Paying for VET – The funding equation

So I have been thinking a fair bit recently about funding in the VET sector and different models and approaches.  A lot of this has been prompted by the release of the new QLD VET investment program and the issues with what has happened with funding in South Australia and the discussions about that, as well as the recent comments by Senator Birmingham and some of the insights which came out of the panel I chaired at EduTech.

As we are all aware there are a range of ways in which VET is paid for in Australia from income contingent loans (yes I know they are not technically funding as such but let’s go with it anyway), to skills shortage lists and priority areas, individual based funding and programs aimed at producing specific outcomes for specific groups.  When we add to this direct funding for public providers in what ever form that takes and apprenticeship and traineeship schemes it is no wonder the average person has difficulty in figuring out who is paying for what.

Firstly lets consider income contingent loans (VET-FEE HELP). I am actually a proponent of this style of ‘funding’ particularly for higher level programs and to be honest if it wasn’t for this kind of system I would never have got the education that I currently have (admittedly my education is from the Higher Education sector rather than VET but the same principle applies).  The advantage to these programs is that it allows people to undertake the study that they wish to, without relying on whether or not that funding is considered to be a priority by the government.  It allows a strong freedom of choice around both what is studied and where and how that study is undertaken.   There are of course problems with this style of system (outside of issues around the cost of a program) the biggest of which is that employment outcomes from these programs may not be as high as they are in other more directed programs.  Why?  Well because people get to choose what it is that they want to study regardless of whether or not there will be an employment outcome at the end of the program.  Is this really a problem though?  I am not so sure that it is, providing people entering into these courses of study understand that there may not be a significant employment outcome for them as a result of undertaking the course, or that they may need to take employment in a different area first, before they are able to utilise their chosen program of study.

What about so-called entitlement style funding, where individuals who meet certain criteria are able to have their training subsidised  by the government.  This funding is almost always tied to those skills shortage and priority occupations lists, which means that while an individual may be able to obtain their training for a very small out-of-pocket expense, they are limited in the areas in which they can study, if they meet the eligibility criteria.  This kind of funding is interesting because it accounts for a fair proportion of the funding provided to the sector by the State governments and different people in different states may therefore have not only different eligibility criteria, but also a different choice of programs which they can undertake, as well as differing choices around providers and co-contribution rates.  The upside of these programs, if well-managed and run would seem to be a much stronger connection to employment outcomes and workforce participation particularly at more entry-level positions, the problems of course are that not everyone will meet the eligibility criteria and even for those people who do, the courses which are available to them, may not the courses which they wish to undertake.

Specific purpose programs (like Queensland’s Skilling Queenslanders for work program) are similar to entitlement style programs, with one key difference, they are designed with usually quite specific outcomes in mind.  If we take the Queensland program as an example, it is heavily focused on youth, particularly those youth are disadvantaged in some way and entry-level qualifications.  It is designed to increase the level of workforce participation in group which currently has a high level of unemployment.  Of course youth (people under 25) are not the only targets of these programs, they are also targeted at anyone who is disadvantaged and who has had difficulty in obtaining work (medium to long-term unemployed).  There are a couple of advantages to these sorts of programs, firstly they are designed and funded with a specific outcome, which usually means more funding for supporting services which may assist students to actually achieve the result that the program is designed around.  Being specifically designed also means that providers and other who are involved also have a very clear idea of what the goals of the program are and what they need to achieve.  The disadvantages are the same of those for entitlement style funding in that there are very specific criteria for participation and in terms of what programs are offered.

Traineeships and Apprenticeships are a slightly different fish from the other styles of funding, primarily because before being able to access these types of funding one must be employed or employed as part of the program.  They also in most cases carry an incentive component for the employer in order for make it more attractive for them to take on a trainee (and the additional costs which may be associated with them) than may have normally been the case.  The advantages to these programs are obvious, people are employed as a result of them and they are specifically aimed at the student completing the qualification in question and continuing to be part of the workforce.  The problem with these programs tends to be the amount of paperwork and regulation involved for all parties concerned.

Then finally we have direct funding to public providers.  I am going to be really open here and say that I think that the vast majority of funding for VET should be contestable.  It should go to the provider who is chosen by individuals and employers, sectioning off parts of funding programs specifically for the public providers simply limit choice and creates state-run monopolies.  That being said however I sincerely believe that there should be funding provided to TAFE, it should however be transparent, not hidden under quotas and things like that.  It should also be for specific purposes, where there is market failure, or where there is a lack of providers, or specific skills or facilities are required.  There should also be funding for the up keep of government-owned assets (where those assets are being utilised or are needed for the future.  However like with non-public providers operational expenses should be met through the utilisation of  contestable funding and fee for service delivery.

So the question which comes from all of this for me is what works best and is there any realistic way in which we could simplify things to make things easier for everyone.  Problematically I don’t think there is, each of the styles of funding have a specific purpose behind them, which also means that it is difficult to determine whether one type of funding is better than another.  I do however think that often entitlement style programs are the most problematic, primarily because of the occupation and course lists which support them.  For these style of funding programs to be effective there needs to be a tight link between the courses on offer and the needs of the workforce, because if there is not they are doomed to not meet the needs of anyone.  The other issue with these style of programs is getting the eligibility criteria right, one of the criticisms of the higher skills part of the QLD VET investment plan is that holding a Certificate IV  in anything disqualifies you from gaining funding for a diploma or above level qualification, regardless of whether or not it is a qualification in the same sector.   Now I am not suggesting that these types of funding aren’t useful and don’t have a place, they do, governments just need to be very careful about the programs they subsidise and the criteria for students.

Anyway that’s just my opinion.


About pauldrasmussen
Paul Rasmussen is one of Australia’s most widely read Vocational Education and Training Commentators. He provides deep, unbiased analysis and insights not only on topical issues, but also on the underlying structure and policy which supports the industry. His writing and analysis has been praised for its uncompromising and thought provoking style and its ability to focus on the issues of real importance to the sector. He has advised various government departments and ministers, training providers, public and private organisations, not for profits and small to medium enterprises on the VET sector and the issues and opportunities facing it. He is one of Australia’s most awarded learning professionals and a regular speaker at a range of conventions and forums. His extensive experience in vocational education, and learning and development coupled with formal qualifications in philosophy, ethics, business and education management allow Paul to provide a unique view of the road ahead and how to navigate it.

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