Guaranteeing what in a contestable market?

1. Guaranteeing what in a contestable market? John Pardy Monash University

2. Victorian Training Guarantee • VTG represents a decisive shift in market reforms to VET in Victoria • Purchaser-provider arrangement that focused upon supply (government as purchaser of training from public and other RTOs ) • VTG premised upon a focus on consumer demand and choice and a price structure allocated to qualifications

3. From market reform to market design The Victorian Training Guarantee segments VET qualifications, courses, and programs through different classifications with different price structures Qualifications and skills funding categories. • Foundation skills • Skills Creation (Certificate I and II) • Skills Building (Certificate III and IV) • Skills Deepening (Diploma and Advanced Diploma) • Apprenticeships (Certificate III) • Traineeeships (Certificate II, III, IV & Diploma)

4. Setting the rules for a contestable market • The Minster responsible for Vocational Education and Training approves the classification of courses and each year is charged with fixing the maximum hourly tuition fee. • Concessions are available for all courses excepting those at Diploma and Advanced Diploma levels (Skills deepening). • Stringent eligibility criteria for funding have been introduced (if you have an existing qualification at a certain level or higher to the one you are seeking access to you cannot get government funding, Less than 20y.o can access government funding)

5. Contestability without cooperation • Five principles of the contestable VET market as arranged through the VTG… • Simplicity, Certainty, Efficiency, Consistency and Adaptability • No cooperation resulting in more precarious conditions for consumer protections and quality VET • Intensified competition and wasted effort

6. Cooperation • Altruistic exchanges, win-win exchanges, differentiated exchanges, zero-sum exchanges, winner-takes-all exchanges • VET sector/market in Victoria involves a mix of providers types, schools (secondary), TAFE, Private (for and not for profit) RTOs, Adult and Community, Enterprises and AMES- and these types different amongst and between them • A contestable market without cooperation results in complex, uncertain, inefficient, patchy and distorted VET market

7. Fees and funding review • Newly elected Victorian government undertook a policy review • Essential Services Commission and was known as the “Inquiry into Vocational Education and Training Fees and Funding Arrangements”. • Outcome- policy continuity • Public airing of the issues and impact of contestability as arranged through the VTG

8. Submissions

9. VTG impacts and issues (ACFE) • The ACFE sector submissions raised issues about the lower level funding arrangements in the sector in contrast to that allocated to the public and private providers. • A community provider does not have the scale of large public providers, and specialist private providers who are also differentiated by their particular focus and scale.

10. VTG impacts and issues • The Adult and Community Education sector has a 13% share of government funded VET activity, with TAFE having 61% and private sector having 26% (Allen, 2011). • Concern was expressed in several submissions that a preoccupation with completion rates would marginalise many ACE learners and that the benefits of participation was being devalued through the focus on outcome and completions.

11. VTG impacts and issues The funding and fee structures were identified as working against intensive engagements with learners with extra support needs. Learners with intellectual disabilities or acquired brain injuries, it was pointed out required continual education opportunities to reinforce learning and that the possibilities for such approaches were being undermined by the funding and fee arrangements.

12. VTG Impacts and issues (industry) ‘Sally’, a 21 year old, has been working in a café since leaving school 4 years ago. She wants to improve her earning capacity and change career through becoming a plumber, realising the benefit of having a trade in an area that has great potential. The best way to enter this industry is through a pre-apprenticeship – a Certificate II in Plumbing. During her first year of employment at the café Sally’s employer put her through a 6 month Certificate II traineeship in Hospitality. Sally is now ineligible for government funding and what would have been a $600 course is now $2000, on her current income she cannot afford this fee (Building Industry Consultative Committee).

13. VTG impacts and issues • The dairy industry raised the issue of ‘fees shock’ and was actively negotiating through its submission and other activity for the re-categorisation of its skills to a lower qualification level to make skills development more affordable. What was once a $387 program had increased to $2,272 (Dairy industry). • Housing sector expressed concern about the eligibility criteria of prior qualifications foreclosing the option of a government subsidized place and suggested that a ‘sunset clause for prior qualifications’ be adopted to make the criteria more flexible.

14. VTG impacts and issues (TAFE) Many TAFE submissions reported a decrease in their enrolments because of the fee increases. One TAFE explained that the funding of training did not reflect the true cost of training. While another TAFE submission argued there was a need for investment in training from industry and employers and not just the present focus on increasing student contributions

15. VTG impacts and issues ‘The Skills Reform policy is a thinly disguised initiative to increase statistical VET participation across Victoria, regardless of training quality and integrity, and delivered at times on a user pays/cost recovery basis, regardless of the training requirements of industry and the needs of individuals across the life span.” This TAFE believed from the outset that this was an attempt to largely privatise the VET system by stealth based on unproven and spurious assumptions.

16. VTG impacts and issues (private RTO) • Submissions from private RTOs critiqued the restrictive nature of the eligibility criteria and the equivalence between senior secondary certificates of education with a Certificate II. • “Private training institutions are now arguably the ‘engine room’ of the Australian training sector”. • One submission by a private RTO argued that, “the non-subsidised cost of our most popular course (Diploma of Nursing) is “beyond the reach of the majority of our potential student demographic”.

17. VTG impacts and issues • If the Government makes it so hard for lower class young people to get an education most of us will end up relying on the government for the rest of our lives (Student) • I suggest that people making funding decisions need to come out and see what we do and talk to us about how we can put a better system in place where we are able to focus on the quality of our training rather than trying to make our training match an ill conceived funding model. I would also like to spend more time with each student than dotting i’s and crossing T’s because someone doesn’t trust that we are doing our job (Teacher)

18. Guaranteeing what ??? • The current market as arranged in Victoria based on contestability misrecognises that there can be no contest without cooperation. • An unfettered market that does not know and recognize differences and the differentiated of VET suppliers/providers character is socially, politically and economically irresponsible as it provides very little basis for cooperation and engagement. • It results in costly and destructive practices that foster the exploitation of differences as divisions.

19. Guaranteeing what??? The important function of VET in offering education opportunities to diverse groups of learners in a breadth of vocational fields and through a range of organisations is central to growing the base of workforce skills. Yet the submissions to the policy review contain important critiques of the market and its haphazard character as it is currently struck. The submissions made also contained information that competition for the sake of competition has little real dividend in terms of quality. Such competitive jostling guarantees a contestable VET market/system that errs on the side of winner-takes-all, where the annihilation of important players in the VET market/system is enabled through a contest without cooperation.