While the Senate education and employment committee report on the government’s higher education changes predictably endorsed Christopher Pyne’s plans to cut university funding and deregulate fees, Labor has zeroed in on one of the most significant weak points in the government’s case — its claim that fees will not necessarily rise significantly once deregulated.

Throughout the government’s so-far unsuccessful campaign to attract support for its changes, which will see university funding cut by an average of 20%, heavier loan repayment requirements for graduates and universities allowed to charge what they like for undergraduate courses, it has insisted it is not a given that deregulation will see fees universally rise. “‘Some fees will go up and some will go down’,” Education minister Christopher Pyne has claimed. However, Education department officials have admitted that no modelling was done on the impact of deregulation on fees.

In Labor’s dissenting committee report released yesterday, the opposition highlights the experience of partial deregulation under the Howard government, when then-Education Minister Brendan Nelson allowed universities to lift fees by up to 30%, arguing — in words that uncannily anticipate those of Pyne — that “some course costs would rise, some would drop and others would stay the same”. Once the reforms were introduced in 2006, within two years all universities had lifted fees.

As Ross Gittins explained in May, the experience in the UK has also demonstrated that letting market forces set university fees means fees only ever go up — reflecting that higher education simply doesn’t function effectively as a competitive market, due to the strong position of universities and the hard-to-assess nature of the product students are “buying”. Labor’s report also highlights the New Zealand experience in the 1990s, when deregulation saw skyrocketing fees that were subsequently capped by a Labor government.

The main committee report rejects the comparison with the Nelson reforms, quoting Education department evidence.

“In 2005 the Howard Government introduced a partial deregulation of student fees, such that universities could increase fees by up to 25 per cent. This measure, however, was not comparable to the current reforms, as fees remained capped ‘and the system did not allow for demand-driven enrolments, so that the access of institutions to Commonwealth Grant Scheme subsidies was limited.'”

Note that logic — that the failure of fees to fall under the partial deregulation model established by Nelson was because there was a cap preventing them from going up further than 30%. The issue again prompts the question of why no modelling was done by the government about the impact of fees on deregulation. In practical terms, of course, the answer is obvious: Education Department bureaucrats understood the likely outcome of any vaguely plausible modelling would be to show that fees would tend to rise, and probably rise significantly for Group of 8 institutions.

The attempted defence of deregulation by the University of Sydney’s vice-chancellor Michael Spence has also pointed to the inevitability of universal fee rises, with Spence making the circular argument that the big rise in fee revenue would enable Sydney to provide more scholarships for the courses it would make more expensive to access.

As the Labor report notes, there was no consultation with the sector by the government prior to the announcement of the reforms, except vague allusions by Pyne about coming reform. Between the lack of consultation and the lack of any rigorous basis for its claims about the impact of deregulated fees, the government’s handling of higher education reform has been every bit as inept as the Rudd government’s mining tax debacle — and for a sector far more important to the long-run performance of the Australian economy than mining.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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