Julian Hill (Bruce, Australian Labor Party) Share this | Hansard source

This is actually the first time that I have risen to speak in this House on legislation. I decided to speak on the VET Student Loans Bill 2016 as I believe that reforms to the VET FEE-HELP scheme are urgent and overdue.

Now, it should come as no surprise to anyone that Labor supports these bills in principle, because, as we have just heard from the member for Berowra—the other Julian; it is a lovely name—the government has finally accepted, after four long years of inaction, the need to act to stop the rorts and the waste in the vocational education and training sector and to copy Labor's policies. For too long students have been ripped off, running up debts that they have no hope of repaying.

I think the sector is now graduating in the order of one in five students, which is a nonsense. If the government had acted more quickly, in just some of the last four years, as we heard before, then billions could have been saved. Indeed, successive coalition ministers have shovelled money out the door to dodgy private providers.

The government has had five ministers in three years. If you are running at an average of five ministers in three years—I did the calculations coming in here—then the current minister's job is going to be up in February, so he had better watch out. He will be due for replacement. If that does transpire, I predict that it will be implementation that brings him undone, as these changes are overdue and are now being rushed through. This is complex legislation, and the transition and implementation will be diabolically difficult to do by 1 January—so be this on the minister's head.

Now, it is not as if the government did not know. The VET FEE-HELP rorts featured daily in national newspapers and the national press. I know myself that institutions of longstanding good reputation were alerting the government—directly by providers and through peak bodies—to growing problems years ago and were beyond frustrated that successive ministers would not listen and would not act.

I will not break private confidences, but, given my links with the training sector, I was approached many times as a candidate for federal parliament by reputable providers begging me to raise the issue and do something. They showed me letters which they had written to coalition ministers, which were simply ignored—letters that outlined the rorts by brokers and agents, exponential growth in payments, growth in the number of providers.

There were a myriad of warning signs that would have sounded the red-alert alarms for any competent government. One of the most stunning statistics I found was that in 2014 the graduation rates of the 10 largest providers was under five per cent. That is $900 million in federal taxpayer money shovelled out the door for nothing—over $215,000 for every graduate they managed to produce.

We have heard from the previous speakers—and no doubt we will hear more—that this is all Labor's fault. The government effectively acknowledged their failure when bagging Labor year after year. But the biggest problem was that they did not do anything. The problems exploded on their watch.

Now, it is true that the scheme is not working as intended, as we kept saying publicly. But it is balanced comment, I think, to say that, with the best will in the world and with the most thoughtful analysis and policy design at a given point in time, it is almost inevitable that in new, complex areas of policy, particularly those interacting with the market, problems will emerge.

It is a truism of public policy, I would say, that when you hang out the shingle for public funding and the giving of public money away to the market then sharks will appear and feed. You try and anticipate these things. You try and get the policy settings right. But these problems that you did not predict will emerge, and you have to adjust.

So the issue, by 2015, and indeed the first half of this year, was not about what happened in 2012. It was what you do about reality as you find it. That is your obligation as a government. I know reality can be a difficult concept at times for some of those opposite challenged by the notion of evidence based policy: climate change—carbon is not real, then it is again; housing affordability—just get rich parents; nothing to see here. A government's obligation is to identify problems and to fix them. Goodness only knows what kind of market failure and get-rich-quick schemes we can expect when the government starts privatising Medicare and human services, which, as we know, is on their agenda.

There are two aspects of the impact that I want to touch on and one aspect of the bill, in particular. Firstly, one of the most disturbing impacts in my view is that our national reputation for quality and efficiency has declined. Even those opposite, I think, would accept that a highly skilled workforce is critical to our future national prosperity and requires a well-structured, effective training system—and that the lack of such holds back Australia's productivity and growth potential if money is wasted on substandard costly and badly targeted training.

There is a domestic angle to that, of course, but there is also the international angle, as others have touched on. To amplify: I know this previously from my work leading international education in Victoria, a sector worth in excess of $5½ billion—probably now over $6 billion—to the Victorian economy. Our skills and training sector used to be the envy of the world. I myself have led vocational training trade missions to many countries to explain and promote our VET sector with its focus on quality, industry-linked training, industry-driven standards and our diverse provider model. Australia has been up there in reputational terms with the best in the world—right alongside Germany, for example, who many say is the gold standard with their GTZ system.

There is huge interest all over the world in our model. This interest is not just academic. There are large export opportunities which abound in the Indo-Pacific and across the globe from India, China, right across South-East Asia, Latin America and the Middle East. That is from students coming here to study onshore—and all the economic value that that brings—transnational delivery for our colleges and providers delivering in other countries and also education services exports, whether that is curriculum advisory services and so on.

But our competitive advantage is and must always be our reputation for high quality. If that suffers, Australia's market disappears, because, frankly, we are a relatively high-cost, top-tier provider internationally for skills and training. Under this government this reputation has suffered, and these things are not easy to repair.

The other aspect of the bill that I want to turn my attention to is that in relation to education agents and brokers. The bill's attempt to finally deal with the shady part of the sector are welcome and, in my view, long overdue. For years we have heard legions of stories of unscrupulous agents signing people up to courses they cannot complete, of dodgy quality and that do not lead to a job.

Brokers that find students and churn them through, if you like, have been paid outrageous commissions. That is money which should have been going into the quality of education, the institutions themselves and the students but, instead, have been seen, because of this model, as a marketing or recruitment cost in a business model that relies simply on churn.

I know reputable private providers who have despaired at the inaction. How on earth can you compete? Just think about it: you are a business; you are out there; you have been there for many years; you are running a good show; you have a reputation for quality; you have found your niche in your sector in the market, and you have all these others around you focused on shoving students through, paying outrageous commissions with no regard to quality—and they push the price down. You cannot run a quality business in that environment, so many of the old hands scaled back their business simply waiting for the bubble to burst, as it has now.

I heard stories when doorknocking of students left with these debts. I have seen stalls at suburban shopping malls in my electorate recruiting students and people at stations in the morning and heard of brokers hanging around institutions, trying to convince students to swap from lower cost courses to those where they make a commission.

In relation to the bill's proposal, I would contrast the approach with Labor's election policy, which made clear that the approach of not directly regulating these brokers has failed and proposed regulation through ASQA, with a licensing fee, cost-recovery arrangement. The bill proposes to ban providers outright from using brokers or agents to interact with students in relation to VET student loans. Two important questions arise. I say these seriously as matters which I think should be considered in detail through the Senate inquiry. Firstly, given how rushed this legislation is and how entrenched this behaviour is, the Senate inquiry has to look at this aspect of things very carefully to be sure that the legislative provision as drafted is watertight to achieve the objectives. I urge the inquiry to hear directly from experts in the industry, from businesspeople who actually understand this model and this market, to make sure there are no backdoor loopholes, unintended consequences and that the behaviour stops. I am concerned on a plain reading that the way that clause 49 is drafted may still leave loopholes for unscrupulous behaviour, and this needs to be tested with industry—in particular, subclause (1)(a). I would also note that clause 49(2)(b) provides for arrangements to continue that are 'specified in the rules'. It is entirely unclear what sorts of circumstances the government may be contemplating here. Secondly, more broadly, the Senate inquiry must consider whether this approach is the most appropriate or whether further action is needed.

The regulatory impact statement, as I see it, indicates that the bill's approach is preferred to the regulation of agents. My experience of working with the sector is that the issue of agents requires much more attention and reform. The bill seeks to stamp them out in one part of the sector. It makes sense that, if you were going to pick one part of the sector to have a go at, it would be that which public money is actually pushed out in. It directly sheets home to the taxpayer; that makes sense. However, they remain an unregulated, concerning influence in other parts of the sector. Agents exist to support domestic students as well as international students onshore and offshore. They can play a useful role for some students, particularly for international students unfamiliar with countries on offer, but they are not regulated. There is no peak body or industry association, there is no clear code of conduct and there is no industry standard for self-regulation. There are too many reports still of dodgy agent behaviour in all other parts of this sector that will not be captured by this bill. Young people, of course, are particularly vulnerable consumers, but international students are especially vulnerable, with no legal norms, cultural norms, language or understanding of their rights. Reports continue, as I said, of agents hanging around train stations and universities basically trying to steal international students and tempt them to lower cost courses, for which they receive a large commission. Some changes in recent years to the student visa arrangements have gone some way to curtail this, but it remains a problem.

In terms of options, regulating offshore agents is incredibly difficult and there is doubt about legal capacity, but through existing arrangements in the ESOS Act framework there are some obligations placed on providers through a provider code. There are other bits and pieces of indirect regulation through various pieces of legislation and registration standards for TEQSA and ASQA in some states, but there is nothing comprehensive, fundamentally. If a dodgy agent—this is a fact—is sacked by a provider, the same person can pop up tomorrow working for another provider. The plausible deniability continues for providers to say, 'I knew nothing; it wasn't me; it was the agent' and the same agent is out there doing it again or, indeed, doing it again for the same company, under a different company name. There is no policing or regulation of the sort of person who is able to enter the agent industry and provide advice to vulnerable consumers, often on highly expensive products that will still lead to debt. The Productivity Commission's research paper on international education services provides a good overview of these issues. A 2015 Senate inquiry, in fact, recommended that ASQA be granted powers to directly regulate brokers or marketing agents in the domestic VET sector. In my view, there remains a strong case for proper regulation of agents, whether through licensing or accreditation, as operates for migration agents, real estate agents and many other industry specialists. If the individual does the wrong thing, they are kicked out of the industry.

We have heard about the impact on students, and I will not go through that again. I think they have been well made, and no doubt we will hear more. This bill does not go far enough. There is nothing in the bill to restore the $2.75 billion the Liberals have ripped out of TAFE schools and apprenticeships; nothing to protect TAFE; nothing to boost apprenticeships. There is nothing also, I might note, in this bill about the government's commitment in the second reading speech where we learnt that they are going to establish a VET loans ombudsman. We look forwarded to seeing how the government plans to make good on this commitment. I do have to point out that Labor moved in the Senate to establish this ombudsman over a year ago. It is another thing that the government has wisely, in this instance, chosen to copy from our policy, because this is not yet in the bill before the House. Perhaps it is another afterthought, or maybe they forgot to copy that bit of our policy and we will see it when it returns from the Senate. Perhaps it will be in a separate bill tomorrow, given there is not much of a legislative program and we seem to be currently splitting lots of little things into little bills so we all have some work to do.

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