Simon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | Hansard source

They are significant amendments, Senator Xenophon. They are significant, new and additional amendments, but they are not amendments that in any way vary or undermine the amendments in this substantial bill. So I think Senator McKenzie and her committee did the right thing in arguing for the passage of the bill.

I want to turn now to the particular amendment that is before us, and that is Senator Carr's amendment. In turning to it, I want to reflect on the fact that the arguments that were used particularly by Senator Carr in relation to the government's amendments that were presented in this place were arguments that criticised the government for the timing of the amendments. He quoted and claimed that the timing of the amendments had variously been described as 'panicked', 'desperate' or 'rushed'. I think Senator Xenophon used the word 'stopgap'. Yet, if the government were to now accept the opposition's amendment on this, all of the same arguments could apply. There was no further or earlier knowledge of the opposition's amendment, no further or additional scrutiny provided to the opposition's amendment—in fact, from the government's perspective, less, because we had not seen it until it was introduced into this place. They are not reasons why the government will oppose it. I just highlight the hypocrisy in the arguments that are presented.

But I want to deal with the substance of the amendment and the arguments around the setting of individual course fee caps, whether they are set on an individualised basis or in some type of banding structure, as Senator Carr has suggested. The amendment that is put before us—Senator Xenophon is right—provides the power for the setting of caps without any suggestion as to how or by what means they may be set. Senator Carr made some suggestions in his contribution, which I will touch on shortly, but the amendment does not prescribe in any way how such caps may be applied.

It is important that we remember the diversity of the VET sector when we are discussing this, because in effect the Senate would be asking the government to go away and try to conceive of some process where we would set caps for everything from courses in business administration or marketing to courses in nursing or landscaping, through to courses for pilots or aircraft engineering.

Of course, there are inherent risks that would come if the government were just to trundle along on our own way and set such price caps in relation to those courses. There is the risk of what happens if you set the price caps too low. Set the price caps too low and essentially you will drive providers out of business. You will stop the offering of those courses. You will force state governments to have to increase subsidies to their TAFEs if they are to continue to offer those courses. You risk creating skills shortages in those areas where you have set price caps too low.

There is an alternate risk if you set a price cap too high. The history of price caps tends to be that the market operates at the price cap. So it is not that you set a price cap and people then differentiate underneath the price cap. That is certainly not the experience in the university sector. It is that, when you set a price cap, everybody simply shifts to the price cap. If you set it too high, you will simply drive providers, most likely, to that maximum price and in fact see the prices in some quarters go up. So by virtue of setting a price cap, because people tend to operate at the cap, we know that we would destroy any sense of pricing competition across the sector and simply be, in effect, establishing a government sanctioned price.

To go through the process of doing so would require extensive consultation. It would require additional regulation to be applied not just in setting the price but in relation to the unit structure of courses and having the government try to ensure some consistency of that unit structure across VET courses and the way in which they are priced. So it is not just as neat as discussing the price itself and how that might be regulated; there would be flow-on implications for doing so as well.

Senator Carr has suggested that perhaps we could simply adopt the price schedules of the states or of the TAFEs. The obvious question that flows from that is: which states or which TAFEs? Would he propose that we adopt one at a lower price than some of the TAFEs and some of the states and therefore force those states which are higher than that to lower their prices through their TAFEs and, if they think those courses are operating at a break-even point at present, to come up with subsidies or to withdraw course places? Or would he propose that we set it at the highest of the TAFE rates amongst the states, thereby giving the green light for the other states to simply increase their fees to be equivalent with that new highest level? Senator Carr suggested that, if we set it at the TAFE rates, providers would still be making a profit from their operations. Is that necessarily the case? The states provide various subsidy arrangements to those TAFEs. I do not think you can come in here and simply say there is an easy solution for how this might be done if it were to be done. It is a much more complicated decision that would require some greater thought than is the case.

Senator Carr makes great play of the fact that university undergraduate places operate within this type of price cap banding structure, and he particularly makes great play of medical places in that debate. Most universities, of course, would say they actually run medical places at a loss, so to draw a parallel between how university medical places are capped and the vocational sector would be to suggest that you would have to somehow then be conceiving of another layer of potential complexity in the setting of these caps—if you wanted to follow the medical example set by Senator Carr—and work out how you applied effective cross-subsidies across the different places that might be offered. That is what universities do: they run medical places largely at a loss and they cross-subsidise them with other courses that they run more cheaply. So that argument in and of itself does not particularly hold up.

I would also point out to Senator Carr and to others in the chamber that universities are but one part of the higher education sector and that we do not seek to cap the prices of other, non-university higher education providers. In fact, the universities are the only part of the education sector where the government and the parliament seek to cap prices as we do for undergraduate courses. We do not do it for other higher education providers. We do not do it for those non-university providers. We do not currently do it in VET. We do not do it elsewhere. We are not in the business of price setting, generally speaking, as a parliament, and yet that is what Senator Carr proposes we seek to do in relation to these courses.

He also highlighted the IPART processes that the New South Wales government uses for trying to set efficient prices. Of the various points you make, Senator Carr, that is one of the interesting ones that I am minded to go away and take a closer look at—it was already on my radar, I have to say—as we contemplate where overall reforms for VET FEE-HELP might go in 2017. But that is not a quick process. That is not a simple process. That is quite a detailed, analytical process.

The point that I would make to the chamber is that what we have achieved today—and pretty much all senators have worked cooperatively to implement a series of reforms—is reforms that stop the growth in the VET FEE-HELP scheme for next year. Yes, they are emergency measures, in the sense that they are trying to put an immediate stop to growth, but by doing that they are giving us the breathing space to be able to go away and design a new scheme that can actually deal with the nuances that might be required in trying to drive more efficient and effective pricing behaviour.

The greatest driver of efficient and effective pricing behaviour should be student choices. I spoke before about the way the full-fee-paying market operates and the high-quality outcomes we seem to see through that sector and the fact that that seems to work because people put a very clear value on what it is that they are buying. Somehow we need to make sure that, when it comes to the operation of income contingent loans, people equally are putting a clear value on what they are buying, because they are still buying it. There is still an expectation those loans should be repaid. They are making a purchasing decision, and they should be making that purchasing decision to undertake that course based on the merits of what they are getting as a value-for-money proposition—the quality of the training, the likelihood of an employment outcome. That is the aspiration that I hope we will be working towards in working towards a model for a reformed VET FEE-HELP scheme.

But it would be a crude and likely ineffective measure today for the parliament to simply pass this amendment, which Senator Xenophon accurately said does not mandate that the government go in and applies fee caps. But I have supreme confidence that, in passing this amendment, we would instantly hear from Senator Carr and those opposite calls for the government to mandate those fee caps and that we would be under pressure to do so and under not unreasonable expectation from people that, if the government accepted this amendment, it was our intention to use those provisions. But the government has real reservations about the impact that the use of such provisions for fee caps would have on the operation of the vocational education and training sector. We have real concerns about the administrative complexity of it.

We do not think the arguments put by Senator Carr today, that there are easy way through this, stand up to any type of rational testing, as I have outlined. And we do have confidence that the measures we have put in place through this legislation, along with other measures that we have introduced throughout the course of this year, will give us a much better-functioning VET FEE-HELP system, will stop much of the abuse, will empower the minister to be able to step in where abuse is occurring and instantly stop new enrolments and new payments to providers, will make sure that we end the rorting that we have seen and will give us time to write a proper new scheme, rather than what this measure would be, which would be essentially to attempt to apply another bandaid to the program but another bandaid that would distract attention and resources from trying to work out how to set a new scheme in place rather than enabling us to get on with what should be the proper policy task of developing that new scheme. So I urge the chamber to reject this amendment, whilst thanking senators for their cooperation in dealing with the overall suite of reforms that we have proposed today.