Hon. Steve Maharey

7 November 2001 Speech Notes

Funding the Strategic Approach: the Commission’s proposals and the Government’s initial response

Address at the release of the Tertiary Education Advisory Commission’s fourth report, Shaping the Funding Framework. Resolution Room, James Cook Hotel Grand Chancellor, Wellington.

Introduction

Welcome to the end of the beginning.

Last February some of those here gathered at a press conference where I released for discussion the draft terms of reference of a new body called the Tertiary Education Advisory Commission. Today that Commission is releasing its fourth and final report, completing a 480-page, four-volume body of work.

Added together the Shaping reports - covering “Vision’, “System’, “Strategy’ and “Funding Framework’ -- form a comprehensive rethink of tertiary education policy, focusing on a more strategic approach. In terms of the scale of the undertaking, its breadth of coverage across the entire system, and the sheer ambition of its vision, the Commission has now completed the most significant review of tertiary education since the Hawke Report / Learning for Life sequence in the late 1980s.

And change is needed. We must ask the tertiary education system to play a vital role if we are to succeed as a knowledge nation. This was eloquently expressed by Sean McDonagh last Friday at APNZ’s Skilling the Nation conference, where, in relation to the remarkable recovery of the Irish economy, he said:

“In its partnership with economic life our educational and higher educational system is reacting to a changing growing economy which is at once making strong demands in relation to its skills and knowledge needs and providing additional resources to enable these challenges to be met”

The current funding system is inadequate to this task because it focuses solely on student enrolments. Other vital elements such as lifting achievement levels, responsiveness to economic and social needs, and the quality of teaching and research must also be taken into account in the future.

The Tertiary Education Advisory Commission is also notable for another reason. It was originally established with a view to it being an ongoing body to complement the existing Government bodies overseeing tertiary education. It was the Commission itself in Shaping the System, who in a rare moment in the history of government bodies and quangos, recommended their own abolition.

They recommended they be replaced by a Tertiary Education Commission with full operational functions. As you know, this is a recommendation we’ve taken up. I’m pleased to be able to acknowledge here today Dr Andrew West and Associate Professor Kaye Turner, who as the Chair and Deputy Chair of the new Commission (in its current transitional form) are the living embodiment of the changes that the Advisory Commission has set in motion.

Andrew and Kaye aren’t the only ones picking up the baton, though. I’d also like to acknowledge the various members of the Charters and Profiles Working Party. I have just received your report and I thank you for your contribution to making these changes a reality. Thanks also to everybody who has made a contribution to informing our work on the Tertiary Education Strategy, which will be released in draft form next month.

Let me now return to the reason we’re here today: the much-anticipated Shaping the Funding Framework. I’d like to start by setting the report in the context of the decisions the Government has already taken about previous Advisory Commission recommendations. Then I want to outline the process for the Government response to this report. In doing that I’ll indicate the key areas that the Government is looking for feedback on initially, and give some preliminary areas where the Government has already taken a view.

The Tertiary Reforms - the story so far

I’ve already alluded to the very strong record that the Advisory Commission has of having its recommendations implemented by Government. Its first set of proposals, in Shaping the System, were principally:

- A Tertiary Education Commission (TEC);

- Charters to be extended to all publicly-funded providers and ITOs;

- A new accountability document called profiles;

- Different parts of the system to be distinguished through functional classifications; and

- The establishment of centres of research excellence.

Government has agreed to all of these, with the sole exception of the functional classifications, which I believe the Charters and Profiles Working Party is advising against. Even there, we are clear that the TEC will need to develop some operational policy that distinguishes the charter and profile requirements of various parts of the system from each other.

In this year’s Budget, we committed $40.6 million operating over four years and a capital contingency of $20 million to establish Centres of Research Excellence. I know many of you have already submitted applications for this initiative to the Royal Society. We have also provided $35 million for a one-off Strategic Change Fund to assist public institutions to adapt to the new environment - a move that prefigures this latest report’s proposed ongoing Strategic Development Fund.

Next month I hope to introduce a Tertiary Education Reform Bill into Parliament to amend the Education Act and the Industry Training Act. It provides for a Tertiary Education Commission as a stand-alone crown entity, incorporating Skill New Zealand. It will provide the framework for a system of charters and profiles for all publicly-funded providers and ITOs.

It will also pick up a number of other recommendations from Shaping the System. Any moves to establish a new institution, change the institutional status of an existing institution, merge institutions, or allow the use of a protected term will now be subject to a desirability assessment by the Tertiary Education Commission as well as the present quality assessment by the New Zealand Qualifications Authority. Once these provisions are in place, the Education (Limiting Number of Universities) Bill that is currently before Select Committee will be allowed to lapse.

The Responsible Minister will have the ability, if good cause can be shown, to establish a specialist college or institute as a tertiary education institution. Colleges of education will remain as a separate category. There will not be a separate “University of Technology’ category.

The Tertiary Education Reform Bill will also be making amendments to the Industry Training Act reflecting Government decisions arising out of the Industry Training Review. That review identified a number of initiatives building on the actions that the Government has already taken to lift investment and performance in vocational education and training

The Government has also been receptive to the Advisory Commission’s third report, Shaping the Strategy, which proposed:

- A Tertiary Education Strategy;

- A Tertiary Education Scoreboard; and

- A desirability test as the prerequisite for public funding, based upon the priorities set out in the Strategy.

We have already begun talking to external and internal stakeholders about the strategy and we have received a number of written submissions setting out possible priorities, for which we thank you. We intend to release a Tertiary Education Strategy, in draft form for discussion during December with a view to finalising it in April. The Strategy will include a Scoreboard to evaluate progress and will form the basis for the Government’s Statement of tertiary education priorities, which will be a statutory document informing the work of TEC, including desirability decisions.

Process for the Government Response to Shaping the Funding Framework

All in all, the Advisory Commission has had a record of having its advice largely implemented that most Government think tanks, advisory groups and review groups would envy. What then will be the process for making decisions in response to this final report?

We will be largely be reserving our position until we have had a chance to receive submissions from the sector and stakeholders. We have set a date of 31 January 2002 as the closing date for this. It is important that we press on so that changes can begin to be put in place for the 2003 academic year.

A slightly different process will be undertaken with regard to the way the report impacts on the Training Opportunities and Youth Training programmes of foundation education. I have already established a Ministerial Review Group to carry out a first-principles review of these programmes. Those recommendations in Shaping the Funding Framework that focus on foundation education, as well as the implications of more general recommendations for foundation education, will be referred to the Training Opportunities/Youth Training Ministerial Review Group. The Review Group will be releasing a discussion document next month and the closing date for submissions on this will also be 31 January 2002. The Review Group will provide a final report to me in March.

At this stage it is our intention to release decisions on the funding principles in response to Shaping the Funding Framework as part of the finalised Tertiary Education Strategy in April 2002, and then provide further details as part of the 2002 Budget.

The Government will be listening carefully to feedback and we hope the report will be considered carefully and widely because it contains a large number of recommendations which will allow us to take a strategic approach to tertiary education and training. This is vital if New Zealand is going to succeed as a knowledge nation.

Shaping the Funding Framework advances some concrete proposals for the design of the new funding framework we intend to implement for the 2003 academic year. The new framework will be phased in, which will keep compliance costs down and help the tertiary sector manage the transition.

Key Areas for Consideration

Shaping the Funding Framework is a substantial and wide-ranging document with 77 different recommendations. It’s important to consider each of them on the merits, rather than trying to accept or reject the entire report wholesale.

Nevertheless, I realise everybody has limited time and so it would be helpful to indicate the aspects of the report to which the Government is likely to give consideration first. This will allow submissioners to focus their efforts on these areas in the first instance.

Let me outline then what I see as the “first order’ decisions about a future funding framework.

A More Integrated Funding System

Currently we have a number a distinct funding systems in tertiary education, the primary ones being the EFTS system, the Industry Training Fund, the Training Opportunities and Youth Training programmes, and a variety of arrangements for adult and community education. The Advisory Commission has advocated the development of a more integrated approach to the funding of tertiary education, drawing upon the best aspects of each of the current funding approaches. The Government is sympathetic to these aspirations and intends to investigate this further.

Obviously, nobody wants to adopt a “one size fits all’ approach. I think there’s emerging consensus on an approach of as much integration as possible, with as much distinction as is warranted to preserve the valuable features of each part of the system and the outcomes that the Government desires. The question is simply what that means in practice.

The Government tends to agree with the view in the report that Adult and Community Education be funded separately for the time being, but will await submissions before finalising a decision.

Also, as I’ve mentioned before, the extent to which (and manner in which) Training Opportunities and Youth Training are to be integrated with the other parts of the system is a question that I am referring to the Ministerial Review Groups. I invite those of you who wish to make submissions on this matter to do so to them, though I’m sure it will also be factor in many of the more general submissions.

Greater Steerage

The second key area is one of incorporating a greater element of steerage and alignment with nationwide priorities into the funding of tertiary education, while balancing that with the need to be innovative and responsive to immediate stakeholders. As you will be aware, this is an area that the Government has expressed a great deal of interest in.

We will certainly investigate further having specific funding for strategic initiatives, and including a greater element of steering into the funding formula. We invite your feedback on the mechanisms that the Advisory Commission has put forward for this task, particularly the Priority Index and the Strategic Development Fund, as well as any proposals of your own that you wish to advance.

Separation of Teaching and Research

Thirdly, the report proposes separate funding streams for funding and research, with the current enrolment-driven “research top-ups’ being reconfigured into a performance-based research fund.

The Government will investigate further a more performance-related approach to the funding of tertiary research, and welcomes comments on the performance-based research fund proposal.

Accountability for Quality and Performance

Fourthly, the report encourages a stronger emphasis on accountability both for quality and for performance in terms of outcomes. The Government will investigate further the introduction of accountability measures for quality and performance, and seeks further discussion on the Advisory Commission’s recommendations in this area.

Finally, I would like to emphasise that the Government, along with the Advisory Commission, recognises the need for an evolutionary approach that minimises compliance and transaction costs. The tertiary education system is a huge and complex organism and it will not be turned around overnight. We need to think carefully about what we intend have in place for 1 January 2003 and what needs to be phased in more gradually.

Some Initial Government Responses

There are also some areas where it is important for submissioners to be aware that the Government has taken a viewpoint right from the start. In particular there are a small number of recommendations that the Government has decided to make its opinion clear on now to avoid confusion. These are:

- Discontinuing the current student loan interest write-off policy. Making tertiary education more affordable was a key pre-election commitment made by Labour and the Alliance in response to widespread public concern that cost was becoming a significant barrier preventing potential students enrolling;

- Reallocating existing funding to public tertiary education institutions for support services for Maori and Pacific students. Funding currently allocated to improve responsiveness to Maori and Pacific peoples will continue to be used for this purpose but the Government wants to discuss if it can be allocated more effectively;

- Discontinuing current base grants for all tertiary institutions. The Government needs to investigate the best means to secure tertiary education’s contribution to regional development and remains committed to the retention of base grants for regional institutions in the absence of more effective mechanisms; and

- Automatically adjusting funding rates by a Tertiary Education Price Index. The Government is more interested in the alternative idea of providing greater certainty by signalling funding rates in advance, which has also been advanced by the Advisory Commission.

Also, the Government is not persuaded that the affordability of tertiary education can be ensured without active measures to keep fee levels down. We will be consulting with students, staff and institutions to develop a sustainable approach to fee-setting for 2003 and beyond.

Other recommendations about student support will be considered as part of the Government’s response to the Report of the Education and Science Select Committee Inquiry into Student Fees, Loans, Allowances and the Overall Resourcing of Tertiary Education.

In relation to proposals for a relatively extensive rationing by merit of all under-graduate degree places, we are encouraging a broad-ranging discussion on the best ways to ensure the effective use of national resources and to encourage learners to choose the educational pathways that most suit their needs.

I will be making further announcements over the next few days on the Government’s view on a number of other issues.

Conclusion

The next few months will be busy ones for us all. Over the next month the Advisory Commission is planning a series of meetings with stakeholders across the country to discuss this report, and public submissions to the Government are now being invited.

Next month the Government will be releasing the draft Tertiary Education Strategy for discussion, and also introducing the Tertiary Education Reform Bill. I am currently considering the report of the Charters and Profiles Working Party. And very soon we intend to call for expressions of interest for membership of the board of the Tertiary Education Commission.

These are exciting times for tertiary education and also demanding ones. I thank all of you who have contributed your thoughts and ideas to the process of moving to a more strategic approach.

In a little over a year the Tertiary Education Advisory Commission has made an outstanding contribution to the reform of New Zealand’s tertiary education system. I want to thank them for their hard work and commitment to rebuilding a strong, quality, focused tertiary education system. In particular I want to note the considerable contribution made by Hon Russell Marshall and his predecessor as Chair, Norman Kingsbury.

The Advisory Commission has consulted widely in the preparation of its four reports. This will help ensure that the system we implement has widespread support. I have outlined some indication of the Government’s initial repoonse to their ultimate report today. I look forward to hearing your own initial responses.

ENDS

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