Victoria takes razor to skills funding

VICTORIA'S budget will pop the state's skills bubble, slashing funding for lucrative courses of questionable vocational value.

VICTORIAN TAFEs will be stripped of preferential funding arrangements, and government support for many courses will be slashed to less than $2 an hour, under an overhaul of the open training market to be announced as part of Tuesday's state budget.

But The Australian understands funding rates will rise for about 20 per cent of courses, including apprenticeships and other high-cost training.

The government will also introduce a 5 per cent loading for regional training, scrap maximum and minimum caps on tuition fees and halve the funding most providers get for merely assessing students.

The government hopes the changes will prevent gaming of its training market, whose costs have blown out by about $350 million a year, while channelling training activity into the skills most needed by the economy.

And it believes TAFEs will benefit from the changes because they dominate the technical training which is now going to attract the highest funding rates.

But TAFEs will be outraged over the removal of an additional base funding allowance of up to 22 per cent, which was designed to help them provide a full range of training services.

This change is in line with last year’s Essential Services Commission recommendation that the different base funding rates be phased out. But it ignores a separate ESC recommendation to consider alternative means of funding TAFEs’ community service obligations.

The new funding regime leaves them with no funds to pay for their extra responsibilities as government providers – particularly in staff costs, reporting requirements and full service provision obligations – making it harder than ever for them to compete with private colleges.

However private colleges argue that they’re disadvantaged because they have to pay for their own infrastructure. And many will see their business models torpedoed, with funding rates slashed from between $6.50 and $8.00 to – in many cases – less than $2.00 an hour per student.

The Australian understands the government will discard the previous funding bands, which were based on qualification levels, and replace them with five bands based on teaching cost and industry demand.

Band E courses in areas including business, hospitality, retail, customer contact, process manufacturing, events, fitness and sport – ranging from certificate I to diploma level – will attract less than $2.00 an hour. Enrolments in some of these courses have grown by over 4000 per cent since 2008.

But high-demand Band A courses in high-cost areas such as roof tiling, aeroskills and mechanical trades will attract between $11.00 and $12.50 an hour. Funding rates for these courses will rise by around $1.00 an hour for TAFEs and $2.50 for private colleges.

The Australian understands funding rates will rise for about 20 per cent of courses in areas of industry demand, including specialised skills, ‘thin’ markets and apprenticeships.

Apprenticeships will also be excluded from a 50 per cent cut to funding rates for ‘recognition of prior learning’ enrolments. The existing arrangement, under which colleges receive the same funding for assessing students’ prior skills as they get for training them from scratch, is a major source of rorting.

The government believes the changes will make it more feasible for private providers – particularly group training companies – to move into the high-demand technical training areas which they’ve largely shunned because of the massive start-up costs.

And it believes the changes will make the system more sustainable by dampening rampant growth and discouraging the most commercially focused of the 535 government-approved providers.

But private colleges will protest, after yet another change to an already complex system sends a shockwave through their budgets and business plans. And TAFEs in particular will cry foul, with enhanced funding for trades training and the 5 per cent regional loading unlikely to compensate for bigger funding cuts to many of their activities.

Some regional institutes are already close to the wall after TAFEs’ share of government-funded training plunged from 66 to 48 per in just three years, stripping almost $100m from their financial reserves last year alone.