Tertiary Education: A revolution to what end?

Brendan Nelson's revolution is the biggest shake-up of Australian universities since the Dawkins reforms of the late 1980s, perhaps since mass higher education began in the 1960s.

The Labor Party's John Dawkins created larger and more business-like universities, selected fees and the Higher Education Contribution Scheme (HECS), and ramped up enrolments by 50 per cent. With incentives to grow so as to maximise public and private incomes, universities took on an ever-widening arc of teaching, research and service functions. New universities found themselves in an unfamiliar world of research training, venerable "sandstones" sold themselves to thousands of overseas students. All were competing against each other but were protected from outside competition by protocols confining funded HECS places - and the title "university" - to the established comprehensive institutions.

The Dawkins' assumptions have been removed by Dr Nelson. His system is not about uniformity, growth and access. The one-size-fits-all formula no longer applies. Access is scarcely discussed. It's all about mission diversity, status differentiation and debt.

The crucial reform

Universities now set the level of HECS, ranging from zero to 25 per cent above 2004 levels. They can enrol up to 35 per cent of students in each course on a full-fee basis. Fee-paying students can draw on FEE-HELP to cover the cost. This is a student loans system functioning like HECS. Debts are carried forward and adjusted for inflation, with no interest rate. Repayments are income contingent, beginning only when earnings reach $35,000 a year (2004-2005). FEE-HELP can also be used for fees in accredited private higher education institutions.

Later the Government can draw together full-fee and HECS strands by lifting the limits on maximum HECS, FEE-HELP places and FEE-HELP debt, and reconfiguring the publicly subsidised HECS places as merit scholarships. Presto! A unified full-fee student market.

The crucial reform is income-contingent FEE-HELP. This makes the full-fee market viable. It also makes viable a large American-style private sector, with small specialist institutions and elite "Ivy League" private universities subject to government approval. FEE-HELP is the most important university policy since the abolition of fees in 1974.

The long-term costs of FEE-HELP might be unsustainable. The Government carries the costs of the sub-commercial interest regime, and incomplete repayment or default. Many graduates won't earn enough over their lifetimes to repay all of their debts, and others will go overseas. Meanwhile, though, FEE-HELP is transforming the sector.

Entry scores for full-fee places are below HECS places. Those students unable to secure their optimum HECS place (i.e. most students) can secure their preferred course and or university with FEE-HELP assistance by going deeper into debt.

The redistributive effects are likely to be reinforced by the introduction of a British Research Assessment Exercise (RAE)-style system for allocating public support for research based on performance. This approach involves detailed disciplinary assessments and emphasises research quality as much as quantity. Judging by the British case, it would distribute a large part of public university funding this way, strengthening research in strong universities, with some others pushed towards a teaching-only role.

The minister has also flagged his desire to lower the barriers to market entry by broadening the category "university" to admit teaching-only domestic and foreign private providers. He also wants to take over the legislative functions of the states in higher education, enabling him to more directly control market entry, research, teaching and industrial relations. More than Mr Dawkins, Dr Nelson is both market deregulator and administrative centralist.

What it means

Universities that try to be all things, as in the Dawkins system, now risk dissipating research potential and consigning themselves to bulk teaching in the bargain basement. The high-end game is to build research performance and reputation and to maximise student ENTERs, raise prices, expand full-fee revenues, and further build research.

A positive feature of the Nelson system is that academic capacity will be more instrumental than business acumen in shaping institutional success (except in the lower echelons of the market). The downside is that Dr Nelson's system is patrician. Research-based academic capacity is more scarce and tied more closely to university status. In a global knowledge economy, this might be the wrong policy move.