Third wave of VET reform bodes well but…

If TAFE Institutes are to prosper under demand-driven conditions, then they need to be given more power to control their own destinies, writes Andy Smith In early May, Skills Australia released its long-awaited report on the future of the VET system in Australia, Skills for Prosperity: a roadmap for VET. Chris Evans, Federal Minister for Tertiary Education, Skills, Jobs and Workplace Relations, hailed the report as the “Bradley report for VET”. He had good reason to do so. Skills for Prosperity rolls together key recommendations from three recent reports on the VET system. The original proposals from the Skills Australia discussion paper released last year appear, albeit in a more tempered and less radical form. Skills for Prosperity also encompasses some of the recommendations from the recently released Productivity Commission report on the VET workforce as well as some of the major ideas contained in the controversial Expert Panel report on apprenticeships, Apprenticeship for the 21st century. In covering so many of the key areas for VET – funding, the role of employers, apprenticeships and the state of the VET workforce, Skills Australia has produced a truly comprehensive vision for the future of the VET sector and initiated what might be termed a third wave of national training reform following the first wave national training reform agenda of the early 1990s and the second wave training package reforms later in the decade. Moreover, the Federal Government moved very quickly in the May Budget to begin the implementation of some of the major recommendations contained in Skills for Prosperity, including employer-driven funding, changes to the apprenticeship system and further reform of the system focusing on RTOs. Of these measures, perhaps the most significant for the future of the VET system are the proposals for employer-driven funding. In his speech last week to the Australian Chamber of Commerce and Industry, Senator Evans talked of putting “industry front and centre of the national training effort”. This is a good and long overdue policy. Since the early days of training reform governments not only in Australia but throughout the developed world have struggled with the problem of helping industry and employers to engage more effectively with the VET system which is largely dedicated to producing their skilled workforces. Germany is often held up as the system that has got this right with the employer groups essentially running the dual system of apprenticeship training that forms the heart of German VET. But the dual system has proved difficult to transplant to countries that do not have the same culture of employer engagement with VET. Many, including Australia, attempted compulsion through training levies designed to force employers to spend mandated amounts of revenue on training or face government imposed financial penalties. These levies (with the possible exception of Singapore) never worked and often produced what might be characterised as “sullen compliance” from employers. The new National Workforce Development Fund provides the carrot rather than the stick for employers and forges a partnership between governments, employers and RTOs that is far more likely to result in effective training to meet the changing skill needs of the economy. The expansion of the role of Skills Australia into a funding agency, the National Workforce and Productivity Agency, overseeing the fund is also a welcome development. Not quite the re-birth of ANTA but a good step towards a more strategic approach to VET reform. A centrepiece of Skills for Prosperity are the recommendations for changes to funding which envisage full funding for all students studying to Certificate III and income contingent loans for those studying at Certificate IV and above. This, of course, is the doorway to a fully demand-driven system for VET, paralleling the demand-driven funding that will be introduced for Higher Education in 2012. If the National Workforce Development Fund takes care of the industry/employer aspect of VET then these recommendations address the individual aspect. What will be the effect? Here we have some evidence from Victoria that has implemented such a demand-driven system over the last two years. On the face of it, the evidence is very promising for kick-starting growth in VET enrolments that have languished at 1.7 million for the past decade. Between 2008 and 2010 government-funded enrolments in Victorian VET increased by 16 per cent and have increased yet again in 2011. But closer inspection reveals that this growth pattern is not uniform. Across fields of study some areas did much better than others. Thus whilst strong growth occurred in some occupational areas in demand such as Building and Construction and Community Services and Health, other critical shortage areas such as Business Services grew much more slowly or even, in the case of Metals and Engineering, declined. These variations were much more marked when looking at particular qualification levels. In the all-important area of higher level VET qualifications (diploma level and above) overall growth in government-funded enrolments was 24 per cent from 2008 to 2010. But this disguises major differences between fields of study. Whilst Community Services and Health and Wholesale, Retail and Personal Services grew rapidly, other areas such as Metals and Engineering and Transport and Storage slumped. This may reflect the “eligibility criteria” that are built into the Victorian system under which students over the age of 20 can only receive a government subsidised place if they are studying for a higher level of qualification than they currently possess. Whilst eligibility rules help to constrain the overall costs of the demand-driven system, they also distort demand at the individual level. For employers, eligibility makes it less attractive to re-skill workers who already hold higher level qualifications. Since we know that more students move from Higher Education to VET than the other way around, the implementation of eligibility criteria at a national level through the national skills agreement would not sit well with the complex realties of the modern Australian labour market. So while demand-driven funding clearly stimulates individual demand, if the third wave of VET reform is to help meet skills shortages then a moderating mechanism needs to be built into the system. This is where the National Workforce and Productivity Agency may play a crucial role in ensuring that employer demand moderates the impact of demand-driven funding and results in a balance between individual preference and industry need. Another disparity in the impact of the Victorian reforms is the performance of the different provider sectors. Whilst private RTOs doubled their enrolments between 2008 and 2010, enrolments of government-funded students at TAFE Institutes increased only marginally and those at ACE providers declined slightly. There is no doubt that demand-driven funding represents a significant challenge to the public TAFE system. In a more competitive market, TAFE Institutes need to be able to compete effectively. This points towards a need for greater agility within TAFE Institutes, but it also highlights the need to address the level of autonomy that public providers enjoy under current arrangements. Working in a dual sector university, I am constantly struck by the relative lack of autonomy that TAFE enjoys compared to Higher Education. If TAFE Institutes are to prosper under demand-driven conditions, then they need to be given more power to control their own destinies. State government controls in areas such as governance, financial management and industrial relations should be relaxed so that, like universities, they can position themselves to better meet the rigours of a competitive training market. With more autonomous and responsive TAFE Institutes, there is no reason why individuals, employers and RTOs cannot be winners in a more competitive VET system. Andy Smith is pro vice-chancellor (schools and programs, University of Ballarat, a dual sector university

Third wave of VET reform bodes well but…

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