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Thursday, 3 February 1994
Page: 404

Mr FREE (Minister for Schools, Vocational Education and Training) (9.54 p.m.) —in reply—In closing this debate on the Training Guarantee (Administration) Amendment Bill, I would like to thank those honourable members who have participated, particularly those from the government side who made thoughtful contributions and also those from the opposition. Those honourable members from the government side who particularly pointed to the policy vacuum that exists in the opposition on training have made some important points.

  The opposition currently lacks a training policy. It is in that sad position of being able to oppose, but only to oppose—that is all it will do. That is a shame, given the plethora of spokesmen that it has now—37 people on its front bench. It really is a case of more means less. One can only express the hope that Senator Bishop, in her new role as spokesperson on all matters in all places at all times, may be able to assist the Deputy Leader of the Opposition (Dr Wooldridge) and the honourable member for Menzies (Mr Andrews) in getting together a set of policies in the education area, but on training in particular.

  Before turning to the particular comments made by the honourable member for Menzies in the course of his remarks, I make two simple points. The Training Guarantee (Administration) Amendment Bill is concerned with improvements to the training guarantee legislation. It is concerned with commitments which were made in the context of the last election. For that reason, I reject the criticism contained in the Canberra Times today, or at least that part of it which said that employer groups have been caught by surprise by important government changes to the training guarantee scheme. The facts are that these changes, as I said, were election commitments made in response to industry concerns. They were announced in the 1993-94 budget. They were certainly canvassed during the Lateline program on 10 July last year when I took part in a discussion which also included Mr Ian Spicer of the Australian Chamber of Commerce and Industry. Certainly these changes have been commented on by bodies like the Victorian Chamber of Commerce and Industry.

  I also make the point that, as part of the consultative arrangements, in 1992 a reference group was established to keep the major stakeholders informed and to seek their input on issues to be considered as the scheme was evaluated. That membership covered the Australian Chamber of Commerce and Industry and the Business Council of Australia. I understand that the Chamber of Commerce withdrew from the reference group later that year, and that may explain why representatives of that body are not as well informed as they ought to be.

  People should also be aware that a review of the levy is currently under way. That is a commitment which was made back in 1990 when the training guarantee was first introduced. Of course, that review will provide an opportunity for interested groups to make comments on its findings. As I said, the primary focus of the bill is concerned with improvements, not whether we have a levy or not. For that reason the government will be rejecting the opposition's amendments.

  The review itself provides a framework for further consideration of the training guarantee levy. It is a comprehensive review sampling a large number of businesses—some 6,000—some 17,000 households as well as a number of case studies and, of course, it will provide useful input into any further consideration of the legislation which the government might choose to undertake.

  There were a number of matters raised by the honourable member for Menzies which I should deal with. The particular enterprise that he used at the beginning of his remarks yesterday is not really the subject of the training guarantee. The one thing we do know about it is that its payroll certainly would not have met the required threshold.

  The honourable member for Menzies made the point that 93 per cent of businesses are excluded from the training requirement. The most important thing to remember is that, while 85 per cent of employers are excluded—that is, those with very few employees—75 per cent of the work force is included. It is true that some big companies were spending two or three per cent on training. Some companies, like IBM, were spending 10 per cent or more on training. It is important to note that, although some companies did this, before the legislation the majority of companies did little or no training. The 1989 training expenditure survey confirmed that. It showed that 58 per cent of private sector employers with an annual payroll of $200,000 or more were spending little or nothing on structured training. In line with the massive training effort by companies like IBM, the legislation provides for outstanding training status.

  As for the proposition that 63 per cent of employers believe that they are spending the same or less on training since the training guarantee was introduced, we should understand that other things have been happening to the economy during the period that the legislation has been in force. We can certainly be confident that the training guarantee has not been a positive inducement to spend less. Many of the 63 per cent were over the threshold anyway, and people should remember that the major thrust of the training guarantee is to lift the tail. By that I mean that those employers who previously did little or nothing are required by legislation to increase their efforts.

  In times of economic downturn the training guarantee may have been the only mechanism which has maintained any level of industry training. Training appears to be one of the first corporate functions to be cut during a period of economic downturn. It is most important to maintain training efforts during those periods to reduce the occurrence of skill shortages once the economy moves into recovery.

  Much was made during this debate of the results of various studies that have been carried out on the training guarantee. The general point to be made about these studies is that frequently they use small samples. This makes it difficult to make any claims of substance on the basis of the findings. Very often claims are made about the findings far in excess of claims which would be made by the researchers themselves.

  In regard to the Noble study, which produced the result that 81 per cent of employers believe that if the levy was abolished there would be no impact on training, I simply respond that good trainers will always train. But since industry generally would be no longer responsible for training, the onus for funding training would fall back onto the government or onto individuals. For that reason the amount of training undertaken would be likely to decrease. The Henson survey reported that fewer than four in a hundred employers had anything positive to say about the training guarantee levy. Both the Henson and the Beresford studies were taken from very small samples of respondents—138 in the case of Henson and 10 in the case of Beresford. To quote that 60 per cent were minimally effective to not at all effective in improving work place skills is in fact to talk of 82 respondents.

  In regard to the surveys within the metal industry which purport to show that the levy has been inefficient, I can respond that one survey that we know of specifically covering the metal industry—Waters, Marsh and Thomson in 1992—indicated that the training guarantee appeared to have led to an increase in training expenditure at all levels of the work force in its first two years. Again, the sample survey was small. There were 66 firms in the first round and 42 in the follow-up. I make the general point about criticisms of the levy based on surveys or, indeed, supportive remarks about the levy based on surveys that the really worthwhile evaluation will be the one completed later this year. As I mentioned earlier, it will cover 6,000 employers and 17,000 households.

  The honourable member for Menzies claimed that 70 per cent of firms believe that the levy has resulted in more administrative work for business. This proposition ought to be examined. The administrative work basically falls into two areas: maintaining records of expenditure and records of training. The records required to substantiate training expenditure are minimal. In most cases very little more than the records required for normal accounting purposes are required under the legislation. The record of training is simply a record of the decisions made about training that any prudent manager would make—in other words, what skills are needed, how those skills are to be taught and what benefit the new skills will bring. As the honourable member for Melbourne (Mr Tanner) pointed out in his remarks, there is a valuable effect to be obtained under this scheme in raising awareness in organisations which have not previously thought about training in particular as it relates to the needs of their organisation.

  In response to the claim that no money has been spent to assess the impact of the training guarantee and that, therefore, there is no way of knowing whether any goals have been achieved, the evaluation of the training guarantee is now well advanced and a considerable amount has been spent on assessment. The principal data sources are the two major surveys commissioned by the ABS, the training expenditure survey covering the 6,000 employers and the survey of training and education covering the 17,000 households. These surveys were conducted in the June and September quarters last year and the results are expected around April or May of this year.

  In response to the complaint that bookkeeping is a serious problem, the government believes that the record keeping requirements are not onerous, as has been suggested in the press. This complaint appears to stem from confusion occurring in the early years of the scheme during which employers were not sure what records needed to be kept. The major cause of difficulty in complying with record keeping requirements appears to be the maintaining of records that were well beyond the requirements of the scheme. In that respect, the introduction of Australian Taxation Office pro-formas should help to reduce this confusion as they lead employers through the records which are required to be kept. These are being distributed by a mass mail-out. The claims that record keeping for the training guarantee has significantly increased on-costs should cease once employers fully realise how administratively simple the requirements are.

  Claims about pseudo training and rorts under the scheme are made from time to time, often to add colour to media criticism of the scheme. The figure cited is an unsubstantiated guess and is rejected by the tax office. There have really only been a handful of cases where junkets have been claimed towards the training guarantee obligation. The suggestion that 30 per cent of the funds have been used on overseas holidays is incorrect. Of the 6,000 audits carried out by the tax office, only 60 claims have been disallowed as ineligible. Of these, only 12 resulted in a shortfall under the legislation. That is a one per cent incidence of companies attempting to claim expenditure which was not eligible, with a 0.2 per cent incidence of such claims resulting in the particular company not meeting its obligations. The firms that attend such jaunts usually have enough eligible expenditure to meet their obligation. Once this is met, any other expenditure is up to the discretion of the company. The tax office has consistently maintained that ineligible expenditure of this kind will be disallowed.

  The example of a group of motor industry executives going to Brazil for a conference has been misrepresented during this debate. Honourable members will be aware that the motor industry is multinational in scope. The group of executives were attending a training conference. In this case, the major industrial base of their company was in Brazil. It therefore made obvious sense to gather in a country which held the majority of the company's interest. So the form of travel referred to in that particular example is not to be correctly described as a jaunt or rort, but rather a justifiable business trip for which the expenses can be met and claimed under the training guarantee.

  The claim that small business is particularly affected by the guarantee fails to recognise the importance of the threshold. More importantly, it fails to recognise that it is just as important, and often more important, for small business to engage in training as for large business. The essential thrust of the training guarantee legislation is precisely to leave decisions like that in the hands of business. It is not a matter of the government saying to business what kind of training it should undertake but to raise awareness of the importance of training to the economic health of the particular business.

  In closing the debate, I again draw to the attention of honourable members the primary focus of the bill before us. It is, as I said, concerned with improvements to existing legislation to honour commitments which were made in the context of the last election and which are well understood by the business community.

  Question resolved in the affirmative.

  Bill read a second time.

  Clauses 1 to 18—by leave—taken together, and agreed to.

  Proposed new clause 18A.