The Australian, 19 February 2015
By Andrew Trounson
LEVYING a tax on university fees is a better way to limit the risk of excessive price increases in a deregulated market compared with capping prices or loans, according to sector expert David Phillips.
Education Minister Christopher Pyne is understood to be giving serious consideration to proposals from Mr Phillips and economist Bruce Chapman to charge a progressive tax on university fee increases above set thresholds. The details of how such a system could work are likely to be included in submissions to the latest Senate inquiry into higher education.
The tax is aimed at addressing concerns that cheap HECS loans and status seeking could drive up fees excessively under deregulation.
“My view is that it is highly likely that fees will rise very substantially and relatively quickly under deregulation. Therefore policymakers would be wise to think seriously now about ways that excessive fee rises could be ameliorated,” Mr Phillips told the HES after presenting the idea at a University of Canberra higher education policy roundtable last week.
Mr Phillips is director of consultancy PhillipsKPA and a former adviser to Hawke era education minister John Dawkins. He has headed the higher education division in the federal government and been an adviser on both the Bradley and Lomax-Smith reviews.
He warned that a cap would see universities increase their fees to the maximum as has happened in both Australia and the UK. He argued that a cap on HECS loans, if set too high, wouldn’t achieve anything. If set too low students would end up having to pay upfront to cover the full cost of the courses they want to do.
“If policymakers want to consider creative ideas I think (a levy on high fees) would be fertile ground,” Mr Phillips said.
Professor Chapman said the tax would be aimed at driving “socially desirable” behaviours in universities in much the same way that taxes on cigarettes and alcohopops seeks to curb consumption.
The tax would also reduce the rising cost of servicing the HECS system as student numbers rise. The Grattan Institute has estimated that unrecoverable student loan debt will increase to $11.6 billion by 2018, up from $8.7b, under the government’s reforms, stoked largely by the extension of HECS loans to vocational training, but also driven by shifting costs more onto students.
“The higher the fees go the higher the doubtful debt will go, so (the tax) would help with that too,” Professor Chapman said.
It would be up to government to decide how to spend revenue raised from such a tax, though the sector would likely argue that such revenue should be reinvested in higher education.
Grattan Institute higher education expert Andrew Norton expressed concern that a tax on fees risked inflating fees.
There may also be concerns that student paying high fees will end up cross-subsidising other students or government general revenue. However the government is already advocating such cross subsidisation by requiring universities to fund scholarships from a 20 per cent levy on premium fee revenue.
“It is an interesting idea and presumably it is one of the mix of ideas being discussed by the government with cross benchers, but whether it is enough remains to be seen,” Universities Australia chief executive Belinda Robinson said.
The Group of Eight universities, which are expected to have the most pricing power in a deregulated market, said it was premature to speculate on alternatives to the government’s plan.
“It is premature to speculate on plan A, B, C, D, or whatever, until we see what is eventually presented to the Senate,” Go8 chief executive Vicki Thomson said. “It is not helpful to be speculating on the many different models that are currently being discussed by all and sundry. Suffice it to say the issue at hand here is a sustainable funding model for the nation’s university sector which delivers a quality experience for our students. Any alternative to fee deregulation is a Band-Aid measure at best which simply won’t cut it,” she said.