Trish Crossin (NT, Australian Labor Party) Share this | Hansard source

The Higher Education Endowment Fund Bill 2007 implements the government’s budget announcement about the establishment of a perpetual endowment fund for the use of higher education institutes in this country. The fund so set up will generate earnings which can then be applied for and used for capital projects. The Treasurer and the finance ministers will be given the powers to credit cash amounts to this fund, which will in turn be managed by a board of guardians. The responsible ministers then issue an investment mandate—a series of ministerial directions—to the board regarding the investment of the funds and benchmark returns expected on these investments. They will also have the powers of setting the rules for determining the maximum amount of payments from these funds. We note here that these directions will be tabled in parliament as legislative instruments. I understand, though, that these instruments will not be disallowable. The Minister for Education, Science and Training is responsible for appointments to the board and then responsible for authorising grants from the fund based on advice from the Higher Education Endowment Fund Advisory Board.

We note that, by including non-disallowable instruments concerning ministerial determinations and Higher Education Endowment Fund investments, the government is actually minimising the transparency and accountability of the processes surrounding this fund, its investment and allocations. I know that the bills concerning the establishment of this fund were sent to the Senate Standing Committee on Employment, Workplace Relations and Education, and concerns have been expressed about the operation of this fund and the way in which the funds emanating from this will be distributed. In fact, we have expressed concerns and uncertainty about exactly how it would work.

I noticed when the majority report was tabled that it played down the risk of the fund being used for pork-barrelling and, of course, I questioned whether the advisory board would have the expertise that is needed in order to allocate this fund. We know that the board is going to have a chairman and six members, including the Secretary of the Department of Education, Science and Training and the Chief Scientist. The minister has told us that members will be chosen for their knowledge of the higher education sector—that is probably a good thing, an essential thing—and other relevant expertise. ‘Other relevant expertise’ is yet to be defined.

We are not sure what that would mean. Perhaps under this government it would mean previous Liberal government members or even ministers. As we have seen with the Regional Partnerships program, this government is not averse to ensuring that funds it sets up are delivered and directed most prominently to its marginal seats, so we have grave reservations about how these funds will be allocated. The implications for the higher education providers that may be relying on being awarded approval for the endowment funds for infrastructure programs are, I think, fairly massive under this government. We know that decisions may well be made for political purposes. I noticed that in the minority report Senator Stott Despoja actually suggested that the funding recommendations from the board be made publicly available and the funding guidelines should be subject to parliamentary scrutiny and veto. So there are concerns about not only exactly how this fund will operate but how the funds will be awarded and established at the end of the day, particularly under this government.

We are in the position of having publicly said that we would of course support much-needed funding for higher education, but we are critical of this government, which has neglected higher education for so many years. In fact, we have seen a real funding decline in this sector since this government came to power in 1996. The government commenced cuts to this sector of the education industry in its first budget in 1996, under Senator Vanstone, and has never reversed the trend. It has never turned around the funding implications and the funding cuts. It has never reversed the trend in cuts to the higher education sector in its 11 long years in government. It has forced universities to find other funding avenues and forced students to pay even higher fees.

The government’s own estimates are that there is a backlog of $1.5 billion in infrastructure needs in the higher education sector, so no wonder it has sought to set up a fund under the guise that this is something new and wonderful. Once again, this government is really playing catch-up for its 11 long years of neglect. Universities have put a much higher figure on what is needed in infrastructure. This government would say $1.5 billion; the Group of Eight say that it is closer to $1.53 billion just for them alone. That is $1.53 billion for just the Group of Eight, unlike this government’s guesstimate, which is $1.5 billion for our 38 universities, so there is quite a significant difference in where this government believes the infrastructure shortfall is at this point in time.

As a proportion of their total revenue, this government has cut Commonwealth grants to universities from 57 per cent in 1996 to only 41 per cent in 2004. It has forced universities to raise 24 per cent of their revenue from fees and charges since 2004. While just about every other developed country has been increasing higher education funding, the Howard government has gone the other way. The result of this perverse policy, bucking the trend of the rest of the developed world, has been that, since 1995, student to staff ratios have increased from 14.6 to 20.4 today. Bigger class sizes clearly have an adverse impact on teaching and learning, but this is a concept that this government has failed to grasp—not only in the higher education sector but particularly in primary schools and in early childhood education, where the government believes quality teaching is the be-all and end-all to outcomes in education, as opposed to actually looking at staff-student ratios, resources and infrastructure needs. Many lectures are now given to groups of well over 100 per class. Tutorials and seminars, too, have decreased in numbers offered and have increased in class size.

The Group of Eight sum it up in their submission to the Senate inquiry, in saying that the implications of the funding cuts are fivefold:

1. large increases in student to staff ratios, with implications for quality of teaching and learning;

2. reductions in academic salaries relative to average wages, with implications for the sector’s ability to attract top talent;

3. the deferment of essential expenditure on the maintenance of buildings and facilities, with long term consequences for the quality of essential infrastructure;

4. the pursuit of alternative sources of income, for example from full-fee domestic and international students; and

5. the pursuit of various practices designed to increase productivity and reduce costs.

These are all indicators of the implications of the funding cuts under this government.

Indeed, this government has been more concerned with forcing their industrial relations laws on the higher education sector than they have been with the quality of the education itself. Our higher education system now relies more on private financing than all other OECD countries except, of course, America, Japan and South Korea. It is clear that the present Prime Minister follows everything the American government would want us to do, and he would have us go the same way. We often talk about and hear about the Americanisation of our higher education system. The average amount of Commonwealth funding per student has declined in real terms over the life of this government by nearly $1,500. At the same time, HECS fees and other charges have had to rise to cover not only the real decline in government funding but the ever-rising costs faced by universities. Even with the rising charges and fees, universities have often had no choice but to defer important capital infrastructure projects.

Now they may have the chance to get some of this work funded, although there is no guarantee of that under the model proposed by this government. Submissions for assistance from this fund will be made on a competitive basis, by competitive tender on as yet unknown criteria. It is, therefore, possible under such conditions that the smaller, newer universities and institutions in the regions may be disadvantaged by this process. I might say that institutions that, perhaps, are in very safe Labor seats may well be disadvantaged as well. They may lack the economies of scale of projects on larger campuses or be forced to incur higher costs due to isolation.

Of course, the amount available will depend on the performance of the fund and the returns managed. Over the past few years, these returns might have been expected to be high, but in the present situation the financial market is quite volatile, largely—and very ironically—tied to the economic situation in the Prime Minister’s favourite country, once again, America. Returns have become far less predictable and may, indeed, be very low in the present circumstances. Under the maximum grant rules, the ministers responsible cannot allow payments to exceed accumulated nominal earnings, so the trust fund has to earn a return, and this may not be much in the early days. Mercer Investment Consulting, under Bruce Gregor, presented evidence before the Senate inquiry which said that a provision designed to preserve the government’s initial cash contribution would impose a very defensive investment strategy, possibly leading to no returns at all in the event of extreme market volatility in the early years.

This fund will not be operating until the end of this financial year and will certainly not be of immediate benefit. One would have to say that 18 months from now might see some funds available for payment towards replacing or repairing degraded infrastructure. The budget papers have the fund returning a notional $300 million a year, but, as indicated earlier, this is by no means guaranteed. However, even at this rate, if the Group of Eight are correct with their estimate of their needs being $1.53 billion between them, it would take six years of returns to meet the needs of just those eight universities. In their submission to the Senate committee, the Group of Eight said:

While $6 billion is a large amount of money it needs to be viewed in the context of recent funding trends for Australia’s public universities, the recurrent expenses and infrastructure challenges they now face, and international developments in public investment in higher education systems.

In other words, it is not as generous as this government would have us believe. The appointed advisory board will advise not only on grants made but also on investment proposals and strategies. As I said, this board will have a chair and six members, all appointed by the minister and able to be unappointed and dismissed by that minister.

The Senate inquiry into this legislation received several submissions expressing concern about the composition and appointment of this board. Again, these ministerial discretions are non-disallowable instruments, so the degree of transparency and accountability of the board can be questioned. The board could be open—and will be open, I suggest—to undue pressures or influence, as we have seen in the past, as I mentioned before, with the Regional Partnerships program. Again, I use the Group of Eight submission to reinforce this point. They say:

However, as introduced the Minister will determine who sits on the Fund’s Advisory Board (ss.40(2 &3)), how the Board is to carry out its function and the processes by which it will operate (ss.40(4)), will decide which grants are funded (s.45) and the terms of any funding (ss.50(3)).

The Group of Eight go on to say:

There are risks under this model that funding allocations will be based on political factors rather than on the merits of individual proposals, or through any strategic consideration of the sector’s infrastructure needs.

Philanthropic gifts can be paid into this fund; however, under this legislation they cannot be for any specific project. You would perhaps have to wonder why you would not just give your money to a single institution in its own right rather than go through the fund. The funds will go into the general ‘pool’, so a grateful former student of a particular university will be able to donate to the fund but will not have a say in where their donation is used—hardly any real incentive to donate. Despite all these doubts about the workability of the fund, it is a sure sign that, after 11 years of neglect, the Howard government has, in its own way, rediscovered higher education. ‘It must be an election year,’ I hear you say.

The recent ACOSS report A fair go for all Australians: international comparisons, 2007 found that Australia spends the least on education of the six English-speaking OECD countries except Ireland. We are lagging behind Canada, UK, New Zealand and the United States. The OECD report Education at a glance for 2006 shows that we are fourth lowest in the proportion of public expenditure on education—not a performance, I would have thought, that would give much optimism for the future of the skilling of this country.

The government of course makes all the excuses it possibly can and brings out the spin doctors and statistics geniuses to deny these reports. Even today we have Senator Bishop denying figures that have been released in an international report with regard to school education.