Producing Jones's Knowledge Nation will be a costly affair

The Knowledge Nation Taskforce's comprehensive agenda for upskilling Australia was widely welcomed yesterday. But the ultimate fate of the task force's report depends on a short passage near the end of Kim Beazley's speech at its launch.

"Reforms will be implemented as and when budgetary circumstances allow," the Opposition Leader said. "We will not be undermining fiscal responsibility in the delivery of these essential reforms."

We've had many reports before on why we should spend more on education and "knowledge" activities.

The task force's report is more wide-ranging than others, but that only makes the financial problem larger.

There are no costings provided, but they would be enormous. Doubling R&D as a proportion of GDP, one of the ideas to which Beazley committed himself, is alone a multibillion-dollar proposition.

And this is before we even start on improving school retention rates, increasing access to high-bandwidth services, or making Australia a world leader in biotechnology - all of which find favour with the Opposition Leader.

Financing, though, is the key issue and, unless we get some progress on that, the task force's volume will be shelved along with all its predecessors.

People associated with the ALP have given the issue thought. Professor Simon Marginson, who collaborated on an earlier ALP-aligned report into knowledge expenditure, points out that Australia has a lower tax burden than other OECD countries, and particularly its European members. He believes there is room for tax increases. But Kim Beazley's political opponents are struggling in the polls at least partly because of perceptions that the GST increased tax.

Should he win office, he is not likely to want to replace them in the electoral doldrums by increasing tax.

Earlier this year, Labor's former spokesman on education, Mark Latham, released his latest book, What did you learn today?

His solution to the financing problems is to "defund the old economy" by abolishing industry assistance and reducing what he calls "passive welfare".

With the money saved from these areas we could substantially increase investment in education and research.

Latham's idea has policy merit, but it would face enormous political resistance, as governments from both political parties have experienced reforming these areas over the past 20 years.

A third option is to open education to greater private investment. At the moment we have an odd situation. Higher education is one of the few things that an Australian teenager cannot invest his or her money in.

HECS is really a tax rather than an investment, since the money goes to the Government and not to the universities.

So university students are free to invest in almost anything but the one thing that is most important to their economic future, their human capital.

The Group of Eight, representing Australia's eight research-intensive universities, is listed as having put in a submission to the Knowledge Nation Taskforce. It is a pity it did not adopt the Group of Eight's idea for what is sometimes known as "top-up fees". This would allow universities to charge their students more for their courses, with the money repayable through an income-contingent loan, as with HECS.

The difference is that that the money would go to the university rather than the Government.

The Government plans such loans for postgraduates. It seems highly anomalous to prevent undergraduates from similarly investing in their own degrees.

Private schools should be seen in a similar way. Subsidising these schools lets parents invest more than they could within the government-controlled system.

While some of what parents pay does not increase net investment in education, as it replaces government subsidy with parental subsidy, even this is of value when looked at in the comprehensive context of the Knowledge Nation Taskforce.

A key to financing grand visions like the one it contains is to get private individuals or groups to finance those expenditures which provide direct returns on investment.

Another key is to focus government spending on genuine public goods, rather than private goods that might have some positive spillover effects for the rest of the community.

The task force makes a good case for investing more in knowledge, but we know that fiscal responsibility as currently practised will deliver too little, too late.

The important debates should be about tax, spending priorities, and letting the private sector finance more.