House of Representatives

Second Reading Speech

the Hon J S Dawkins Minister for Employment, Education and Training

I move:

That this Bill be now read a second time.

In the 1988-89 Budget context the Government released A New Commitment to Higher Education in Australia, which marked the culmination of an intensive twelve-month process of discussion and review of the future of higher education in Australia. The Statement addressed this Government's plans for substantial growth in higher education over the next three years, the associated resource requirements of the higher education system, measures to improve equity of access to higher education, and the means by which the total resources required for growth can be provided.

The expansion and funding strategy, the cornerstone of the Government's Higher Education package, is one of the most substantial in the history of Australia's higher education system, ensuring that the system will have been substantially expanded over the 1989-91 Triennium. The Higher Education Funding Bill 1988 gives effect to the decisions announced in the Budget statement, with adjustments to take account of the Government's policies on cost supplementation.

To support its growth plans, the Government will significantly increase in real terms the funds available to higher education institutions over the next triennium. Funds will be increased over 1988 grants by $141 million in 1989, $275 million in 1990 and $427 million in 1991. This represents a total real increase in resources over the next three years of $843 million.

The main thrust of the Higher Education Package is the creation of more higher education opportunities, particularly for young Australians. Taking into account pipeline effects of funded increases, an additional 40,000 places will be created by 1991. This new growth will be funded at a substantially improved average rate of $8,000 per place, up 14 in real terms from 1988.

Special recurrent funds have been earmarked to promote access and equity. The Higher Education Equity Projects Program, first introduced in 1985 and currently expending $1.2 million each year, will be boosted by a further $2 million in each year of the new triennium. $1 million will be used to provide seeding grants to assist institutions to incorporate proven pilot initiatives into their programs. A further $1 million will be used to provide additional child care places for higher education students.

Provision has also been made to earmark 200 of the annual intake increases over the triennium for Aborigines under the Aboriginal Participation Initiative, bringing to around 3,000 the total number of higher education places for aboriginal students by 1991 .

The growth in higher education planned by the Government will need a substantial increase in capital facilities. As a result there will be a significant injection of capital funds during 1989-91.

Capital funds will rise from $78.5 million this year to $126.7 million in 1989, S145.4 million in 1990 and $177.2 million in 1991. Included in the 1989 grant is a special injection of $19 million for the urgent renovation of higher education buildings.

Institutions will also be assisted by the introduction of rolling triennial funding, enabling them to undertake long term planning with confidence. The introduction of a single operating grant to replace the existing general recurrent, equipment, minor works and special research grants will enhance institutions' flexibility in the use of their recurrent funds.

To help finance the substantial expansion in the funding of higher education that was announced in the 1988-89 Budget, the Bill makes provision for the establishment of the Higher Education Contribution Scheme (HECS).

HECS will apply to study in award courses undertaken in higher education institutions from 1 January 1989. People who benefit from participation in higher education will be required to make a small contribution towards the cost of their study. The scheme will replace the existing Higher Education Administration Charge (HEAC) which required a payment by students on enrolment.

The key features of HECS are:

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an annual course charge of $1,800 per year of equivalent full-time study for study in award courses;

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pro rata charges according to the actual proportion of an equivalent full-time load being undertaken;

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payment arrangements based upon personal capacity to pay; and

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a choice between lump-sum payment with a 15 per cent discount at the time of enrolment each semester or payment through the taxation system once a person's taxable income is around the level of average earnings in the Australian workforce).

If people choose to pay through the taxation system, the required annual repayments of HECS liability, once the Scheme is fully operational, will be:

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nothing for personal taxable incomes below S22,000;

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1 per cent of personal taxable income for incomes of S22,000 to $24,999;

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2 per cent of personal taxable income for incomes of $25,000 to $34,999;

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3 per cent of personal taxable income for incomes of $35,000 or more; and

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no further payment once debts are discharged.

These repayment rates will be halved for the current financial year in view of the introduction of the Scheme on 1 January 1989.

The annual course charge, the outstanding debt and the personal taxable income levels above which payment is required will be indexed to keep pace with inflation. These arrangements will ensure that those paying the charge will pay the same amount in real terms, regardless of how long they take to do so.

The Scheme will cover all higher education students (both new and continuing) and study undertaken from 1 January 1989, except for:

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students enrolled in fee-paying postgraduate courses;

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students in non-award courses;

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students in recognised bridging and supplementary courses;

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overseas students subject to payment of the Overseas Student Charge, full fees or who are subsidised under a foreign aid program;

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students enrolled in basic nurse education courses will be exempt until 1993, when the Commonwealth takes over full responsibility for funding these courses (unless State and Territory governments ask the Commonwealth to collect the contribution on their behalf before 1993);

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students undertaking industrial experience as part of a course will not be liable for that proportion of their course spent in industry; and

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students receiving a postgraduate scholarship exempting them from liability.

Adult and continuing education students and TAFE students, including those studying higher education courses provided wholly by TAFE institutions, are not covered by the Scheme.

With those exceptions, the Scheme will apply to all students enrolled in higher education institutions from 1 January 1989. There is no liability for studies undertaken prior to 1 January 1989 .

To encourage participation in postgraduate courses, especially those relevant to the national research effort, a system of postgraduate scholarships will be introduced providing exemption from liability under HECS for a given year of study. To be directed particularly at full-time higher degree students, these scholarships will be allocated by institutions in accordance with Government guidelines. Institutions have already been advised of their allocation of scholarships for 1989. A special allocation of postgraduate awards will be incorporated under this arrangement to assist in the professional development of teachers.

The Government will establish a Higher Education Trust Fund to receive all HECS funds collected by the Australian Taxation Office. These funds will help finance the expansion of the higher education system.

The Trust Fund will operate as follows. The Commonwealth, under its 'benefits to students' power, will make direct payments from the Trust Fund to higher education institutions each semester to fully discharge students' course charge liabilities for that semester. These payments will amount to about 20 per cent of total operating grants to institutions. The Trust Fund will be financed in part from HECS payments made by students through the taxation system, and in part from a reallocation of general operating grants for higher education which would otherwise be paid to institutions via the States. The remaining 80 per cent of total funding will continue to be paid via the States in line with current arrangements.

All students who are liable under the Scheme will be offered a choice of payment arrangements each semester. They May choose to pay their liabilities in a lump sum directly to the institution, in which case a discount of 15 per cent will apply. Alternatively, they May ask the Commonwealth to pay their contribution to the institution and agree to repay the Commonwealth through the taxation system. Students who thereby incur higher education debts to the Commonwealth will also be required to notify the institution of their current tax file number or where they do not have one, make written application for a tax file number.

The provisions of this legislation relating to the use of tax file numbers for purposes of the Scheme are based upon, and are generally consistent with, the corresponding provisions in the Government's general Tax File Number legislation currently before Parliament. Normal taxation secrecy provisions will protect the privacy of a student's taxation information, including the tax file number. In addition, the provisions of the Government's Privacy Bill relating to the use of the tax file number generally will apply equally to the use of the tax file number for purposes of this Scheme.

The Higher Education Contribution Scheme is an essential part of the Government's plans for expansion and development of the higher education system. In financial terms it will raise more than one-third of the additional funding for the 1989-91 triennium allocated to higher education in the Budget. The size of this contribution will grow in future years. Just as important, the Scheme will increase the fairness of funding arrangements for higher education, ensuring that the total burden of funding does not fall entirely on the taxpayer.

For these reasons the Government believes that the introduction of the Scheme must be a pre-condition for implementation of the other aspects of its Higher Education package. It has framed its legislation accordingly. In the event of significant amendments or outright rejection of those provisions of the Bill giving effect to HECS, the Government will have no alternative but to curtail its plans to expand higher education. Without HECS, the Higher Education Administration Charge will be retained and indexed, and the funding of higher education institutions for the next three years will be held at a level consistent with the maintenance of 1988 funding levels in real terms together with pipeline effects for funded intakes prior to 1989. The unfortunate consequence would be that many Australians would then be denied the opportunity to participate in higher education.

The Budget announcements on higher education were followed by a series of consultations between officers of the Department of Employment, Education and Training, individual higher education institutions and State authorities. This process, which enabled the Commonwealth to identify priorities for the allocation of resources according to State and regional needs, and the agreed educational profile of each institution, continued during September and October. Advice on these matters has also been sought from the Higher Education Council of the National Board of Employment, Education and Training.

As the Government's Policy Statement on Higher Education made clear, Commonwealth support will be directed mainly towards those institutions which form part of the unified national system of higher education. The letter of invitation to all higher education institutions requested a response by 30 September, but the Commonwealth agreed to accept a response by 30 October at the latest in line with the publicly expressed wishes of some institutions for more time for consideration. Decisions on final membership of the unified national system will be made during November. Some institutions have already been advised that their application to join the Unified National System has been accepted.

Because of the timetable for consultative processes and membership of the unified national system, the Government was faced with severe time constraints in the drafting of funding legislation for the 1989-91 triennium. As a result, while this Bill incorporates system-wide funding levels, it has not been possible to include details of the allocation of grants to individual institutions. The Government proposes instead to table before both Houses of Parliament a Report which will give details of the majority of institutional grants for each year of the 1989-91 triennium. It is anticipated that this Report on Higher Education Resources for 1989-91 will be available for tabling at the time this legislation is introduced into the Senate.

The Government will then table Determinations in early December which will give legislative effect to its decisions on institutional grants.

Madam Speaker, I seek leave to table the Social Justice Impact Statement on this legislation.

I present the Explanatory Memorandum to this Bill and I commend the Bill to the House.