How the National Partnership on Skills Reform Helped Create VET FEE-HELP Abuses

23rd November 2015

Ever wondered how the Australian Vocational Education and Training (VET) system arrived at its present state of affairs? There are various contributing factors, but a key reason is the National Partnership on Skills Reform.

The National Partnership on Skills Reform is an agreement reached between the Commonwealth and State and Territory Governments under the revised COAG Framework adopted during the period of the first Rudd Government.

In 2009 the Commonwealth/State funding arrangement for VET was collapsed into one single National Agreement on Skills Reform, (following the process of rolling in all previous Commonwealth State Agreements in Education, Housing, Health and the like) made as a payment from Treasury to State Treasuries rather than through the Education and Training Portfolio.

To drive ‘reform’, the idea of time limited National Partnership Proposals (NPP) was introduced. This was to be the vehicle for special initiatives to be funded, on a time-limited basis.

In 2009, the Commonwealth developed an NPP for VET that proposed the introduction of competitive funding arrangements into training. This NPP did not proceed due to the reluctance of the States and ACTU pressure not to extend the reforms of the Victorian Brumby Government into the other States. The exposure of TAFEs to competition, notably from community, private and employer-operated Registered Training Organisations (RTOs) was strongly resisted.

As a result the competition proposals only proceeded in Victoria, which was designated a ‘reform State’ in the associated legislation. Victoria contributed to the loan cost for VET FEE-HELP and grew its total quantum of VET funding to meet the demand for training.

However, in 2012 a new National Agreement on Skills Reform (covering the period 2012/13 to 2016/17) was finalized between Commonwealth, State and Territory governments. It emphasized a new national entitlement to government sudsidised training to the Certificate III level; competition in training provision; and expansion of the VET FEE-HELP Scheme.

It sought to improve accessibility and equity in training by:

“improv(ing) the accessibility of higher level qualifications and work(ing) with the Commonwealth to enhance a quality framework including state and Commonwealth quality requirements for RTOs to access ICLs”

The Commonwealth agreed to remove the credit transfer requirements that had been part of the original VET FEE-HELP legislation and a trial of Vet Fee Help was instituted for Certificate IV qualifications (since abandoned.)

VET FEE-HELP was extended to support government-subsidised training and the 20% loan fee was removed in state subsidised courses but not in full fee and privately funded training. It was further decided to eliminate any ‘gap fees’ for students.

The result is the national training system that we see today, including the rapid growth in VET FEE-HELP.

Governments have been the architects of the current VET FEE-HELP growth through policy settings that have enabled States and Territories to:

  1. Cost shift to the Commonwealth (e.g. Queensland no longer funds higher level qualifications), and to students (through ‘credential creep’ and loans to students through Vet Fee Help for National Training Package Diplomas),

  2. Gain the benefits offered by the Commonwealth while not meeting their competition commitments (SA has closed its training market to TAFE SA only; NSW restricts its Smart and Skilled Funding to its TAFE and a restricted number of RTO’s),

  3. Reduce their overall financial investment in training (Noonan et al 2014),

  4. Allow their TAFEs to be major exponents of on-line training, targeted at management and commerce studies, with completion rates of less than 10%. 10 of the top 15 online training course providers are State–owned TAFEs, the largest NSW TAFE. (Acil Allen, October 2015)

The Commonwealth has failed to properly monitor and control the growth in VET FEE-HELP which has consequentially seen the:

  • Emergence of brokers offering inducements and receiving payment for no training delivery

  • Growth of 5 large privately owned on line deliverers

  • Escalation in prices of Diploma qualifications

  • Elimination of any upfront payment by students to moderate demand

  • Exorbitant growth in Management and Commerce studies and

  • Disastrous completion rate (7%) in online courses

Future policy responses by government need to deal with the root causes of the current growth in VET Fee Help and not further exacerbate the issues caused by the current policy settings.

Jim Davidson
Senior Advisor