Universities are afraid of competition

Opinion by Professor John Dewar

With all the noise in recent days over elements of the Kemp-Norton Review, you have to ask yourself, what are Australia's universities afraid of?

One of the most controversial recommendations of the review is that public funding for higher education qualifications should be extended to non-university higher education providers. At the moment, access to government funding for higher education is — with some tightly controlled exceptions — the exclusive preserve of universities.

Universities Australia has warned that the proposal poses a threat to the quality and reputation of the higher education system claiming that expansion to include for-profit providers "could pose a substantial risk to the reputation of the entire sector, with devastating consequences".

Individual vice-chancellors have used even stronger language.

It is hard to explain this level of reaction: already, several thousand students each year are enrolled in higher education qualifications in TAFEs and other non-university institutions. Indeed, universities themselves have begun to form partnerships with non-university providers to deliver their qualifications. Reputable universities such as Griffith, Deakin, and La Trobe, already offer all or part of their degrees through partnerships with high quality TAFEs and private providers.

And yet, the sky has not fallen in. Instead, these arrangements have expanded opportunity for students to study in ways that suit their needs, perhaps more effectively than going straight to university.

However, there is one major difference between higher education qualifications offered by universities and the rest — with some tightly controlled exceptions, only the former receives a government subsidy for Australian students. The Kemp-Norton recommendation seeks to level this playing field.

This would have a number of benefits.

First, it would reduce the cost to students of studying for higher education qualifications outside the university system. At present, most of these students have to cover the full cost of their course through the fees they pay, which usually means that they pay more than their university-enrolled counterparts. It's hard to see the logic of this, given that these students are more likely to come from disadvantaged backgrounds. This is a great way of promoting access to higher education.

Second, the proposal would introduce more competition into the higher education market. The Kemp-Norton review itself celebrates the effect that increased market forces have already on the sector, especially in lifting quality and encouraging innovation. But the impact of the market is highly constrained at present — by the near-monopoly given to universities over government funded places, and by the controls imposed on universities in setting student charges. The Kemp-Norton recommendation removes the first these constraints and paves the way for removal of the second.

Third, greater competition will bring with it greater diversity of institutions. For example, it would allow some institutions to focus entirely on teaching, unlike universities which have dual missions of teaching and research. This would allow more specialised institutions to develop, addressing particular skills needs or student cohorts. Universities would have even greater incentive to play to their strengths, to improve quality and to articulate more clearly the benefits they offer compared to other types of provider — such as access to the country's leading researchers in the classroom, opportunities to study in great universities around the world and qualifications that are highly sought after by employers.

Of course, there will be important points of detail to sort out if the system is to be expanded. For example, non-university providers should expect to be subject to the same regulatory regime as universities; and they should not be able to cherry pick which courses they offer with public subsidy: they should be all in or all out of the public system. All of this is part of the Kemp-Norton recommendation, but its implementation will be important.

There is also the question of whether non-university providers should receive the same funding rates as universities. There is a strong case that they should be funded at a lower rate, given that universities have research functions as well as teaching ones. However, Kemp Norton did not agree. There may be a number of reasons for this — for example, that differences in universities cost base should be recognised in the fees they charge students, not in the government subsidy they receive. But this also presupposes greater flexibility to set student charges than exists at the moment. It seems that this is just the first round in a larger debate about deregulation in the sector.

Demonising this important recommendation will only create an image of universities as a bunch of grumpy old monopolists protecting their turf. Instead, I suggest that we need to engage fully with the opportunity it offers: to distinguish clearly the advantages of a university qualification, and to welcome an expansion in the range of competitors who, likewise, will also play to their unique, but very different, strengths.

The Kemp-Norton review rightly celebrates the dynamism of our higher education system and its responsiveness to the introduction of market forces with improved quality and greater innovation. Universities have an excellent track record of responding creatively to the gradual introduction of greater market forces. There is every reason to expect that they will continue to do so. Let's not be afraid of the next wave of similar reforms that this reports foreshadows.

First published in The Australian on 25 April 2014.

Professor John Dewar is Vice-Chancellor of La Trobe University.