Performance Based Growth Funding a new approach to matching demand to places

By Professor Iain Martin, Deakin University Vice-Chancellor

The Federal Government’s new approach to funding growth in Commonwealth supported university places is an appropriate next stage in the evolution of how modern Australian universities are resourced to educate its students.

With many of my Vice-Chancellor counterparts, I was in Wollongong with Education Minister Dan Tehan recently to discuss the significant investment the Commonwealth makes in our universities and the requisite social contract that underpins it.

Minister Tehan and the Federal Government, with the input of universities, now have an opportunity to develop a sustainable model that ensures universities continue to offer what Australia needs and clearly articulates the long-standing tripartite contract tended to by students, universities and the Commonwealth for more than 60 years.

To cast our minds back, the conception of our current university system was contained within Menzies response to the Murray report in November 1957. The speech makes interesting reading in the light of today’s challenges but was underpinned by two principles. The need for more graduates:

“Great skill achieved after high training is no longer to be regarded as something to be admired in a few. We must, on a broad basis, become a more and more educated democracy if we are to raise our spiritual, intellectual, and material living standards … This new charter for the universities should serve to open many doors and to give opportunity and advantage to many students.”

And, no less importantly, a clear statement of a social contract between students, the universities and the wider community that recognises the benefits that accrue to all from a high quality and well-resourced university system:

“They [students] will, I am sure, not forget that under all the circumstances I have described, the community is accepting heavy burdens in order that, through the training of university graduates, the community may be served.”

Our universities occupy a privileged position as a result.

We are given appreciable autonomy and freedom to operate on the understanding that real benefits are returned to our students and the wider community. Since 1957 our university system has grown and developed to an extent that I am sure would not have been foreseen back then. We have one of the best university systems in the world and it has contributed hugely to Australia’s current economic, cultural and social wellbeing. Despite this, there are unresolved challenges in ensuring that this enviable position remains.

The demand driven system of 2012-2017 delivered much for Australia; it opened up educational opportunity for many who would have otherwise missed out under the previous model and enhanced the scale and reach of Australian higher education. It was however expensive and did not always link growth to areas (geographical or discipline) where there was real strategic need. Since 2017 we have had a situation where there is no opportunity for growth, either at the whole of sector level or between institutions.

This position cannot continue and it is recognised by Minister Tehan as he proposes this new model. At the heart of the new model are two principles; that the system can grow at a rate linked to overall adult population growth; and that this growth funding is linked to performance metrics.

Given the investment that the Commonwealth makes in our universities and the underpinning social contract it is appropriate that there are some clear expectations of university performance. One could argue with the precise measures that have been chosen but it is hard to counter that asking for improved teaching quality, better student retention, equal participation from across society and preparation for both first job and a lifetime of careers are unreasonable. The danger in this approach is not the desires but the measures chosen.

We need to be extraordinarily careful that the measures do not inadvertently distort our system. I am concerned that a number of the measures assess a university against its own past performance. I understand the reasons for recommending this, but I believe such an approach must have some absolute thresholds. For example, it is nonsensical that a university with the best employment outcomes in the country would not receive 100 per cent of the growth funding available because they did not improve year on year.

It is important too that the suite of performance measures remain balanced – while employment is important it is not the only measure of quality that should matter. The ever-increasing focus on employment and salary in the UK’s Teaching Excellence Framework measures has really distorted that system and should be a warning for Australia.

There is a broad acceptance that, if formally adopted, this is the first stage of a series of changes that will allow for further growth. The question is what else should the system react to?

  • It needs to allow for future school leaver growth which will increase substantially in the next few years, especially in Victoria and NSW. A national growth measure is simply not tenable given that the vast majority of Australian students attend university within their own city or state;
  • The measures concentrate on school leaver undergraduate education, but we need to acknowledge that over the coming years there will be an increasing need for mature student access to higher education in the face of changing workforce needs;
  • We must ensure that the growth and quality measures are linked clearly and in a way that really values quality and performance;
  • While recognising the limitations of central workforce planning, as a country we must have a system that prioritises areas where growth is identified as of national importance; and
  • It must reflect the needs for higher education around a university’s region.

To bring all of these together I believe that we need to move to a new model that articulates a rolling three-to-five year contract between a university and the Commonwealth. This would be based on an assessment of each university’s context, strengths and performance. It would allow for described growth where required but could also describe a reduction in size where performance and/or demand is appropriate. Any contract must be transparent and reflect the distinctive university mission.

Whilst there is still much work to be done to both implement the described performance-based growth funding model and to develop the next stages, we have an opportunity to advance a sustainable approach with the potential to ensure a higher education system appropriate to Australia’s needs. Importantly, such a model will enable a clear articulation of the three-way social contract between students, universities and the Commonwealth and ensure the continuation of the approach outlined in 1957 and developed over the past 62 years.

  • As published in The Australian, Wednesday, 21 August, 2019

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