Deregulation of Victorian vocational education: A case study in policy and market failure

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The policy has not only delivered substantial resources to private providers to deliver courses that students want rather than courses the economy needs, but it has also resulted in funding cuts that are undermining the financial viability of many of Victoria’s TAFEs.

The significant growth in government subsidised training activity up to 2012 was not always in areas of industry and economic need.

… while market design in the VET sector has met one of its primary policy objectives –  increased training completions – it is now getting poor value for its public investment as funds are directed to private providers in areas of skills surplus.

by Paul Kniest,  Policy & Research Coordinator, NTEU National Office, Advocate, June 2014, http://bit.ly/1FI0mmu

As we all wait with anticipation for the market to ‘waive’ its magic in the deregulated higher education market, we might ask why such an approach has been such an unmitigated failure in relation to Vocational Education and Training (VET) in Victoria. The Brumby Labor Government’s 2008 Securing Jobs for Your Future policy introduced a student-demand driven system in which public funding was fully contestable between public TAFE institutes and private providers for the delivery of VET, not dissimilar to the approach Christopher Pyne wants to impose on higher education.

The primary objective of the Victorian policy was to increase the number of people undertaking training in areas and at levels where skills are needed for the Victorian economy.  The only problem is that this did not happen.

Impact on students and skills

According to the latest data from the National Centre for Vocational Education Research (NCVER), the total number of students enrolled in VET in Victoria increased by 31.8% between 2008 and 2012 compared to 7.3% for the rest of Australia over the same period.  Virtually all of this expansion was a result of increased enrolments in non-TAFE providers whose market share increased from 10% to almost 40% over the same period. For the rest of Australia the non-TAFE share rose from 16% to 23%.

The 2014 Productivity Commission Report on Government Services shows that between 2008 and 2012 recurrent government VET expenditure in Victoria grew by 79.6% which was more than three times higher than for the rest of Australia (26%).  The vast bulk of this additional expenditure in Victoria went to non-TAFE providers, who accounted for almost 80% of the $863 million increase in expenditure between 2008 and 2012.  This resulted in an unexpected budget blow-out on tertiary education of some $400 million in 2011-12.

The fundamental problem with the Victorian experiment was that record student enrolments and levels of expenditure on VET did not reduce the skills shortage gap. The Vocational and Education Training Market 2013 report produced by the Department of Education and Early Childhood Development perhaps summarises the failures of this strategy best when it says:

The significant growth in government subsidised training activity up to 2012 was not always in areas of industry and economic need.

Or as a Per Capita report entitled Training Day summarises, the extent of market failure in relation to VET policies in Victoria says it all:

… while market design in the VET sector has met one of its primary policy objectives –  increased training completions – it is now getting poor value for its public investment as funds are directed to private providers in areas of skills surplus.

The failure of the Victorian Government’s policy does not stop at budget blowouts associated with public funding going to non-TAFE providers that are delivering qualifications that are not needed.

Two recent reports from the Victorian Auditor-General’s Office (VAGO) show that the VET participation gap between metropolitan and rural Victorian students has widened since 2008 (Access to Education for Rural Students) and there are currently no more people undertaking apprenticeships and traineeships than there were 10 years ago (Apprenticeship and Traineeship Completions).

Impact on TAFEs

The budget blow-out associated with this rapid increase in non-TAFE enrolments promoted a policy response from the Baillieu Government which in 2012 with a $300 million per annum funding cut to TAFE.  The immediate impact of these cuts included:

  • Significant increases in student fees.
  • The loss of at least 2,500 TAFE jobs.
  • The closure of many campuses and cessation of many courses.

According to the front page of The Age of Tuesday 8 April (TAFE Funding in crisis), a leaked Victorian Auditor General’s report showed that half of Victoria’s 14 TAFE institutes made an operating loss in 2013 and that at least were considered to be in doubt ‘as a going concern’.

In other words, the policy has not only delivered substantial resources to private providers to deliver courses that student want rather than courses the economy needs, but it has also resulted in funding cuts that are undermining the financial viability of many of Victoria’s TAFEs.

The funding cuts have had a disproportionate impact on TAFE support and technical staff and on regional communities. The removal of the full service (which included community services for TAFE institutes) funding means that TAFE institutes have to fully fund library and student support services from other revenue, namely teaching funds. The result has been massive cuts to library and student support services. In some regional institutes, more than half the library staff have been made redundant and many closed.

Reducing library and student support staff numbers directly impacts student retention and completion rates. Library staff play a significant role in student retention through provision of information literacy training and general support. Information literacy skills including critical thinking are essential for a positive student outcome. Although many students are at ease with technology, this doesn’t mean they are capable of finding, analysing and using information.  In other words, the quality of the educational experience being delivered is under severe threat.

Impact on communities

In addressing a public meeting of the Sunraysia Education Forum held on  22 August 2012, Professor Tony Vinson was highly critical of the TAFE cuts and that:

… throughout Victoria the effects of the cuts go beyond the career ambitions and training pathways of individuals, important though those things are. They have major implications for the wellbeing of communities.

Market dynamics

A Victorian Essential Services Commission report published in 2012 (VET Fee and Funding Review; Volume II Technical Analysis) neatly captures the dynamics of a fully contestable demand driven model as it has evolved in Victoria in observing that:

… it is the student who ultimately decides what (if any) training they will undertake. If students’ training choices do not align with the skills needed by the economy, there will be an under- or over-supply of skills in particular sectors. (p. 49)

In other words, as you would expect, training (predominantly from non-TAFE providers) are responding buy offering courses with high levels of student demand which can be offered at reasonably low costs. Non-TAFE providers are cherry picking the market and leaving it up TAFEs to continue to offer less popular high cost or unprofitable courses.

Research undertaken by the Australian Skills Quality Agency in 2013 (Marketing and advertising practices of Australia’s registered training organisations (RTOs)) also questions the marketing practices of private VET providers. They conclude that up to half of the RTOs it examined are potentially misleading consumers, including numerous examples of:

  • Students being guaranteed a qualification without any need for assessment.
  • Claims that qualifications could be achieved in unrealistically short time frames and in contraction to the  Australian Qualifications Framework on volume of study.
  • Students being guaranteed a job on completion where the RTO was not in a position to do so.
  • Websites advertising superseded qualifications.
  • Online upfront payment of fees in contravention of national standards.

Conclusion

It would be a brave person to suggest that the experience of deregulating VET education in Victoria has been anything short of absolute policy and market failure. Victoria’s failed experiment has resulted in budget blow-outs, massive increase in student fees, cuts to funding for TAFEs which has undermined their viability without making a contribution to closing Victoria’s skills gap. If similar results are replicated in higher education no one can be surprised, least of all the Federal Government.

 

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