Rebalancing VET in Victoria

Review proposes “a more managed,sustainable training system”

16 December 2015

skills (1)


The Victorian government has released the Final Report of The VET Funding Review (Mackenzie Report).  It’s a weighty document, both literally and figuratively, running to 173 pages and 109 recommendations. Skills minister Steve Herbert says the government accepts the “general thrust” of the report and its recommendations.  It will take the next year to work through design and implementation issues and to consult with stakeholders ahead of the introduction of a new funding model in 2017.  Certain matters, however, are given, such as restoring the public provider network (TAFE) as the bulwark of quality in the VET system, imposing stricter regulatory and contract compliance on providers and formally abandoning the “open market” approach of the previous government.



Bruce Mackenzie who undertook review with Neil Coulson

Bruce Mackenzie who undertook review with Neil Coulson

In their introduction to the report, reviewers Bruce Mackenzie (formerly CEO of Holmesglen Institute) and Neil Coulsen, (formerly CEO of VECCI and newly appointed as Victoria’s Skills Commissioner) observe that there has been too much change, too quickly, with almost overnight changes in subsidy levels, which have proved highly destabilising to the VET system overall and laid waste to a significant public asset in the TAFE network (the latter is our interpretation, not their actual words).

They state their purpose as proposing measures to rebalance the system so the “design, incentives and administration promote quality training…to restore stability… and value to the system”:

In recent years, too much of the system has been driven by provider behaviour, rather than supporting students to make informed training decisions, or to protect them from opportunistic or unethical behaviour.  There has been too much emphasis on increasing both the number of providers and the intensity of competition between them, and not enough care taken in ensuring they are delivering quality training. There has been too much focus on increasing the volume of training, and not enough on whether the training leads to positive outcomes for the students such as employment and further education.

The report doesn’t bag the concept of contestability, just the way successive governments have gone about it:

Contestability can, if properly implemented, drive innovation, efficiency and improvement across the sector.  But government cannot simply declare something contestable, open up the market and hope that it works. It needs to design and administer the market more carefully, guided by the outcomes it seeks achieve.

That’s a pretty good summary of all that has gone wrong – all of it quite predictable – in Victoria, at least, over the last five or six years.

The proposed measure that’s attracted immediate attention is the introduction of a price signal (or “co-payment”, if you prefer).  The rationale is that reintroducing a standard fee is a way to make students or their employers more conscious that a training entitlement, under the Victorian Training Guarantee, is limited and not free.  If student makes a poor choice enticed by “no fees”, the student might exhaust their entitlement.  Disadvantaged students would get concessional rates.

While the overwhelming bulk of Victorian RTOs are covered by the national regulatory regime, through the Australian Skills Quality Authority, state governments have significant de facto regulatory heft through their control of funding levers: they can determine who does and who doesn’t get access to public funding (in Victoria through the Victorian Training Guarantee – VTG).  The report portends a further tightening of access rules (which have tightened considerably over the past year already), which would include empowering the Auditor–General  to audit private providers in receipt of public funding.  It also proposes a system of “classification of providers, based on VET capacity and financial and organizational stability.   Allied to this would be the negotiation of “compact” agreements with highly rated providers which would encompass outcomes-based funding and include performance measures. The successful attainment of performance measures would result in lighter auditing and reporting arrangements.  While smaller and specialist providers would not be excluded from VTG funding, in a budget capped system (as already announced by the minister and provided in the review’s terms of reference), it would mean that providers in compact arrangements would be, in effect, “preferred” providers.

To manage training expenditure within the existing budget, it is proposed that enrolment limits be placed on individual providers.

The VET budget (currently capped at $1.2 b a year) would comprise:

  • a general pool of contestable VTG funding – that is, all funding for enrolments in training at both government and non-government providers;
  • an allocation to support provision in thin markets (which might be allocated on a tender basis):
  • funding to continue concession arrangements;
  • an allocation for a workforce innovation fund, which would focus on initiatives to improve workforce productivity at an industry or firm level and perhaps provide some funding for applied research
  • a specific allocation to meet the costs, obligations and restrictions placed on TAFE institutions; and,
  • an allocation for community service grants (which might also be allocated on a tender basis).

To manage training expenditure within the existing budget, it is proposed that enrolment limits be placed on individual providers.

It is proposed that restrictions on subcontracting by VTG providers be further tightened so that a small portion of the delivery of a qualification can be delivered be delivered by another provider.  This is to prevent, for example, where a qualification appears to be from a capable provider, but a significant part of the training is undertaken by a lower-capability provider.

At the heart of this report is restoring the much rundown fortunes of TAFE in the VET system.  In addition to recent government initiatives, such as the Rescue TAFE Fund, the report proposes a number of interventions to improve the position of these institutes and to make them sustainable as It says that TAFEs face costs, obligations and restrictions that other providers do not and which inhibit their capacity to compete in the training market. The measures include:

  • the minister making a clear statement about the role of TAFE institutes in Victorian VET (and we would add the economy and community);
  • funding institutes for some of the obligations imposed upon them by virtue of public ownership; and,
  • developing a compact which involves TAFE institutes responding to government priorities, as well as identifying their communities’ educational and training needs, negotiating these with government and meeting agreed outcomes.

The review also gives a big tick of approval to the concept of a “polytechnic university” (as long advocated by Mackenzie himself – and The Scan).  As defined in the report, a polytechnic university would be a type of university offering higher education underpinned by VET programs, that meet the needs of industry, enterprises and students by being applied in nature and closely demonstrating the link between theory and practice.  The target group would be students who do not follow conventional pathways to tertiary education and training.  It proposes a detailed examination of the utility and place of such a type of institution in the Victorian tertiary landscape.

In what might be seen as something less than a tick of approval of ASQA, the report proposes the establishment of a VET Quality Assurance Office to develop standards (and presumably police them) in relation to market entry requirements for a VTG contract, protocols for training, standards for marketing VET courses, registration of brokers and aggregators (such as Acquire Learning) and “other matters associated with maximizing student outcomes”.

In addition, the office would have a role in conducting strategic reviews of industries and qualifications, identifying and investigating systemic issues and risks, and would have responsibility for outsourcing activities such as the development of the proposed provider classification system.

A VET Quality Funding Office would be responsible for contractual arrangements and managing the State’s relationship with training providers, including payments. It would be responsible for the development of an investment plan and monitoring provider performance and contract compliance.

The Victorian government generally only funds training for those people seeking to undertake a qualification at a higher level than the one they hold.  The Review some refinements to the upskilling requirement that in some circumstances, people can receive government support to re-train at the same qualification level. Exemptions proposed are:

  • people under the age of 24;
  • long-term unemployed (greater than 12 months);
  • workers who have been retrenched; and d. people with qualifications older than 7 years.; and,
  • people returning to the labour force after an extended absence from the upskilling requirement.

People exempt from the eligibility exemptions would be required to attend an approved provider in the first instance, TAFE institutes.

In response, skills minister Steve Herbert said the government supports, in general, the review’s proposals for “a more managed, targeted and Steve Herbertcontestable system that better links training to industry and job outcomes, guarantees additional funds for TAFEs, and ensures only quality training providers receive government funding.” He said:

A training system that delivers quality and industry relevant skills is vital to improving productivity, creating jobs and increasing Victoria’s economic growth. The Andrews Labor Government will take a more hands-on role in the VET system to support strong public TAFEs and Learn Local organisations.

He said matters that would be given attention include general adherence by VTG_approved to the notional volume of learning in a qualification and rationalisation of courses that would be eligible for funding under VTG (from something like 3,000 to 700 as in NSW.

The reforms to be developed over the coming year would revolve around six themes:

  • a clear vision for VET in Victoria, targeted to meeting industry need and providing job outcomes;
  • a responsive and sustainable model that promotes lifelong learning;
  • defining clear roles for TAFEs and community sectors to ensure strong and sustainable systems;
  • transparency for students, industry and employers;
  • supporting quality and continuous improvement; and,
  • promotion of equity for learners of all abilities.
One size doesn’t fit all unis



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