Productivity Commission releases flawed report on skills

The Australian Government’s Productivity Commission (PC) has released a flawed interim report on the National Skills and Workforce Development Agreement.

That’s the view of Community Colleges Australia (CCA) and Australian VET experts (see below), following a review of the interim report, which was released on Friday 5 June.

“The Productivity Commission has a strong record of producing well-documented evidence-based reports that lead to significant public policy changes. Back in 2018, the Commission’s Reforms to Human Services report used the badly designed VET FEE-HELP program as a case study of policy failure, and pointed out the importance of good government stewardship,” said Dr Don Perlgut, CEO of CCA.

“Yet the Commission does not seem to have learned the lesson it so carefully wrote about then. This new report promotes ‘contestable community service obligations’ and a voucher system, all in the pursuit of improved ‘user choice’. For that, read a move to increase marketisation – effective privatisation – of Australian VET,” said Dr Perlgut.

“There are three major problems with their proposals. First, the quality of VET will suffer when for-profit providers improve their already substantial market share of government-funded VET. Building in a 20 percent profit margin is incompatible with quality education. Look no further than the Australian National Audit Office Report on VET FEE-HELP,” said Dr Perlgut.

“That leads us to the second, related problem. For-profit providers avoid the high needs vulnerable and disadvantaged learners. Why? Because they take extra time and resources, and that’s hard to do when you want to make a good profit. One of the best examples of how the marketisation approach disadvantaged learners comes from research by Dr Don Zoellner, who examined Victoria and New South Wales after market approaches were adopted in those states. The Commission had no excuse, because Dr Zoellner provided two detailed submission to the original inquiry,” Dr Perlgut said.

View Dr Zoellner’s submissions here and here.

Dr Zoellner’s research shows what while student enrolments decreased in all areas of Victoria between 2009 and 2017, the major impact was felt in outer regional areas (down 61.1%) and remote areas (down 80%). The further students were located from the major city region the greater was the reduction of access to training rather than the promised benefits of the market. In 2018, Victoria had 1014 RTOs: 88% in major cities, 10.8% in inner regions, 1.5% in outer regions and none in remote areas. Of the 777 private for-profit VET providers, only 65 (8.3%) were located outside major cities.

“The final problem with the Productivity Commission report is the total lack of concern for the community. If we in Australia have learned nothing else from the current Coronavirus pandemic, it is that community action has helped us to survive. Public health experts underestimated the ability of the Australian community to react. The Productivity Commission report simply does not trust the community, but we in Australia’s adult and community education sector know the value of teaching and learning skills in a supportive community environment,” said Dr Perlgut.

The Productivity Commission has requested feedback on the Interim Report by Friday 17 July, with the final report is expected to be handed to the Australian Government by November 2020.

The “Overview Report” runs 56 pages, and the full Interim Report runs 332 pages.

Media Coverage and Commentary

“Vocational training loans would saddle many with a ‘lifetime of debt’,” by Anna Patty, The Sydney Morning Herald, 15 June 2020: quotes:

Craig Robertson, TAFE Directors Australia CEO: “All that is going to happen is students get saddled with debt that stays on their tax record, and the government is transitioning costs to the most vulnerable students in society.”

Peter Hurley, the Mitchell Institute: the commission’s promotion of contestable funding would not solve the sector’s problems.

Robin Shreeve, former TAFE NSW deputy director-general and Skills Australia chief executive, “was surprised the commission had raised the prospect of vouchers in the VET sector after they had been tried in Britain but failed because of rorting.” And: “VET FEE-HELP was almost a voucher and it always ends up in tears because VET is not a perfect market and you have a situation where, unfortunately, unscrupulous providers can exploit students who lack some of the basic information about products.”

“Government cancels more than $1.2 billion in VET student loans”, by Anna Patty, Sydney Morning Herald, 16 June 2020:

“Mr [Craig] Robertson and other education experts including Peter Hurley from the Mitchell Institute at Victoria University have warned the federal government against adopting Productivity Commission proposals that include expanding student loans in the VET sector. The commission has acknowledged exploitation of the loan scheme by some private providers but proposed tighter regulation to safeguard students.”

“The warnings come as the Australian Competition and Consumer Commission was on Monday granted leave to file further evidence in an ongoing case against Empower’s former solicitor Alistair McKeough, alleging contempt of court.”

Summary of the Interim Report

(from the Productivity Commission website)

The National Agreement for Skills and Workforce Development is overdue for replacement.

  • It reflects the consensus in 2012 about how Australian, State and Territory governments should boost participation in training — including creating a national training entitlement, promoting ‘user choice’ led competition, and expanding access to income contingent loans.
  • However, governments have stepped back from some of its policy aspirations. Targets have not been met and the performance indicators have proved to be deficient.

There is a manifest capacity to better allocate the $6.1 billion in governments’ spending on VET to improve outcomes.

Governments should consider reforms to make the VET system a more efficient, competitive market, driven by the informed choices of students and employers, with the flexibility to deliver a broad suite of training options.

This goal should be pursued through a new principles-based agreement. This study proposes a set of principles for such an agreement.

Based on these principles, some reform directions are clear, including:

  • supporting effective competition in service delivery by establishing clear, contestable community service obligations
  • better data collection and transparent, comprehensive reporting of the allocation of public funds to support regular assessment of governments’ policies
  • better curated information for students and employers about career opportunities, the performance of registered training organisations (RTOs), course quality and prices
  • reform of course pricing
  • a single national regulator.

There are various options for reforms to VET funding, which will require further consultation and assessment. Reform options include:

  • expanding access to VET Student Loans by relaxing loan caps and course and qualification restrictions, underpinned by strong risk management. This may be a preferred option to any additional subsidies
  • simpler subsidy arrangements, such as:
  • binding arrangements on all governments to apply a nationally-consistent set of course subsidies, based on the efficient cost of delivery, with loadings to address higher delivery costs in some locations and to some student groups, or
  • replacing the proliferation of granular subsidy rates for courses with a limited range of subsidy rates, but otherwise leaving jurisdictions to set their own subsidy levels and allocation
  • using student vouchers instead of subsidy payments to RTOs to facilitate user choice
  • moving away from, or complementing, incentives to employers to train apprentices by using other approaches to support apprentices, including mentoring and pastoral care.

Regardless of the extent to which State and Territory governments adopt a common national approach to subsidies, there are strong grounds for them to use common methods to measure costs and determine loadings.

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