Topics: Issues with Labor’s failed VET FEE-HELP; New VET Student Loans program
Simon Birmingham: I’m very pleased to announce that the Turnbull Government is taking strong action to hit the reset button on the vocational educational system in Australia, and particularly the disastrous VET-FEE HELP scheme introduced by and extended by the Rudd and Gillard Labor Governments. VET-FEE HELP will go down in history as one of the great policy failures of the Rudd-Gillard years, alongside the Pink Batts or school hall programs. It was a slower burn in terms of the problems being realised, but the problems nonetheless were billions of dollars of waste that resulted in particular from the 2012 changes implemented by the Gillard Government to remove articulation requirements and to really open up access into this program.
It is a scheme that's come with immense human cost, human cost to those Indigenous Australians in remote communities, older Australians in retirement villages, Australians with disability, who are amongst the many vulnerable people who have been targeted by unscrupulous providers who have been rorting the VET-FEE HELP system. It has come at a reputational cost to vocational education and training providers. Those providers who are good providers doing high quality work providing high quality training and strong employment outcomes to Australians have had their reputation tarnished and trashed, thanks to the operations of those in it, purely for a quick buck. And we’ve seen that through the poor completion rates that many have had, the price-gouging activities; all of it unacceptable behaviour that has hurt so many. And it's come at an immense budgetary cost. Since the Gillard Government's decision in 2012 to change the arrangements, and at that stage we had loans of only $325 million being issued, it grew to in 2015, $2.9 billion worth of loans: enormous growth in the cost of the program to the taxpayer, and the cost to students and the industry.
As the flaws in this program have become apparent over the last couple of years, the Coalition Government has acted. Around 20 different reform measures were put in place during the course of 2015 and 2016 to try to stem the problems in this sector. We banned the offering of inducements; we changed the payment methodology; we capped the loans ultimately that could be provided to providers. All of those actions have made an impact. We anticipate that the 2016 figure for loans offered under the VET-FEE HELP scheme will be many hundreds of millions of dollars less than what occurred in 2015. So we've seen positive results from the action the Coalition Government has undertaken. Not only have we stemmed the growth, but we have actually ensured a reduction.
However, it's become apparent that to truly fix the VET-FEE HELP scheme we first need to axe it, that the scheme is fundamentally broken from its construction and design, and that we need to build a replacement model from the ground up. And by axing the VET-FEE HELP scheme we can be absolutely confident that we therefore get rid of the rogue providers and shonky operators from any new model without the type of legal impediments and court challenges that we've been facing as a result of our action to date. As a result I announce today that from December 31 this year, Labor's flawed and failed VET-FEE HELP scheme will be no more. No further loans will be issued under that program. We will grandfather and protect existing students who choose to opt-in so that they can complete their studies as enrolled at that time under the existing program, and they will have to complete those arrangements by the end of the 2017 calendar year.
We will bring in place a new scheme, a new scheme that has strong barriers to entry. TAFEs and public providers will be provided with automatic entry into the new scheme. However, other providers will have to meet strong and clear tests and those tests will relate to their relationship with employers, the employment outcomes, the satisfaction of their students, their completion rates, their compliance with current regulatory settings, all of which will be put in place to make sure there is a strong barrier to entry so only those providers of greatest repute make it into the new system. We will ensure the relevance of the courses that attract public subsidy. So courses that do not have strong employment outcomes should not expect to be subsidised under the new arrangement. We will be using state and territory skills lists as the baseline upon which we will put courses into the new program. Our expectation is that the test will be that any course needs to be on at least two skills lists of the states and territories to be added in. We’ll also be having a look at areas of national economic importance such as STEM skills or the agricultural sector to make sure that we have comprehensive coverage. But it's my anticipation and expectation that the list of more than 800 diplomas and advanced diplomas that are subsidised to date will reduce by more than half as a result of the measures that we’re undertaking. We will work through a proper process of consultation with industry to make sure we get that list right.
There will be new loan limits. The Labor Party went to the last election proposing one single policy change to VET-FEE HELP, which was a flat $8000 cap. We believe that’s inadequate because we are proposing a whole range of different measures to restrict who gets in, what is subsidised, and to put downward pressure on prices. But you have to recognise and accept that there are a range of different costs of delivery for different qualifications, that diplomas in business or management can be delivered far more cheaply than diplomas in agriculture or engineering. As a consequence we're setting in place three different bands of loan caps: $5000, $10,000 and $15,000. Our intention is to place courses within those caps based on the New South Wales independent pricing regulator’s analysis of cost of delivery, which will provide a baseline upon which we can make fair and reasonable assessments. There will be opportunities for providers of very high cost courses, such as aviation, to seek exemptions, but they will truly be the exemption rather than the rule. We’ll also put in place provisions for enrolment caps. Providers will be expected annually to advise the Federal Education Department of their intended enrolment numbers across different courses, and we will have the capacity to cap the number of students in those courses by those provider numbers to make sure that we constrain future growth and that where providers are not meeting standards of employment outcomes, course completions, we're able to enforce changes in a quick and rapid manner. There will be further measures in terms of student engagement that are being applied importantly to make sure that students are genuinely engaged in their studies.
This is really about building a new scheme from the ground up; a scheme that involves genuine students undertaking worthwhile study at high quality, reputable training providers. We are confident that our new model of VET Student Loans will support students to undertake studies that enhance their capacity to get a job. It will benefit students by best directing them to employment-focused and consumer-supported courses. It will support the VET sector by restoring confidence in the sector, in integrity and quality, and it will support budget repair by ensuring that over the forward estimates there will be some $7 billion less in bad loans written under this scheme, some $25 billion reduction over the next 10 years. That will be $25 billion less of gross government debt that needs to be undertaken. That will be a reduction in public interest to the taxpayer in the future and, of course, and of course importantly, it will mean $25 billion less of debt that is not likely to be repaid under the existing settings.
Our intention is to release legislation next week. I have already offered a briefing to the Labor Party. We hope that we can enjoy their support to ensure legislation passes through the Parliament quickly and effectively to get the new program in place, to bring Labor's flawed program to an end, and to give Australia the type of support for vocational education and training that we deserve and that Australians need to support the new economy into the future. Thank you and questions?
Question: Minister, you mentioned just in that last little section there the savings in public interest. I was wondering if you've got estimates of those figures in addition to the debt figures. And also the savings: are they just prospectively because you're anticipating there will be less dodgy loans or is it that you actually think that the existing pool will shrink as a result as well?
Simon Birmingham: We've seen a reduction in 2016 loan take-up compared with 2015. And so that reduction we anticipate will be in the order of hundreds of millions of dollars. Clarity on that won't be available of course until the end of the year, but based on current projections, that's where it's headed. In terms of the future savings, there will obviously be savings to public debt interest. They’re not savings that I'm able to project upon today but they will be obviously very significant savings when we are talking about a $20 billion reduction in gross government debt over the next ten years as a result of the new program relative to the old program that's put in place. Because of the accounting treatment that's applied to these loans, we don't anticipate, and there won't be in MYEFO some dramatic budget savings applied to this. I know the Labor Party went through the election campaign proclaiming that their measures would deliver enormous budget savings. In terms of the Budget bottom line, that was a hoax and a fraud on the part of the Labor Party. MYEFO will show that this has marginal cost but, of course, when you work through the practicalities of it, you can see that there will be vast savings to the taxpayer in future.
Question: Minister, why apply the strict criteria to TAFEs and publicly funded institutions when privately funded institutions are the ones that have predominantly seen the rorting?
Simon Birmingham: Thanks for that question. We have taken the decision proactively to collect TAFEs and public institutions into the new system without needing to go through the same application process. But TAFEs have not been exempt from the growth and some of the problems that we have seen in relation to the VET FEE-HELP scheme. In fact, TAFEs have been recipients of $1 billion of funding under VET FEE-HELP and have seen a 371 per cent increase in their loan volume between 2012 and 2015. I’d also note that on the latest completion data I've looked at, around half a dozen TAFE institutes around Australia have completion rates of less than 15 per cent. So, we expect that TAFEs will have to meet the same new high standards as private providers. Yes, we are giving them automatic entry into the new scheme but there are problems there that need to be addressed as well.
Question: But in terms of restricting the courses that people can get this new loan scheme for, we know that TAFEs have a very broad range of subjects. Does that mean say people who are currently in industries that have not that many jobs going will see that they’re no longer eligible for loans?
Simon Birmingham: If there is genuine demand for employment in a particular field, then I would anticipate that course will be reflected on the skills lists that the different states and territories produce already. Equally, we'll make sure there’s capacity, if there is a worthy case for us to be able to add further qualifications in future. But courses such as a diploma of fashion styling, a diploma of veterinary Chinese herbal medicine, the advanced diploma in therapeutic arts and counselling or the diploma of energy healing - can I cast my energy healing powers over all you now… those sorts of courses, I think, Australians would question the value of public subsidy going to and Australians expect that where public subsidy is going into the training courses, that that public subsidy is directed towards training courses that will maximise employment outcomes for those participants.
Question: Did you consider looking at direct business input into the lists? That might happen through the skills lists, I'm not quite sure, but did you consider some sort of consultative panel with business groups?
Simon Birmingham: The states and territories do engage with business in construction of their skills lists and as I indicated, we will consult about the exact list that we take forward and I anticipate in that consultation that we will obviously talk to leading business representative bodies to get their feedback and views to make sure we have captured the right types of programs to maximise those employment outcomes.
Question: Minister just on that, sorry, you’ve spoken about consultation going forward now, but what consultation has there been with the sector in coming up with this new and improved VET scheme?
Simon Birmingham: So the former Assistant Minister for Vocational Education or former Minister, I should say sorry, for Vocational Education, Scott Ryan, released a comprehensive discussion paper pre-election. Submissions have been received from all of the likely parties in relation to that, meetings and discussions and consultation fora were held during that process and that of course has all fed into the design of the new scheme that we’re announcing today.
Question: So will these have the same repayment rules as HELP so the income threshold and the percentage repayments and will there be a loan fee attached to it?
Simon Birmingham: Thanks Julie, at present loan fee arrangements will mirror those of the VET FEE-HELP scheme and repayment arrangements will mirror those at the overall HELP program. However, I am looking at the sustainability of the HELP program in the context of higher education reforms more generally and so there may be further measures in relation to the sustainability of HELP loans, how they are repaid, loan fee settings to come when we release responses in relation to the higher education reforms.
Question: On the question of timing, presumably as soon as the legislation could be passed would be that second week of November, the first sitting week in November. That's if there is no senate committee inquiry, for instance, and if you have the full cooperation of the Opposition. That effectively just leaves one month for all these private providers to reapply for courses to start in 2017. How is that going to affect students who might be applying now for courses to start next year?
Simon Birmingham: We will start the application process for new entrants into the new program prior to the passage of legislation to make sure that we provide adequate time for assessments to be undertaken. I'm very mindful that there is a time constraint period here, but I'm also very mindful that it's important to act, act with urgency to bring about a new scheme that provides the type of protections that we're talking about.
Question: So students who are applying for courses might be applying now for courses, they can be confident that they’ll get a [indistinct] loan?
Simon Birmingham: We will make sure there is advice available to students as well as to providers and others concerned about these changes. Obviously as I said, existing students under the current VET FEE-HELP scheme will have the option to opt in to continue their studies and see them out by the end of next year. For new students looking to enrol in subjects from next year, we will be making sure that the lists of eligible courses are available in the very near future and hopefully we will be able to progress those applications from providers as quickly as possible. While, of course, they can have confidence the public providers will be in the system for next year.
Question: Are the loan caps going to prove problematical in that providers will just go to the cap? So there is a lot of TAFE courses you can do at the moment that are valid courses but they might be 3,500 or 3,800, will cap loan limits just, actually just push them up to the $5,000 loan?
Simon Birmingham: Well I think what we’ve seen is of course enormous triple digit growth in the terms of the fees that many providers are charging. You can go and do a diploma of salon management that costs more than $30,000 now. I'm confident that will come down and come down dramatically to align with one of the loan caps, dependent upon where that is exactly fixed in in those arrangements. There’s always a risk when you cap a loan in that nature that some will move up but this is still a competitive space, competitive between TAFE and quality private providers who will be admitted to the scheme and so I hope and trust that that competition will, in tandem with our new loan caps, keep downward pressure on prices more effectively than we’ve seen to date where vulnerable Australians have been targeted with very high and inflated prices.
Question: Also I understand that Certs III and IV [indistinct] which providers can offer those?
Simon Birmingham: Well the overall arrangements for registered training organisations are administered, as you would know by the Australian Skills Quality Authority. We have around 4700 registered training organisations in Australia but only about 270 of them are operating under VET FEE-HELP scheme. So the vast majority were going about their business, some of them with access to state government subsidy or support, the vast majority actually operating purely in the fee-for-service market and research from [indistinct] the national vocational education and training research body indicates very high level of employer satisfaction and student satisfaction with those fee-for-service training providers so I think in that market we can have confidence that people are doing the due diligence in making sure they’re happy with what they’re paying for whether that’s the employer paying the bill or the student paying the bill. It’s in relation to the area of public subsidy that the rorting has been occurring, that’s a much smaller cohort of training providers and we have to make sure that in future, those training providers have such strict conditions put in place around them that we can have absolutely confidence there won’t be a repeat of these problems. That’s why pending the VET FEE-HELP scheme and starting again building from the ground up a new model is much more effective than continually trying to fix the old broken model.
Question: Sorry, can you just explain the opt in idea for people who are in the existing scheme, what will actually happen to them?
Simon Birmingham: So in around February next year, we will have expected that students who want to complete and continue their studies under VET FEE-HELP will have registered with the department to indicate their desire and intention to do so. If they don’t do so then the availability of further loans under the VET FEE-HELP scheme to those students will cease and if they want to enrol again, they’ll have to enrol under the new program.
Question: And if they’re in a– if they’re in a course that isn’t going to be accredited under a new scheme, what happens there?
Simon Birmingham: They will still be grandfathered in, so any existing student who choses to complete their studies in a course under the current scheme, will be able to do so. Thanks everybody.