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Tuesday, 22 May 2012
Page: 5073


Ms LEY (Farrer) (19:30): I rise today to speak on the National Vocational Education and Training Regulator (Charges) Bill 2012. This bill seeks to enable the Australian Skills Quality Authority, which I shall now refer to as ASQA, the national VET regulator, to impose a cost recovery model on registered training organisations for compliance audits and substantiated complaint investigations conducted by the regulator. The national VET regulator commenced from 1 January 2011, with responsibility for registering and monitoring national VET regulator registered training organisations. The regulator is established under the National Vocational Education and Training Regulator Act 2011, which the coalition supported, and it has the power to examine quality concerns in all areas of the VET sector. National VET regulator registered training organisations must comply with the registration standards at all times. So that is the main act, and this is a subsequent proposed act. We in the coalition will not be supporting this proposed act.

The national VET regulator was established on a cost-recovery basis, and the main act entitles it to charge fees for registration. This act has moved away from the language of fees, which is a bit mysterious, and just talks about charges, particularly the ability of the regulator to charge for compliance audits and investigation of complaints about registered training organisations. Some fees apply from 1 July 2011; others will progressively apply in line with the regulators' implementation path to full cost recovery by 2014-15. So this bill is to authorise charges for services that are not application based—that is, the fees for registration—but which are instead for additional monitoring activities. This bill talks about these additional monitoring activities.

The regulator is financed by parliamentary appropriations of approximately $95 million between 2011 and 2015, but it is funded on a progressively cost-neutral basis. Charges for the additional monitoring activities are part of the regulator's cost-recovery arrangements. Current estimates anticipate that these charges will amount to $2.1 million in 2012-13, rising to $5.4 million in 2013-14. That is a considerable amount of money that will be raised by these additional monitoring activities, and it will be raised from the registered training organisations themselves.

We in the coalition have serious concerns about this. Before I get to some of the specifics, I say generally that we have already established a VET regulator. It does not work very well because not every state has signed up to it. This bill does not say exactly what the fees charged will be; only that they will be made by legislative instrument. It does not say to what extent they can be recovered, but it acknowledges that they will be quite high—an hourly rate, I believe, of at least $110, and that is just as a basis. If a complaint is substantiated, then an organisation has to pay. My question, just off the top of my head, is: what if it is only partly substantiated—who pays, and how much?

This is the government saying, 'We're here to help. We've set up a regulator because that's what we really like doing: regulating, controlling, saying that one size fits all and determining how you in the small business sector run your business and your lives. We've set up a regulator. We're not going to tell you exactly how much it charges, but we want the parliament to approve a bill that says it can charge pretty much what it likes, because we've had a consultation.' I have not seen the details of this consultation, but I know that small businesses, if asked to say how much they are prepared to let the government recover from them from compliance activities that they are being monitored under, are hardly going to put up their hands and say, 'Yes, we're happy with anything, including if we have an overseas partner in our organisation'—and we know the importance of overseas education; everyone in this place knows that—'and the national VET regulator wants to go overseas.' The bill before us talks about 'reasonable costs'—meaningless reasonable costs. Before we know it, members of an organisation are going to be travelling overseas to check out the veracity and the bona fides of education partners that domestic organisations wish to partner with. In a hugely competitive international education market, imagine the disadvantage it is going to put Australian RTOs—registered training organisations—under. That is just one aspect.

I know that the government is going to say that they are happy for the registered training organisation sector to proceed unregulated and unencumbered by any constraints on its activity and let loose to provide dodgy training. That is an old argument. We recognise the need for a regulator; we support the regulator; it is coalition policy that there be a national regulator. But I will in my further remarks alert the House to some alarming increases of costs, which really should not surprise anybody. You put a national regulator in place, allow it to recover fees and give it carte blanche. I mean no disrespect to the good public officers who work for compliance and regulatory organisations, but have we ever heard any of them say, 'I don't really need to be here, because everyone's doing a really good job'? No, they will tell you all of the problems in the sector and how, if they had enough resources, they would be out there checking and maintaining quality in a much more rigorous fashion. They tend to come from the perspective that people are doing the wrong thing. The coalition comes from the perspective that people generally do not do the wrong thing, but small business is struggling under the weight of the added cost burdens being imposed by this government, not least the carbon tax. We have no intention of supporting a bill that will impose an additional regulatory burden—no intention at all. The coalition supports the concept, as I said, of a VET regulator—no question. There are about 4,500 registered training organisations in Australia. Particularly where they operate in multiple states and territories, a national regulatory body makes perfect sense. Regrettably the system that we now have is not exactly what was intended, as two states, Victoria and Western Australia, have decided to retain responsibility for the regulation of their domestic VET sector, and Queensland is yet to pass legislation referring their powers and no date for the transition has been set. So ultimately ASQA has not got off to the best start.

In addition to this, COAG agreed that ASQA would be established on a cost recovery basis, initially funded by partial cost recovery. But, as I outlined to the House, that is ramping up pretty quickly to full cost recovery. Previously the cost burden was borne by the states. So, at a time when business is already struggling under economic uncertainty and the threat of increased operational costs, they are going to have to dig deeper to fund their own audits.

Section 7 of this bill states:

If the National VET Regulator conducts a compliance audit of an NVR registered training organisation’s operations, a charge is payable for:

(a) the costs and expenses incurred by the Regulator in conducting the audit; and

(b) if the audit is conducted outside Australia in whole or in part—any reasonable expenses incurred by the Regulator relating to the audit or part of the audit.

ASQA themselves acknowledged in their submission to the Senate committee that reported on this bill that, for most RTOs, the proposed fees and charges will be an increase on what they have paid in the past. This is because most state and territory governments have subsidised the cost of regulation. Okay, I acknowledge it was a COAG agreement that organisations will pick up the tab. But there was a submission from the National Meat Industry Training Advisory Council which talked about the rapid increase in the costs of establishing as an RTO. This council sought advice from its RTOs as to their response to this legislation. One of them stated that moving to ASQA had already seen their audit costs increase from $3,000 to $17,000, and full cost recovery based on earlier modelling would push that up to $32,000. So it has gone from $3,000 to $32,000 under this fabulous piece of legislation.

So the reality for many providers is a far cry from this vague acknowledgement of additional costs in ASQA's own submission to the Senate inquiry. Drilling down into their proposed fees we discover the following. Based on the average salary for a compliance officer, and making allowances for costs and overheads, ASQA indicates that the hourly rate would be in the vicinity of $111 an hour. You can see that for yourself in ASQA's submission to the Senate inquiry. Additional cost would be incurred where various subtasks were completed by other employees within ASQA. For a small business, $111 an hour is a very costly audit. Tradesmen charge a lower call-out fee. Couple this with travel costs and many RTOs, particularly those in rural and regional Australia, could really struggle to afford these charges. I note from a media article in yesterday's Fairfax press that the cost of a domestic airfare from Sydney to Mount Isa exceeds the cost of an airfare to Los Angeles. If costs like these are going to be passed on, then there would be providers forced out of business.

We understand that large training organisations can to some degree absorb costs or manage certain efficiencies. But this is not just about the effect on small business, difficult though that is. This is about recognising that not every RTO is big, multipronged and across all states. There are some specific niche skills that one or two people do very well, and if they want to, or have to, set themselves up as an RTO, with all the wealth of experience they may have—I am just thinking from my aviation background of people who consult on human factors in aviation accidents or certain aspects of air crash investigations outside the main body or who build the capacity of airlines to cope with the regulatory environment that they face; a lot of these organisations are small and nimble and light on their feet and light in terms of their staff—under this regime, they are just going to say, 'We won't bother.'

At the heart of our concerns is the impact that this cost recovery model will have on small business—the ones who have been given a very raw deal by this government. The high cost of doing business under Labor is breaking them—and passing on the cost of compliance audits might be the final straw.

As I looked through the submissions to the Senate inquiry in depth, there was a constant theme from providers and their stakeholders. The submissions received by the inquiry reiterate the concern within the sector as to the lack of transparency with potential fees and charges and the impact that could be felt by, in particular, the smaller rural and regional providers. I gave also the example of an overseas provider, or a domestic provider who partners with an overseas provider, because that is a really good way to attract international students to Australia.

In their submission to the Senate inquiry, the Australian Chamber of Commerce and Industry pointed out that a cost recovery model could lead to two outcomes—insufficient monitoring of the quality of training delivery and/or fees, including fees for audit that are so high as to limit the participation in the training market of small business training companies. These increased costs further evidence the red tape that is stifling productivity and development in this country. The coalition acknowledges, as I said, that the intergovernmental agreement makes provision for states to continue to assist in meeting these costs. However, if they are not required to help reduce the end cost to the provider, it is my guess that they will not do so.

The Queensland government made a rather useful, short, sharp and very much to the point submission to the inquiry, noting certain aspects of the bill. But it did say that, as an observation only, it adds complexity to the VET legislative framework to introduce an entirely new bill to provide for these charges. What was the reason that they could not be provided for under the original bill? Or are they just sort of being slipped in behind it because they would not have looked acceptable? That is my own observation, not the Queensland government's, but it is curious that we had to have a whole separate bill.

The Queensland government says that this bill, as opposed to the main act, does not require the minister to obtain the agreement of the ministerial council before making a determination in relation to the amount of a charge. 'The fact that the bill provides for the minister to make a legislative instrument without the oversight of the ministerial council is actually inconsistent with the tone of the intergovernmental agreement for regulatory reform in vocational education and training.' The Queensland government goes on to make the point that the currently published Australian Skills Quality Authority fee schedule does not include any advice about what audits, if any, are included in the registration fees. The draft fee schedule and charges attached to the cost recovery impact statement did provide, with regard to registration fees, that this fee includes the cost of one post-registration audit, either 12-month monitoring or a compliance audit. There is an inconsistency, which I think the government does now need to clear up. Does the registration fee actually provide for a compliance audit, the first one that an organisation may have to face, or will they now be hit under this subsequent legislation with another fee for just such an audit?

The Queensland government also notes that the national VET regulator may at any time conduct a compliance audit of an NVR registered training organisation's operations to assess whether the organisation continues to comply with the VET quality framework. It sounds like an innocent statement, 'at any time conduct a compliance audit', but that could be an onerous regulatory burden on an organisation. This really does allow the VET regulator quite substantial power for when, how and how much it does and charges and inserts itself into the process of an RTO's operations.

I reviewed the original second reading speech by the parliamentary secretary, who happens to be sitting at the table here today, on behalf of the minister who is in the other place. Again, I was alarmed by the language used:

The main method by which ASQA monitors compliance is by conducting … audits. … investigates complaints …

This bill will enable ASQA to recover … costs and expenses associated with these additional monitoring activities.

… … …

It is necessary for ASQA to conduct compliance audits to ensure ongoing compliance with the VET Quality Framework and identify issues relating to the quality of VET.

ASQA conducts a risk assessment on all registered training organisations (RTO) and this risk assessment is used to determine whether to conduct a compliance audit. Providers who have been assessed as high risk will receive more rigorous monitoring by ASQA.

Compliance audits require a significant regulatory effort. This bill provides that, where the ASQA undertakes such an audit, a charge is payable … outside of Australia—any other reasonable expenses incurred.

Audit compliance charges will represent the resources required to effectively audit a provider.

If an organisation is struggling and not quite sure how it is going to fund next year's budget, what does it do? It ramps up the fees. So we may well find that providers are paying a component of overhead running costs for an organisation, which, under accounting practice, you could quite reasonably attribute to the exercise of an audit. As I said, I am very concerned that this is just going to get away—like so much of this government's legislation when it comes to charging small business. Private providers, which are struggling under the current set of economic circumstances they are facing, will find that the government has carte blanche to charge them what they like.

I want to note briefly that a provider in my electorate of Farrer came to me in the last week to say that they made an application to ASQA for one additional course, a certificate III in financial services. They lodged their application in 2011. On 26 April they received a request for additional evidence, which they provided. They asked how much longer they should expect to wait for registration and they were told three to six months. A basic registration for a certificate III course could take almost a year for the regulator to approve? How could a business that is making money from providing this service or providing training to jobseekers in conjunction with a job service agency operate in such an environment? When I hear stories like that—I do not know the full circumstances and I intend to discuss this with ASQA—I do not have any confidence in this organisation. I do not have any confidence that it is not going to seek to undertake significant extra regulatory activity in order to provide the dollars it needs to administer its affairs and pay a staff of public servants. I am really not confident at all, and I would like to reiterate that the coalition will not be supporting this bill that imposes additional red tape and cost burden on Australian small business.