It’s not just a matter of entitlement

Student demand-driven funding is emerging as the most contentious of Denise Bradley’s broad reform proposals, with some commentators claiming the approach would hurt less established universities and wouldn’t be sufficiently responsive to workforce needs. But others say Bradley had no realistic alternative, and that a voucher system is effectively already in place.

Under Bradley’s proposals, central allocation of university places will be replaced by entitlements – virtual vouchers – automatically issued to students who “decide for themselves what and where they will study”. Accredited providers enrol as many eligible students as they care to accommodate in their eligible courses, receiving a Commonwealth subsidy for each student.

The new arrangements would initially apply to undergraduate higher education (HE) students in public universities, gradually extending to postgraduate courses and other HE providers. They would also be introduced in vocational education and training (VET), first at diploma level and above, then extending to lower level qualifications. HECS-style income-contingent loans would be available to higher-level VET students.

There would be no caps on place numbers, no time limit on vouchers, and no centrally ordained minimum cut-off score. Universities would decide their own entry standards, enrolment targets and discipline mixes. Unlike Victoria’s new VET funding model, there would be no requirement for students to move up the qualifications ladder in order to qualify for vouchers.

In a rare concession to regulation, the government would have the prerogative of banning vouchers for particular courses if it wanted to influence student numbers in particular disciplines.

Bradley told Campus Review an entitlement approach was the only way forward, given the blurring boundaries between public and private, and the proliferation of private providers. “We have 150 private providers. Many are owned by universities, or universities have substantial interests in them. And many are religious not-for-profit organisations with a public good mission. Seventy have access to FEE-HELP and half a dozen are already carrying Commonwealth-funded load.

“Where would we go next? Do we take the Commonwealth-funded load and FEE-HELP away from them, and have a highly controlled public system? I don’t think so. The evolution is towards greater competition, in my view, combined with a stronger and more robust regulatory system operating on a level playing field.”

The report dismisses potential consequences such as plummeting entry standards and an excessive drain on government education funds. It argues that market forces and a strong accreditation system will take care of quality. And it says that if universities were at risk of being swamped by students, that would already be happening. “With the changes in the last year or so, universities need little permission now to over-enrol what in many cases are quite ambitious targets,” Bradley said.

Swinburne university vice-chancellor Professor Ian Young said Australia already had a de facto voucher system. “It’s not a long way from where we are right now. Although the government regulates the distribution of our courses to some extent, we have very little unmet demand. Students who want a place in university can get it. The caps at present are pretty minimal.”

Research fellow with the Centre for Independent Studies, Andrew Norton, said vouchers were “the only argument” presented to the review panel. “If you look through the submissions, the voucher advocates were the only people who seriously considered this issue of how you distribute places between institutions. The question is, what are the realistic alternatives to a voucher scheme?

“It’s not a novel idea, but it’s probably the most logical way of dealing with the problems. I’ve actually never seen a serious case for the current system. It’s just the sheer power of inertia in higher education that has kept it in place.”

But others argue vouchers wouldn’t make the sector more responsive. Gavin Moodie, principal policy adviser at Griffith University, said it would take six or seven years for market signals to translate into newly qualified professionals. “If there’s a great increase in the demand for geologists, it takes that a year or two to filter through to prospective students. Then they’ve got to do a three or four year program to qualify as geologists.

“To tell an employer your increased demands will be satisfied in seven years is not solving their problem at all. To all intents and purposes, that’s a market failure.”

Moodie also questioned whether the tertiary education market is big enough for vouchers to influence quality. He argues there’s no effective competition in regional centres which are only big enough to support single universities, and in specialised disciplines such as veterinary science, dentistry, aeronautical engineering and many foreign languages.

“Even at Sydney and Melbourne, there’s a whole range of disciplines which are too specialised to have any competition. A voucher scheme isn’t going to make institutions more responsive in Greek or physiotherapy. The marketised approach of vouchers will only work - if it works at all - in relatively narrow circumstances – fairly popular programs in the bigger capital cities.”

Simon Marginson, professor of higher education with the University of Melbourne, told CR that vouchers were unlikely to influence elite universities given that Bradley had also recommended a cap on student fees. “It doesn’t create any market force pressure because you don’t have any price differentiation. For institutions that are oversubscribed, it doesn’t really change their relationship with the consumer – they are not able to leverage their market position to gain additional income.”

Norton agreed. “In order for providers’ behaviour to be changed, the price they get for a place has to be at least enough to cover their costs. An Access Economics report from last year showed that of the disciplines they looked at, about half were making a loss. The incentive to take more students is weak, because they’d just be putting up their hands to lose more money.

“In fact it may encourage the reverse – they would take advantage of the relaxed controls to reduce their numbers and refocus on areas where they could make some money.”

The National Union of Students, which is campaigning against vouchers, claimed they would reduce graduate numbers in priority areas like maths and teaching. It said university language departments would also suffer, despite Prime Minister Kevin Rudd’s call for Australians to learn Asian languages. “Do we really want to double the number of lawyers and accountants and have less teachers, nurses or scientists?” said outgoing president Angus McFarland.

A voucher system could also leave non-Group of Eight universities vulnerable, Marginson argued. “It creates a commercial dynamic in the bottom half of the system – a lot of pressure in the weaker institutions in demand terms. Some of them are in a lot of trouble and need to be shored up by other means. It also puts constraints on the VET institutions that are trying to come into the degree market.”

Australian Catholic University vice-chancellor Professor Greg Craven said vouchers would encourage predatory recruitment. “Every university will eye off its neighbour to figure out what it might want. There are a lot of quite vulnerable universities that it wouldn’t take much to knock off balance – I’m talking particularly about the regionals,” he told CR.

“It’s not as simple as demand following quality. Vouchers won’t necessarily reinforce quality because a lot of higher education choice is by brand. I can think of quite a few areas where the quality course is in the second or third-tier university, yet the only thing that keeps it going is the fact that there are limited places at the neighbouring Go8.”

Moodie said vouchers could have a particularly strong impact in Adelaide and Perth. “If you’re a Go8 in Brisbane, Sydney or Melbourne, you don’t want to get any bigger. But the universities of Adelaide and Western Australia are rather small by Australian standards. There might be a rationale for them to increase – maybe they want greater economies of scale. They would have no problem increasing their intake substantially while maintaining their selectivity – they’ve got very strong student demand.

“That risks taking students from their nearest competitors – Flinders and Murdoch universities. Both are quite modest in size. It would have a direct effect on Murdoch, and then maybe down the line it would affect Edith Cowan University. Curtin – maybe it’s sufficiently separate from UWA to protect it. And perhaps the University of South Australia could afford to lose a few students. But I’d be worried if I were Flinders.”

Flinders vice-chancellor Professor Michael Barber agreed a voucher system could affect the business models for some universities. “As one of the Innovative Research Universities, we will continue to provide that environment for all our students. We are confident of meeting any challenges that arise,” he said.

Bradley acknowledged many of the arguments against vouchers. She said no system was perfect but an entitlement approach, backed up by improved labour market advisory bodies, was the best way forward.

“We know some of these recommendations will be quite difficult for newer institutions. But it is 20 years since they were formed. Either they are viable in a more competitive arena, or they’re not.

“There will be winners and losers if a deregulated system is put in place. But why would you force students to go to places that are losing. We need to shift our mind away from protecting institutions to protecting students.”