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Tuesday, 2 December 1986
Page: 3183

Senator MACKLIN(6.13) —The Senate is debating cognately the States Grants (Tertiary Education Assistance) Amendment Bill (No. 2) 1986, the Australian National University Amendment Bill 1986, the Canberra College of Advanced Education Amendment Bill 1986 and the Maritime College Amendment Bill 1986. The last time we debated the issue of student fees was when the Liberal-National Party Fraser Government attempted to impose fees on students undertaking second and higher degrees. The Australian Democrats opposed the legislation at that time. We oppose the imposition of fees by the Australian Labor Party at this time. We believe that the circumstances with which we are faced in terms of the Bills we are now debating are identical to those when the Fraser Government was in power. They are based on the same reasoning, the same logic and essentially the same approach to tertiary education in Australia.

First, I would like to look at the actual figuring with regard to these Bills. I must admit that the results depend very much on whether one takes the explanation of the Budget by the Minister for Education (Senator Ryan), the information set out in the Budget Papers or the guidelines to the Commonwealth Tertiary Education Commission. I have chosen to take the guidelines to CTEC to get a rough estimation of what the figure is. In fact, the figures from those three sources differ, which is extraordinary in itself. The CTEC guidelines show that the flat tax on students-and that is what it is-will bring in a gross amount of $96m. The institutions may keep $10m of that amount which leaves us, in round terms, with $86m. A refund in respect of Austudy, Commonwealth post-graduates and other exceptions seems to be costed at roughly $28m, which takes the net gain to the Commonwealth down to $58m. This is about the figure that turns up in most of the Budget Papers. It seems that the Government then managed to sell this measure to its own back bench by saying that this net gain would go into the education budget. Indeed, this might be the case but an interesting fiddle has taken place on the way. The new places that this $58m is supposed to be funding are going to cost $18m. That still leaves us with $40m from the flat tax on students. Where does that go? Quite precisely, it goes to plug up the gap that appeared when the Government dropped the amount of money that it was spending on tertiary education.

The Government has been able to maintain its commitment to tertiary education in Australia only by taxing students. That is the only way in which it has been able to do that, and it has done it effectively to the tune of $58m. If we take off that extra $18m from existing students to fund new students, it is plugging the gap to the tune of $40m. It would be interesting to see whether the Government agrees with that analysis and, if not, I would like to hear how the Minister manages to arrive at the quite extraordinary figures that keep bobbing up in the ever-enthusiastic Press releases which come from her office.

Quite frankly, we are talking about a reinstitution of the user pays principle which was the basis of the Australian Democrats' objection to the Fraser Government operation and which is the basis of our objection to the Labor Government operation. There have been some rather desultory contributions to the debate about public and private contributions to tertiary education in Australia. I would like to take some time in this second reading debate to tease out some of those items because they seem to me to be fundamental to this debate. I would like to defer to the Committee stage my remarks on the more detailed items in these Bills. I simply say now in passing that the amendments that Senator Peter Baume said he does not have were actually circulated in the chamber on 17 November. We will be moving amendments to a number of clauses. For example, we propose to move an amendment which will have the effect of not allowing the Government to gazette but rather only to make regulations with regard to exemptions. We will be seeking to move an amendment with regard to part time students. Also, we will be seeking to move an amendment to put in a sunset clause because we believe that this is an acceptable thing to do. Lastly, at the end of the Committee stage we will be seeking to move that these Bills be referred to a Senate committee for report because we believe that this whole matter has never been the subject of a detailed dispassionate inquiry. I would hope that such a committee report would provide us with a much more intelligent education debate than the one which has been pursued so far in Australia on this issue.

I start my remarks about the fundamental operation of the user pays principle by referring to the experience of the United States of America in particular. I refer to the United States because it is the largest example in the world of private tertiary education. It is a system similar to our own; it is one with which we can make some comparisons. Although not every comparison will hold up in its entirety, there are sufficient similarities between our systems and the aspirations of our peoples to make it worth while looking at the United States to see what is going on there. I also choose the United States with regard to private education because it is generally held up as the most successful example of private contributions to tertiary education. The United States system is an example of a mix between private and state higher education institutions. The private institutions receive public subsidies directly. That is the first item I wish to raise. It is often not acknowledged in the debate about the United States. Not only do they receive public subsidies directly; they are also financed very much indirectly through various systems that operate at Federal, State and institutional level. That is to say, students attending a private institution can be supported in terms of the payment of their fees by one of a number of very expensive support systems that are provided by the Federal Government in the United States. Alternatively, they may be supported by a support system at the State level or, again, they may be subsidised by the institution itself, for a variety of reasons. The last of these is not a very large contribution, of course, but it is an important contribution. Certainly in dollar terms it is quite significant from the point of view of Australia.

Senator Peter Baume —Harvard is earning interest on $2.5 billion, isn't it?

Senator MACKLIN —I will come shortly to the matter of the capital base of these institutions. As the various levels of grants which were available declined over time and as the costs also increased, students had to increase their borrowings. This introduced a new element into the United States-the negative dowry effect. An average borrowing has now come to be called in the United States a negative dowry. People can probably see why that is so, given the fact that tertiary students in the United States tend to be very much in the marriageable age bracket and given the fact that they tend to marry other students at tertiary institutions. Because of the high attendance at tertiary institutions, it is much more likely that a student's marriage partner would also be a student. Such young married couples would have this negative dowry. In the United States when one gets married one does not bring assets but massive debts. Those types of debts depend very much on the types of courses studied. They may be as low as $5,000 if the student is attending a liberal arts college. They may go up to something of the order of $11,000 if one is attending a reasonably prestigious middle-rung university doing a science or technology course. They can go up further, and it is almost a case of the sky is the limit in the case of the high prestige institutions. In those places the amounts that may have to be borrowed are often in excess of $20,000 or $30,000.

It is interesting to note, too-when I was recently in the United States I managed to get some of the more recent figures on this-that the fees that are charged have risen well above inflation for the last few years. So the institutions are charging more, the people are borrowing more, and the pressure is now turned back on to the Federal Government and the political parties in Congress to do something about it. As somebody said: `The only people who seem to be able to attend American higher education institutions are either the very poor or the very rich; the middle class got squeezed out'. Because the middle class got squeezed and because the middle class provides the basis of any political survival in the United States in particular, certainly in terms of votes, because it has a voluntary voting system, the Congress had to respond immediately. It responded with a plethora of support systems aimed specifically at enabling the middle classes to attend higher education institutions.

One area through which those private institutions in the United States are able to take in public moneys is that of fees. I point out to the Government that, looking at that fact, at the failure of the private institutions in Japan in the early 1960s, at the problems of the private institutions around the world-Birmingham is a very interesting example; it managed to get itself off the ground only when the local institutions funded fees for students-indeed, it is the fees which are a crucial issue in the operation of private institutions around the world. I point out to this Labor Government that its intrusion into the area of fees is not only setting up the context of being able to proceed in that direction, it is also setting up the context for a private sector in the tertiary education system in Australia. That is what it is doing. I do not know whether it realises it is doing that. I do not know whether it bothered looking at the comparisons and the operations of those private systems around the world, but that is precisely what it is doing.

We all admit that modern higher education is an incredibly expensive business. In terms of the most wealthy private institutions in the United States-that is, Stanford, Yale, Harvard, Princeton, Chicago and the Massachusetts Institute of Technology-the endowments there represent 24 per cent of the total endowments of all higher education in the United States. They are the ones with the wealthy base, the capital base, and they are still in difficulties, because it is a massively expensive operation. More than that, it is inherent in the operation of a private institution that it has to offer more, if there is a scarcity of positions, or better, if there is a reasonable number of positions, or else it must add to what is available-for example, the old school tie effect, or something like that. It has to offer one of those three things or it is not in the race. The difficulty is that in each of those areas, unlike the private sector in almost every other sphere, the thing which gives prestige to a higher education institution is having well known professors on high fees doing little teaching. It is that type of thing that gives prestige, and it is that type of thing, quite frankly, which is not conducive to attracting terribly many clients. Clients are attracted for reasons other than that. Clients are attracted for what they can get out of the institution, not for what the institution is itself. So there are some inherent problems in the operation of these private sector institutions within our type of system. I think these have not been looked at sufficiently.

The point I was making about the endowments for those institutions representing 24 per cent of total endowments is that, according to a paper published in the European Journal of Education last year, the rest of the private sector in the United States relies on heavy subsidies from the public purse merely to exist, either through direct grants or through subsidies by way of fees from students. That is what worries me about this move on the part of the Government. It is not just the thin edge of the wedge argument in terms of fees. It is the setting up of a whole context in terms of the future development of our higher education sector in Australia. The point is that with the system of private and public institutions and colleges-with fees, grants and loans schemes and that whole situation-the demands on the public purse grow rather than lessen.

Sitting suspended from 6.30 to 8 p.m.

Senator MACKLIN —Before the suspension of the sitting I was referring to the package of Bills that we have before us and looking at the basic philosophical thrust that I see emerging from the Government's intention to reimpose fees for the first time since they were removed by the Whitlam Government in 1972. I was looking at the United States mixed system and the difficulty of that system existing except by significant public funds being channelled through to institutions via the support mechanisms for student fees; likewise, the capacity of a number of the prestigious universities to continue their operations by a massive capital investment fund, that fund not being available to most of the liberal colleges and the smaller universities dotted across the United States. The overall effect in the United States is that 65 per cent of current expenditure on higher education is met directly by the public purse either at the Federal or State level and of course a higher percentage indirectly through other means.

When one looks at that-and the history of the private institutions in the United States goes back well over a hundred years-one must be daunted in one's enthusiasm to overthrow the system that has operated here in Australia for so long. Indeed, when one turns to the Australian system, the most recent report that we have, the Commonwealth Tertiary Education Commission Review of Efficiency and Effectiveness in Higher Education, shows quite clearly that Australia's system of higher education by and large has performed well in the last decade, certainly since fees have been removed. I believe that, if one reads that report right the way through, one is struck by the fact that it makes a very close examination of our current operation system. One finds a statement such as that on page 244:

. . . Australian higher education has operated at lower costs per student, while at the same time broadening access and exhibiting a high degree of responsiveness to changed community demands for courses. Furthermore, progress rates have been maintained or improved, thus reducing costs per graduate to a greater extent than the fall in costs per capita.

That is an interesting comment, and certainly when one hears all the talk about higher education and the costs associated with it, it is a change to see a thorough analysis of the economics of education. It is interesting to see that economies have come into the system, that the system has been responsive to the demands made by the community and that it is seeking to meet ever increasing demands for expertise and effectiveness at the same time as for lower costs.

The higher education sector has worked well under the existing system of funding and planning, particularly in terms of the growth in equity and efficiency. Frankly, the problem is not the mechanisms but the fact that, as the Australian Democrats believe, there is now not enough oil to keep that machinery running smoothly. There need to be additional public funds for higher education rather than the self-defeating searches, which have become the vogue in Australia, for magic solutions involving fees, private institutions or some type of mix. The break in the philosophy of the Labor Government, the acceptance now of the user pays principle, is taking us down a road which will not in the end give us the type of equity which we are looking for and which the community is demanding. The CTEC review points out that total public sector funding of higher education as a proportion of gross domestic product declined by more than a third between 1975 and 1985. The higher education sector has had to do with less and less.

Government in this country must have the will in relation to higher education. We are not simply looking at expenditure in this area in the same way as we look at so many other areas in which money is expended and nothing is returned. Here we are looking at the development of the imagination, capacities and skills of all Australian citizens and that investment in our citizens should be treated in the same way as or even in a higher way than investments in so many other areas in this country. We must talk about the investment that we, as a community, are willing to make in higher education rather than talking about costs, as so often happens in education debates in this community. The CTEC report has shown that those costs are contained and that there is and has been increasing efficiency. That should be recognised in the debate. We should also recognise the imperative demand for increased funding, particularly in the area of capital investment.

The Australian Democrats believe that education is a public good where the social rate of return vastly exceeds the private rate of return. This country requires and needs the higher education sector. I believe that the searches I have described for so-called magical solutions in this area are really not down the path that the Government is taking with its user pays principle, which is enshrined in these pieces of legislation. Free market economists may not perceive any theoretical reason why higher education cannot become part of the capitalist economy, but when one looks around the world at actual operating systems-in Japan, the United States or Europe-one is hard pressed indeed to find the type of responses that those promoters of the capitalist economy in higher education say is there. Private colleges and universities have in fact been singularly unsuccessful in our types of society in being able to enter into capital markets and they are simply unable to charge the full extent of fees which are necessary in order to provide the quality of education for which the community is searching. In these circumstances, if one merely meant that one would allow the free market to operate, then one would not see a private institution operating. But of course, that is not what the debate is about. The rigorous and very severe strictures of the free enterprise system would simply rule out private institutions. In the light of the realities of current costs in higher education, private higher education is not on. It is simply naive to argue that market forces would produce socially optimal levels of product mix, design, quality and price. I believe all those have been met by publicly funded institutions in this country.

Senator Peter Baume —Not optimal, though.

Senator MACKLIN —Optimal for the expenditure that we are willing to put out. This is the difficulty. I am working in that framework, Senator. Under present conditions, the high cost of quality higher education and its extensive penetration in our community-nowhere near as extensive as in the United States, Great Britain or a number of other countries, but extensive nevertheless-and the considerable social returns that this country has already derived and will derive in the future from its higher education, either directly in terms of graduates or indirectly through the research efforts that are carried on in this country mainly within those institutions, all present a very persuasive case in Australia for a continuation of and support for publicly funded higher education. Private alternatives I think might very well be able to complement state controlled higher education in a number of ways. However, it is doubtful that any one of those would be an exemplar of the private enterprise system because if the private enterprise system were really allowed to work those private institutions could not exist. I believe that is the type of debate we really have to confront in Australia: It is not about whether private institutions privately funded should be allowed to exist-they can exist-it is whether we are going to have private institutions supported by the public purse or public institutions supported by the public purse. In terms of equity in distribution, in a country which has such a small population, such a large area and limited resources, we would be absolutely insane to go down that path at this time. I believe we need to support the current institutions as they are and to encourage as many students as we can into higher education. We need also to work on the social mix in higher education.

I completely reject the notion that since fees have been abolished there has not been a change in the social mix. There has been a dramatic change in the ability of women to enter higher education. In fact almost double the percentage of women now partake in higher education in this country. I am not saying that is totally and completely a result of the removal of fees but that is a contributing factor. The greater incidence of mature age students, who are of course economic students to deal with in higher education, in higher education is also contributed to by the absence of fees. I believe that the imposition of these fees will go no way to promoting that equity in Australia that we have come to desire and need. It is a retrograde step and it opens the way for other retrograde steps, particularly in increasing fees and opening the real prospect of a publicly funded private higher education sector.