Bums on Seats

In some tertiary education it has been “Never mind the quality: feel the width”.

Listener: 9 April, 2005.

Keywords: Education;

Third party funding occurs when neither producer nor consumer pays for the economic trans-action, but some outsider does. This opens up the possibility that the two beneficiaries from the funding will thwart the funder’s purposes. So funders typically impose additional rules, to ensure their money is spent as intended.

For instance, major health care is financed by the state or by private insurance. Either is vulnerable to the patient and/or the health professional mis-using the funds, say, for treatment that is unnecessary or by overcharging. So the third party sets criteria for that which is to be funded.

We have been much less careful with tertiary education funding. There is a long history of third party funding without the tight controls of the health services. Universities were once given block grants. On the whole, they did not misuse the funding. True, some of the staff were somnambulant, putting little effort into teaching, research or public service, and some courses were – well – low quality. But the universities supplied world standard degrees, if not education (as the Reichel-Tate Royal Commission once characterised it).

The system succeeded for three reasons. First, our universities tried to imitate the best overseas ones, as well as they could (for their funding was never generous). Second, most of the staff aimed for international professional standards. Third, the block grant system, for all its faults and inequities, did not give as many opportunities to cheat, especially as academics fought bitterly over the limited resources within universities, using quality as one of their criteria.

About 15 years ago this arrangement started to break down. Today’s university third party teaching grants are largely related to the student numbers (aka “bums on seats”, the crudity indicating how crude the method is). Other tertiary institutions such as polytechnics and private training establishments (PTEs) are funded the same way. Opportunities for “cheating” on third party funding increased.

Here is one. Suppose the government gives $6000 for a course. Recruit students by offering them a free computer and cellphone – perhaps costing $2000 – which they keep. Use $2000 for teaching, and the remaining $2000 goes to the institution’s overheads. Even if students do not bother to turn up, they have free computers and cellphones. Money for jam as far as the tertiary providers and student consumers are concerned.

What does the funder (taxpayers like you and me) get in return? I have no problem with the principle that we should contribute to the cost of preparing students for life. But too often the course we pay for is of little social value, and its certificate worthless, even if the students complete the course. Sometimes over half don’t. The public money is still paid.

Such rorts do not happen everywhere. They don’t work for long, expensive courses that require considerable student commitment, so they appear to be rare in universities. Many polytechnic courses are also expensive, but there have been reported lapses for some of their cheaper ones. As for PTEs: well, some are very good – but not all of them.

The abuses need not be illegal. Rather, they depend on a poorly administered scheme, whose objects are unclear, and whose quality controls are minimal. Can we really justify some of the courses that have been offered – a certificate in surfing, barista training? Yeah, right!

The reforms have achieved a spectacular increase in the proportion of our young adults who get some tertiary training. We are now near the top of the OECD in terms of adults. However, the comparison does not allow for the poor quality of many of those certificates. Our OECD proportion for degrees is about middle, which is what you would expect from the current funding arrangement – a bias towards the ephemeral over the solid.

Regrettably, public recriminations have focused on isolated courses and institutions rather than on the system as a whole. Any failures that the various investigations identify will be much smaller than the general waste from slack controls over the third party funding. Far better to spend those wasted funds on degrees and advanced vocational qualifications that meet defined social purposes, reducing the costs of students and increasing the public funding for quality.