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Vocational Education and Training Funding Amendment Bill 1997

House: House of Representatives

Portfolio: Vocational Education and Training

Commencement: Royal Assent

Purpose

The major amendments proposed by the Bill:

reduce the level of Commonwealth funding for vocational education and training for 1998; and

set the level of funding for 1999.

Background

. Commonwealth role in the provision and support of vocational education

The Commonwealth provides grants to the States and Territories for the provision and support of vocational education and training primarily to the Technical and Further Education system. Prior to 1 January 1994, grants to the States and Territories were provided in accordance with the provisions of the States Grants (TAFE Assistance) Act 1989. The grants contributed to general operating costs (recurrent expenditure grants) and infrastructure (capital expenditure grants).

From 1 January 1995, the funding arrangements under the State Grants (TAFE Assistance) Act 1989 were replaced by funding arrangements under the Vocational Education and Training Funding Act 1992. Under the new arrangements, a single pool of funds comprising the previously separate recurrent expenditure grants and capital expenditure grants is passed to the Australian National Training Authority (ANTA) for allocation among the States and Territories.

The Australian National Training Authority Act 1992 gave effect to an agreement (the Agreement), announced by the then Prime Minister on 21 July 1992, between Commonwealth, States and Territories for the establishment of ANTA. The objectives of the Agreement include:

. the establishment of a national vocational education and training system;

. closer interaction between industry and vocational education and training providers;

. an effective training market; and

. improved cross-sectoral links.

The key elements of the Agreement, the text of which is set out in the Australia National Training Authority Act 1992, relate to the roles and responsibilities of ANTA, the Ministerial Council and funding arrangements.

The functions of ANTA include allocating and remitting funding to State and Territory training agencies on the basis of guidelines determined by the Ministerial Council, and administering any programs, agreed by the Ministerial Council as requiring national delivery, within the guidelines approved by the Ministerial Council.

. Budget Measures

Program 4.3.0 Vocational Education and Training

Outlays 1996-97 ESTIMATE $1363.4 million

1997-98 ESTIMATE $1354.8 million

EFFECT OF MEASURE ON BUDGET OUTLAYS $MILLION

Measure 1997-98 1998-99 1999-2000 2000-2001

Benchmarking Vocational

Education and Training -10.0 -20.3 -20.7 -21.0

In 1996-97 an efficiency dividend on Commonwealth own-purpose outlays resulted in a 5% reduction of funding provided to ANTA. In 1997-98 the Commonwealth will reduce annual funding to the States and Territories appropriated under the Vocational Education and Training Funding Act 1992, to provide "an incentive to the States and Territories to achieve efficiency gains in vocational education and training operations."

1 The reduction, which takes effect from 1 January 1998 and is anticipated to be carried into subsequent years, is estimated to be $20 million in the 1998 calendar year.

. Comments

The reduction aims "to provide an incentive to the States and Territories to achieve efficiency gains in their VET operations by, for example, benchmarking their activities against the most cost effective States."

2 Procedures for applying the reductions on the basis of a State or Territory's record in meeting relevant efficiency benchmarks are to be negotiated with the States.

At their meeting on 23 May 1997, State, Territory and Commonwealth Ministers agreed that, "in negotiating VET plans for 1998, ANTA would agree bilaterally with each State and Territory its activity levels for 1998 having regard to that State/Territory's scope to achieve efficiency gains and the agreements reached at MINCO regarding priorities."

3

In a further development the Minister for Vocational Education and Training, Dr David Kemp announced guaranteed funding of $4.5 billion in the next five years "conditional on the States and Territories increasing TAFE places and improving the quality of training through more effective use of funds."

4 Drawing on analysis by ANTA which indicates that with better targetting of $300 million a year in existing TAFE funding an extra 100,000 student places could be created, the Minister is requiring that 500,000 more places be created in the next five years. Renewal of the five-year ANTA agreement is due to be considered later this year.

. Efficiency Indicators and Negotiated Priorities

While details about the conditions of the Commonwealth's offer are unavailable, reports on statements by the Minister suggest that new places, better targetting, improved standards and greater responsiveness to industry are likely to be criteria to be considered during the funding negotiations.

Other measures of benchmarked or relative efficiencies may also be utilised during the negotiations. Recurrent costs per curriculum hour are identified as the main efficiency information available regarding VET in the Report on Government Service Provision of the Steering Committee for the Review of Government Service Provision. While the report documents unit costs ranging from $8.30 in Victoria to $20.30 in the NT, it points out that these are problematic insofar as they have not been adjusted for factors such as population densities, provision to disadvantaged groups and remote locations.

5

. Institutional, lobby group and media reaction to Budget measures

The Victorian Minister Mr Honeywood, is reported to have said that Victoria did not agree to the conditions under which the Federal Government proposed to continue its normal funding. He has also questioned whether the requirement for 'up to 40 per cent' more TAFE places with no additional Commonwealth funding, aimed to 'dismantle the TAFE system'.

6

A spokesperson for the NSW training Minister John Aquilina was reported as surprised by the offer given the announcement of the Budget cut in May. He suggested that it was the Budget being 'repackaged'.

7 In the same article, Campus Review reports that senior VET sources view that the States' failure to respond to the Commonwealth's offer could result in a redirection of funds from the TAFE system to private providers.

8

Main Provisions

The effect of item 1 of the Schedule is to amend the amounts payable to ANTA under section 9 of the Vocational Education and Training Funding Act 1992 in the following manner:

increasing the amount payable for 1997 from $869.779 million to $887.717 million;

decreasing the amount payable for 1998 from $872.154 million to $869.039 million; and

setting the amount payable for 1999 at $869.039 million.

Section 9A of the Vocational Education and Training Funding Act 1992 provides for payments to ANTA for additional trainees under the Australian Traineeship System (ATS) and Career Start Traineeships (CSTs). Item 2 of the Schedule provides funding of $21.546 million for 1999.

Endnotes

1 Vocational Education and Training Funding Amendment Bill 1997, Second Reading Speech.

2 Budget Measures 1997-98, Budget Paper No. 2, p. 40.

3 Department of Employment, Education, Training and Youth Affairs.

4 Minister for Vocational Education and Training, Media Release, June 8 1997 K28/97.

5 Report on Government Service Provision, Steering Committee for the review of Commonwealth/State Service Provision, p.142.

6 Training Ministers angered by TAFE plan, The Age, 13 June 1997.

7 Kemp's funding offer stirs the States, Campus Review, 11-17 June 1997.

8 ibid.