Malcolm's Gap Year: Higher Education in the Budget

This year’s budget is as notable for what it doesn’t contain as for what it does. There’s one particularly glaring omission: the lack of any Higher Education measures whatsoever.

This is particularly surprising looming threat posed to the budget balance by higher education funding. This threat is of the government’s own devising; its proposal for fee deregulation in 2014-15 met a backlash and was scrapped, but the billions the government expected to save from deregulation have been included in subsequent budgets anyway. If the government can’t find anything to make up for that saving-that-wasn’t, their claims of a path to surplus will be undermined.

That, in the view of many, is why Education Minister Simon Birmingham has spent the last month preparing the public for a suite of changes. Most expected that today’s budget would contain some attempt to recoup the savings the government gave up when it abandoned deregulation.

The predicted changes were significant, and included:

• A 20% funding cut (as was also part of the initial deregulation package);
• Increasing the share of course costs students pay via HECS from 40% to 50%;
• Lowering the income level at which HECS repayments kick in from $54,000 to closer to between $42,000;
• Deregulating domestic fees up to a cap;
• Recouping HECS from the estates of deceased graduates.

Instead, there was nothing. At least, nothing yet. The budget papers acknowledged that there would be some need for higher education changes, but announced that it was holding off these changes for another year.

What might these changes look like? Although the budget papers themselves contained no answers, a supplementary discussion paper titled ‘Driving Innovation, Fairness and Excellence in Australian Higher Education’ seemed to provide the answers. Ostensibly, the paper contained only “potential” policies and existed to lay out “options”.

But what might these options be? Unsurprisingly, the above measures, those floated over the past month, were all present: the funding cut, repayment threshold, student contribution level, domestic fee cap and the deceased HECS recoupment were all there, as were some more savings measures.

But, as well as these expected measures, several unheralded policy options were canvassed.

One was the introduction of an upfront fee to be added onto HECS-HELP repayments, such as currently exist for FEE-HELP and VET FEE-HELP. The paper suggested favoured a 20% fee. This would mean, for example, that a $30,000 degree would incur a $36,000 HECS repayment, subject as usual to interest.

This appears in practice to be similar (from students’ perspective) to the recently-abolished policy of a 20% HECS discount in the event of upfront payment. Under that policy, those who didn’t pay HECS upfront essentially incurred a fee in their foregoing of the discount.

The main difference here is for the government. Whereas the benefit of the previous 20% discount went to the university, the benefit from charging a 20% fee goes to the government, allowing it to claim a saving. The paper acknowledges this benefit, suggesting that a fee could help the government to recoup unpaid HECS debts, by charging more to those who do repay.

Another notable policy suggestion is allowing universities to trail full fee deregulation for select “flagship” courses, under the banner of giving universities the ‘flexibility to innovate’. The paper is unclear about the criteria by which universities could choose which degrees were ‘flagships’, suggesting only that they should be innovative course offerings.

In practice, however, it is reasonable to expect that a policy along these lines would create an effective ‘deregulation loophole’ for universities, allowing them greater fee flexibility without pursuing the publicly unpopular case for full fee deregulation.

When might any of these ‘options’ be implemented as actual budget measures? In a ‘post-budget revision’, suggested the paper. In other words, after the election.