VET Fee and Funding Review

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Recommendations

In the VET Fee and Funding Review the Essential Services Commission has made 43 recommendations, which are listed in the order they appear in the report. Each recommendation needs to be understood in context with the respective chapters in Volume Two of the Review.

The recommendations are broken up into their relevant chapters from the Review:

Chapter 4: Eligibility for a government subsidised training place

Recommendation 4.1

The Government should collect data on all domestic students undertaking VET qualifications (including from providers that offer only full fee-for-service courses) to provide decision makers with a more complete picture of the sector and the training being undertaken.

Recommendation 4.2

The Government should improve the availability of information to students on career paths, training outcomes, employment opportunities, and skill shortage areas. In doing so, the Government should consider the accessibility of information, how it could be improved and the appropriate roles of industry, training providers, employers and the government. Information coordinated and available at a national level should also be considered.

Recommendation 4.3

The Government should improve the availability of information to students on the VTG, including the difference between subsidised and full fee places, and the consequences of training for future access to subsidised places. In doing so, the Government should consider the accessibility of information, how it could be improved, the timing of information provision, and the appropriate roles of training providers, employers, agencies like Job Services Australia and the Government.

Recommendation 4.4

The Government should monitor and publish information on the training being provided to identify trends and work with industry to identify any areas of skills under- or over-supply.

Recommendation 4.5

The Government should treat trainees and apprentices consistently with other students under the VTG.

Recommendation 4.6

The Government should review the courses and qualifications on the foundation skills list after the national foundation skills training package has been developed.

Recommendation 4.7

To be able to assess the impact of the VTG on VET participation the Government should conduct a survey during the next peak enrolment period (end of 2011 to start of 2012) to gather information on those people who are ineligible under the VTG, including the demographics of this group, whether they enrol in study, and what were the reasons they were seeking to enrol in the qualification for which they were ineligible.

Recommendation 4.8

The Government should revise the operation of the VTG so that VCE, VCAL and VET undertaken in school is not taken into account for the purpose of determining whether a student is up-skilling.

Recommendation 4.9

The Government should consider allowing people whose highest qualification is between 7 and 15 years old access to a partially subsidised training place for enrolment in a qualification at an equivalent level.

Recommendation 4.10

The VTG should be expanded to provide people with a VET qualification that is greater than 15 years old access to a government subsidised training place for enrolment in a qualification at an equivalent level.

Recommendation 4.11

The pool of available eligibility exemptions should be allocated directly to students by Skills Victoria. However, should the Government decide that providers should retain administration of exemptions, the Government should provide additional guidance on how they should be allocated (e.g. by clarifying the objectives of the exemptions process).

Recommendation 4.12

If the exemptions continue to be administered by providers, exemptions should be allocated twice a year — reflecting peak enrolment periods (in proportion to enrolment numbers between these two periods).

Recommendation 4.13

If the exemptions continue to be administered by providers, the available funding should be allocated to providers based on market share of training in the preceding 12 month period.

Recommendation 4.14

If the exemptions continue to be administered by providers, the Government should move toward allocating exemptions to training providers based on value, rather than a defined number of places. Appropriate data reporting and tracking systems would need to be in place.

Recommendation 4.15

As soon as is practicable, the Government should remove the VTG’s exemption arrangements, and replace them with better targeted concession arrangements.

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Chapter 5: Tuition fees

Recommendation 5.1

Hourly tuition fees should continue to be set on the basis of a lower government subsidy for higher level courses, unless an independent cost and pricing review indicates a more suitable basis for revising the fee structure (see Recommendation 5.2).

Recommendation 5.2

The maximum hourly tuition fee rates and the fee structure should be revised (in conjunction with any appropriate revision of subsidy rates) following an independent cost and pricing review to determine the cost of provision (see funding recommendations).

Recommendation 5.3

The Government should adjust the maximum tuition fees for apprentices and trainees with the aim of creating greater consistency and alignment with the fee structure that reflects public/private benefit and is based on qualification level.

Recommendation 5.4

Maximum hourly tuition fee rates should be retained only while there is limited competition in the VET sector. Over time, in areas/courses where greater competitive provision can be verified, the maximum hourly rate should be increased and eventually removed (see Recommendation 7.1).

Recommendation 5.5

After the expiration of the current tuition fee schedule at the end of 2012, maximum hourly tuition fees should be indexed, annually.

Recommendation 5.6

Maximum and minimum category fees and the annual cap should be removed.

Recommendation 5.7

Concession fees should be based on a maximum hourly rate that is a specified percentage of the maximum tuition fee rate. Providers should be free to compete on price and charge all students below the maximum hourly rates specified.

Recommendation 5.8

The Government should reconsider the need for concessions where students have access to VET FEE HELP.

Recommendation 5.9

The Victorian Government should commence negotiating with the Commonwealth Government about the Commonwealth assuming responsibility for the administration of concession arrangements for students enrolling government subsidised VET.

Recommendation 5.10

The Victorian and Commonwealth Governments should consult with providers to improve flexibility of VET FEE HELP arrangements.

Recommendation 5.11

The Victorian Government should consult with the Commonwealth Government about the extension of VET FEE HELP to vocational graduate certificate and graduate diploma students.

Recommendation 5.12

The Victorian Government should consult with the Commonwealth Government about extending VET FEE HELP to Certificate IV qualifications (subsidised and full fee) or alternatively nominated Certificate III and Certificate IV qualifications.

Recommendation 5.13

The Government should move toward fully reimbursing concessions based on the actual fees charged by providers to non-concession students. Under this arrangement, providers would invoice the government for the amount of revenue foregone.

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Chapter 6: Funding VET delivery

Recommendation 6.1

The Government should retain the existing mechanisms of Student Contact Hour, Weighted Training Hour and base hourly funding rates to allocate funding to providers under the Victorian Training Guarantee.

Recommendation 6.2

A cost and pricing review (including a survey of TAFEs, ACFE providers and for private for-profit RTOs) be undertaken as soon as practicable to update the parameters used in the current Student Contact Hour Model (including base funding rates and Weighted Training Hour funding models).

Recommendation 6.3

Base hourly funding rates should be indexed after the final 2012 funding schedule has been implemented, with an appropriate indexation factor (including productivity adjustment) to be determined following further review of costs and market developments.

Recommendation 6.4

The base funding model should continue to be based on outputs (i.e. the Student Contact Hour).

Recommendation 6.5

The cost and pricing review (Recommendation 6.2) should include an assessment of the cost structures faced by training providers to assess whether funding payments could or should be better aligned to the costs incurred.

Recommendation 6.6

The current system of funding in arrears should be retained, while Skills Victoria provides training providers with more administrative guidance in order to address their concerns in relation to receiving payments on time.

Recommendation 6.7

The cost and pricing review (Recommendation 6.2) should attempt to identify the spread of costs that are associated with teaching students of different capabilities (including higher needs or disengaged learners).

Recommendation 6.8

The issue of thin markets should be addressed outside the fee and funding model - for example, by using a system of incentive payments (see Recommendation 7.5).

Recommendation 6.9

The gap in base rate funding rates between TAFE and non-TAFE providers should be progressively closed over the next four-year funding agreement.

Recommendation 6.10

A review be undertaken of the funding and corporate arrangements of publicly owned training providers (including TAFEs, CAE and AMES). This review should: (i) provide a clearer articulation of the role of publicly-owned training providers; (ii) consider how funding and corporate arrangements might be changed to promote greater transparency and accountability of funds; and (iii) consider whether direct funding should be provided to fund any community service obligations met by public providers.

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Chapter 7: A more competitive pricing model

Recommendation 7.1

A market oversight body, independent of government, be established to monitor the degree of competition within different sections of the VET market (by course and/by region).

  • Where the independent market oversight body ‘declares’ a market (or sub-market) to be competitive, there would no longer be a maximum cap on tuition fees, and providers would be free to compete on price.
  • Where markets are not declared, the independent market oversight body would determine a ‘benchmark price’ for VET courses.

Under both scenarios, the level of subsidy would continue to be determined by the government – although the independent body could provide advice to inform the Government’s decision making. 

Recommendation 7.2

All providers operating within the Victorian Training Guarantee should be required to publish: ((i) the full price of the course – i.e. the full fee-for-service price that would be paid by a student who does not qualify for a subsidy; and (ii) the tuition fee for students who meet the VTG’s eligibility criteria. In addition, providers should be encouraged to provide information and links about additional forms of assistance (e.g. concessions).

Recommendation 7.3

To support efforts to improve the quality of outcomes within the VET system, the Government should investigate options to improve publicly available information on course outcomes (e.g. completion rates, student satisfaction measures, and post-study outcomes), taking into account new Commonwealth arrangements through the Australian Skills Quality Authority.

Recommendation 7.4

The Government should review the most efficient form of arrangements to resolve disputes between students and providers in the VET system, and to ensure that students are adequately protected. This should include an assessment of an industry-funded, complaints-based, industry ombudsman-like scheme.

Recommendation 7.5

Demand-side interventions designed to promote participation in VET (e.g. attracting specific cohorts, or encouraging students to undertake specific types of training) should be addressed through a system of incentive payments that are independent of the VET fee and funding model.

Recommendation 7.5

Demand-side interventions designed to promote participation in VET (e.g. attracting specific cohorts, or encouraging students to undertake specific types of training) should be addressed through a system of incentive payments that are independent of the VET fee and funding model.

Matters for further consideration

  • There would be value to a clear articulation of the principles by which parameters in the fee and funding model are determined, and for these principles to be applied transparently and consistently across the entire spectrum of VET qualifications.
  • The role of the proposed independent market oversight body could be expanded to include monitoring and investigating anti-competitive behaviour by providers.
  • Policy-makers should review whether there is a ‘maximum’ or ‘optimal’ level of flexibility that should be allowed in the design of training packages.
  • The Victorian and Commonwealth Governments need to investigate better (non-distortionary) policies in the service delivery ‘overlap’ between the VET and higher education sectors.

Suggested transition path for key reforms

The move to a more market-based and competitive VET system will clearly take time, and require a staged implementation of recommended reforms to establish the conditions that are necessary for more efficient pricing. As such, the Commission envisages there will be a transition path to a competitive, market-based fee and funding model. This will require the appropriate sequencing of reforms identified in this review.

The following figure attempts to summarise, at a very broad level, some indicative phasings of the key reforms identified in the review. The reforms have been categorised into:

  • those dealing with pricing issues (i.e. fees and funding)
  • those that address issues of eligibility (including the process of exemptions)
  • measures to improve market information
  • areas of ‘structural change’ to VET arrangements.
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