Hon Michael Cullen
11 April 2006 Speech Notes

Address to Industry Training Federation Forum

Port Nicholson Yacht Club, Oriental Parade, Wellington

I am sure all of you will be aware of the announcements I made a week ago about the next phase of reform in the tertiary education system. From the start of our term of office we have sought to reshape the sector into one that will drive economic transformation and social development, as well as provide better value for money for taxpayers and students.

The first phase of the reforms in 2000 saw, among other things, the establishment of the Tertiary Education Commission, the development of charters and profiles as key governance documents, and a major boost to the level of investment in industry training. This next phase will see a sharper definition of what different types of institution contribute to the sector, a more sophisticated approach to funding, and improvements to the quality assurance system.

Today is an opportunity for you to learn more about the proposals, particularly how they will benefit ITOs and how you can have more input into New Zealand’s tertiary education system in the future.

The needs of New Zealand industry, in terms of a more skilled workforce with the broader competencies that allow ongoing improvements in productivity, are a central concern in the reform process. When I speak about quality I am thinking both of education that meets international benchmarks and of education that delivers to employers graduates whose skills are current and who are well prepared for the workforce. And when I speak about relevance I am thinking of a tertiary education system that is in tune with the major drivers of productivity and of change in the economy.

This is not to say I have a primarily utilitarian vision for tertiary education. However, I do want a system that brings New Zealand industries into a continuous and information-rich dialogue with tertiary providers.

The aspect of the reforms that has had the most attention has been the signalling of a move away from a volume based funding formula. That system made rather too many heroic assumptions about the capacity of individual students to predict what skills would be most valued in the labour market, and to communicate those through their choice of courses.

It gave tertiary providers no particular incentive to understand exactly what industry wanted. What we are seeking to do is to bring the needs of employers firmly back into the frame as one of the key stakeholders that inform tertiary planning.

These changes may well seem long overdue from your perspective. ITOs have been the one part of the tertiary education system where the needs of industry are paramount. The role of ITOs, as clearly defined through the Industry Training Act, is to serve employees and employers in their industries in a range of ways and to be responsive to changing workplace needs.

The success of industry training is the result of the focus on relevance (that is, meeting the needs of industry and the people wanting to work in those industries) and on quality (ensuring the education and training being provided delivers what it was intended to deliver, in terms of outcomes.)

My government has always been firmly committed to industry training. In 2000, when we started work, the Industry Training Fund was $58.6 million (GST exclusive). In 2006 it has reached $128.9 million, an increase of 120 percent.

Funding for Modern Apprenticeships has increased every year since the launch of the programme and by 2008 annual funding for Modern Apprenticeships will have reached over $38 million, enabling us to achieve the current target of 11,000 Modern Apprentices by December 2007.

Industry Training and the Modern Apprenticeship scheme are a success thanks largely to the hard work of the ITO sector. I am delighted to announce today that in 2005 161,676 trainees participated in Industry Training, far exceeding the 150,000 target.

My proposals for the next stage of the reforms would aim to build on the leadership role of ITOs in terms of better connecting the different parts of the tertiary system to industry and business. This way other parts of the system will be more able to understand and address the skill needs of industry and business.

ITOs also have a key role to play in promoting foundation learning and literacy in the workplace as they are often best placed to ascertain what these needs might be and how effective learning could be delivered.

Hence the importance of ITO involvement in the consultation on the reform proposals. We need to consider how best to involve industry in shaping the whole of the tertiary sector, and also how to remove the barriers that are currently preventing ITOs from developing their roles and their leadership.

To recap, the proposals focus on three key areas:

Better differentiation of tertiary organisations, where the roles and distinctive contributions of different types of organisations are better defined, and the different parts of the sector work together in more complementary ways.

I appreciate that this is particularly important for ITOs and ITPs. We do need greater clarity about the respective roles of ITOs and ITPs and where the boundaries are. ITOs and ITPs have a responsibility to find ways of working together and supporting each other to deliver for industry and students.

We are particularly keen to hear your views on this during the consultation being run over the next few weeks.

The next key area for reform is funding. The government needs to be able to invest in organisations based on plans agreed with the government. This will mean a greater role for profiles so the government can be sure that its investment is being channelled into meeting real needs. Also important here is the proposal to move to multi-year funding, so both the government and the organisations it is funding have more certainty.

The third area is quality assurance and monitoring. The current system is too input focused. What is required is a system that focuses on outcomes, and enables organisations to demonstrate how they are meeting specific student and stakeholder needs.

Despite what some are suggesting, none of this smacks of centralised planning in my book. What it is about is increasing the accountability of the group of organisations operating in a region for working together and meeting their region’s needs.

For the government’s part the new arrangements must deliver two things.

First, they must place an overall constraint on tertiary expenditure. The current lack of fiscal control has hurt the tertiary sector. I do not need to provide examples as the media likes to remind us all of them all the time.

Second, they must allow the government to make informed high-level investment choices across the sector and know how that money is going to be spent.

For tertiary organisations, any new system needs to provide more certainty so organisations can plan ahead, and focus on delivering for students and employers, regions and communities.

At the heart of the system must be an enhanced regime for gathering, analysing and disseminating reliable and relevant information. Better information on tertiary education organisations’ performance will help improve decision-making at all levels; that is, amongst the organisations themselves, as well as at a government, student, ITO and employer level.

At the highest level, an increase in accountability and transparency would bring about a much needed increase in public confidence in the tertiary education system, and a reduction in the negative press that tertiary education gets in this country.

I believe these proposals are good news for the sector, for students, for taxpayers and for New Zealand’s future.

They will help provide clarity around the distinctive contributions of various tertiary education organisations, which will help ensure the tertiary education sector works together in a more complementary way.

They will also deal with the funding, quality assurance and monitoring barriers that are holding back parts of the sector.

As I said at the start of my address, it is important that ITOs take part in the consultation process that is now underway.

I am aiming to go back to Cabinet in June with a more detailed set of reform parameters which have been worked through at a high level with the sector. That will set in train more detailed design work and you can be assured that we will aim to consult again once we have something closer to a blueprint and an implementation plan.

I urge you all to get involved. Our conviction from the start has been that fragmented thinking has hampered the sector and that it is only by working together as a sector that we will realise its potential.

I am now happy to take questions.

ENDS

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