Uni VCs should take some blame for consequences of latest cuts

Well so much for the Universities Australia campaign for increased public funding of higher education, with another half-page ad in today’s Weekend Australian. The government has announced a new wave of higher education spending cuts.

As usual with these weekend announcements there is not much detail available, and not all the numbers make sense to me on current information. For universities, the main impact will come from ‘efficiency dividends’ of 2% in 2014 and 1.25% in 2015. This will be the first cut to nominal per undergraduate student funding since the Dawkins reforms 20 years ago. [Mookster makes the point below that after indexation there will not be a year-on-year reduction, though I am anticipating that there will be a reduction to Commonwealth contribution amounts in the Act.]

Reducing public funding to higher education is not in itself problematic. But arbitrary changes to the prices universities receive for reasons which have nothing to do with higher education (funding Gonski is the claimed reason in this case) are not easily justifiable. In a more market-based system, we could see whether students would rather put up with cuts or pay more to maintain current services.

This outcomes highlights the political failure of the Universities Australia process that led to their current policy document. By maintaining an exclusive focus on public funding rather than building a political case for more fee deregulation they were always taking a big risk. The idea that a $5 million university advertising campaign could alter the political calculation that there are more votes in schools and health was always pretty fanciful. And so it has again proved to be, even sooner than I thought.

The reality here is that there are vice-chancellors who would rather undermine the services they can provide than concede an ideological point about student charges. They should take some of the blame for the problems these cuts will cause.

  1. There is another reason why the sector can only blame itself for the efficiency dividend; back in 2010 and 2011, basically every university which could find the students chose to be marginally funded (i.e., over-enrolled beyond 110% of agreed funding). Some had already chosen to over-enrol by much more than the 105% funding limit for years before that. That is no way to win an argument that the per-student funding rates are too low to deliver quality education.

    This will be the first cut to nominal per undergraduate student funding since the Dawkins reforms 20 years ago

    I don’t think so; the current indexation formula will deliver +3.5% or more in the next few years. The efficiency dividend will merely take us back to a nominal 1.5% to 2% increase per annum in the next two years, i.e. the outcome will be in line with the old HEIF indexation formula, but it won’t be a nominal cut, year-on-year.

    Also, the media statement refers to the dividend applying to ‘all HESA grants’ – but student contributions paid by students (and HECS-HELP advances paid by govt to universities) are not grants. So maybe the 2% cut will apply to the Commonwealth contribution only. Hard to say exactly what the exact implications will be without knowing these details.

  2. I am presuming they will have to reduce the Commonwealth contribution rates in HESA, but I have added a note to the post. I am pretty sure you are right that it will not apply to student contributions. That is what I have been saying based on the media release.

  3. The combination of MYEFO and Gonski cuts are a collective big hit to institutional budget forward estimates – with a coalition committed to a surplus it’s not inconceivable that more and bigger cuts are on the way. In this context the UA policy statement and campaign should have tapped into the zeitgeist around Graduate Winners and pushed for fee liberalisation. I wonder whether we’ll now see the sector turn on itself and lobby for policy reform that is outside of the policy statement.

  4. I’d be interested in your thoughts re limits placed on tax deductions for self-education expenses. From what I can see, Universities have done everything within their power to make it easier for people to work while studying either on-line or at CBD campuses. I suspect that many in the workforce are happy to purse post-grad studies because of the personal tax deductions that come with it. How do you see these proposals affecting this part of the education market?

  5. Benoit – I suspect that the change will have quite a big effect on the postgrad market, given the large increase in costs. However I don’t have any data on how many postgrads are claiming a deduction.

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