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Anatomy of a scandal

How did the Australian VET system get here?

LH Martin Institute    |     8 December 2015

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Jim Davidson, a former senior official of both the Victorian and Commonwealth governments and now a Senior Honorary Fellow of the LH JimMartin Institute, dissects the  crisis now enveloping the VET sector.  As he asks: How  could this have happened?  Good question. He says future policy responses by government need to deal with the root causes of the current growth in VET FEE-HELP and not further exacerbate the issues caused by the current policy settings.  And he proposes that an immediate measure should be  a moratorium on VET FEE-HELP loans for online course delivery and an enquiry to formulate appropriate requirements and costings for online delivery of nationally accredited qualifications including a benchmark completion rate.  It’s a bit of a no-brainer: ALL the providers under investigation and/or being prosecuted by the Australian Competition and Consumer Commission have one thing in common: online delivery.

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skills (1)

 

In 2009, the Commonwealth developed a National Partnership Agreement for Voational Education and Training (VET) that proposed the introduction of competitive funding arrangements into training.

This agreement did not proceed because of State reluctance and ACTU pressure not to extend the recent reforms by the Brumby Government in Victorian VET into the other States. The exposure of TAFEs to competition, notably from community, private and employer-operated registered training organisations (RTOs) was strongly resisted.

As a result the competition proposals only proceeded in Victoria, which was designated as a ‘reform State’ in the associated legislation. Victoria both contributed to the loan cost for VET FEE-HELP and grew its total quantum of VET funding to meet the demand for training.

In 2012 a new National Agreement on Skills Reform was finalised, and it emphasised three things: a new national entitlement to government subsidised training to the Certificate III level, competition in training provision and expansion of the VET FEE-HELP Scheme.

It sought to improve accessibility and equity in training by:

Improving the accessibility of higher level qualifications and working with the Commonwealth to enhance a quality framework including state and Commonwealth quality requirements for RTOs to access income contingent loans ‘.
The Commonwealth agreed to remove the credit transfer requirements that had been part of the original legislation. VET FEE-HELP was extended to support government-subsidised training and the 20% loan fee was removed in state subsidised courses, but not in full fee and privately funded training. The result has been the national training system that we see today, including the rapid growth in VET FEE-HELP.

Governments have been the architects of the current VET FEE-HELP growth through policy settings that have enabled States and Territories to:

1. Cost shift to the Commonwealth, for example Queensland no longer funds higher level qualifications, and to students through and loans to students through VFH for Diplomas.

2. Gain the benefits and funding offered by the Commonwealth while not meeting their competition commitments, and effectively reduce their overall financial investment in training (Noonan et al., 2014).

3. Allow some TAFEs to be exponents of on-line training, targeted at management and commerce studies, with completion rates in some cases less than10%. 10 of the top 15 online training course providers are State–owned TAFEs, the largest NSW TAFE. (ACIL Allen Consulting, October 2015)

VET FEE-HELP (VFH) enrolments by provider (2013)

(ACIL Allen Consulting, October 2015)

Distribution of enrolments by mode of delivery – top 15 VET FEE-HELP providers and all others (2013)

(ACIL Allen Consulting, October 2015)

The Commonwealth has failed to properly monitor and control the growth in VFH which has consequentially seen the:
1. Emergence of brokers offering inducements and receiving payment for no training delivery,
2. The growth of 5 large privately owned online deliverers,
3. Escalation in prices of Diploma qualifications,
4. Elimination of any upfront payment by students to moderate demand,
5. The exorbitant growth in management and commerce studies and
6. The disastrous completion rate (7%) in online courses.

Future policy responses by government need to deal with the root causes of the current growth in VET FEE-HELP and not further exacerbate the issues caused by the current policy settings. They also rely on effective monitoring of rates of growth, funding estimation processes and investigation of emerging trends.

In the short term, the Commonwealth Government must:

1. Place a moratorium on VET FEE-HELP loans for online course delivery and establish an enquiry to formulate appropriate requirements and costings for online delivery of nationally accredited qualifications including a benchmark completion rate.

2. Take administrative action or amend the Higher Education Support Act HESA if necessary, to prohibit the use of Commonwealth Loan funds to students being used by approved RTOs to reimburse agents for the recruitment of students.

3. Require RTOs undertake their own marketing activities which ensures the RTO is subject to the ASQA regulatory standards and oversight.

4. Introduce a modest co-payment for all students accessing VET FEE-HELP in the form of an application fee that must be paid by the student prior to commencement. This would be more effective than the proposed two day cooling off period.

5. Require RTOs with Diploma and Advanced Diploma qualifications seeking support through VET FEE-HELP alone, or jointly with State subsidised purchasing, to have their courses individually accredited by a recognised Course Accreditation body, including where the qualification exists in a Training Package.

In the medium term, the discussions re new Federation arrangements for VET can then focus on:

Governance

  • The retention of ownership of TAFE Institutes by the States and the ACT, (unless a State or the ACT decided to sell off individual TAFEs or the TAFE system as an entity).
  • States disentangling ownership responsibilities from purchasing decisions.

Registration of RTOs

  • Victoria and Western Australia to refer the registration authority to the Commonwealth to ensure a single national regulatory framework for all RTOs.

Purchasing

  • The purchasing and/or funding of Certificate I to IV training courses to be as the sole responsibility of State and Territory Governments.
  • Diploma and Advanced Diploma courses purchased or funded by States and Territories to be subject to State based purchasing priorities and requirements.

Accreditation

  • Victoria and Western Australia to retain their course accreditation powers and bodies to ensure alternative course accreditation mechanisms to ASQA are available, as in the UK, Canada and the United States.
  • States consider the reintroduction of course accreditation requirements for qualifications seeking subsidized purchasing, including when the qualification is provided for in a Training Package.

References

ACIL Allen Consulting, 2015, Australia’s Skills Reform Journey: The Case for VET Reform and Progress To-Date. Available from: http://www.acpet.edu.au

P. Noonan, G. Burke, A. Wade and S. Pilcher, 2014, Expenditure on Education and Training in Australia, Mitchell Institute. Available from: http://www.mitchellinstitute.org.au

 

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