VET funding at lowest level in more than a decade – Mitchell Institute report

Funding for vocational education and training (VET) is at its lowest level in more than a decade and Australia risks failing to properly provide the high-quality training for the 45% of new jobs needing VET qualifications that will be created in the next five years.

That’s the message from the Australian Investment in Education: Vocational Education and Training report (PDF) from education policy think tank the Mitchell Institute at Victoria University, which found that every state and territory government had cut funding to VET over the past decade. Funding has now fallen to 15% below 2006 levels.

According to the report (released on 20 December 2019), New South Wales has experienced one of the largest declines in recurrent funding of 21% in real terms compared to 2006, while Victoria has seen its funding almost halve since 2012.

“The funding crisis was making it especially difficult for quality VET providers to sustain high course standards. If we want to ensure a quality education for our VET students and to meet the growing demand for skills for industry, it will be important for governments to increase funding for VET courses, said Peter Hurley, Education Policy Fellow, Mitchell Institute.

Per course funding has declined across all states and territories, and access to income contingent loans has become restricted. As a result, students have faced high upfront fees, making the sector a less cost-effective training alternative to university.

“Student choices about what to study and where are too often driven by factors such as course fees, or the availability of loans, rather than their strengths, interests, or job prospects on graduation,” Mr Hurley said.

Community Colleges Australia Comment

CCA’s CEO, Dr Don Perlgut comments: “These funding figures are even more telling when you factor in Australia’s population, which grew from 21,644,000 in December 2008 to 25,180,200 in December 2018, an increase of 16.3%. As a result, VET funding has effectively been going backwards for the past decade. This is particularly significant for areas of high population growth, such as Western Sydney, outer suburban Melbourne and many regional coastal areas such as in the NSW north coast and Queensland.”

Criticisms of Contestable Funding

The Report criticises the results of contestable funding (also called “marketisation” or “privatisation”), In identifying “promising areas of reform”, the report states: “Giving greater attention to the limitations of market based reforms, such as contestability, as a principle for investment and policy in the VET sector, especially in balancing the agility of the sector with appropriate quality assurance for new and existing providers.” (p. 4)

Specifically, the Report says (p. 19):

“Future VET reform should also give attention to the limitations of contestable markets, and how these have influenced previous policy failure in the VET sector. The limitations of contestability are frequently raised in research and commentary on Australian VET reform, especially in the rise and decline of major RTOs that entered the market, made significant income, and then closed after regulations were tightened (Aston & Evans, 2014; Danckert, 2016, 2019; Gillezeau & Fowler, 2019; Hurley, 2017). This ‘hit and run’ strategy is encouraged by the contestability principle of having as few entry and exit barriers to the market as possible (Baumol, 1982b, p. 4); suggesting that contestability principles require further modification if they are to be implemented in a VET context.

“The second principle of contestable markets is no sunk costs, which refers to investments that cannot be recovered, such as start-up costs. By establishing VET funding markets that involved few sunk costs, firms with no previous experience in the VET sector could establish themselves without substantial investment in fundamental elements of quality, such as classrooms or teacher expertise. While the VET sector must remain dynamic and responsive to emerging needs, this should not occur at the expense of the quality of the VET experience. The future of the VET sector depends not only on its agility, but the restoration of public trust in the value that it delivers, as the core justification for both public and private investment.”

Federal VET Funding

In relation to Federal Government VET funding:

“While state governments have reduced VET funding, the Federal Government initially increased it via the VET FEE HELP program. Concerns about financial sustainability, quality of courses and rorting by some unscrupulous providers saw the Federal Government’s scheme close and replaced by VET Student Loans. Excluding the income contingent loans scheme, the Federal Government’s commitment to the VET sector has been relatively constant over the past decade, although it fell in 2018. Funding increased in some states in 2018 for the first time in six years.”

Report Recommendations

The report recommends:

  • Removing the artificial divide between higher education and VET so students can study at both without penalty and receive the training and skills they need.
  • Reforms that enable VET students to access the same level of support as university students, such as the ability to defer payment for all out-of-pocket costs via income contingent loans.
  • Greater coherence between state and federal governments and long-term commitment to funding to allow for stability, sustainability and improved quality in VET.
  • Establish an efficient benchmark price for each VET qualification. This will stem the rise of low cost, low quality courses, and lead to higher quality, efficiently funded courses.
  • Limit contestability to prevent unscrupulous operators with no previous experience, capital or quality courses from entering the market and profiting while leaving students with high debt and poor quality, ineffective qualifications.

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