Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Hansard source

In speaking to my amendments, can I indicate that savings of $75 million in an industry worth $18 billion per annum are quite small—quite small indeed—and the costs of getting this wrong may well be considerably more than $75 million to the affected colleges, particularly in the private industry operating within the international community.

In speaking to support these proposals I think it is worth reminding the government that its rhetoric about regulators operating in a robust manner—being able to act quickly to stamp out poor behaviour—flies in the face of lived experience. I am very concerned about the fitness for purpose of our regulators in higher education. I am very concerned as a result of the direct evidence that is presented to us almost on a daily basis.

Today, Vocation has announced that this college is closing up shop. There is no money in the bank and students are being sent on their way. How long has the government known how serious a situation Vocation was in? How many hundreds of millions of dollars have been paid to Vocation and its various subsidiary arms? Why did it take so long for the government's regulators to see the problem that the Senate committee managed to identify quite quickly, and that newspaper columnists seemed to be able to identify quite quickly? Our regulators, the minister says, acting in a 'robust' manner, can act quickly—but, of course, that is certainly not the case.

If you take the situation with regard to the Australia Post example, the principals of two of the international colleges directly involved with that have now been charged with fraud. One of them had a streamlined visa approval—a streamlined visa approval—to channel people directly into these rorts, while the other college recently had its accreditation re-established without a site visit from the regulator. So it is a bit hard to have confidence in the regulators, given the evidence that we see before us on a regular basis. When the government says: 'We are moving these measures to deregulate this industry still further' then, faced with the evidence that is before us, I am always going to be concerned. This is particularly so when we are looking at a measure that was only introduced three years ago by the previous government to secure the moneys that students paid in advance of starting their course.

I will go through the detail of that in a moment, but I remind the minister as to why that fund was established. In principle, it was established to weed out the fly-by-night operators in international education—those colleges that did not have the resources to be able to fund a proper program; those colleges that lived from hand to mouth and had to use the deposits of students to fund their operating expenses. They are the people we do not want to see operating in this industry.

Let me go through the detail. The Tuition Protection Service and the OSTF only came into existence on 1 July 2012 to assist and support international students on student visas whose education providers were unable to complete the delivery of their course of study. The creation of this body and the Overseas Student Tuition Fund was a direct outcome of the Baird review. The Baird review arose because of the widespread malfeasance in this industry. The review said:

Adequately and appropriately supporting students in Australia is at the heart of the sustainability of the sector.

Further, the review found:

The recent dramatic growth in students coming to Australia, alongside the increase in vocational education and training (VET) providers offering a narrow range of courses linked to migration outcomes and sourcing students from a limited number of countries, has increased the risk of closures. This has put considerable pressure on the current tuition protection framework, with fears it is unsustainable. Consultation with key stakeholders and independent actuarial advice has informed the recommendation to replace the current arrangements with a single tuition protection service.

The review noted the inadequacies of the previous arrangements:

Recent provider closures and a lower rate of TAS placements have resulted in increasing calls upon the Fund with the potential to deplete the Fund's reserves, thereby diminishing the Fund's capacity to respond to future provider default events as required.

But when the TPS was set up by the Labor government of the day, the government said:

The centrepiece of the Amendment Bills is reform to strengthen tuition protection to ensure students receive tuition they have paid for or, as a last resort, a refund.

It is important to note, I might say, Minister, because it is so easy to forget just three years on. The explanatory memorandum said:

To further protect students, the pre-paid fees amendment is proposed to require all providers who do not receive a recurrent government funding to place pre-paid course fees for the first study period into a designated account. This account can only be drawn down when the student's first study period begins. By keeping pre-paid fees separate to day-to-day operating expense accounts, refunds will be more accessible before the student commences.

The minister introducing this legislation, the former member for Kingsford Smith, the Hon. Peter Garrett, said:

This will stop providers from using pre-paid fees for operating expenses … and encourage more sustainable business models.

Together with limiting refunds, this will mean providers are better able to meet their student refund obligations and there is less recourse to the TPS.

The defenders of abolition suggest that it is not needed, and as the minister stated in his summing up remarks, because the overseas student tuition fund fulfils the role of the designated accounts. That is simply not the way in which the designated accounts were designed to operate nor is it the way in which the overseas student fund was designed to operate. It is envisaged as a last resort not as a right. I repeat the point that I made in the second reading debate: if it operated in that way then the crisis that engulfed the industry between 2008 and 2011 would have seen the funds completely depleted.

So the evidence is really clear here of what happens if you are negligent in this regard. The designated account was intended to be the first level of protection for students in the event of provider closure. I want to repeat this: we simply cannot afford an industry that has operators in it that live hand to mouth, that have to dip in to the deposits of students to maintain their operations. That cannot be the way in which we encourage this industry to prosper. I am sure the sector understands the implications of this. If you say to most of these private providers, 'Would you like access to the students' money ahead of time?' of course they are going to jump at it, they are going to jump all over it. They are the same people who jumped all over this government for the last two years when it came to VET FEE-HELP. They are the same people who rip off students and undermine all the good providers.

The Tuition Protection Service in its statement, while acknowledging there will be those who want to remove the designated accounts obligation, argue it remains 'an area of potential risk for the TPS'. These are the people you are relying upon who are telling the Senate that this is an area of potential risk. The Tuition Protection Service say that they would prefer the retention of this integrity measure. I trust senators will note the opinion of the Tuition Protection Service. Their submission noted that the worst outcome would be the abolition of the designated funds obligation together with the removal of existing limits on prepaid fees. That, of course, is precisely what this bill is doing. While we have deep reservations about this, we are not moving an amendment on that but we do say to the government very bluntly that we are awake to this and are very anxious about how that will operate.

In its submission, the TAFE Directors told us:

In the current environment where there is so much public concern surrounding the actions of some less reputable private education providers, TDA feels it imperative that the requirement for retaining pre-paid student fees in a ‘designated account’ remains.

The NTEU said:

Supporters of the proposal to remove the designated account and 50% rules as a way of reducing provider compliance costs and red tape argue that it is justified as the international sector is more stable—

We have seen the evidence of that. That is just not the case that the sector is stable. Yes, it might be more stable than the crisis of 2009, but I would have thought most earthquakes would be than those events. I do not want to see those events ever return.

The NTEU went on to say:

While we acknowledge that there have certainly been improvements, supporters of the changes argue that the Regulatory Impact Statement (RIS) is premised on the assumption that the risk of the circumstances (that is, the turmoil the sector experienced over the period 2008 to 2011) which was the catalyst for these and other changes is now very low or non-existent. However, given the recent evidence of widespread problems within the private vocational sector … we are concerned that both the Government and the sector are seriously underestimating the current levels of provider risk. As such, the assumption that it is fine to pull back on regulatory protections is being made under a false premise.

Ged Kearney, President of the ACTU, advised the committee:

We oppose the removal of these provisions because they unnecessarily weaken protections for overseas students studying in Australia and threaten to undermine the international reputation of Australia’s tertiary education sector.

In light of the continuing evidence of predatory behaviour and exploitation of vulnerable students in the private for-profit vocational training sector, as documented in the recent Senate Committee report into this subject, now is not the time to be complacent about the need for such protections.

Even the Tasmanian Department of Education, the Liberal Tasmanian government, a government to which you are related, Minister Colbeck, as I understand, told us:

The designated accounts ensures that private providers are able to guarantee consumer rights of students and times of provider failure … The designated account should remain to provide this protection in the more viable Private sector.

So Labor maintain that the abolition of the designated account requirement is, in fact, dangerous. It has only been in operation for three years. It is the interaction of the designated account in the ESOS Act and the OSTF which has yet to be tested. The removal that this government is pursuing is blind ideology. Their assumption that the private sector should be treated the same as the public sector is wrong given the long and repeated history of failure by the shonky providers within the vocational education system.

This measure is grossly premature and grossly irresponsible. We would urge the Senate to support the propositions I have moved today to vote 'yes' to the first amendment and 'no' to the second block of amendments that I have proposed.