The Joyce Review of VET: good summary, incomplete analysis, solutions need a rework

First Ministers met at COAG and agreed to a new Vision for Vocational Education and Training (VET) for Australia. The impetus for this was the Australian Government announcing its Skills Package Delivering Skills for Today and Tomorrow in its 2019/20 budget, responding to the Strengthening Skills: Expert Review of Australia’s VET System – the Joyce Review (‘Review’). First Ministers reaffirmed their shared responsibility for VET and its equal and complementary status to Higher Education (HE) as a vital part of Australia’s post schooling ‘tertiary’ system and formed (another) VET-purposed COAG Ministerial Council.

The Review’s 71 recommendations, if fully implemented, represent a ‘major repositioning of all governments in their independent and relative roles, responsibilities and funding of VET’. Sentiment gleaned from limited public comment about the Review is broadly positive in regards to the quality of its coverage, analysis and structured implementation of reforms. A more critical view is that it revealed nothing new, only summarising prior trampled ground as evidenced by multiple sources of VET-related reviews, reports and research that policy-owners had not acted on (eg. ‘All Eyes on Quality’ Review of VET quality). The Review commendably synthesised this evidence into six integrated and interdependent reform areas.

The Australian Government is now implementing its budget commitments. Whilst advocated by some, COAG has ‘shut the gate’ on a formal Commonwealth takeover of VET, meaning VET’s national governance remains by ‘cooperative federalism’^[1]. Beyond agreeing a Vision, the views of States are uncertain. Intergovernmental negotiations over the next twelve months or so will progressively stress-test details of the Review’s recommendations and their implementation.

This article attempts to expose ‘root-cause’ issues that need national solution between governments versus those that are unquestionably important but lower tier. Its purpose is to highlight issues not covered in the Review and to examine whether or not its key recommendations are best suited to fixing the VET sector, as part of a national tertiary system, for the long term.

The key areas of reform proposed by the Joyce Review

The Review’s headline ‘six points of the plan’ are here rearranged into three priority tiers rated by: long term impact on VET sector; the need for First Ministers to get in and fix it; and expected degree of difficulty in gaining a workable consensus under ‘cooperative federalism’ governance.

Tier 1                     Simpler funding and skills matching

Tier 2                    Speeding up qualification development; Strengthening of quality assurance

Tier 3                    Better careers information; Clearer secondary school pathways; and greater access for disadvantaged Australians.

Emphasis below is given to Tier 1 issues, with less coverage of still challenging but lower Tier 2 and 3 issues.

Tier 1 – Simpler funding and skills matching (Reinterpreted as ‘Sufficient funding and contested policy control of how it is spent’)

Standing above all other issues is the quantum of government support (training subsidies and loans) nationally available for VET and the long term sustainable contributions by all governments.  VET will be little helped by ‘simpler’ funding alone (Joyce Recommendations 5.1, 5.2, 5.5 and 5.6). All available evidence indicates it needs increased funding and not just from governments. The Review’s Recommendation (2.4) on ‘sufficiency’ of funding states all governments ‘commit over time to reducing the differential in the level of student funding support at a particular AQF level between qualification-based vocational education and university education’.  This meekly points at the root cause problem but neither explores options nor indicates a solution.

This is the core issue governments need to address given VET students, relative to university students, do not have fair and equitable access to public funding/financing. This is for the lack of a coherent, federally supported and nationally operating tertiary funding framework that spans the Australian Qualifications Framework (AQF). Universities have had to accept a curb on the HE ‘demand driven’ policy with the introduction of ‘performance based’ growth funding. VET now needs an all-of-governments agreement.

The evidence – VET funding has been in decline and is low relative to other education sectors

There has been a net trend decline in government funding/financing of VET, as cited by Joyce (pg.69), with a pronounced decline in VET relative to increases in universities (and schools) and lower expenditure in VET than either universities or schools. In the past six years, VET government-funded full year training equivalents have decreased by 30.6 per cent, from 673 600 FYTEs (2012) to 467 200 FYTEs (2018). Such declines are all the more acute given the nation’s labour force has grown from about 10.8 million in 2009 to 12.9 million in 2019 and the gathering tsunami on needed re-skilling and upskilling of employees for the nation’s firms to be competitive in a digitally disrupted world. Five causative reasons have contributed to decline in VET funding and cost shifting.

What are COAG’s ‘fix it’ options: (a) improve efficiency and/or (b) increase funding/financing?

Efficiency (optimal use of public funds) is an endless essential pursuit, but the ‘do more training with less funding’ argument eventually runs thin and rubs up against real risks to quality of teaching and learning. The Report on Government Services (2019) indicates a decrease in recurrent expenditure per annual hour from $18.20 in 2008 to $13.95 in 2014, before increasing to be $17.19 in 2017.

TAFEs and private registered training organisations (RTOs) differ in their views with regards to training quality and efficiency in arguing their share of declining government funding. Regardless of their advocacy, ‘market contestability’ as a policy and TAFE’s leadership as public providers will remain. There is evident decline in RTO numbers driven by either: costs (eg. full cost recovery by ASQA), less government funding, competition with students favouring higher quality providers, or by regulatory action. Australia has far more RTOs per working age population (15-64 year old) than comparable nations and vastly more than the ~176 TEQSA registered HE providers. Efficiency gains by RTO-led business appropriate mergers creating fewer larger entities is underexplored, noting niche training by some small RTOs.

What of increased funding/financing? There are three options: by increased and proportionately sustained public funding by all jurisdictions (revise the National Agreement for Skills and Workforce Development (NASWD) Recommendation 5.7; by increased contribution from employers such as by greater (hypothecated) taxes/visa levies^[2]; and/or by greater fees paid by students, best facilitated by government financing of VET-specific income contingent loans (ICLs).  None are easy solutions as now explained in greater detail.

Inter-government

Source: https://www.budget.gov.au/2019-20/content/bp3/download/bp3_02_skills.pdf

This Table presents year by year payments to States and Territories (S&T) under the NASWD. This Special Purpose Payment (SPP) had no ‘maintenance of proportional funding effort’ obligations. It’s not a contract but rather an agreement that is in effect unenforceable and is one of five reasons for past cost shifting. Set up in 2009, the Commonwealth has sustained an annual ~1.43 per cent indexation of the NASWD (Table above). S&T have no such obligation. There are two points to emphasise: first, the NASWD SPP contributes a significant but minority part of S&T’s direct training investment, and second, the size of their VET systems is very wide ranging. The larger more populous jurisdictions can have far greater funding fluctuation. Declines across jurisdictions were greater from about 2012 onwards (coinciding with HE demand driven funding ramping up). Some States, such as Victoria and Queensland, have recently increased their funding.

The Review recommends renegotiation of NASWD but expresses this not by an increase in gross funding but rather the ‘Commonwealth and S&Ts co-funds courses … on the basis of an agreed standard percentage share’ (Recommendation 5.7). This won’t increase funding. S&Ts have pressures to fund other higher priority public services (eg. health, schools) and know well they increasingly rely on Commonwealth funded/financed HE graduates for skills. S&Ts would also want recognised their input to all other resources for skills development, including infrastructure investment and also state revenue foregone (eg. payroll tax rebates for apprentices).

The Australian Government provides significant skills funding other than for direct training, like incentives for apprentice employment. It has announced Delivering Skills for Today and Tomorrow. This Skills Package totals $525.3 million over 5 years from 2018–19. However, Senate Estimates evidence shows only $54.5 million is new money. The Package is ~15x smaller than NASWD, the latter is ~$1.55 billon per annum (Table above). Some $463 million is re-directed from the now effectively defunct^[3] National Partnership (NP) Skilling Australians Fund (SAF). The SAF was the headline policy in the national budget 2016/17 announced to create up to 300,000 new apprentices. The latest Commonwealth’s budget decision now redistributes this $525.3 million to ~38% in greater support of ‘apprentice employment’, ~18% on ‘national/departmental’ initiatives, ~23% on ‘industry training hubs and foundation skills’ and ~18% for ‘pilot Skills Organisations (SOs)’.

Business and employers

The Review states: “The new architecture for the skills education system would place industry at the centre of the skills system while promoting close co-operation on funding and quality assurance between the Commonwealth, States and Territories” (pg. 116). No mention of students. The Review proposes some 25-30 industry-owned, government registered Skills Organisations (SOs) (pg. 60) whose remit inter alia includes: faster than present development of all training package (TP) qualifications; managing all apprentice support; assessing industry skills needs; recording benchmark hours and work placement hours in qualifications; promoting skillsets; endorsing preferred RTOs including that for schools; marketing their industry and its qualification pathways; advising on VET and HE articulation; strengthening the links between schools and industry; brokering relationships with employers to secure work placements; and engaging with schools to improve the quality of careers advice. SOs are planned to be co-funded by the Commonwealth (NB. not by all governments) and employers, so making redundant all of the following: Australian Industry Skills Committee, Industry References Committees, Skills Service Organisations and Australian Apprentice Network Providers.

A reasonable question then is: how much are industry and employers collectively investing in VET for this privilege of being the ‘centre-of-the-skills-system’? If investment by all governments is to be publicly accountable, what is the net (after government funds paid to industry) that industry and employers contribute to VET, and, are any of this government funding displacing what industry should reasonably fund themselves? What are the principles? The Review is silent on all this.

The visa levy enacted to (part) fund the SAF remains in place and is an example of an employers’ ‘tax’ hypothecated to national training purpose. The levy is on specific classes of visa applications and is criticised by CEDA for not being collected on visa approvals and not well targeted to skills shortages. It is reported that ‘Home Affairs declared in March that the fund had received a total of $90.3 million from the levy between August 12 2018 to January 31 2019, significantly short of its first year target of $243.4 million and $1.2 billion over the forward estimates. When bilateral SAF contracts with S&Ts cease, if the levy legislation remains in place, it will provide an uncertain future revenue stream that might be better directed to national training.

The Training Guarantee Levy introduced in 1990 by the Australian government implemented an employer training levy requiring enterprises to contribute some of their income to employee training or a government fund for the development of training programs. It was scrapped by 1996 being criticised particularly for its impact on small business. The present UK Apprentice Levy can be used to fund apprenticeship training and only taxes employers with payroll costs of more than £3 million at a rate of 0.5 per cent of their total pay bill.

There are however objections to any tax on employers, on the basis that students (who repay loans) and all tax payers fund university graduates without any direct tax on employers, so why should businesses be ‘levied’ for VET only. This argument only puts strain back on public funding/financing. It is also the case that Australian companies do invest in training but the difficulty is that there are no credible baseline measures. Their investment is most probably in accredited and non-accredited ‘short courses’ in upskilling their employees. The dearth of reliable detail, data and quality assessment of such training and the urgency of companies to increase their investment in upskilling employees (e.g. digital skills) is overlooked by the Review. A recommendation to assemble such details would then better demonstrate employers’ contributions.

Student loans

The last and most obvious alternate is for VET students to have better access to ICLs spanning say AQF levels 3 and 6 (the Review mooted including Certificate IV/AQF 4, pg. 76). The merits and risks of ICL expansion have been detailed elsewhere as have specific policy proposals to unify the present separate funding of VET and HE qualifications at AQF 5/6 levels by expanded use of ICLs.

Alternately, incentives for students may be introduced (as government revenue foregone) in allowing greater specific individual education tax deductions, or, for business specific corporate tax training incentives, or re thinking a Training Guarantee Levy. All of these alternate ideas seem unlikely propositions.

So, ‘simpler funding’ is proposed to set up nationally averaged and consistently subsidised VET course costs and student ‘out of pocket’ expenses. But, ‘simpler funding’ does not address adequacy of funding, nor HE/VET sectoral inequities, and it does not establish a coherent, federally supported and national tertiary funding framework that spans the AQF.

Furthermore, ‘simpler funding’ is assumed for ‘qualifications’. The Review itself noted that some 51 per cent of VET students by training type are ‘short courses’ (pg.11) and makes an unexplained assertion its proposals progress the policy ideas for a ‘life-long learning account’, a Business Council industry-led policy proposal. As such the Review offers no advice on funding of short courses, skill-sets/micro-credentials and subjects (some of which, but not all of which, might be fee for service). So the Review gives no clear funding advice about these 51 per cent of students, with clear evidence of ongoing declines in full qualifications and trends towards ‘short courses’ reported in national VET activity.

Tier 1 continued – contested policy control of how funding is spent

The Prime Minister is reported as recently stating “his government was not prepared to invest more in ‘dud’ training programs and throw money into a bottomless pit^[4]”. ‘Dud’ is assumed to be no job relevance and/or poor quality.  So the second issue is: under whose policy and operational authority is public funding/financing to be spent, for what training purposes, and, at whose view of quality and alignment to jobs. Exploring this requires a broader brush critique of the Review’s recommendations.

Governance is now agreed to be by ‘cooperation’. The underlying principles of ‘cooperative federalism’ are to balance (a): subsidiarity, being proximity of government action close to the community; with (b) responsibilities and roles set at a higher level of government appropriate to geography or national interest; tempered by (c) comity; governments take account of each other’s views.

This throws light on the fault lines in the Review’s ‘change logic’. In order to assess the best options for change, there is need to sift through all options. You do not propose a case for ‘national’ (seemingly central) models without also canvassing the merits and limitations of more disbursed models, or where ‘subsidiarity-dominant’ solutions may, or may not be, for some functions a better design feature. This is especially so if seeking a ‘healthy cooperative federalism’, and more so if players have reasons for reluctance or suspicion of ‘centralised’ solutions. Why such criticism? - especially as the reviewer is “very conscious that the [VET] system in Australia is shared between the Commonwealth and S&T…Many of the 71 recommendations...require…agreement of the two levels of government” pg 112. Consider the following.

No consideration of other federated systems

Other federations like Germany and Canada that have well regarded VET (or equivalent) sectors should have been explored. Canada has a geography, economy and population not dissimilar to that of Australia. The Cabinet of the national government has no VET Minister, nor schools nor HE Minister. In Canada the Provinces are responsible for their own college systems. The federation has “ten provinces and three territories, each responsible for its own education system. Provincial governments provide on average over 80% of direct public funding to tertiary education institutions (including colleges). While this gives the main lead role on postsecondary VET to the provinces, the government of Canada supports provincial funding through federal…. transfer payments to provinces and territories and through direct financial support to colleges and to students. It runs a national student loans programme” (OECD Review). Canada reinforces co-ordination of its federalism by a long standing Council of Ministers of Education. Its Interprovincial Standards Red Seal Program sets common standards to assess the skills of all tradespeople across Canada. So when testing options best suited for a federated Australia, a dispersed federated system like Canada is one extreme, a single government in New Zealand is another. Both can provide learnings.

The closest proxy to the Canadian Provincial set up in Australia is perhaps Victoria. It has relative stability having four dual sector universities, retained 12 TAFE colleges, multiple private RTOs, a dedicated Skills Commissioner, the VET Development Centre (supporting professional development), and the VRQA which constitutionally retained the means to locally accredit VET courses.  It has an advanced skills data analytics capability relevant to Victoria’s needs and has extensive and long practiced course pricing experience.

This is not a ‘wave the flag for Victoria’ as the ‘education state’ of national best practice, but it is a model potentially more fit for future-purpose for Victoria’s needs. Other than Commonwealth NASWD transfers (Table above) there appears little in the overall Review proposals that would significantly better the present Victorian VET system. Rather, the proposals just risk ‘national/central’ overbuild and limiting of State-decision making (eg. TAFE ‘fee free’ courses) in delivering policy and practice far more ‘proximate’ to community. This is subsidiarity writ large which deeply frustrates those who seek a uniform national VET set up.

This is not to argue Canada’s system is adaptable to Australia (ie. Commonwealth’s role in VET is shut down). Canada is a creature of its own federal structure. Like Germany, Canada has less vertical fiscal imbalance, which in Australia is some 45 percent (inclusive of GST) so there is greater need for intergovernmental transfers. VET in Australia, from a funding perspective (unlike HE) sits in the contested ‘quick sands’ of fiscal imbalance.

Finally in Canada both HE and college students can access loans to help cover tuition costs thereby supporting student cross sectoral transition. Courses and costs are set by Colleges, students get a provincial subsidy and access to loans (federal or joint provincial/federal schemes). They are means tested and have more immediate payback terms on graduation than Australia’s ICLs – but loans at ‘VET-level’ are available.

Illogical policy disjoint in addressing ‘skills matching’ VET compared with universities

Australia has a university system centrally governed and funded by the Commonwealth. Subject to regulatory quality standards, universities have dispersed self-governance in course design and self-accreditation. The nation abandoned central planning of university course load which has underpinned the success of the ‘demand driven’ system. Trust is now placed in Vice Chancellors and robust academic governance to determine HE courses and how they best meet academic quality as well as employability and vocational needs. The national Minister’s rhetoric on university graduates needing to be job ready is becoming more strident and universities have and will respond through pertinent industry advisory input and by tracking graduate employment, the latter being one metric within their future ‘growth funding’.

Conversely the Review proposes a VET sector, constitutionally governed and funded under dispersed federated arrangements, but where all government funded/financed courses will be subject of a centralised ‘skills matching’ ie. demand-determined course planning and pricing regime, albeit with ‘direct input from States, Territories, local jurisdictions and industries’ (Review pg. 124), by a yet to be comprehensively detailed NSC.

This disjunction will become fraught. The HE/VET sector ‘divide’ remains at its extremes, but has fading validity for the bulk of students given future jobs requiring graduates of greater composite knowledge and skills from an integrated ‘tertiary system’.  The view that VET is ‘vocational’ and trains students for employment (job-ready skills) is valid but the evidence is that many of its graduates quickly move to jobs different to their ‘trained’ vocation, ie. transferred skills.  Likewise universities educate students and enable their employability (trainable/transferable skills) and always trained vocation-specific graduates.

There are benefits but inherent limitations to ‘skills matching’

‘Skills matching’ works best in circumstances where the economy and especially jobs are relatively stable in their defined scope.  This allows the number and timing of job openings to be reasonably predictable (both in ‘growth’ and ‘replacement’ demand) and so ‘matched’ by training supply. This works better in jobs ‘defined’ by a clear vocational purpose linked with either specific licensing or professional accreditation eg. trades and engineering, nursing, teachers etc. with such graduates coming from both HE and VET sectors. Many factors go to make ‘skills matching’ models useful, but even more factors make it imperfect (even unreliable).

The first is timing and matching economic cycles in ‘bell weather’ industries such as construction, manufacturing and resources; it takes years to train electricians, mining engineers, geologists etc. The next less obvious is that people find a job(s) as and how they can and switch from their ‘trained’ vocation to other jobs relatively quickly, e.g. by pursuing promotion, more interesting jobs etc.

Looking at the occupational destination of non-trade apprentices (trainees) employed after training across surveys for each year 2009-2018, it shows some 45 percent are in the same occupation as training, 45 percent in a different occupation but say training was relevant, and 10 percent are in different occupations with training not relevant. Results are similar for each survey year. It’s similar for general VET students (many of whom have jobs while studying) with typically about half or fewer students surveyed six months after their graduation being in the same occupation as their training.  Analysis of trades over 2009-2018 shows in 2009 that 86 percent were in same occupation after training, this down to 71 percent by 2018. Some 10 percent were in different occupations in the 2009 survey, but say training was relevant, with this percentage rising to 20 percent by 2018. So the tightest alignment, unsurprisingly, is between training and an occupation in licensed trades. Overall this tells a story of transferable skills, that is people both get jobs as they can, and also win better or different jobs after training, so this makes ‘skills matching’ way more complex than at first sight.

Next, a large proportion of jobs in the labour market, whilst ‘definable’ by ANZSCO, have a route where clear ‘line of sight’ from ‘named graduation title’ to ‘named job’ is inherently too generalised to make ‘skills matching’ meaningful. These are typified by the majority of students (in both VET and HE) that graduate in Fields of Education (FoE) such as Management and Commerce, Society and Culture, and ‘general sciences’.

The next confounding issue is that HE and VET are increasingly competing across the same FoE disciplines (albeit at different AQF level). The Commonwealth Education Minister states that ‘over the five years to 2023 more than half of all new jobs will be taken by those with a bachelor or higher qualification’. As a consequence HE qualified graduates are part colonising VET’s more traditional roles e.g. allied health and ‘caring’ professions. This makes ‘skills matching’ by trying to steer government funded supply of VET qualifications all the more problematic.

Lastly, jobs are not as stable or well defined in scope, increasingly the opposite with digital and other disruptive forces fast changing job tasks and removing old and creating new job types – so making Government’s inertia to fund a review and modernisation of ANZSCO bewildering.

Better skills planning has merit in some circumstance and occupations

That said some industries, especially those with companies of national-span, have rightfully vocalised concerns about skill shortages in trade/engineering apprentices. Better forecast methods to improve understanding of national apprentice skills needs, including impacts on immigration priorities, is a good initiative. Recent evidence suggests too many students (mostly young males of lower ATAR-score) went to university for reasons of perceived prestige, lack of knowledge or opportunity of apprenticeships and perhaps costs (ICLs).  Evidence shows that their employment prospects and long term earnings would have been as good, or better, had they completed an apprenticeship. But this skills shortfall is more driven by distortion of HE/VET sectoral policy and funding than there being a systemic failure of the VET system to ‘skills match’ apprentice demand and supply.

Limited recognition of State legislative requirements, knowledge and practices

All S&Ts have sought to sharpen their VET expenditure to optimise their investment in skills for current and future jobs, made more acute by their funding constraints. The Review gives no listing or analysis of S&Ts legislations, their many and various skills advisory bodies or structures, example reports nor summary of practices across jurisdictions, nor feedback from contracted RTOs, nor regional communities, nor cited audits such as “Matching Skill Training with Market Needs (NSW Audit Office) or like advice in Queensland. In this absence, the Review gives no due credence to S&T’s accumulated learning and concludes overall “funding …is not well matched to skills” (pg. 27).  S&T have accumulated expertise in using a span of econometric models and contemporary data analytics to forecast job openings to best inform graduate supply. This is not, and need not be, a monopoly for a ‘central’ bureaucracy. Other than tax and social services data (held by the Commonwealth and useful for data linkage) this is a function where subsidiarity and connected professional communities of expert practice should be a design priority.

Why – because the competing labour demands and upskilling needs of employees in, for example, the “saw mills of the forestry industry vs the sheds of the dairy industry within Limestone Coast communities of South Australia” place a State Minister far closer to the action and in the frame for a solution. This is especially so where States are reliant on their regions for much of their exports and face increasing regional skills shortages.  S&T Ministers and communities won’t be overly helped or convinced by online access to ‘electoral/regional’ job outlook tools, albeit providing useful data. This is subsidiarity writ large with many like examples across the nation.  And a further reason for dispersed expertise is it better services the mid-to-mega size examples of future State workforce planning eg. for defence industries in and between States.

None of the above undermines the need to track major trends in a shifting labour market and better workforce planning for initiatives such as the NDIS roll out, as emphasised by Skills Ministers.  But overly high trust in the precision of ‘skills matching’ is a false road. Noting then both its benefits and limitations designing a national network of professionals, common tools and data sources, that is centrally coordinated, seems reachable.

Complexities of national course costs and pricing 

‘Simpler funding’ seeks to set up national VET courses with ‘averaged’ costs and equal student ‘out of pocket’ expenses. ‘Skills matching’ seeks to optimally align public subsidies to support training for current and future jobs.  The relevant Review recommendations are: 5.1 … “..the Commonwealth preparing agreed national average costs and subsidy levels…” and 5.5…”the National Skills Commission (NSC) be given responsibility for determining nationally consistent subsidy levels, in partnership with the States and Territories”.

Under the terms of the National Partnership for Skills Reform S&Ts took different approaches to setting and amending student ‘entitlement’ policies and course subsidy regimes. A wide felt and reasonable gripe by users/employers (such as national companies) has been the lack of consistency across jurisdictions with regards to which courses are subsidised, the level of subsidy and their access (i.e. capped places), and abrupt changes to these settings.  Behind such gripes typically lies vested industry sectoral interest in gaining public funding. The S&Ts facing increasingly constrained resources have, with some exceptions, not helped their collective cause.  There has not been uniform S&Ts transparency about the mechanics of their different policies and reasons for setting course priorities or costings, including decisions about individual access and equity, and in explaining any policy changes.  Such details might be found inside government funding contracts with RTOs.

The Review rightfully called all this out by pointing to examples of courses where prices, government subsidies (if any), and student ‘out of pocket’ costs vary across the nation for the same course.  The extreme example cited was Nursing^[5] and the Review next noted that ‘subsidy amount for some courses can also be quite similar, with around 5 per cent of courses subsidised in both New South Wales and Victoria having a difference of $100 or less’ (pg. 68).  Other than these two examples, no other more comprehensive evidence was presented (as an appendix).  So the mapped detail of dispersion in course subsidy/pricing across S&Ts, factual evidence showing the full extent of the problem, was not provided in the Review (albeit it’s a complex analysis).

The proposed ‘fix’ is as set out in Recommendations 5.1 and 5.5 above, with a method proposed in Recommendation 5.6: “Subsidy levels would be determined on a grouped qualification basis similar to the Commonwealth Grant Scheme and Student Contributions table used in the university sector”.

This needs unpacking. HE financing is for one AQF level (Bachelor AQF 7) and is constructed in 8 different ‘discipline funding clusters’ that provides each student a Commonwealth Support Grant (CSG) with the balance fully covered by access to a student loan (HECS-HELP). The proportion of CGS/HELP in student funding support may vary. By comparison VET Student Loan Diplomas are at two AQF levels (AQF 5 and 6) specific to about 360 qualifications each within three funding bands^[6], that may not fully cover costs, plus a 20 percent loan fee.

First as a question of principle, is it rational to specify ‘average costs’ specific to a course given business input costs (eg. labour/rent/utilities and taxes) vary across the country? Second, VET qualifications when priced (by the proposed NSC) will span six AQF levels (AQF 1-6) specific to an estimated 1500 active Training Package (TP) qualifications (not including accredited courses) where some 93 per cent of TP student enrolments are in only 21 per cent of these qualifications (there are niche qualifications in far less used courses). Access, costing and pricing also need to nuance connected qualification pathways across AQF levels. Given limited public funds and no general ICLs for VET, the tough questions then are: which courses may get no/some/full subsidy; which courses attract regional/remote or special (eg. drought) loading; and what relative emphasis is given to courses to lift training participation vs. those at higher level supporting more advanced skills. It needs emphasising S&Ts have had 15 years of experience in making awkward compromises to try to get best value from constrained public funds and you can’t please everyone. The NSC will be in this limelight going forward.

A further complexity is deciding ‘bites of the cherry’, that is, policy on an individual’s subsidy entitlements (lifetime number/$ cap/attempts/fails/exceptions etc.) to set nationally fair access and equity rules. This also was not considered by the Review. (Students also ‘game’ settings by enrolling in full qualifications and then pick only bits they want). Subsidy entitlement rules need to mesh with students’ needs and choices – the system can’t just be designed with industry in mind.  Evidence shows increasingly students want to fit in study around their other work/life commitments.  They increasingly enrol in accredited and non-accredited subjects, skill-sets, micro-credentials, short courses etc. Indeed employers are of like mind when funding training.

The Review, in saying very little specifically about TAFEs, states that S&Ts ‘may prefer to keep paying additional block amounts to the State-owned TAFE system beyond the qualification subsidies, to reflect TAFE’s additional services ….or different cost structures’ (and this) ‘should be able to continue’ (pg.77). However, while TAFEs may get this treatment, it leaves unclear if other S&T-specific initiatives and price signals (e.g. ‘free courses’ for age-specific apprentices) will be possible, or denied by the NSC.

So overlaying a university-like 3 year ‘funding cluster’ course subsidy over all VET qualifications is not an optimal model suited to VET or its ‘short courses’.

Tier 2 and 3 Issues – All are complex to achieve real reforms

Each and all of Tier 2 and 3 issues are challenging.  Whilst impacted by overall funding, none are inherently First Ministers’ business. They should be resolved by a determined COAG Council of Skills Ministers.  The most recent meeting addressed adjustment to ASQA’s approach to regulation. VET in schools pathways including senior secondary pathways into work, further education and training  is subject of another national review which should make this area of reform joint business of COAG Schools Education and Skills Ministers.

Of all Tier 2 and 3 issues “speeding up qualification development” is the most challenging. There is overwhelming agreement it needs fixing. The Review proposed that some 25-30 industry-owned SOs be charged to faster develop/update TP qualifications (see above). They will displace relatively recently instated advisory structures (‘fixing the status quo’ was not seen as an option). Given the very wide remit designed for SOs it is untested why they, with ASQA, will dramatically speed up qualifications accreditation. It risks funders and educators having insufficient input and at worst risks design practice of ‘inserting more, deleting less and expecting someone else to pay’. ASQA has to adjudicate any inter-SOs ‘turf disputes’ and will need far greater expertise and resources as a lone agent for course accreditation.  Amidst this disruption universities with self-accreditation will work closer with industry and professional accrediting bodies to update their curriculum.

At what point is the question asked: given present distorted uptake and utility of qualifications and evidence of ‘transferable skills’ in the employment of VET graduates, is there need for so many qualifications, and, why not re-examine the arguments of linking qualifications and the labour market through vocational streams to see if another approach creates a step change in efficiencies?  Again, the Review did not open this line of thinking.

The Review also advises to retain the rule that ‘an accredited course can only be approved where there is no existing TP qualification that already addresses the relevant training’ (pg. 62).  This may be in ‘new or emerging areas’ (pg. 57). An alternate ‘break up and break out’ of current turgid processes is to change the rules. Starting with VET Diploma levels (AQF 5/6) courses, why not abandon the TP-dominance rule, allowing competent bodies of proven regulatory governance to accredit courses at a State-level? Why not allow selected providers of highest governance and quality full rights of self-accreditation (Universities self-accredit HE AQF 5/6 courses). Both Victoria and Western Australia retained rights to State-accredit VET courses. The Review (pg. 54-55) highlighted collaborative industry/RTO course design in ‘cybersecurity’ and mining-related courses. Willing parties were able to ‘nut out’ industry skills-specific courses. Again - subsidiarity writ large.

Like with TPs, there is also overwhelming national agreement to improve pre-post and post school ‘careers’ information to inform young people about VET pathways and choices. This has to be way more engaging than dry information about ‘you need to do these studies to have a chance at this job and earnings’. It is a far deeper psychological journey and discovery of intrinsic motivation for individuals which is best shared between young people and their key influencers.

Cut Through to Achieve Reforms

Two key principles are proposed to guide governments’ future actions.

• Governments need to devise a coherent, federally supported and nationally operating post schooling tertiary funding framework that spans the AQF for VET that is seamless with HE.

Students pick courses on personal interest, entry standards, costs and perceived longer term benefit. Upfront cost barriers to VET course options means students will continue to preference university vocationally-relevant HE courses and take up HELP loans if they are offered a place, regardless of which government(s) or ‘central body’ sets VET courses/costs by ‘simpler funding’. Better careers information about VET options is essential - but this won’t of itself deliver major change until a fair tertiary-system funding framework is put into place.

First Minsters and Treasurers need to work out a new style of NASWD that covers VET Certificate I to Advanced Diploma (AQF 1-6) that comprises both subsidies and loans and is (bi-directionally) seamless in meshing HE and VET loan systems. S&Ts would need to commit to a predictable and sustained contribution to direct costs of VET training. VET loans would be ICLs like HELP, but may have their own policy specifics. Without doing this, any new NSC will get bogged into the same ‘entitlement’ policy complexity as S&Ts have grappled with in like circumstances of constrained public funding. One ‘solution’ to a national approach might be:

On a multilateral basis (ie. all jurisdictions) agree as follows: Step 1: agree which VET courses get no subsidy or loan and are Fee for Service (FFS); Step 2 - agree on those which are loan only; Step 3 - agree on those which get proportionate subsidy/ies with all additional course costs to be covered by student loans. This would ideally set up a nationally consistent base. However, given the design features S&Ts want, build in ‘subsidiarity-flexibility’. S&T would be able to, by notification, increase course-specific base subsidies (eg. extra funding or an offset to the student loan).  At extreme this might be a State supporting ‘TAFE fee free training’ for their highest priority courses, or say age-dependent funding of apprentice training.

The above national approach would apply to ‘short courses’ as well with these initially likely to be dominant in FFS or loan category, and a minority of high priority having some subsidy. Governments could separately decide any specific loan policy with regards to non-accredited short courses. If of quality and relevance, this would open student loans to a flexible, capped, student-centric ‘life-long’ learning account to support all forms of quality education/training, for both full and short courses

Let industry/employers have ‘first right’ of use of all visa-levy revenue (it is their tax dollars) and like States they too could supplement a course subsidy/loan using levy funds (or their own resources) and could contract specific qualifications in and across S&Ts as they determined, again by notice to the NSC.

The NSC would not need to set ‘average’ course costs. Rather any RTO with government funding support (subsidies or loans) would annually submit auditable evidence of full course prices for each qualification. The NSC would analyse prices from (de-identified) RTOs examining all components of how a student paid fees (by loan or loan/subsidy mix). Public investment per course per RTO when linked to student outcomes would be the granular data the NSC and governments need to drive quality/efficiency improvements. RTO’s ongoing access to public funding could be determined on the basis of this data. The NSC role would then be in ‘system monitoring, verification and assessment’ of all parties meeting the terms and intended outcomes of the new-NASWD, and not ‘up-front’ deciding which courses are offered at nationally ‘average’ prices. Like the ofqual (UK), the NSC could publish annual qualification price index changes based on RTO surveys.  The NSC might include features of an independent pricing tribunal  examining for exceptional price movements. Such data should also allow advice on which qualifications are not in effective use and be removed from government support, or removed from accreditation altogether.

The above sets up fairer nation-wide ‘government supported’ VET course funding, as well as allowing S&T and industry (accessing the levy) flexibility to help drive their highest priorities in VET training. States would remain responsible for any additional TAFE funding. As the Review notes, there is at present some $6bn (subsidies and loans) in the pool of resources to cover direct training costs. This needs to lift, and in the main this has to be done by further extending ICLs into VET. The national productivity payback of implementing this vs risks of unpaid loans needs modelled calculation to set benefit/risk parameters.

• Design on the basis of a cooperative federation – subsidiarity preferred, centralise if better option

In both the actuality and spirt of the now agreed governance, ‘national’ does not have to become ‘central’ control. Where better outcomes can be achieved by dispersed cooperative models, coordinated by unifying national policy and platform technology, then this can be pursued. As noted above, a good example is ‘skills matching’. Sharing data sets, national licensing of internet job vacancy data (that itself has technical limitations), and networks of professional practice will build widespread government and institutional expertise supported by effective national coordination. This is far more in the mould of ‘cooperative federalism’.

The same thinking can be applied to careers advisory initiatives. Instead of a ‘central’ overbuild of what now exists (and is unlikely to be dismantled by States and other institutions so will only add to the plethora), invite stakeholders to be part of a nationally co-owned platform which S&Ts and institutions can populate with local and regional content. Yes it will need design rules, firm coordination and curation of content quality and accuracy to migrate what currently exists into a higher quality widely used platform. Do trial novel approaches to better inform school leavers and don’t create a ‘grey haired careers tsar’ who just talks courses and jobs.

Fall back scenario if all this fails

What is the fall back scenario, the ‘hard-Brexit’? One scenario is that the Commonwealth corrals its present outlays: the NASWD, SAF levy, VET Student Loans, industry assistance and Skills Package funding and starts again.  This could transpire as an AQF divide where the Commonwealth takes control of funding/financing all AQF 4/5/6 VET courses (with exacting ‘entry standards’) and leaves the S&T to fund VET Certificate III and less, with specific exceptions. These exceptional interventions might be in foundational language/(digital)literacy and numeracy skills by direct contracting with RTOs targeting all students who are (or are deemed) to be supported by specific Commonwealth welfare payments. This would help address the Review’s proposals on ‘access for disadvantaged Australians’.

The second exception could be the Commonwealth offering/taking control of specific ‘nationally designated’ courses, the target here being all trade and non-trade apprentices.  The NSC would advise and the Commonwealth decide which of the present declared (about) 110 trades and 1100 non-trades apprentices are to be funded at what level. These comprise less than 8 per cent of all VET students or about 25 per cent of government funded students (but more by way of training costs). S&T could fund more places at the same costs if they wished.  This approach addresses long held concerns by peak industry bodies to make national the apprentice system with one level of government fully accountable for an area that falls into sharpest concern and dispute about skills shortages. The S&T would then fund all remaining VET outside the above.  This is only one fall back scenario, not a proposition, nor a preferred outcome.

The road ahead looks to be challenging

It may be over reading the Review’s recommendations but - why would a State Government or Minister, with present constitutional right and with authority over VET in their State, choose to agree to write down their legislative responsibility and political accountability to be limited to deciding on from whom to purchase VET services (‘States and Territories would retain responsibility for allocating funding to providers to meet local industry demand’ pg. 118), but only at national prices determined by and for priority skills advised by a NSC legislated as an Authority by the Commonwealth?  Neither Victoria nor Queensland signed into the SAF NP.

A State Minister said after the recent COAG Skills Ministers’ meeting, if reported correctly^[7], that ‘every State had reserved the right to custom build its own set of Joyce principles’.  The COAG Skills Council communique also reads “Council agreed on the importance of placing learners at the centre of VET reform, including those of all ages and at all stages of their learning journey and career” which is at odds with the Review’s “The new architecture for the skills education system would place industry at the centre of the skills system” (pg. 116).

The Joyce Review has commendably given momentum for reform. Its diagnosis is broadly correct, its analysis acceptable but its key solutions need a re-work, including the need to examine issues it did not cover. Far deeper thinking and much wider debate is needed to encourage a ‘redesign’ not just ‘co-design’ to future proof the Australian VET sector. All of governments, industry, employers and education providers need to step up and carry their own expert part of this national cooperative effort for the sake of students and the nation.

Dr Craig Fowler is an analyst and observer of national policies impacting tertiary education, science and innovation after decades of experience in private, public and university sectors.

References:

[1] This is not a term used by Joyce, ‘federal financial relations’ or similar is the only use of the word ‘federal’ in the Review’s body text.

[2]  As per legislative arrangements to (part) fund the Skilling Australian’s Fund

[3] Based on present public evidence, only WA and SA agreed multi year terms; ACT, NSW, Tas and NT agreed one year ending June 2019 and Vic and Qld did not sign up at all.

[4] Canberra Presses CEOs to Spend Big on Workforce Training Aust. Fin Review 11 Sept 2019

[5] It is notable that recent reports show the highest enrolments by far under the cost fixed VET Student Loans program is Enrolled Nurse.

[6] These are $5000, $10,000 and $15,000 with a few exceptions attracting greater funding.

[7] ‘Education overall should remove career dead ends’ Australian Financial Review Weekend 21 September 2019

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