‘Planting a pretty flower garden when you can’t pay the rent’ – Minister Penny Simmonds slams Te Pūkenga priorities

Universities are feeling the inflation burn and polytechnics are facing a $189 million financial hole as the Government shifts more of the financial pain on to students rather than the places where they study.

The deficit figure for polytechnics was revealed this morning by Tertiary Education Minister Penny Simmonds to the education and workforce select committee during an at-times testy hearing, where she frequently clashed with Labour MP Deborah Russell over what blame could be laid at the feet of the previous Government.

Financial woes in the vocational education sector are not new and the previous Government bailed out several institutes to keep them afloat. The mega-merger Te Pūkenga aimed to save some of the duplicated costs in a centralised model, while standardising courses and looking to match local courses with regional training and employment needs.

But Simmonds, former chief executive of the Southern Institute of Technology (SIT), says it has destroyed regional voices and whatever replaces it – which Cabinet is still deciding – will empower localism and encourage the kind of innovation that saw the zero fees scheme at the SIT.

Last month she sent her second letter of expectation, asking Te Pūkenga to continue with cost-cutting and asset sales.

“The polytechnic part of Te Pūkenga deficit is $189 million for 2023,” she told the committee this morning. “Work around $131 million of assets that are under- or un-utilised absolutely should continue and should have started a long time ago.”

Russell pressed Simmonds on whether this was selling assets to fund operating losses, and when Simmonds tried to blame Labour for not doing this work four years ago, the committee descended into a cacophony of competing voices.

At one point Russell said Simmonds was repeating herself, to which the minister responded: “You’re asking the same questions.”

Simmonds conceded that centralisation was good in some respects such as standard courses for nursing, but it was “disappointing” Te Pūkenga had pursued that work when the fiscal holes were already so deep; its deficit in 2022 was $80m.

“It’s like when you can’t pay the rent but you’re planting a pretty flower garden at the front gate.”

Russell asked if the College of Nurses wanting nursing courses to be unified was a “pretty flower garden”.

Simmonds: “No. I’m not saying that. The Nursing Council is the regulatory body and they have not approved it. It has not been driven by the council but by Te Pūkenga and there are a variety of opinions about whether it is required or not.”

Unification of programmes was “a worthy aspiration but... the priority should have been given to sorting out the financials and then moving into the unification of programmes because there were already perfectly good programmes running”.

Te Pūkenga was established to centralise functions across the vocation education sector but it is being disestablished because the Government wants to empower localism. Photo / RNZ

Budget 2024 has set aside money to disestablish Te Pūkenga but the figure has been withheld due to commercial sensitivity. Decisions will be made by the end of June on proposed models to replace Te Pūkenga, which will then go out for consultation.

Simmonds also defended allowing tertiary education providers to increase their fees by up to 6% next year, even though this was higher than inflation forecasts. She said they had absorbed an inflationary hit of 20 per cent between 2020 and 2024 when they could only boost their fees by 10.35 per cent.

Russell asked Simmonds about unfairly loading the university costs on to students at a time of cost-of-living pressures and with unemployment expected to rise, given the increase in subsidies (2.5%) was less than half the 6 per cent potential increase in fees.

Simmonds noted both private and public goods from tertiary education, the former including higher-paid and more consistent employment.

“The private benefit means that some of the cost should come from the individual, and some should come from the Crown. It’s that balance of getting it right. The fees have not increased at the rate of inflation – they’re less than they were in real terms in 2019,” she said.

“Inflation has caused distress right across our country whether you are a business owner or a household or a student or a beneficiary. This was caused primarily by the previous Government.”

This led once again to a cacophony of objections (“it’s an opinion”) and counter-claims (“it’s a fact”).

The Government is also increasing the student loan interest rate for those based overseas by 1%, which is expected to bring in about $6m over five years, even though compliance from overseas-based students is only about 30 per cent.

The forecast median amount of extra interest borrowers overseas will be charged each year is $245.

As of December 31, 2023, there were 109,484 borrowers based overseas; about 74% of them held 92.8% of the total overdue loan debt.

The Government is shifting fees-free from the first year to the third year to "reward completion". Photo / Mark Mitchell

‘Very difficult to defend’

On fees-free, Simmonds said moving it from the first to the third year of study would save $893m over four years, though work was still being done on eligibility rules.

“It’s very difficult to defend spending over $800 million on students who do not complete a qualification as good-quality spending.”

She said the goal was to reward completion rather than incentivising it, adding that about 95% of tertiary students who made it through their first year ended up finishing their qualification.

Asked about whether it would improve completion rates, she said that would be a “useful guide” but it wouldn’t necessarily see the policy axed if those rates weren’t improving, which would be up to Cabinet.

Pressed on the goal of the policy, she eventually said it was honouring the National-NZ First coalition agreement.

She also defended a $2m cut to international education programmes as part of the Government’s ethos to cut the back office and increase spending on the front line.

“We are all having to make changes to our spending in making sure we get good value for money for our spending.”

Afterwards, the Tertiary Education Commission confirmed it was asked to find 6 per cent in savings, and that $14.9m over four years had been identified, equating to the loss of 28 jobs or 25 fulltime-equivalent roles.

Universities continued to be under financial pressure with the slow post-Covid return of international students, and Victoria and Massey continued to be “higher on our risk radar”, chief executive Tim Fowler told the committee.

“Massey is probably higher-risk for us at the moment but they are making really good strides.”

Derek Cheng is a senior journalist who started at the Herald in 2004. He has worked several stints in the press gallery team and is a former deputy political editor.