Submission to
Review of Higher
Education Financing and Policy
from
Peter Karmel,
former Vice-Chancellor, the
Australian National University and
the Flinders University of South Australia,
former Chair, Australian Universities Commission and Commonwealth Tertiary Education Commission
18 April 1997
Attachments
Attached are three papers which have been or are to be published. They contain detailed discussion of matters referred to in the submission, especially in relation to the scheme for a program of national scholarships.
Attachment A: A Comprehensive Program of National Scholarships, February 1997.
Attachment B: Funding Mechanisms, Institutional Autonomy and Diversity, February 1997
Attachment C: Education and the Economic Paradigm, November 1994
Urgent Problems
Within the Australian universities there appear to be many people, among both senior management and academic and general staff, who believe that there is little the matter with the present arrangements in higher education in Australia that additional Commonwealth funding would not rectify. This is not my view. Since significant additional funds are unlikely to be forthcoming from the Commonwealth, such a passive approach is likely to condemn Australian higher education to a slide into uniform mediocrity.
In truth the Australian higher education system is facing a number of serious problems. These relate to:
Scale of Higher Education
The scale of higher education depends on the rate at which people access it and the length of time they spend enrolled. At present some 40 to 45 per cent of a cohort of Australians make an initial enrolment in higher education either within several years of leaving secondary school or somewhat later during their lifetimes. (On a gender specific basis the proportions are approximately 36 per cent for males and 49 per cent for females.) This represents a high level by world standards and is probably close to the United States experience in relation to universities and four year colleges. Over the past seven or eight years, and especially in 1995 and 1996, there has been a relatively modest increase in access from a level of around 35 to 40 per cent of a cohort to one of around 40 to 45 per cent.
Total enrolments depend not only on the rate of access, i.e. the rate at which people enrol in universities for the first time, but also on the length of courses, the success rates of students and the extent to which people enrol for second undergraduate qualifications and for postgraduate degrees. Over the decade 1987-96 the total enrolments in higher education in Australia increased by 61 per cent to 634,000; undergraduate enrolments by 52 per cent to 502,000 and postgraduate enrolments by 110 per cent to 132,000. The scale of higher education is sometimes measured by participation rates, which relate enrolments to population numbers for certain age groups. However, they do not have a great deal of meaning when the age groupings are wide.
The remarkable increase in enrolments over the past decade has been driven by three factors:
The extent of access to higher education is reflected in entry standards. In general, the greater is access, the lower are minimum entry standards. Universities do not appear to lay down formal minimum entry standards as they once did. Rather, the minimum entry standard is determined by filling quotas of enrolments. Minimum entry standards vary from institution to institution and from course to course. In some courses in some institutions students need to be in the top one or two per cent of the order of merit list in order to be admitted; however, some institutions are admitting students into some courses with results as low as the 70th percentile from the top. Mature students are admitted on the basis of judgments about their equivalence to school entry students. An issue which needs to be confronted is whether standards should be merely a reflection of the scale of higher education or the scale determined from adherence to fixed minimum standards.
The scale of higher education that the Commonwealth Government should support is a matter for political judgment in the context of community aspirations and national needs on the one hand and, on the other hand, of standards, alternative forms of post-school education and the preparedness of government to provide funds. As for the current scale of publicly supported higher education in Australia, my judgment is that the scale, if anything, is rather too great. A reasonable objective would be to provide sufficient publicly supported places to cater for an access rate of some 35 to 40 per cent of a cohort of Australians.
Funding
For a given scale of higher education, the level of government funding required depends on the standards of service to be provided to students by the institutions, the institutions’ efficiency and the extent to which students carry the costs themselves. At present students cover some 35 to 40 per cent of operating costs through the Higher Education Contribution Scheme. By world standards this is a relatively high proportion for people attending publicly supported institutions and, in my judgment, ought not to be further increased.
As far as quality and efficiency are concerned, it should be noted that over the period 1988 to 1996, while student load increased by 49 per cent, academic and general staff numbers increased by only 26 per cent giving an increase in productivity of 18« per cent - a significant improvement, assuming, of course, that the quality of the services offered did not decline. Some decline in quality seems to have been likely, given the increase in class sizes and the elimination of tutorials in some areas. (While on the subject of productivity, an even more marked increase can be demonstrated in relation to the number of courses completed: course completions increased in an eight year period by 75 per cent to 141,000 in 1995 - an improvement in productivity of almost 40 per cent even before taking into account the current cuts in staffing. The magnitude of this improvement seems not to have been appreciated.)
As one would expect, given the growth in student numbers, total government expenditure has risen over recent years. The rise has, however, been moderated by the assumption by students of a significant fraction of costs via the Higher Education Contribution Scheme. As a proportion of gross domestic product government outlays on higher education rose from 1.0 per cent in 1987/88 to 1.2 per cent in 1994/95. The recent cuts in higher education expenditure and increases in HECS will bring this figure back towards 1.0 per cent. It is worth noting that this proportion was at its maximum of 1.7 per cent in 1975/76: there has been a significant long-term decline in the government’s commitment to funding higher education in relation to the scale of the Australian economy. In my judgment there is no case for further economies in higher education - indeed some modest relaxation would be in order by maintaining funding while scaling down enrolments somewhat.
A major problem confronting institutions relates to salary adjustments. When the Commonwealth became involved in funding universities it adopted the practice of supplementing grants to provide for adjustments in salary scales. In 1996 it decided to do this no longer. The current round of salary adjustments that is taking place in higher education institutions is effectively imposing a cut of around 8 to 10 per cent in the real value of university funds. The universities need to adjust salary scales from time to time in order to be able to retain and attract high quality staff nationally and internationally and in order to avoid a brain drain overseas. The institutions are coping with the present round by economies involving, for the most part, reductions in staff numbers. No doubt there is room for some such economies but they cannot be contemplated as a recurring phenomenon over future years. In my view measures to cope with the salaries issue are of the greatest urgency.
Government Regulation
While the Commonwealth has avoided interfering with the internal management of the institutions, it has required them to conform with various government determined policies. In particular, the complexity of the permissible fee structure and the changing controls exercised over student numbers have created significant planning and administrative problems.
More broadly, there is the issue of a centrally directed higher education system versus a decentralised one in which institutions operate independently of centrally determined policies. In my view there is a powerful argument in favour of allowing higher education institutions to determine their own priorities in the light of their judgments about the directions in which their activities should go rather than requiring them to conform to a set of dirigiste priorities determined by the central government (see Attachment B, pp. 7-8).
A Program of National Scholarships
Attachment A outlines a comprehensive scheme for National Scholarships (see Attachment A, pp. 3-6) which would enable issues relating to the scale of provision of university courses and their funding (including the salaries problem) to be addressed in a simple fashion and would eliminate the current complex system of different fees for different kinds of courses and students and the controls over institutional student numbers. Attachment A sets out the scheme in sufficient detail for its practical application and discusses the benefits arising from its implementation (see pp. 8-12) as well as its limitations (pp 12-14). The scheme involves a market approach to the provision of higher educational services, the freeing of the institutions from government intervention and regulation (especially with respect to fees and student numbers) and the encouragement of a plurality of priorities among institutions.
The proposal for a comprehensive national scholarship program is not a popular one. Much of the opposition is because of misunderstandings involving wrongly based assumptions that the scheme involves the imposition of up-front fees and/or the imposition of greater costs to students. In fact the scheme offers no specific support for up-front fees although full fee paying Australian students can be included within its scope, and students will, on average, incur about the same costs as at present which they will be able to pay up-front or through HECS, again as at present - a significant fraction of students will probably enjoy lower costs.
There are some objections that have been raised against the scheme which require consideration:
If this were to happen in a particular case and if the Commonwealth desired to ensure the viability of a regional institution it could provide it with a lump sum subsidy. A better solution might be to provide an annual endowment of, say, $10m to all public institutions, offset by a reduction in the value of scholarships. This would have the advantage of treating all institutions equally thus avoiding the seeking and giving of special favours;
Students already make choices by expressing preferences in their applications to admission centres - the situation under the national scholarships proposal would be little different;
If such expansion was clearly threatened it would be possible to negotiate limits on the growth of the stronger institutions;
While the existence of tenure does inhibit flexibility, it is not as total as is generally believed: for example, in 1996 44 per cent of academic staff and 36 per cent of general staff were not tenured. In any case universities are able to terminate the employment of redundant staff.
In my view, the case for the adoption of a program of National Scholarships is extremely strong.
Diversity
Attachment B contains a detailed discussion of issues relating to diversity: what is meant by diversity; why diversity is important; and the relationship between diversity, institutional autonomy and funding mechanisms. The paper argues that inter-institutional diversity is important because specialisation among institutions is likely to produce courses and services that are more effective in meeting needs and more efficient in the use of resources (see Attachment B, p. 5).
An important conclusion of Attachment B is that inter-institutional diversity in Australian higher education has diminished since 1987 (see Attachment B, pp. 26-28). The way in which the post-1987 universities have fallen into line with the older institutions is illustrated in the following:
Diversity is likely to be promoted by a move towards a more market oriented higher education system as would occur with the introduction of a comprehensive national scholarship program. In particular it is likely that there would tend to be some concentration of enrolments in graduate courses and research training in those institutions best able to offer such opportunities and an increasing emphasis on undergraduate teaching in other institutions.
The issue of diversity also gives rise to the question whether research and research training ought not to be concentrated in fewer than the 36 public universities.
Research Training
The program of national scholarships would provide for students enrolled in course work degrees both at undergraduate and postgraduate levels for up to five or six years of successful full time equivalent study. Students might also be able to undertake the first one or possibly two years of a research degree within the tenure of the scholarships.
On the basis of the parameters of the Relative Funding Model, annual fees for research degrees could vary between $12,000 and $28,000. Clearly, scholarships to cover all or part of these fees will be necessary for the bulk of Australian students in addition to the existing postgraduate awards which provide living allowances. As it does now, the Commonwealth will need to determine the number of such scholarships and awards that it is willing to fund. This will depend on the extent to which it believes research training to be of national importance.
There are efficiency and effectiveness grounds for a greater concentration of research training. In particular, it can be argued that research training should be undertaken where there are critical masses of proven academic researchers. Three factors which will be conducive to concentration of research training should be noted:
Institutional-Government Relations
Over the 30 years from 1959 to 1987 dealings between the Commonwealth Government and the institutions of higher education were conducted through statutory commissions. The commissions comprised a mix of senior experienced and well-respected academics and leaders from business and the professions. They were served by relatively small but well informed secretariats. They produced public reports of their evaluations of the state of higher education and their advice and recommendations to the Commonwealth were included as public information.
The original Australian Universities Commission was inaugurated in 1959 by Sir Robert Menzies as a mechanism for ensuring university autonomy and freedom from political interference - a buffer between the institutions and the Commonwealth Government. Over the period 1959-87 Commissions advised the Commonwealth on tertiary education and administered the Commonwealth’s tertiary education programs.
The abolition of the Commonwealth Tertiary Education Commission in 1987 resulted in:
(See Attachment B, pp. 17-20.)
In my judgment, the existence of a statutory body as a buffer between the institutions and the Commonwealth Government is of the first importance, whether or not there is a move in the direction of a comprehensive national scholarship scheme.
Such a statutory body, say, a "Higher Education Commission", should:
In the event of a national scholarships program coming into existence, the Higher Education Commission’s responsibilities would include:
Research
The proposal for a national scholarships scheme and a concern to promote diversity highlights two issues relating to research:
In my view the answer to both these questions should probably be "yes" but they require detailed investigation. A reasonable objective would be to raise the research quantum component of operating grants, currently at 4.9 per cent, to around 10 per cent, which is still substantially lower than the corresponding figure for United Kingdom universities.
Quality
As indicated earlier, I believe that it would be appropriate for questions of quality to be handled by the Higher Education Commission. The move to a market orientation by the introduction of national scholarships would mean a shift from a producer dominated system to a consumer sensitive market. In itself this would make universities more aware of the concerns and needs of students and would be a positive move to promote quality.
Apart from this, institutions should be encouraged to internalise concerns about quality to ensure that regard for quality continues to be an essential element in the profession of university teaching. In addition the Higher Education Commission should monitor quality assurance procedures and the extent and nature of teaching services that universities make available to students.
In my view the assessment of the quality of whole institutions and the awarding of prizes for success in such assessments should not be pursued. The reasons for this are set out in Attachment C pp. 24-28. In particular, the conceptual basis of such exercises is dubious, and it encourages institutions to exaggerate their strengths and minimize their weaknesses.
Vocational Education and Training
The ways in which higher education and vocational education and training have been organised, financed and publicly perceived have erected a substantial barrier between the two sectors in spite of the small but growing liberalisation of articulation and accreditation arrangements.
In an ideal world there would be a seamless robe of post-school educational institutions ranging from research universities with concentrations on research, research training and honours degrees to colleges involved in skill training of the traditional kind. A step in the direction of a more holistic approach to post-school education would be to generalise the concept of a national scholarship scheme to provide entitlements for all post-school education. Scholarships could be negotiable at all accredited institutions and the dysfunctional barriers of the kind at present faced could be eliminated (See Attachment A, pp. 10-11).
The development of a truly comprehensive national scholarship program for all award courses in post-school education would require a rearrangement of Commonwealth/State financial relations so that the Commonwealth became the funder of all post-school education. Clearly this is not a simple matter, but in my view it should be a medium to long term objective of Australian educational policy.
Future Arrangements for Higher Education
For the reasons relating to scale, funding and diversity set out above, the continuation of the present arrangements for higher education seems to me not to be a sensible option. A return to the pre-1987 situation would not be practical politics, since it would mean unscrambling mergers and reversing the evolution of a number of institutions.
As is clear from earlier sections of this submission, I favour a comprehensive program of national scholarships of the kind outline in Attachment A.
A possible alternative would be to establish, say, 6 to 16 of the present 36 public universities as "national universities". These could be funded by the Commonwealth at levels that allowed for a relatively high volume of research activity and research training. They could relate to the Commonwealth through a Higher Education Commission of the kind outlined above. The other universities would become State funded institutions and their organisation in each State would be influenced by that State’s policies. This arrangement would require modifications to Commonwealth/State financial arrangements. The question of the eligibility of the staff of State institutions for Commonwealth competitive research grants or other research support would have to be resolved. The arrangement would at least have the advantage of promoting some specialisation among institutions and enhancing diversity.
Recommendations
My recommendations to the Review are: