Analysis of claims relating to the impact of Higher Education Reform Package

There have been a number of claims made about the impact of the higher education funding package on funding for universities. An analysis of some of these claims is available below.

It has been claimed that as a result of the efficiency dividend, the net impact of the proposed changes will be a permanent reduction by nearly five per cent on resourcing per place.

The efficiency dividend to be applied is 2.5 per cent in both 2018 and 2019. This will lead to an overall reduction in CGS funding of almost five per cent.

However, this will not lead to a five per cent reduction in resourcing per place (generally understood to be both CGS funding and student contributions). As Table 4 in the Higher Education Reform Package document shows, the reduction in total resourcing will be 2.8 per cent across the sector in 2021.

The Cost of Delivery of Higher Education study undertaken by Deloitte Access Economics in 2016 showed that between 2010 and 2015, average costs per Equivalent Full-time Student Load (EFTSL) have increased by 9.5 per cent. Over the same period, funding to universities for Commonwealth Supported Places has increased by around 15 per cent.

It is claimed that two major reviews (the Bradley Review of Australian Higher Education in 2008 and the Lomax-Smith Review of Higher Education Base Funding in 2011) found that funding for university teaching was less than adequate across the board, with particular shortfalls in some disciplines, meaning that any increases since this period are simply correcting previous underfunding.

The Bradley Review recommended that “the Australian Government increase the base funding for teaching and learning in higher education by 10 per cent from 2010” (recommendation 26, p. 153). This recommendation was based on a belief held by the review panel that expenditure on higher education should be 2 per cent of GDP – a level of expenditure that the European Commission’s Lisbon strategy notes. There was no independent analysis by this review as to the adequacy of higher education funding. (pp. 152-153)

Independent analysis of the impact of the Bradley reforms on per place funding commissioned by the Government and undertaken by Ernst and Young in 2012 found:

  • For teaching, learning and research in 2013, the per EFTSL funding for 2013 would have been $19,524 had pre-Bradley arrangements continued, compared to $21,488 (post-Bradley arrangements). An increase of 10.1 per cent.
  • For teaching and learning only in 2013, the per EFTSL funding for 2013 would have been $18,074 had pre-Bradley arrangements continued, compared to $19,600 (post-Bradley). An increase of 8.4 per cent.

In response to a recommendation of the Bradley Review to commission independent triennial reviews of base funding (recommendation 28, p. 154), the Government commissioned the Higher Education Base Funding Review. While the review recommended that “the average level of base funding per place should be increased to improve the quality of higher education teaching and to maximise the sector’s potential to contribute to national productivity and economic growth” (recommendation 2, p. 35), it did not find that funding for university teaching was less than adequate across the board.

In fact, based on work commissioned for the review, it found that “the comparison of this average cost with the base funding received showed that the costs of undergraduate teaching and scholarship across all FOEs at the same universities was 94 per cent of the base funding” (p. 48). This indicates that funding was more than adequate for teaching and scholarship.

Some have claimed that spending on teaching is 91 per cent of base funding per place, leaving 9 per cent for everything else

It is not clear how this 91 per cent was derived. Independent analysis by Deloitte Access Economics of costing data provided by universities in 2016 shows that the cost of teaching and scholarship is 85 per cent of base funding for Commonwealth supported students.

Many have argued that CGS funding is intended to cover teaching and scholarship as well as ‘base capability in research’, administration, infrastructure and community engagement. A cost of delivery exercise undertaken for the 2011 Base Funding review found that the average cost of teaching was 94 per cent of the base funding. On this basis, the review panel concluded that the remaining 6 per cent was used to support ‘base capability in research’. It is therefore possible that the 91 per cent is simply the sum of the 85 per cent currently used for teaching and the 6 per cent for research capability from the base funding review.

However, as autonomous institutions, universities have full discretion in how funding is spent across activities, including how much to use for non-teaching activities. The percentage used for teaching therefore reflects institutional decision making, including decisions that have created cost efficiencies. Irrespective of what percentage is used, the updated cost of delivery work has shown that universities are spending a smaller proportion of their base funding on the primary activity of teaching.