Universities say a "control freak" Government is trying to erode their independence and stifle their academic freedom.
Sweeping state service reforms were spawning the greatest threat to universities since they gained statutory protection 15 years ago, the Vice-Chancellors' Committee said yesterday.
The row centres on a bill that will redefine Crown entities as "organisations in which the Government has a controlling interest".
The Public Finance (State Sector Management) Bill is designed to give the Government greater control over Crown-linked organisations, including the Securities Commission and Accident Compensation Corporation as well as tertiary institutes.
But the vice-chancellors claim it will sabotage the university role as "critic and conscience of society".
Ministers argue the legislation is aimed at increasing transparency and accountability, and will raise the standard of public service.
But Stuart McCutcheon, chairman of the committee, said it would impinge on tertiary institutions' autonomy and academic freedom.
Private funding would be put at risk, because of the institutions' perceived closeness to the Government, and the worst-case scenario would see academics bound by ministerial restrictions.
Professor McCutcheon called on the Government to drop tertiary institutes from the bill, which he described as an attack on the cornerstones of democracy.
"In a democratic society we cannot allow state control of our free-thinking institutions.
"No nation in the Western world has universities under state control. The pillars on which New Zealand academia is built are being eroded by creeping Government control."
The bill was introduced last December, but during a series of meetings the relationship between the Government and universities has gradually deteriorated.
Yesterday, the Vice-Chancellors' Committee said the creation of a Minister Responsible for Tertiary Education Institutions, with wide-ranging powers over universities, was "particularly unwelcome".
The legislation did not define the phrase "just cause" when considering dismissal or veto of council members, giving the minister carte blanche.
"We are not resisting public accountability in any way," Professor McCutcheon said. "There is no doubt tertiary institutions should be accountable for the public funding they receive, but that does not mean state control."
Existing legislation governing financial reporting was adequate and there was no need for the change.
He also argued that the bill contradicted statutory provisions in the Education Act, which held that institutions' academic freedom should be preserved and enhanced. "It is no surprise some have referred to the Government as 'control freaks'," Professor McCutcheon said.
The legislation is being driven by Deputy Prime Minister Michael Cullen and State Services Minister Trevor Mallard. It is due back in Parliament for its second reading, but the vice-chancellors said their submissions to the select committee had been ignored.
Mr Mallard said yesterday that there was no intention of impinging on academic freedom. "We are talking about the proper spending of taxpayer funds, not increased state control," he said.
"I believe most taxpayers would think that spending of taxpayers' money should be transparent, and that there should be accountability mechanisms for that."
Mr Mallard dismissed suggestions that universities could be removed from the legislation. They would be recognised under the bill as a separate category from other organisations.
The role of a minister responsible for tertiary institutions was not a new one and that minister "will not hold the operational responsibility for running those institutions".
But Professor McCutcheon, who becomes Vice-Chancellor of the University of Auckland in January, said the academic community was unconvinced.
REINING IN UNIVERSITIES
Law changes include:
Creation of a minister responsible for tertiary institutions
University council members subject to dismissal by the minister for "just cause"
The minister to have an unrestricted right to conduct inquiries into academic affairs of universities
Borrowing subject to Treasury approval.
Academics lash out at 'control freak' Government
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