, science or mathematical
subjects and, conversely, science students will include units from band
one regardless of whether they are a sensible choice for their degree
because they will be relatively cheap. The ANU claimed that 'it is difficult
to see the rationale for the proposed allocation of discipline groups
to the proposed HECS bands' and argued that the 'ad hoc combination of
market and cost factors such as that proposed must inevitably distort
student choices'. [63]
The Opposition and Democrat members of the Committee are convinced that
the problems with a differential HECS go far beyond the inappropriate
allocation of units to different bands. The system relies for its integrity
on the reliability of the three factors that are combined to determine
the different charges. The difficulty of accurately assessing the likely
future benefits for graduates is a fundamental flaw in the system. A differential
HECS will deter some students, especially those from equity groups, from
participating in higher education. A differential HECS will also distort
the course choices of some students, while penalising others for their
choice of units. In the long term, it will impact on Australia's investment
in its intellectual capital.
The Labor Senators believe that the current uniform HECS, on the other
hand, is well accepted by the community. It has neither deterred students
from participating in higher education, nor has it distorted their course
and career choices. It should be maintained.
| The Opposition and Democrat members of the Committee
recommend that the Senate reject the provisions in the Bill relating
to the introduction of the differential HECS, the increases in HECS
fees and the lowering of income thresholds for repayment of HECS debt.
|
The Open Learning Agency
The bill provides for the de-regulation of fees charged by the Open Learning
Agency. It also provides for a new definition of 'basic charge'. According
to this definition, basic charge refers to the smaller of either the statutory
amount or the fee actually set by the agency. Under the Act, clients will
still be able to defer their payments under the Open Learning Deferred
Payment Scheme. However, the 'effect of the amendment is to maintain the
amount the Commonwealth may lend to clients under the OLDPS, although
fees may be set by the Agency at a higher level'. [64]
The Opposition and Democrat members of the Committee consider it unacceptable
that there should be a gap between the charges set by the OLA and the
amount the government will lend to clients. Any gap will have an immediate
impact on access and restrict participation to those with the means to
pay the difference upfront. The commercial lines along which the agency
operates already means that additional charges are levied for services
such as 'tutorial assistance, counselling, academic support and, from
1997, library services'. [65]According
to the NTEU, 'the idea of allowing this charge to be
increased in a deregulated manner is anathema from the point of view
of access and equity, especially when the needs of rural and other isolated
students (the disabled, the housebound, those with young families) are
considered'. [66]
The fees announced by the OLA for 1997 are $425 per unit. This is approximately
twenty five per cent above the statutory amount specified in the bill.
The absence of any form of a limit on the level of fees in the legislation
may well result in the gap significantly increasing in the long term.
The Opposition and Democrat members of the Committee reject the amendments
relating to the Open Learning Agency.
| The Opposition and Democrat members of the Committee
recommend that the Senate reject the provisions in the Bill which
provide for the de-regulation of fees for the Open Learning Agency.
Students eligible for the Open Learning Deferred Payment Option should
be able to defer the full amount of their fees. |
Research funding
The Opposition and Democrat members of the Committee support the increases
to research structure, collaborative research and the Australian postgraduate
awards, but object to overall cuts in research . They note, however, the
concern of NTEU that the increases in collaborative grants have been backloaded
with most of the money being left until the final year of payment. In
its post budget statement, the AVCC urged the government to distribute
the $90M in three annual instalments of $30M. This measure would allay
concerns in the sector that the final year of payment may be subject to
further rEducations.
Footnotes
[1] Second Reading speech, House Hansard,
p.5022.
[2] Senate Employment, Education and Training
Legislation Committee, Additional Information Relating to Examination
of Budget Expenditure for 1996-97: Volume 1 (October 1996), pp.22-23.
[3] This figure is based on the increase of
$134 million for Programme 2.2 Target Research and Scientific Development
and the rEducation of $1.956 for Programme 2.1 Higher Education System.
[4] Additional Information relating to Examination
of Budget Expenditure for 1996-97: Volume 1 (October 1996), p.23.
[5] Mr Phillips, Senate Estimates, Senate
Employment, Education and Training Legislation Committee, Monday 16 September,
1996, p.68.
[6] Higher Education Funding Act 1988 provides
for amounts which shall not exceed the figures specified in section 17
of the act.
[7] NTEU, Submission No.5, p.23.
[8] Transcript of Evidence, p.130 (Professor
Bruce Chapman).
[9] NTEU, Submission No.5, p.24.
[10] AEU, Submission No.24, p.47.
[11] NTEU, Submission No. 5, p.24.
[12] Bruce Chapman, 'Understanding the 1996/97
Budget Changes in the Funding of Australian Higher Education', October
1996, p.7.
[13] Australian Dental Association, Submission
No.1, p.2.
[14] The World Bank, Higher Education: The
Lessons of Experience, 1994, ps.6, 7.
[15] Ibid.
[16] Transcript of Evidence, p.131 (Professor
Bruce Chapman).
[17] Transcript of Evidence, p.132 (Professor
Bruce Chapman).
[18] Second Reading Speech, House Hansard,
p.5022.
[19] University of Queensland, Submission No.12,
pp.80-81.
[20] Based on figures used by Professor Chapman,
Transcript of Evidence, pp.132-3, (Professor Bruce Chapman).
[21] Transcript of Evidence, pp.132-3,
emphasis added (Professor Bruce Chapman).
[22] NUS, Submission No.6, p.13.
[23] Report of the Committee on Higher Education
Funding, April 1988, p.3, sourced to Department of Education, Student
Assistance for the Disadvantaged: Practice and Prospect, Student Assistance
Policy Series, AGPS, 1986.
[24] NTEU, Submission No.5, p.24.
[25] Department of Training and Education,
NSW, Submission No.19, p.27.
[26] NTEU, Submission No.5, p.25.
[27] Transcript of Evidence, p.261 (Senator
the Hon Amanda Vanstone).
[28] Senator Robert Hill, Interview on Radio
Triple J, 28 February 1996.
[29] CAPA, Submission No.16, p.98.
[30] Ibid, p.98
[31] Transcript of Evidence, p.248 (Senator
the Hon Amanda Vanstone).
[32] Ibid, p.259.
[33] Advice from DEETYA, 19 November 1996.
[34] Transcript of Evidence, p.259 (Senator
the Hon Amanda Vanstone).
[35] Ibid, p.247.
[36] Report of the Committee on Higher Education
Funding, April 1988, p.vi.
[37] Senate Estimates, Senate Employment,
Education and Training Legislation Committee, Monday 16 September, 1996,
Senator the Hon Amanda Vanstone, pp.71-72.
[38] Transcript of Evidence, p.119 (Mr
Burmester, DEETYA).
[39] Transcript of Evidence, p.103 (NTEU).
[40] The University of Queensland, Submission
No.12, p.80.
[41] NUS, Submission No.6, p.52.
[42] University of Southern Queensland, Submission
No.9, p.69.
[43] The Australian National University, Submission
No.13, p.86.
[44] Transcript of Evidence, p.105 (Dr
Allport, NTEU).
[45] Second Reading speech, House Hansard,
p.5023.
[46] Transcript of Evidence, pp.135,
(Professor Bruce Chapman).
[47] Report of the Committee on Higher Education
Funding, April 1988, p.v.
[48] Advice from DEETYA, Question on Notice
4.3, 28 October, 1996.
[49] Advice from DEETYA, Question on Notice
6, 28 October, 1996.
[50] Mr Phillips, DEETYA, Senate Estimates,
Senate Employment, Education and Training Legislation Committee, Monday
16 September, 1996, p.71.
[51] ANU, Submission No.13, p.85.
[52] NUS, Submission No.6, p.54.
[53] D. S. Anderson and A. E. Veroorn, Access
to Privilege (NU Press, Canberra, 1983, p.146) provides data showing
that the proportion of full-time students whose fathers were from trades/manual
occupations, since the abolition of tertiary fees rose from 17% to 22%
between 1974 and 1984.
[54] Transcript of Evidence, p.247 (Senator
the Hon Amanda Vanstone).
[55] Second Reading speech, House Hansard,
p.5022.
[56] Mr Phillips, Senate Estimates, Senate
Employment, Education and Training Legislation Committee, 16 September,
p.70
[57] Ibid.
[58] Transcript of Evidence, pp.132,
(Professor Bruce Chapman).
[59] Charles Sturt University, Submission No.10,
p.73.
[60] Transcript of Evidence, p.263 (Senator
the Hon Amanda Vanstone).
[61] DEETYA response to question on notice
No.4.2 (28 October 1996).
[62] Ms Sudha Shenroy, Lecturer in Economic
History, University of Newcastle, Submission No.20.
[63] ANU, Submission No.13, p.85.
[64] The Higher Education Legislation Amendment
Bill 1996, Schedule of Amendments, Item 20.
[65] NTEU, Submission No.5, p.34.
[66] Ibid.