Excellence through diversity: Funding flexibility the key

As we approach the point where 40 per cent of our young people will have a university education, we need to start asking some hard questions about whether our present higher education system really serves our students and the nation as well as it might. The recently-released Norton/Kemp review of the Demand Driven System has sparked some debate, but the argument needs to be taken further.

Today, every university in the country is funded in exactly the same way for its Australian undergraduate students, regardless of the quality or type of educational experience the students receive. This fixed funding model means little diversity in the type of education offered. It means disciplines are disappearing as institutions decide they can no longer afford to offer them, creates a perverse incentive for universities to cram hundreds of students into lecture theatres, and constrains innovation. It badly needs rethinking.

There are practical examples of these constraints from our own institution, The Australian National University (ANU).  We want to offer research-led undergraduate education, and to deliver on this aim we have some unique, elite programs, in particular the Bachelor of Philosophy (PhB) degree. This exposes gifted young students to research from their very first days as an undergraduate student. They work in the laboratories and offices of our most outstanding researchers, and in many cases complete their degrees with internationally recognised research publications to their names.

This is a remarkable one-on-one experience that stretches gifted minds to the limit, and is a major investment in the future of our nation. But this degree is funded exactly as if we put the students in a class of 300 and only occasionally exposed them to a practical session.  So we can expose only a tiny fraction of our students to this rich educational experience.

Another example: we want to offer undergraduate education at ANU built around a first-class residential experience. Some 40 per cent of our students already live on campus, but we want to give them more than just a place to live, and expose them to a whole range of extension activities which could vastly expand and enrich their learning experience. We do some of this now, but not remotely on the scale we would like to. Why? Because the funding system is simply not built with that in mind. Australian universities only rarely provide education of Harvard or Stanford quality: for us, volume wins over innovation and excellence.

It is time to change our one size fits all funding system and let diversity develop. Changes to the system will be controversial, but real change is required if Australia is to offer its young people a real choice in education and produce graduates to match the best in the world. How do we finance innovation and diversity in education? In an ideal world, government would fund universities differently for different types and quality of education. But in a challenging economic climate, this is unlikely to happen. An alternative is that government deregulates the amount which universities can charge for the student contribution to education.

In such a system, access and equity becomes a crucial issue. Just like the best American institutions we propose that any institution that raised the student contribution would also need to offer additional equity scholarships. Such scholarships could address both tuition costs and living expenses, thus addressing one of the real barriers to study suffered by low socioeconomic status students. Such scholarships would also act as a magnet for enhanced philanthropic contributions to support outstanding students. The objective must be to enhance, not in any way diminish, access to students from disadvantaged backgrounds.

Previous attempts to deregulate student contributions have failed because an arbitrary cap has been placed on the amount which can be charged. Any price competition which might have eventuated beneath that cap evaporated as institutions moved in lock-step to match it.

True price competition in Australia at the undergraduate level exists only for international students, where Australian institutions do compete internationally on both quality and price and achieve excellent results. We believe real domestic competition could be achieved with only one cap: limiting the absolute maximum income an institution could receive for a domestic student (Commonwealth plus student contribution) to the international fee for the same course.

We strongly support the HECS/HELP income contingent loan system as a great Australian policy innovation. This should continue in a deregulated environment, with no fee of any size required to be paid up-front, and all repayments remaining wholly dependent on future earnings.

The bottom line is that if Australia is to develop universities which can truly compete internationally, that can provide an excellent educational experience for students and produce really outstanding graduates of the kind that are so vital to our nation’s future, we have to not only allow, but encourage, diversity by removing the constraints that prevent innovation.

As a nation we have found it difficult to even debate this issue, but a measured and non-partisan public discussion is long overdue. Our students, our education system, and future generations of Australians deserve nothing less.

Professor Ian Young AO, Vice-Chancellor and Chair of the Group of Eight
Professor Gareth Evans AC QC, Chancellor

This opinion piece was first published in The Australian Higher Education Section 23 April 2014

Updated:  19 August 2020/ Responsible Officer:  Director, SCAPA/ Page Contact:  Director, SCAPA