Q+A’s Guyon Espiner Interviews Tertiary Education Minister, Steven Joyce.

Points of interest:

- Government cap on student fees to be raised. Universities to be allowed to raise fees for expensive courses and “perhaps… a percentage increase that’s similar right across all courses”

- Government looking to introduce “lifetime limit” on student loans – no more than six to seven years at undergraduate level saving $10-20 million per year

- New permanent residents and Australians to wait two years before they can take out a student loan

- Approximately 6000 tertiary qualifications are now available in New Zealand; government planning to cut that by 40-45 percent

- Minister confirms 5-10 percent of tertiary funding will be based on an institution’s course completion rates; percentage of students required to complete will vary from course to course

- Chance of increased funds in the Budget for universities and polytechnics is “not great”

The interview has been transcribed below. The full length video interviews and panel discussions from this morning’s Q+A can also be seen on tvnz.co.nz at, http://tvnz.co.nz/q-and-a-news

Q+A is repeated on TVNZ 7 at 9.10pm on Sunday nights and 10.10am and 2.10pm on Mondays.

STEVEN JOYCE interviewed by GUYON ESPINER

GUYON Thank you Minister for joining us this morning on the programme we really appreciate your time. One of your top priorities in the portfolio is course completion rates, but when you look across the sector amongst all providers all students, the rate of course completion is close to 75%, so is this really such a big problem?

STEVEN JOYCE – Tertiary Education Minister
Oh it's a significant problem in some areas, and I would start at the outside by saying there's huge amounts of good things going on in our tertiary education sector, and you’ve gotta be careful not to tar all with the same brush, but there are some courses where we have very low completion rates, sort of as low as 30%.

GUYON Which ones are they?

STEVEN A lot of them in the foundation area, level 1 to 3.

GUYON What sort of courses are we talking about though, what sort of subjects?

STEVEN These are courses in many areas where they're involving catch-up for those that haven't don’t quite so well in secondary, and also across a number of the sort of lower level type, hairdressing and tourism type courses. But I think it's important again not to be too prescriptive because you get some that are doing really well, some institutions doing really well with exactly those courses and some that aren't. So it's really saying here's an expectation we have across a set of courses with a certain type of student body, we expect you to reach that, and the signal is to institutions that aren't getting anywhere near that, to actually do some work and change.

GUYON And so what you're doing is linking performance and course completion, [they] will be part of that to the funding of an institution, having something approaching 10% of an institution's funding linked to pass rates.

STEVEN Be more like 5% to start with, we said 5 to 10% and it's probably going to be at the lower end of that. But it is important – at the moment what we do is we say you enrol a bunch of people to a course and we will pay based on those enrolments, and if you get an attrition rate, a sizeable attrition rate through the period of the course there's no comeback against the institution.

GUYON So what will those rates be though Minister, so what will you have to have as pass rate in order to hang on to that 5 to 10%.

STEVEN It will differ according to the type of students that you're dealing with. For example, under graduate students going into universities, the pass rate now of those that come out of school and go through university is about 70 – 75%, so as you say that’s not the problem area. But can I just say that the whole of the exercise is to get those institutions that aren't focused on, if you like, pastoral care and support of students during the courses, in other words checking to see that they're still turning up, checking to see that they're still engaged.

GUYON Sure, everyone would agree that that was commonsense. But could we just get from you some sort of level of which that you would expect pass rates to be? Would you expect them to be at that sort of 70% rate across the board?

STEVEN No, no you wouldn’t. What you would expect is to have a different pass rate that you're seeking for foundation courses, from vocational courses, from academic courses, and you'd have a different pass rate for full time versus part time. The thing a lot of people don’t understand of course is the tertiary sector is a hugely wide of effectively different sectors, you have universities, you have polytechs, you have private training institutions, you have foundation courses, you have adult literacy and numeracy, all these fit into what's called the box which is tertiary, and they are all different, so you actually do have to treat them all a little bit differently.

GUYON When you're talking about funding obviously fees is a big part of that, there's currently a fee maxima in place which actually caps the amount that institutions are allowed to charge students, are you looking at changing that so institutions can charge more?

STEVEN There's a sort of hidden Labour Party price freeze for the tertiary sector which has been there for some years, and the trouble is that it has actually created some real distortions. Actually there's two fee controls, there's a fee control as to how much you can increase the price of your courses just generally, and then once you're at the expensive end you actually can't go any further, and what that means is that some of our more expensive courses have had their fees capped sometimes for as much as seven or eight, nine years and then the other courses have been allowed to continue to increase. And that creates distortions for the institutions, because it's costing them a lot more to provide them...

GUYON So what changes – are you gonna look at lifting that, are you going to abolish the maxima?

STEVEN No what we're looking at is saying - there will always be fee regulation. As long as the government is providing on behalf of taxpayers a significant percentage of the cost of the course there has to be fee regulation, otherwise the institutions will simply go out there and keep putting their prices up for what the market can stand ....

GUYON So what changes are you looking at there then?

STEVEN I'm looking at whether we should retain the maxima for those expensive courses, or whether there perhaps should be a percentage increase that’s similar right across all courses regardless of whether they're expensive or inexpensive.

GUYON So let's just drill down there a little bit, because that’s interesting. So you're talking about courses such as medicine, where you're looking at ten thousand odd dollars a year – you're looking at allowing that to rise considerably?

STEVEN Well you wouldn’t allow it to rise considerably. I think that would be inappropriate in these current economic times. But the question you have to ask yourself is are you actually really sending a signal to institutions currently that they shouldn’t be supplying these expensive courses, because they're losing more and more money on them as they're not allowed to put the prices up at all in many case, and yet they are allowed to for their lower costs courses. So if I was an institution I'd be tempted to say, well there's our lower cost courses they're some of these ones that don’t involve labs or flying for example, aviation courses. I might just do the lower cost ones that cost me less to provide and do more of those, and of course you get necessarily then not necessarily the ones that the economy are looking for.

GUYON So we can expect some fee increases at those higher end courses?

STEVEN We are getting fee increases now.

GUYON Well it rose 1.9% last year, what are we looking at?

STEVEN Oh well I think just wait till the Budget, that’s a Budget decision.

GUYON But roughly what are we looking at?

STEVEN Oh it won't be dramatic.

GUYON But it will be a rise?

STEVEN There will be the potential for some of the more expensive courses to increase in cost yeah, but we're not talking a dramatic change. What we are going to do once we've made some initial steps is actually go and have a really good look at university course pricing and tertiary institution pricing, because they were last looked at in the mid 90s and some of them are getting highly distortionary relative to the actual cost of providing the course.

GUYON So you're looking at a wider review on that?

STEVEN Yes.

GUYON Let's move to qualifications, the actual qualification that people end up with when they go to these institutions. You’ve highlighted the fact that there are 6000 qualifications.

STEVEN It seems quite a lot doesn’t it?

GUYON It does seem quite a lot, and a report released to me by Qualification Authority under the Official Information Act, shows that your target is to reduce the number of qualifications by 40 to 45%. Now what sort of timeframe are you looking at for that goal?

STEVEN Well by July this year there'll be first of all a real weeding out of those that actually aren't being used, and a fair number of the 6000 are if you like just sitting there dormant at this point. We've gotta cull those out and say well these ones aren't gonna be used in the future, and then actually interestingly the Qualifications Authority will acknowledge it's sort of been it's own worst enemy over the year by allowing a lack of flexibility to adapt national courses for local environments, and effectively everybody's kept popping up with their own local course. So one of the things that they will look at doing is allowing more flexibility to amend a national certificate for example so that it reflects the realities of a local environment while retaining it as a national certificate. I think there's quite a lot that can be done there, and it's good because at the end of the day you want a student to walk out with a qualification that if they go down to the other end of the country or up to the other end of the country that the employer will understand and go yep actually I can see where that one is and I know what this person's been trained for. At the moment in some areas that’s quite difficult.

GUYON If you're gonna roughly halve the number of qualifications, then surely that necessitates reducing the amount of institutions. Do we need 20 polytechs?

STEVEN No, you wouldn’t assume that at all, because the two are actually unrelated. Because for a polytechnic in one part of the country to adopt a national course instead of their own branded course is quite a simple exercise and doesn’t affect necessarily the provision. But your wider question is, do we need 20 polytechnics? I don’t have a strong view on that. I think we need the polytechnic provision roughly where we have it now, but in terms of how the institution should be shaped, I think that’s over to the institutions and we're encouraging further cooperation with the appointments we've just made to polytechnics.

GUYON That means mergers doesn’t it?

STEVEN No it doesn’t necessarily. You’ve got a continuum, a one end is cooperation of calling each other up every now and again and seeing how you're going, at the other end there's mergers and there's a whole range in between. I think in my view of it is regional provision of vocational courses is very important, it's very important to those regions, I think the best way to organise it is up to the individual polytechnics to discuss, but I think the really important thing that must be top of mind is the quality of education for the students, and as long as everybody keeps that at the absolute forefront of their mind then the structures if any should change or not, will actually follow.

GUYON One of the big issues for students themselves is student loans; it's been a big political issue as well. You are looking at tightening up on the scheme to some degree. I understand that that also includes a plan to limit the amount of time you're allowed to spend on having access to interest free student loans. What are your plans in that area?

STEVEN Well there's a number of things we're looking at, and we've all bought into the interest free student loan policy. It's been fought over a couple of elections now and everybody's bought into it, but the reality is that it does create some interesting incentives for people, which once you take out the interest says to people well perhaps you don’t have to think as much as you used to have to think about how long you actually spent in courses and things, because you're not accumulating interest. So given that I think, and given the amount that taxpayers pay, they roughly write off about 47% in the dollar of every student loan at the moment, then there is some boundary issues that we look at.

GUYON Let's talk about those boundaries, are you looking at limiting the amount of time someone is allowed to spend ...

STEVEN We are looking at potentially a lifetime limit in terms of the amount of time you can borrow for student loans, that’s one of the things that’s on the table.

GUYON Roughly what sort of limit are you looking at?

STEVEN Well it wouldn’t be a particularly draconian limit, even somebody with my not necessarily esteemed academic record wouldn’t have had any trouble with it.

GUYON How many years Minister?

STEVEN Well, it was six or seven years for an undergraduate degree of normal length, and so we're not talking at the, you know, you must finish your degree within three years if that’s what's been set down, we're not talking about that at all.

GUYON So roughly you get six or seven years of access to interest free student loans

STEVEN At an undergraduate level.

GUYON How much would that save, have you worked that out?

STEVEN Well of course it's not massive in the overall scheme of things for the year, you know given that student loans is a very expensive policy. These are all things in the margin, but with all the things we're looking at you're sort of looking at between the 10 and 20 million a year, because it's that sort of numbers. Another thing we're looking at is the issue of people that come to New Zealand and when they should be able to access student loans.

GUYON What change are you looking at there from the current situation?

STEVEN Well currently if you come to the country as a new permanent resident, or Australians of course as they come across, you are not allowed to get a student allowance for two years, and you are not allowed to have a social welfare benefit for two years. But interestingly you are allowed to borrow for a student loan the moment you arrive, and that creates some interesting incentives for people to sign up to tertiary institutions where perhaps they're not as committed to the country, or not committed to tertiary education as perhaps others would be.

GUYON Interesting, so are you hinting there that there would be a two year window before they would be able to ...

STEVEN It's one of the things we're looking at, whether we should line that up with the student allowances.

GUYON So international students may have to wait for two years before they could access?

STEVEN Well not international students. They're defined as people that come in and they're fee paying students, but new residents to the country who come into the country might have to wait for a period of time before they qualify for student loans, that’s something we're looking at.

GUYON When you look at the budget you spend about 1.5 billion on student loans.

STEVEN Yeah, it's big.

GUYON Have you got a target to reduce that to?

STEVEN No I haven't. What I have got though is a commitment to have the best possible outcome from what is a very sizeable spend in tertiary education in this country. We're well ahead of the OECD average, we're ahead of the Australians in terms of how much we spend overall. My friends at the universities and polytechs would all love us to spend more, but the chances of me getting to do that in the current fiscal environment and given how much of our economy that already is spent in this area is not great, so I have to actually move things around to get a better result, and one of the things we want to do is maximise the number of places in universities and polytechs.

GUYON So that money will come out of student loans and it will be filled back in...

STEVEN …To the tertiary sector yes, and this year we actually - many people don’t know this - we are actually putting more places into our tertiary sector this year than we ever have before. Now unfortunately that was scheduled to drop off a bit next year for two reasons. One, there was a demographic change which the Labour Party endorsed before they left, and then also we've been going higher than expected because of the current economic environment. So the challenge for me is to find the money to keep those places in place in 2011, that’s my immediate challenge.

GUYON Just final question cos I'm running out of time, student allowances, any change planned there?

STEVEN No nothing planned at this point.

GUYON Nothing changed there. Look that’s all I've got time for but thank you Minister for joining us this morning, we really appreciate your time.

ENDS

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