Hon. Michael Cullen
11 April 2006
Speech Notes

Address to University Chancellors/Tertiary Advisory and Monitoring Unit Workshop

Intercontinental Hotel, Grey St, Wellington

This time last week I was making some announcements regarding the future direction of tertiary education in New Zealand and the next steps in developing a tertiary system that will better fulfil our needs in terms of national identity and economic transformation.

As I said at the time, we want to engage fully with the sector to develop the details. Today’s workshop provides an important opportunity to do that.

I want to focus my remarks on the implications of the announcements for those involved in governance and leadership in the tertiary sector. It is all too easy to get caught up in terminology and short term considerations and to miss the important underlying shifts. These are more than just shifts in the thinking of ministers; rather, we are talking here of shifts in the economy, in the demographic makeup of our communities, and in our sense of identity and culture. These forces together are altering the way that New Zealanders seek to engage with tertiary education, and tertiary providers need to be aware of that.

As an historian I am bound to point out that it is helpful to remind ourselves of the history that has led us to this point. I was never a strict Hegelian, but there is something of a dialectical process to be discerned in what has happened to tertiary policy over the last couple of decades.

Until the early 1990s, you will remember, we had a very rigidly differentiated system, with separate streams of resourcing going to the universities (through the University Grants Committee), the colleges of education, and the polytechs. PTEs at that stage lay largely outside the purview of the state, and while some nascent wananga may have existed within tribal communities, there were none with TEI status.

What drove the reforms of the late 1980s and early 1990s was a concern that our participation rates were low by OECD standards, that the system was overly hidebound and lacking in dynamism, and that a spirit of elitism was holding back innovation in the university sector in particular.

For this reason, the sector was deregulated and the highly stratified funding system was replaced with the EFTS system.

By the end of the 1990s, it was clear that we had achieved our goals in terms of participation, and there certainly was a greater sense of entrepreneurship and innovation in some parts of the sector. However, as is often the case, we were beginning to see a rather dark underbelly emerge.

Employers and industry groups were not seeing the kind of skills they needed coming out of the tertiary system. Instead, it seemed that while the economy was crying out for people with skills in high end manufacturing, engineering, applied sciences and biotechnology, the tertiary system was happily turning out record numbers of graduates with middling degrees in law, business and communications.

Equally worrying, the much-vaunted competitive dynamic did not seem to be propelling tertiary institutions into strategic alliances with industry in areas of crucial importance to our economy. Instead, institutions were competing aggressively to provide middling degrees in law, business and communications.

In addition, it seemed that a worrying number of students were enrolling in qualifications and either dropping out or meandering through several years of inconclusive study. For some, tertiary education was becoming a rite, but without any passage.

In other words, the pure market model was not delivering. For that reason, in the last five years my government has been attempting to push the pendulum back in the other direction, although, in true Hegelian fashion, we are not interested in a return to the situation of the 1980s, rather we are aiming at a better balance between the subjective choices of students and the priorities that emerge out of an objective analysis of where our economy and our society are heading.

What I want to focus on today is my view of what that swing of the pendulum means for those with an interest in providing leadership to the tertiary sector. You are the people who are (or should be) thinking of where your institutions need to be in five, ten and twenty years time. I want to link last week’s announcements to that frame of reference.

I assume that you have all read the material released last week very closely. If you have not done so, you might want to quietly tender your resignation at the close of the session.

You will recall that there were three key themes to last week’s announcement:

• A clearer focus on the distinctive contribution of each institution;

• A shift away from a purely enrolments driven funding system towards multiyear funding on the basis of plans which relate closely to profiles; and

• A marked improvement in quality assurance across the sector.

I want to make a few comments about each of these themes. These are not intended as definitive, but rather to prompt discussion at this workshop regarding where the sector needs to head over the next five to ten years.

First, a clearer focus on distinctive contribution. This arises out of a concern that tertiary institutions have sought to be all things to all people in order to capture a sufficient portion of the market. What has been lost or at least placed in jeopardy is the sense of a network of provision with each institution identifying its own strengths and playing to those.

A rather unhelpful feature has been the perception that for institutions to succeed they need to ascend through a hierarchy of provision and take on some of the attributes of a university, if not acquire the cachet of university status itself.

What the government is seeking is excellence within types of provision; excellent ITPs, excellent PTEs, excellent universities, excellent wananga. Having said that, we are certainly open to a redefinition of boundaries where there is good reason to do so.

For example, the process of merging colleges of education with universities is almost complete. This has been driven largely by the desire on the part of students for a more broadly based teaching qualification.

We also need to look more closely at our concept of what constitutes a degree and ask ourselves whether it reflects the current reality. The Education Act is quite clear that degrees should be linked to research and while that is very much true of post-graduate degrees it is somewhat out of step with the reality of under-graduate degrees, whether in universities or in other institutions.

I am certainly prepared to contemplate legislation to bring the Act more into line with reality, so long as the outcome is a more sensible set of choices for students within an accessible network for provision.

Some of you have voiced concern over whether the government’s call for providers to contribute to the larger system implies a loss of institutional autonomy. My immediate response is that it does not. There is no suggestion that the government will be seeking to control what is taught or who teaches it, and certainly no intention to curtail the intellectual leadership role that academics have in the community.

I would say that at times institutional autonomy is invoked where it should not be. The government as the primary funder of tertiary education is charged with a general oversight of how tertiary resources are used. Where we see significant overlaps or gaps in provision it is important that we enter into a dialogue with tertiary institutions around how to address these.

A good example is the need to provide our growing biotechnology industries with the cohorts of skilled and motivated graduates they will need in the decades ahead. I do not believe there is any threat to institutional autonomy for the government to engage tertiary providers on how we tackle this issue.

Instead, an autonomous institution should be prepared to consider possibilities for greater collaboration with other institutions to ensure complementarity of provision, and to create more opportunities for staircasing and cross fertilisation in teaching and research.

Turning to the question of funding, the pendulum is swinging away from a system based on a rather severe market logic. That chain of logic held that the long term strategic interests of the economy in terms of skills were translated into labour market signals about the relative value of different types of qualifications. Those signals were then interpreted by students who made rational choices about what qualifications they most valued and enrolled in tertiary courses accordingly.

In short, the theory held that the aggregated decisions of students represented as accurate a forecast as was possible of the pattern of labour market demand over the medium to long term. That being the case, one need only fund on the basis of enrolments and each cohort of students would be led by an invisible hand to acquire the optimal set of qualifications.

In reality, the links in this chain have proven too tenuous. Student choices are in important factor, but they are not the only consideration. The government needs to able to fund the tertiary sector strategically. That means to fund it in a way that achieves broad goals that are based on where we want our economy to develop, what social and cultural issues are emerging, and what is important for our sense of national identity.

For that reason, we want to move away from the kind of atomised approach of funding enrolments towards an approach which elevates profiles so that they form the basis of multi-year funding agreements. Volume will still be an important driver, but so too will a range of other factors such as course completions. Perhaps more importantly, investing in a plan is the means whereby the government can commit itself to an institution that has developed its profile with a clear sense of its distinctive contribution and through dialogue with its stakeholders in the community and in relevant sectors of industry.

I believe a system of formal multi-year resourcing agreements will give the government and the sector more certainty, and the public better value for money.

The third aspect of the reform package is quality assurance. My concern is that we have relied too heavily upon an input-based approach to quality assurance. In other words, provided that we can tick off a range of required features a course is deemed to meet a sufficient standard. I think we can do better and I think New Zealanders expect the sector to be able to demonstrate beyond question that it is delivering relevant education and training to consistently high standards.

That is why we need a quality and monitoring system that:

• Makes sure that providers are meeting specific student and stakeholder needs as outlined in their Profiles;

• Involves robust quality assessment including measures of outcomes and rigorous peer review and moderation; and,

• Promotes a culture of continuous improvement rather than one or compliance.

As I said last week, at the heart of the system must be an enhanced regime for gathering and analysing reliable and relevant information. We need to find ways of improving and assuring the quality of teaching and learning, rather than simply examining unsatisfactory proxy indicators.

A quality and monitoring system like this would foster accountability and transparency, and at the highest level it will build public confidence in the tertiary education system. It should also avoid unnecessary compliance, and I am committed to ensuring that this is an important design consideration.

In summing up, I would like to suggest that the direction we are taking in these reforms reflects very much the principles of good governance. The issues we are asking tertiary institutions to address are essentially those that should be high on the agenda of their own governing bodies:

• What is our distinctive contribution, and how is it linked to the needs of our stakeholders and how does it contribute to the community and the economy?

• How can we develop a multi-year plan that matches our resources to what we want to achieve, and moves us beyond short term viability towards long term sustainability?

• How can we create a culture of transparency and accountability, of robust internal debate and commitment to the highest standards of teaching of research?

In large part, the reforms are an attempt to focus what government does in terms of funding, quality assurance and oversight of the sector on these real strategic questions, rather than distracting institutions into complex exercises in revenue chasing. It is, if you like, bringing a governance framework to the fore and asking how, as individual institutions and as a collective, can we better serve the needs of New Zealanders and New Zealand.

Thank you.

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