October 9, 2014

TAFE - the essential ingredient

By Brendan Sheehan

In late April 2012, the Victorian Coalition government, building on the skills reform initiative of its Labor predecessor, unleashed its own radical model of vocational education and training (VET) market reforms. Basically, these reforms opened up the public funding of VET to virtually all comers and removed any dedicated funding to sustain the public character of TAFE (the public VET provider network).

Most commentators, myself included, predicted that these reforms would undermine the TAFE sector and, with it, the whole VET system.

After the passage of a couple of years, I think we can say, on the available evidence, “we told you so” (although this would be furiously disputed by the government).

Now, I’m relatively agnostic as to the efficacy – or otherwise – of a market orientation in VET provision: in policy terms, it doesn’t matter what institution is delivering a qualification – public or private, TAFE or university, domiciled in a particular jurisdiction or some other – so long as it represents value in terms of both cost and quality.

So I don’t come from the perspective of denigrating training provision by private registered training organisations (RTOs) nor seek to insulate TAFE from competition from RTOs: RTOs can and do add useful diversity, innovation and choice to the overall system.

It follows that governments should be equally agnostic but that appears not always to be the case.

TAFE, as the public provider network, underpins the whole VET system (which is widely acknowledged by industry) and contributes to the public good in numerous tangible and intangible ways that private RTOs do not, to which some governments appear largely or entirely blind.

Present moves to contestability of public VET funding do present fundamental challenges for the public TAFE sector which need to be recognised and addressed in appropriate ways. In Victoria, which is the most advanced of the jurisdictions along the path of contestability and with its radical outlier model, the TAFE system is wobbling mightily, with declining overall enrolments, mounting financial losses and incipient signs of market failure.

One TAFE leader has expressed doubts that TAFE can survive in Victoria.

Publicly provided TAFE will survive, for the time being at least, but it in greatly diminished form. We can see already that many of the TAFEs have become “residualised”, with underutilised assets and need special assistance to cover declining revenues. This runs counter, of course, to the logic of “marketisation” and it runs counter to Australia’s economic and social interests.

While this path is most evident in Victoria, similar pressures are now emerging in other jurisdictions, notably South Australia, where there have recently been substantial TAFE cuts and churn in VET funding, to address budget blow outs. This is notable precisely because the South Australian government, having observed the dislocation attending VET funding reform in Victoria, publicly pronounced that it was adopting a framework to avoid this sort of dislocation.

In a fundamental sense, by simply “being in place”, TAFEs offer the opportunity of broad, accessible and quality vocational education and training – and increasingly other forms of education - to meet community needs (such as for qualified workers in the community sector, including health and aged care), individual needs (for example, for upskilling, reskilling and further education) and business needs (in workforce and business development).

The reach of TAFE, through its network of over 400 campuses and centres throughout Australia, and the capacity of TAFE in its provision of economically and socially valuable qualifications through this network, cannot be currently matched by the private provider network. And it will not be matched by the private provider network without substantial public subsidy.

TAFE providers deliver across all fields of education, unlike private RTOs, which tend to be small scale, with a limited range of offerings.

By virtue of its geographical reach and scope of offerings, for a couple of generations TAFE has been the heavy engine of skills formation in this country, providing services for the skilling, upskilling, reskilling and, increasingly, educating of Australians.

Millions of Australians have acquired skills and qualifications through the TAFE system, generally contributing to Australia’s economic development, providing employment skills for individuals and enhancing life opportunities.

In 2012, there were over 1.2 million students enrolled in the TAFE system – 65% of total VET enrolments. An impressive proportion – but down from 75%, almost entirely on the back of changes in Victoria, where enrolments in TAFE have fallen from 66% to just 40%. As contestability is progressively introduced throughout Australia, we can expect national TAFE enrolments to decline quite precipitously.

If we’re agnostic about the character of a provider delivering AQF qualifications, does this matter? Is not the flight from TAFE the natural consequence of the market – students voting with their feet? Has not there been a sharp rise in VET participation in Victoria?

In the past, TAFEs have been instruments of public policy, in a way that private RTOs have not been and, I would suggest, never will be. TAFEs have also been described as “bulwarks against market failure” (AWPA).

TAFEs contribute to meeting the education and needs of communities and to the maintenance of the economic, social and cultural fabric of their host communities in a multitude of ways.

If we take Victoria – not to pick on Victoria but because its “marketisation” model has now been operating for several years and is unarguably the most radical – what we are now seeing is an actual form of market failure which will see TAFE unable to continue to make this contribution.

Victorian Government policy is that there is essentially no distinction between the public providers – TAFEs – and private providers: indeed, it has gone so far as to assert that TAFEs have no community service obligations (although it has asserted that as a condition of public funding, all RTOs have to serve community interests).

With the withdrawal of substantial dedicated funding to TAFE – of the order of $300 million a year – and the imposition of “commercial obligations”, TAFEs have responded in a market fashion: they have closed a number of campuses and scaled back others, cut marginal courses and retrenched thousands of staff.

A case in point is the closure of the former Lilydale campus of Swinburne University, announced in 2012, which provided both VET and higher education in purpose built facilities to several thousand students. The former campus site sits at the gateway to the Yarra Valley and the Gippsland region, which has generally poor levels of education attainments. The region contains low socio economic pockets, a significant population of young Indigenous people, high levels of student disengagement and low levels of tertiary and vocational education. The availability of tertiary and vocational education at Lilydale has acted as a positive incentive for many disadvantaged people to continue their education.

Intensive efforts to attract other education providers to the site have failed and the site is now on the general market and may well be lost to training and education altogether (without government intervention and funding, at least). The Lilydale campus had a relatively comprehensive range of training and education offerings and there is no sign at all that the hole created by its closure is being filled or, indeed, that it can be filled.

This scenario is being played out across the State and there are signs of similar failures beginning to emerge in other jurisdictions.

It is not as if the private provider sector is well placed to fill holes in provision created by the withdrawal of TAFE from both certain activities and localities. In many cases, private providers simply lack the relevant capacity. In addition, the vagaries of the funding system are not conducive to long term planning and investment, as governments chop and change to contain costs. Most private providers need to game the system to address constant funding changes and maintain the viability of their own operations.

The chair of one Victorian regional TAFE observed that:

We are removing courses that aren’t profitable, but there are some courses you have to do for the benefit of the community. If we were a private provider you’d say ‘Oh, get rid of that because we can’t make a dollar out of it.’ But there are some things we have to do because of our ‘embeddedness’ in the regional community, and there’s a pain factor in that. That’s part of what we do. You can’t make a quid everywhere; there are some things you have to do to fit the community.

In the face of inexorable financial pressures, evidenced by the fact half of Victoria’s TAFEs recorded significant operating deficits in 2013 - a big turnaround from just a couple of years ago - how much longer can TAFEs afford such public-spirited benevolence?

The whole training system – and, with it, entire communities - will be weakened to the extent that TAFE institutes, in order to sustain their overall operations, are forced down the path of “rationalisation” by dropping activities they undertake for the “benefit of the community”.

This is particularly relevant to regional communities. A campus contraction or closure, through a withdrawal of CSO or other funding, has cascading negative effects through a community:

  • It reduces education and training opportunities across-the-board.
  • It results in direct job losses.
  • It reduces regional economic activity, results in other job losses and undermines viability for at least some businesses.
  • It can lead to population loss, as people are forced to relocate to pursue education or employment opportunities (which is actually occurring in regional communities in Gippsland).

Each effect obviously weakens the sustainability of a community.

I would make the observation that there is every likelihood that the Victorian Government will moderate its approach – wisely, it has already to some extent toughened up eligibility for funding to weed out obvious carpetbaggers – when some of these negative impacts are more evident.

But you have to ask the question as to why governments would implement measures that will see – are seeing - the substantial dismantling of the public provider system only to have to seek at some later stage to replicate it in some form, at considerable cost to the budget and following who knows what economic and social costs?

In its recent submission to the House of Representatives inquiry into TAFE, the LH Martin Institute advocated a number of corrective measures:

  • In the competitive market being created by policy makers, proposals to introduce a new Vocational Qualifications System, setting a higher bar for training provider registration, are appropriate.
  • It is appropriate that Commonwealth Supported Places in higher education be extended to non-university higher education providers (as now proposed by the government).
  • TAFE is disadvantaged in the international sector by onerous visa requirements and the extension of the streamlined arrangements that apply to universities should be extended to the TAFE sector.
  • Most importantly, funding of TAFE must be sufficient to enable TAFE to operate efficiently as a comprehensive, accessible provider. There is merit in a review of VET funding, specifically encompassing a “TAFE base funding review”, to establish the minimum funding required to sustain TAFE in its role as a comprehensive service provider.
  • Consideration needs to be given to the efficacy of current national arrangements. The current National Partnership Agreement has failed to create the clarity, certainty and consistency necessary for effective national arrangements and a new agreement needs to focus on establishing such arrangements.

To conclude, as a direct result of public policy, TAFE institutes are being forced down the path of “rationalisation” by dropping activities they undertake – or used to - for the benefit of businesses, individuals and the community.

Under current settings, many TAFEs risk becoming residualised, needing “special assistance” to cover declining revenues. This runs counter to the logic of “marketisation” and it runs counter to Australia’s economic and social interests.

The capability and reach of the VET system is being rundown and what is now a diverse and polychromatic system will be reduced to a disturbingly homogenous and monochromatic system.