Steve Maharey: System set to keep student fees at reasonable levels

COMMENT

In 1999 the Government made specific commitments to students and their families to cut the cost of tertiary education, starting with a fairer student loan scheme.

It has kept to those commitments. Interest was wiped from loans, while students' study fees have been frozen for the past three years.

The fee freeze has saved students nearly $2000 in fees they would otherwise have had to pay, while the write-off scheme cut an average of $1044 in interest charges that would otherwise have been added to student loans in the latest tax year.

The fee freezes plainly could not go on for ever. It locked universities, polytechnics and other tertiary institutions into fee decisions they made in a very different climate at the end of the 1990s. Back then, institutions had faced annual per student funding cuts from the then government and, to compensate, they increased fees by an average of 14 per cent a year.

The Government has steadily reinvested in the tertiary sector, both via annual per student funding increases and through targeted investment in areas like research and new learning technologies.

How then to move on from the fee freeze to a new predictable environment for both students and tertiary providers?

Far from being a sign of policies designed for yesteryear, as a Herald editorial claimed, the system of regulation adopted - fee maxima - brings us into line with all other countries.

In fact, the norm is for centrally set fees within a capped system considerably less flexible than the arrangements settled on for New Zealand. The Government decided the best option was to take the middle ground between the uncontrolled fee-setting environment of the 1990s and a centralised fee-setting system that would give tertiary providers no flexibility to control a significant portion of their annual revenue.

Last year, we announced our intention to set a nationwide schedule of maximum fees. The power to determine and set fees would continue to remain with tertiary institutions within these new limits.

A working party of tertiary student, institution and staff representatives was established to advise on the design of the new system, and we have largely adopted their recommendations. An indicative schedule of maximum fees for the next three years was set out in the Budget, as was the Government's intention to annually increase its per student subsidies.

Submissions were invited on the indicative fee schedule and, following consideration of them, the finalised rates were issued last week. The new system runs for the next three years (2004-2006) and will be reviewed at that time to determine if any modifications are necessary.

Most tertiary institutions have told the Government that they intend keeping any fee rises to around the level of inflation each year. It is, therefore, hard to fathom the supposed outrage from the University of Auckland, when the system we have settled on actually provides the flexibility to go to 5 per cent should that be necessary.

It's also worth noting that only it, of all the Auckland-region institutions, has condemned the new fees plan. In all likelihood, moves to push fees higher than will be allowed would backfire and force students to cross the road to the Auckland University of Technology or leave town to study in other cities.

The introduction of the maxima system also comes at a time when the University of Auckland is accessing considerable new Government funding through a variety of targeted funds.

The Government has already committed itself to contributing $25 million in partnership funding for Auckland's new business school development, and has established a fund to support other partnership proposals developed by tertiary institutions.

The university is host to four of the new well-funded centres of research excellence, is a partner institution in a further centre and has gained new funding from the Health Research Council.

The number of student places at its medical school was increased in the Budget and we recently announced new Step Up scholarships in health education. It is likely to be a major beneficiary of performance-based research funding, as well as funding invested to accelerate the commercial development of research.

Perhaps most significantly, the university, like all tertiary institutions, has finally been given long-term financial security with annually increasing funding rates being set out for the next three years. This will enable it to effectively plan and is a far more preferable environment than the annual and uncertain funding deals it has complained about for more than 20 years.

Taxpayer investment in tertiary education is considerable - only the United States spends more as a percentage of gross domestic product than we do.

In this environment it would be hard to justify turning to students seeking significant fee rises. That would simply invite student protests. The maxima system keeps faith with students by ensuring their fees will be kept to reasonable levels.

The Government has also kept its commitment to invest in tertiary institutions so they can play a key role in the development of our knowledge-based economy.

* Steve Maharey, the Associate Minister of Education (Tertiary Education), is responding to a Herald editorial that said universities should be free to attract students on the basis of quality or price.