Remove government funding and lets see who survives!
November 23, 2015 5 Comments
Over the years and again recently I have heard a number of people suggest that one way to deal with some of the issues around the VET sector would be to remove all government funding for a period of time (say 12 months) and see who survives. The suggestion is that this would cull providers who are not financially sound, don’t have strong fee for services business and who are doing the wrong thing. The thinking is that if there are no incentives then there is no reason for profiteering enterprises to be in the market.
Now aside from the fact that there are a lot of people who are looking for employment, or improved employment opportunities who rely on various funding arrangements to achieve their educational goals (I am not going to talk about this explicitly here), there seems to be an underlying position in these statements. A positions that is when people say remove funding they are actually saying remove funding from non-public providers. However if we remove that underlying position and just ask the question, who would survive if all government funding to the VET sector was cut for all providers I think what we get is a much more interesting position.
So who would survive out of all the providers, both public and non-public, if all government funding was stopped for 12 months. Lets look at the non-public side first. Would the big boys survive, those top five providers who have who have massive enrollment figures up to 15-20,000 students? Maybe they would, there certainly have the capital to be able to weather a storm of this nature, but would we seen campuses in every suburb and gigantic corporate offices? I think not, I think the downsizing would be swift and severe and it would have to be. These businesses survive and remain profitable only to a large extent on the constant flow of new students into the system. I suspect that we would see carnage at the top end of VET town if something like this were ever to be enacted.
What about at the other end of town, the small providers, the mom and pop shops, the niche market players and in general the not for profit sector? While I think there would be damage here I think the damage would be less. A lot of these businesses already operate on successful fee for service models and while there student number might reduce, a lot would weather the storm. Another reason for this with this group I think, is that most of these providers have high levels of commitment to the sector and to student outcomes. They’re not in the business for the money, they are in it because they want to be and they believe in it.
Where we would see the most carnage is in the middle tier. In those businesses where there are lots of competing players, margins are small, cash flow is tight and even a bad month makes paying the bills look a little bit shaky. Now I know no one out there wants to admit it but there are a lot of providers in the middle range who are in just these circumstances, where even a small change in the level of government funding for a qualification has profound effects on their business and staffing. This is where we would see the biggest losses in terms of sheer numbers of providers, and therefore training and administration staff.
But what about the public sector? Lets put aside arguments about public good, the need for strong TAFEs etc and just for a moment consider what would happen if government funding was removed across the board for all providers. Even if we said that the various state government could still support TAFE through capital and infrastructure costs, but they had to generate all of their operating costs through fee for service models and received no direct or indirect funding for students. They had to pay for things like staff wages, resources and general operating costs just from the money they could generate. How many of the 57 public providers would be left? Well I think there would be a lot vacant office and training space up for lease or sale at the end of the 12 months. The vast majority of public providers would simply not survive. The public sector providers would be decimated.
Of course let’s be honest here when people call for funding to be removed from the sector, that is not really what they are saying, what they are saying is lets remove funding from the non-public sector and give it all back to TAFE. It is interesting though to think about what would happen if all funding was actually removed from everyone.
Anyway that’s just my opinion.