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Commission of Audit on Vocational Education and Training

1 May 2014

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CoA Report coverThe Commission of Audit has recommended that policy and funding responsibility for vocational education and training (VET) revert entirely to the states, that the separate higher education and VET regulatory agencies (ASQA and TEQSA) merge TEQSA but that the states be “required” to continue reforms to achieve demand-driven vocational education and training outcomes and improve occupational licensing arrangements.

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Vocational education and training has traditionally been a State responsibility. The Commonwealth has no constitutional responsibility for vocational education and training.

The States provide 97 per cent (or $6.4 billion per year) of government funding for vocational education and training. This includes $1.8 billion per year of Commonwealth money provided through the National Agreement for Skills and Workforce Development and the National Partnership on Skills Reform.

The Commonwealth directly provides only some 3 per cent (or $0.2 billion per year) of government funding for vocational education and training. This includes around $140 million per year for the development of skills and training through the National Workforce Development Fund. The Commonwealth also provides funding to encourage businesses to take on apprenticeships.

Given the amount of money all governments spend in the vocational education and training area, outcome achieved are not strong. For example, in 2012, the completion rate for trade apprentices was only around 56 per cent.

In recent years, the Council of Australian Governments has embarked on reforms in the vocational education and training sector aimed at lifting skills across the economy and better aligning skills to labour market demand. The reform agenda recognises that the sector must be responsive to changes in the labour market. The Commission supports the move away from a regulated and supply-driven system to a demand-driven, contestable market, as has been introduced in Victoria.

In its submission to the Commission, the Victorian Government raises concerns with the duplication arising from the Commonwealth funding its own vocational education and training programmes:

Commonwealth apprenticeships and youth transitions programs, and the National Workforce Development Fund, duplicate State training support and funding programs. This results in financial inefficiency, confusion and red tape for employers and service users, and limited opportunities to improve outcomes through a more integrated service system.

The Commonwealth’s supply-driven funding does not align with, and potentially undermines, Victoria’s demand driven approach. The Commonwealth and Victoria should work together to trial the consolidation of funding and programs at the State level.

The Commission believes it would make sense for the Commonwealth to pull back from its involvement in vocational education and training, with a view to providing full policy responsibility to the States.

Such an approach would require an equivalent adjustment in funding. Section 6.2 discusses opportunities to improve vertical fiscal imbalance between the Commonwealth and the States to facilitate a clarification of roles and responsibilities. Vocational education and training should be considered in this context. Alternatively, the Commonwealth could provide the States with an annual lump sum, with limited conditions, such as requiring appropriate levels of national reporting on outcomes and national quality assurance.

In terms of quality assurance, Section 9.1 recommends that the Tertiary Education Quality Standards Agency be merged with the Australian Skills Quality Authority.

The transfer of responsibility to the States should be done on the basis that the States continue to pursue reforms to ensure vocational education and training is demand-driven and responsive to industry requirements.

The transfer should also simultaneously address the need to improve Australia’s occupational licensing arrangements.
At present, many occupations are licensed separately in each State, with the licence determining the work that can be performed in that jurisdiction. For many occupations, holding a licence in one State does not entitle an individual to work in another. This has long been recognised as an impediment to labour mobility in Australia. It is also an area where the Commission considers that the Federation has failed to deliver a sensible outcome for Australians over many years.
While mutual recognition of licences between States has been progressively introduced since 1992, the system remains unwieldy and ineffective. Workers seeking to have their credentials recognised in another State are often required to undertake additional training and must pay additional licence fees. It can take up to a month to receive accreditation for mutual recognition of qualifications and licensing.

In July 2008, the Council of Australian Governments agreed to establish the National Occupational Licensing System for a number of specified occupations. The intention was to ensure licences issued by any jurisdiction would be valid in all States. This approach was abandoned by the States in 2013, in favour of improving mutual recognition arrangements. It is now incumbent on the States to quickly and effectively streamline these arrangements.

Recommendation 39: Vocational education and training

Currently the States provide the vast majority of funding to the vocational education and training sector, with the Commonwealth contributing through tied grants to the States and some specific Commonwealth programmes. The Commission recommends that the Government wind back its involvement in the vocational education and training sector by:

a. transferring policy and funding responsibility for vocational education and training to the States, with Commonwealth funding to be provided either as:
i. a single annual lump sum with minimum requirements for national reporting and quality assurance; or
ii. as part of a broader reform of federal financial relations;

b. abolishing all Commonwealth vocational education and training programmes including the National Workforce Development Fund and Commonwealth support for apprentices; and

c. requiring the States to continue reforms to achieve demand-driven vocational education and training outcomes and improve occupational licensing arrangements.

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