catallaxy files

catallaxy in technical exile

The limits of 'we pay, we regulate'

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Back in 2003 I wrote a textbook chapter on the Liberal Party. In it I said:

Of the two major Australian political parties, it is the Liberals who have been the strongest supporters of federalism. They have a long history of opposing the centralisation of power in Canberra…

I’m very glad I chose the past tense for those sentences, because as we have been reminded this week the Liberal Party – or at least the current Cabinet – is now the principal opponent of federalism.

On 2GB yesterday, the Prime Minister said

I do think in the area of universities it’s anomalous that you can have the Federal Government providing all the money, but universities are still regulated by the States. I think that is ridiculous, if we pay all the money we should be responsible for the regulation.

Education Minister Julie Bishop also thinks that governments should regulate what they pay for. She told The Australian that

“In relation to the contribution they make to universities, which they establish and accredit and legislate for, in some instances the states are profiteering from having a university,” Ms Bishop said.

“In other words, they get more from the universities than they invest … That must be one reason (states want to keep hold of universities); that they are a source of revenue.”

Ms Bishop said in 2004, states invested $314 million in their universities and extracted $354million in payroll tax. In the same year, NSW invested $40million in its universities and extracted $114million in payroll tax.

But on this measure, the Commonwealth doesn’t put as much into universities as it says it does. After all, it imposes income tax on university staff, and of course students pay part of their educational costs through the tax system. On 2004 figures, I estimate that these factors takes total Commonwealth spending down from about $7.3 billion to about $4 billion. And studies looking at the taxes paid by graduates suggest the Commonwealth makes a considerable profit from higher education.

But the funding issue is a red herring, since the Commonwealth has already taken full advantage of the money it gives and the culture of capitulation at universities to massively over-regulate the public higher education sector.

The only remaining aspect of higher education policy the Commonwealth does not have de facto control over is the accreditation of new institutions. But virtually all the applicants are private institutions that receive no direct subsidy. If funding is the Commonwealth’s rationale for policy control, it doesn’t apply to the issue of accreditation.

This is not to say that the states have done a good job with accreditation. Indeed, the new draft protocols for accreditation to be discussed by Education Ministers this week effectively prohibit the establishment of new Australian private universities, including a preposterous requirement that new universities be sponsored or mentored by an existing university. As if any existing university will help a competitor get established! But at least with a federal system, a state interested in promoting a vibrant higher education sector can break ranks and change its laws.

My CIS paper, Universities in a State: The Federal Case Against Commonwealth Control of Universities(pdf) of March last year has a more detailed argument against further centralisation of higher ed policy.

Written by Admin

July 5, 2006 at 12:47 pm

Posted in Uncategorized

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