Governments’ targets on skills formation will not be met. Progress against other performance measures, such as employer satisfaction and improvements in employment and education status, is mixed.

Key reforms under the NASWD — the national training entitlement and expansion of student loans (VET FEE-HELP) — initially increased participation but incentives were later wound back because of escalating costs and rorting. Overall participation rates are now at or below pre-NASWD levels.

Early efforts to promote a ‘more open and competitive training market’ have stalled. Improving the efficiency of training markets is no longer an explicit priority for most governments.

Further work is required by governments on the policy settings that best facilitate a responsive and efficient training market. This includes a more clearly defined role for public providers.

The NASWD is overdue for replacement. Governments have stepped back from several key policy aspirations. The performance framework has limited value for assessing the functioning of the VET system. Its targets have not been met and some performance indicators have proved to be deficient.

Some principles of the NASWD remain pertinent for a future intergovernmental agreement, including equitable access to training and contestability. Reforms are still needed to give students better information, increase user choice, improve quality assurance, and create a more interconnected education and training system.

Many of the principles in the Intergovernmental Agreement on Federal Financial Relations, including recognising the Australian Government’s interest in areas traditionally the responsibility of State and Territory governments, clarifying all governments’ roles, and allowing State and Territory governments flexibility in the use of grants, are a sound basis for negotiating any new agreement.

I agreement that the NASWD needs replacement but I disagree that the level of flexibility in the use of the existing grants is a sound basis for the next agreement. This level of flexibility acts against the principle of equity for individual students. See below for how I think this can be managed and still allow sufficient flexibility in a future nationally consistent agreement in my comments in response to Option 6.1.

There are significant private and public economic returns to VET, with returns larger for Diploma and Advanced Diploma VET courses.

There are also indirect benefits — such as reduced crime and intergenerational economic mobility — which may be greatest for lower-level VET qualifications.

The use of subsidies in the university system provides a robust efficiency and equity rationale for subsidies in the VET system.

However, given the public benefits and aims of the VET and higher education systems differ, subsidy rates do not need to be identical in the two sectors for all occupations and fields.

Data used to estimate course costs (which inform subsidy rates) are dated in most States and Territories and are not a sound basis for setting subsidies.

Fixing student fees can stifle competition, inhibit allocative efficiency and reduce incentives to improve the quality of training.

There are more direct instruments to address issues of quality management, information asymmetries and budget control.

I agree that student fee levels do not need to be mandated but I am equally concerned at the approach in some jurisdictions whereby funded providers (TAFES and privates) can set their fee at $0. This issue is identified in the Interim Report and the Commission does not appear to be in favour but does not address this matter in any further findings or options.

State and Territory governments share the same goal that subsidies should increase participation in training, particularly by students facing disadvantage and in skill areas in short supply or with other public benefits. All take the same key steps in setting subsidies and managing subsidised services.

However, there is significant variation in policy priorities and the approaches used to determine which courses receive subsidies, and in overseeing course costs and student fees. Consequently, subsidies and student fees for the same courses can vary widely across Australia.

The effects of different settings on the behaviour of students and training providers are poorly understood.

While I strongly agree with this finding I note that the finding is silent on the inequities students in different jurisdictions face as a result of these inconsistencies.

There is a general lack of transparency on subsidy- setting processes and the rationales for subsidies. There is also a lack of transparency on course costs faced by students.

This transparency deficit adversely affects the ability of students and training providers to make informed decisions on investment in training.

Poor design, rather than poor policy justification, was the source of the rorting of VET FEE-HELP. A well-designed VET student loan scheme can improve affordability and access to VET courses with few fiscal risks to government.

Governments have made progress in harmonising and streamlining the apprenticeship system but there is scope to further simplify arrangements for student support and system administration.

Australian, State and Territory governments should develop improved performance measures to provide a more complete picture of system performance. Any future sector-wide performance framework should better measure:

·       total VET activity

·       the contribution of VET to developing the foundation skills of Australians

·       skills obtained through the VET system when students do not complete a course

·       students’ longer-term labour market outcomes.

Australian, State and Territory governments should negotiate a new, principles-based intergovernmental agreement. Such an agreement should commit governments to developing an efficient, competitive market driven by the informed choices of students and employers. The agreement’s principles should include:

·       centring policy on the consumer, including information provision for informed choice

·       equitable access

·       recognition of fiscal sustainability and the stability of funding

·       transparency about where funding is allocated, including detailed information on course subsidies, costs and the size and nature of funding to public providers

·       efficient pricing and delivery

·       designing incentives to increase the likelihood of eliciting training

·       competitive neutrality between public and private provision

·       neutral, but not equivalent, treatment of the VET and higher education sectors.

State and Territory governments should use common methods to measure costs and determine loadings.

Governments should not cap the prices of VET courses.

I disagree with this recommendation. Firstly to be clear governments do not and should not set price caps on any fee-for-service activity. When it comes to government funded-activity, the Interim Report makes clear that there is an immature regulatory system in VET and a lack of clear information to learners to allow them to make informed decisions on courses or providers. Hard caps like those imposed in the VET Student Loans scheme are inequitable but some government regulation on pricing for courses they are subsidising is appropriate.

In making payments to publicly-owned VET providers, State and Territory governments should:

·       adopt the principle of transparent disclosure in interim recommendation 2.2

·       ensure compliance with competitive neutrality principles

·       assess the efficiency and effectiveness of existing investments

·       undertake market testing or other options to increase the contestability of existing obligations.

I agree that States and Territories should be more transparent about their funding for TAFE and their expectations of their TAFE systems. Government funding should also be properly accounted for and efficiency is an important element of that. I consider that determining TAFEs’ funding in relation to its role in delivering public value would be better, rather than the ‘pure’ market efficiency/contestability elements of this recommendation.

Reforms planned or underway to streamline the development and updating of training content should address most stakeholder concerns. To further improve the timeliness of the process, the COAG Skills Council should consider delegating to Industry Reference Committees the power to:

·       commission updates to training packages where there is an industry-agreed change to work standards or a new technology

·       approve straightforward, non-controversial or minor changes to training packages.

The Victorian and Western Australian Governments should ultimately follow other State and Territory governments in referring regulation of training organisations to the Australian Skills Quality Authority (ASQA).

In the first instance, ASQA, the Victorian Registration and Qualification Authority and the Training Accreditation Council in Western Australia should seek to address stakeholders’ concerns about inconsistencies and overlap in requirements between regulators, including different interpretations of regulatory standards.

The National Careers Institute should extend its work on information provision to fill significant information gaps in course prices, subsidies and RTO quality, and test that information is salient to students, trusted, used and interpreted correctly.

Australian, State and Territory governments should work together to establish the Institute as a central information hub.

Australian, State and Territory governments should consider:

1.     adopting a nationally consistent set of course subsidies, based on the efficient cost of delivery for groups of similar courses, with loadings to address higher delivery costs in some locations and to some student groups (as in the Joyce Review); or

2.     simplifying the large number of different subsidy rates for courses but otherwise leaving jurisdictions to set their own subsidy rates and their allocation.

I strongly support the first option as the most appropriate for the future of the VET sector. Considering the myriad issues the Commission identifies in the current funding arrangements and some of the principles identified by the Commission as important for a future agreement (ie centring policy on the consumer, equitable access, recognition of fiscal sustainability and the stability of funding, efficient pricing and delivery, and neutral, but not equivalent, treatment of the VET and higher education sectors) there is a much greater need and argument for Option 1 than Option 2.

By contrast, letting States do as they wish albeit with some simplification (Option 2) does not centre the next funding agreement on equitable access, does not contribute to stability of funding, does not deliver efficient pricing, and does not provide for equivalent treatment with higher education. In higher education all learners who wish to take up a government-funded place pay the same amount for their course and are eligible for the same loan arrangements irrespective of which jurisdiction they live in or which institution they study with. VET students deserve the same.

I accept that there is a need for States to manage their priorities and some specific local labour market issues (although I note that they do not feel a need to intervene in a similar way in the higher education sector). We trust the higher education sector to produce enough degree-qualified graduates in fields like Accounting, Engineering ICT, and Nursing (along with all the others in the higher education sector) but feel a need for every government to interfere to some degree in the supply of diploma qualified graduates in exactly the same fields.

Despite this substantial inconsistency, I accept that States and Territories will not wish to have a nationally planned approach imposed upon them and the Commonwealth lacks the requisite skills to manage one even if it were feasible and desirable.

Therefore I consider that national subsidy methods and levels should be agreed and States and Territories could then determine how many places they wished to fund in the various courses. A portion of funding could be set aside in each jurisdiction to then allow for a tailored approach to their specific circumstances/labour market conditions.

Given the significant disparities in the number of courses which currently receive funding across jurisdictions, States and Territories should not be under any compunction to fund any courses – but where they choose to they should follow nationally agreed subsidy arrangements – unless specific local circumstances apply and they wish to use the portion of funding I consider they could set aside for specific purposes. I accept that this is not a neat solution but the VET sector is not neat. I consider that it would be a significant step forward for students and providers, would still deliver the graduates employers want, and allow States and Territories considerable flexibility.

Australian, State and Territory governments could consider adopting consistent approaches to the determination of skills shortages, while taking account of variations in local labour markets, with this task undertaken by the National Skills Commission.

State and Territory governments could consider re-configuring subsidies paid to RTOs as student vouchers, with the voucher value depending on the method used to calculate subsidies as specified in option 6.1.

Given the myriad problems the Commission identifies in the VET sector at present and the proposals it is considering recommending to government to change how the sector is funded, all at a time when the national quality regulator, ASQA is bedding down major changes in its regulatory approach I do not consider that a case can be made for the introduction of vouchers. Students lack the information needed to make informed choices. Providers, governments and the regulator will all be adapting to new funding and subsidy arrangements. Vouchers with their deliberate lack of certainty would not be a good policy option for VET.

✅

and

❌

Income contingent loans have significant advantages. Governments should consider making VET Student Loans available for a wider range of qualifications. Current restrictions — by AQF level or inclusion on a skill/priority list — could be relaxed to support greater user choice and participation, as could loan caps.

The degree to which restrictions should be relaxed should be based on risks, costs and administrative complexity.

Widening access to loans should largely maintain the existing strong regulations that reduce risks associated with loans, but could also include the adoption of a ‘black list’ that identifies courses ineligible for loan support, setting a transition path to a less-restrictive system, testing risk as caps and course restrictions are lifted, and reducing the income thresholds for loan repayment.

I concur with the recommendation to immediately extend the VET Student Loan scheme to all courses at Diploma level and above and to remove the loan caps. The Commonwealth will need to monitor the new arrangements carefully and can manage risk (as they do currently) by imposing limits on overall funding to providers. In turn this limit should be able to be increased where a provider can demonstrate additional demand and is achieving strong outcomes.

I disagree entirely with the notion of a list of courses which (because of some ill-defined concerns) will never be eligible for an income contingent loan. That is grossly inequitable for prospective students. As above, restrictions on provider level funding allocations mitigates the risks which emerged with the former VET FEE-HELP scheme. Furthermore the income threshold for loan repayments is already low enough and should not be lowered further.

Given the apparently poor effectiveness of employer incentives, the Australian and State and Territory governments could consider:

·       addressing barriers to hiring apprentices, including their foundational skills, work readiness and the minimum wages or other award conditions set by the Fair Work Commission

·       reintroducing (better-designed) industry levies.

Consideration of these options should take into account the effectiveness of any measures to strengthen pastoral, mentoring and other support services for VET students in general (options 6.6 and 7.3).

Australian State and Territory governments could expand mentoring and pastoral services for VET students, including those undertaking apprenticeships.

Governments should also consider the wider uptake of tools for the upfront assessment of student needs — as used by the South Australian Government — to determine students’ suitability for their chosen course and their need for any supports.

To better coordinate and streamline information on their multiple apprenticeship incentives, Australian, State and Territory governments could implement one or more of the following options:

·       task the Australian Apprenticeship Support Network to assist employers in determining their eligibility for benefits offered by both the Australian and relevant State or Territory governments

·       publish clearer information on all incentive payments that employers in each jurisdiction may be eligible for

·       strictly delineate the roles and responsibilities for managing apprenticeship supports

In considering how to streamline trade apprenticeship incentives, the Australian Government could consider extending eligibility for trade apprenticeship incentives to all workers, regardless of their tenure with the employer.

The Australian Government could improve apprenticeship support services by:

·       publishing more information on the scope of services that Australian Apprenticeship Support Network (AASN) providers are contracted to deliver

·       evaluating the AASN contracts to assess how recently-revised arrangements have affected the efficiency of service provision and outcomes for users

·       cooperating with State and Territory governments to jointly contract AASN providers to better align services with local needs, as is the practice in the Northern Territory.