With the Senate as unco-operative as it has become, it's not at all
certain Education Minister Christopher Pyne's proposal to deregulate
university fees will become a reality. But if it does it will involve
harnessing the university status drive to help balance the budget.
The
government's plan is to allow the universities to set their own
undergraduate tuition fees for new students from January 2016. But this
would be accompanied by a cut averaging 20 per cent in the government's
contribution towards the cost of courses.
Joe Hockey has argued that fee control is holding back our unis, stopping them competing with the best overseas.
"Australia should have at least one university in the top 20 in the world, and more in the top 100," he said.
So
the economic rationalists' claim that fee deregulation would make the
unis more efficient is being combined with a status argument: we need to
raise our top unis' rankings on the various international league
tables.
What's the link between fees and higher international
status? Allowing our top, research-oriented "sandstone" unis to charge
much higher fees would allow them to divert more funds to their research
effort (probably including paying higher salaries to attract
higher-status foreign researchers), the thing that would do most to
boost their international rankings.
This is the very motive for
the sandstone (Group of Eight) unis' vigorous support for fee
deregulation.
Both the proponents and the opponents of fee deregulation
assume that the immediate fee increase needed to allow all unis to at
least recover the cost of the reduction in the government's contribution
to course costs would be just the first of many.
This, I have no
doubt, is the main motive for the purse-string departments' advocacy of
fee deregulation: giving the unis freedom to raise their fees whenever
they want to will allow the government to continue to reduce its own
funding of them - not just for teaching costs but also for research via
the Australian Research Council.
The fact is, successive
governments have been reducing their funding support for unis for
decades. Although total spending on universities as a percentage of
gross domestic product in Australia is about average among the advanced
economies, by 2004 the proportion paid by government was third lowest.
Fee deregulation would allow it to go a lot lower.
I don't doubt
the econocrats are genuine in their instinctive belief that de facto
privatisation of our unis would increase the competition between them,
making them more efficient and improving the quality of service to
students.
But this motivation would come a distant second to
reducing the unis' drain on the budget. And I doubt the econocrats have
given any serious consideration to the many instances of "market
failure" involved in partially deregulating a government-owned oligopoly
with considerable market power.
The scope for stuff-ups -
"unintended consequences" - is enormous.
If the tertiary education
"market" did operate in roughly textbook fashion, with individual unis
lacking pricing power, competition between them would greatly limit
their combined ability to raise their fees very far.
And yet it's
clear the government and the sandstone universities are confident of
their ability to impose big fee increases over a few years.
Why?
Because they know that - though it's assumed away in the textbook model -
the higher-status unis would be able to get away with making students
pay for that higher status along with the cost of their tuition.
The
tuition fees unis charge foreign students have long been deregulated.
They vary widely between unis, with the sandstones able to charge a lot
more than the "red bricks" (as the Poms would call them). As well,
the level of fees charged varies by course, with those for higher-paid
professions higher than for lesser-paid, regardless of differences in
the actual costs of delivering such courses.
The econocrats assume
deregulated fees for local students would follow the same patterns, but
that's not guaranteed. There ain't a lot of precedent for this radical
experiment.
Since the buyers' knowledge of the relative quality of
degrees is far from perfect, there's a high risk the lesser-status unis
would hike their fees by more than expected precisely to avoid sending a
signal that their product was of lesser quality.
The
non-sandstone unis don't like the sound of all this, but they won't
openly oppose it because they don't want to publicly acknowledge their
lesser status.
Meanwhile, some status-seeking students at
sandstone unis could be obliged to pay not only the full cost of their
tuition but also to cross-subsidise their uni's research effort.
