Remove government funding and lets see who survives!

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.


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.

5 Responses to Remove government funding and lets see who survives!

  1. Mark Jones says:

    Again, an interesting but real perspective. I am sure it’s a conversation many a politician would not be game to have! (MJ)

  2. andrew says:

    Great article paul. Lets ignore the public v private debate for the moment. My suggestion is pump all the money into incentives for employers. Skewed payments towards longer term & only emlpoyers…focus on skill shortage and proirity industries…a .2-3 year system of employment incemtive. No vet fee ripoff funding & no state based funding. People and employers self fund training, sourcing providers based on real need and real jobs. Incentivize and penalize on emplyment basis. This would reduce the bloated & ineffective job active network costs, reduce training provider rip offs & focus on the real reason for training….JOBS!
    Government driven training and policy is for the reasons of growing employment & the economy. Everything else is fluff and nice have if it can be afforded

  3. Brad says:

    Apart from the social inequality it would create. Most RTOs would disappear. Nationally accredited training could also disappear, why would you operate in a (even more competitive) market to offer exactly the same product as the other guy, when non accredited training can offer the same or different products with out the licensing requirements (that come with funding). If you operated this way for the short term and survived, why not the long term.

  4. Helland Duncan says:

    Interesting idea as a theory. I think the focus needs to go back on the students, for me this is what brought me to training in the first place. Whilst I am not naive and understand some profit needs to be made from any business I think government funding needs to be capped rather than stopped.

    We should be providing students with high level education and training in the most cost effective way possible. I think when you look at the fees that universities and TAFEs charge you get a better idea of what a fair charge per qualification costs.

    If VFH was capped at $10,000 (come on I like round figures) per diploma I believe many of the money grabbers would leave the industry because it would halve their income.

    This way we could continue making education available to those who need it, without entering into lifelong debt and hopefully get rid of some of the money driven RTO’s.

    Win win!!

  5. cjbugden says:

    Very interesting proposition! This would have many providers quaking at the prospect.

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