How much did the demand driven funding freeze save the government in 2018 (and cost the unis)?

When the funding freeze on university bachelor-degree places was announced in December 2017 there were some big claims made about both how much it would cost the universities and save the government.

But at least in its first year, 2018, its effects were probably smaller than many people (myself included) expected.

I have to first put some caveats around my data, because I am trying to reconstruct what went on from multiple sources. As is often the case, there are discrepancies between the sources on what should be the same number,  such as equivalent full-time student load (EFTSL) or money paid. The main reason for this is that they are revised during the year in question and afterwards.

I have also had to make an adjustment to remove medical students from one of my data sources (because they were not in the demand driven system). That may introduce some small errors into the totals. For 2017, however, my two estimates of what should have been paid for demand driven students come to within $5.2 million of each other,  both at $5.9 billion after rounding. So I hope my 2018 estimates are not too far off.

The reason that this analysis can be done at all is that the Department has started putting more detailed data online, including EFTSL by funding cluster, which can be narrowed down to bachelor degree students at Table A institutions (the public universities that were in demand driven funding). These EFTSL numbers can then be multiplied by the relevant cluster funding rate to calculate what should have been paid under demand driven funding.

After deducting my estimate of funding for medical students, on this methodology demand driven funding for 2018 should have been $6,025,446,925.

I then compare to this to the funding determinations for non-designated (ie bachelor) places. After various downward revisions because universities ended up with fewer students than expected, my calculation is that for 2018 $5,929,354,789 was paid.

So in 2018 the funding freeze saved the government $96,092,136, or about 1.6% of the demand driven amount.

One reason that savings are lower than expected is that demand is soft. As a result, if the demand driven system had remained in place total expenditure would not have risen by as much as originally forecast.

If we go back to the 2017 Budget estimates the forecast was for 582,500 undergraduate Commonwealth supported places in 2017-18. Higher education statistics are on a calendar year basis, but averaging 2017 and 2018 570,000 places were delivered.  On average CSP funding rates, the missing places would have been worth about $138 million.

Over the long run, the savings will be much larger – particularly if current policies are still in place when the Costello baby boomers start wanting higher education in the mid-2020s. But it’s hard to imagine that current policies can last that long.

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