Response to the National Commission of Audit

This response was provided for the National Commission of Audit in May 2014.

School education

• We agree with the proposal that schools policy and funding be transferred to the states – this aligns with the principle that policy and service delivery should be delivered by the level of government closest to the people receiving those services.  
• But the proposal that Commonwealth funding could be provided to states in three separate, non‐transferable pools (government, Catholic and independent) is problematic. Mitchell Institute argues that states must be given flexibility to direct funding to student need, and to delivering quality provision in all communities at the most efficient price. The recommendation to lock down funding in separate pools potentially restricts achieving value for money and addressing the equity issues that exist in education.  
• Some further cost saving recommendations have been made in relation to rationalising the national architecture for school education. These recommendations appear opportunist rather than strategic. In rethinking Commonwealth‐state/territory relations, we need to ask what national bodies are required that will provide good governance and when is it in the national interest to have a single authority. Areas of national interest include for example, a national teacher registration and standards authority and, like health, a national education performance commission. This would provide important public accountability and transparency by an independent authority and improve data collection, analysis and information to inform decisions on education‐related measures.  
• The Commission recommends that government rapidly improves the use of data in policy development, and accelerates the publication of anonymised administrative data. We fully support this as highlighted in Mitchell Institute’s forum report, New Approaches to Persistent Problems in Australian Schools. Big data has the potential to transform service delivery by tailoring services to need and improve outcomes.    

Higher education arrangements

• The Commission's proposal to shift the balance between government and student contributions is required if we are to ensure the long term sustainability of demand driven funding. But the nominated average proportion of costs (from 41 per cent paid by students to 55 per cent) seems somewhat arbitrary. It also does not appear to consider the context of full or partial fee deregulation in terms of the extent to which deregulated fees would attract the same public subsidy or the extent to which institutions retain the additional revenue from the extra fees they charge.  
• There is a strong case to reform Higher Educations Loan Programs (HELP), in particular to reduce growing levels of student debt that will never be repaid. The various HELP programs should be rationalised and anomalies between them eliminated.
• The Commission recommends that HELP loan repayments kick in at the minimum wage level ($32,354) asopposed to what happens now (repayment starts when a person earns $51,309 p/annum). This is not supportable as it contradicts a fundamental principle in the design of HECS which was that graduates should pay when they begin to receive the benefit of their subsidized education relative to other people in the workforce. The use of minimum wages as a benchmark would mean that graduates would begin to pay before that receive any relative benefit and this position would be exacerbated over time as the relative value of the minimum wage declined if the Commission’s recommendations to index the minimum wage was adopted.
• The recommendation for HELP debts to be indexed at the cost of borrowing to government is reasonable as the current arrangements do provide an additional hidden subsidy to students from other taxpayers and government.     
• That being said, there are genuine and significant problems that arise under the current student loan scheme in terms of incentives that affect students’ decisions and behaviors (for example, non‐completion). However, there is a complex interplay between subsidies and fees and the balance of benefits to students, institutions and the public needs to be carefully modeled.

Vocational education and training

• What was required from the Commission of Audit was a contemporary analysis of the role of VET in meeting national economic and social challenges facing Australia in 21st century in terms of competitiveness, productivity workforce participation and skills shortages and the role of the Commonwealth and the states. Instead we have a limited and superficial analysis based on a rear vision
  view of constitutional responsibilities.  
•  The Commission has proposed that VET funding and policy be handed back to the states. This is inconsistent given it does not extend this recommendation to include higher education which currently rests with the Commonwealth.
• Financial expenditure by the Commonwealth on VET appears to have been deliberately understated and the role of the Commonwealth in driving growth in VET and VET reform ignored. State expenditure on VET as a proportion of total government expenditure is falling except in Victoria and this trend is likely to continue.  
• There is a real need for a major shakeout in CommonwealthState responsibilities for VET to remove duplication and overlap and to reduce complexity. In fact the 1996 National  Commission of Audit Report recommended that VET should become a Commonwealth responsibility as did the Bradley Review.
• We think VET reforms should be undertaken with the objective of building a coherent tertiary education system in Australia across the VET and higher education sectors.