Interview on 2GB Breakfast with Steve Price
Topics: Australian university spending

Steve Price: It seems our universities are swimming in money. Now, there was a story last week where the University of Bath in the UK, the vice-chancellor there, Dame Glynis Breakwell, retired because there was controversy over her salary. She was earning £468,000 a year, which is about $812/13,000 Australian. That’s Britain’s largest pay packet to a vice-chancellor at a university. Now, that is a lot less than what vice-chancellors in Australia earn. In fact, it would make Dame Breakwell – she would be Australia’s 28th highest paid university vice-chancellor. That seems incredible. Twelve vice-chancellors in Australia took home more than $1 million in 2016. And listen to this figure – I mean, we’re here talking about train drivers getting $100,000 – the University of Sydney’s Michael Spence, total pay last year $1.44 million for running a university.

I’m sure the Education Minister Simon Birmingham’s not on that sort of money. He’s on the line. Minister, good morning.

Simon Birmingham: Good morning, Steve.

Steve Price: You’d have to work – what – five years to make that?

Simon Birmingham: Something like that, Steve. So, we’ve been trying as a Government to reign in some of the costs in universities for some time now. The universities across Australia have seen 71 per cent growth in their funding since 2009; it has been a big contributor to the growth in government expenditure, which of course, comes at the same time as we’ve had troubles dealing with getting the budget back to balance. Now, we’re happily well on the way to achieving that as the Turnbull Government, but making sure that university costs are well under control is a key part of that.

Steve Price: We can track this all the way back – can’t we, Minister? – to when Julia Gillard was in office and uncapped university places. Universities realised then that they could take in a much greater number of students and so, suddenly they were swimming with money.

Simon Birmingham: That’s been a big, big part of the growth factor in terms of their taxpayer revenue. It’s not the only revenue unis get, taxpayers fund about 58 per cent of university revenue. So, they do get out there and generate revenue from international students and other sources themselves. And they’re set up mostly independently, under state government acts, so they’re not something that federally we have direct control over, they have a lot of autonomy. But of course, we are the prime funding source for research funding, for student funding. And the decision we took in the last budget update was that if the Senate, if the Labor Party were going to keep blocking moves to put an efficiency dividend on some of those university funds, well, we’d have to strike it in a different way which is that we have essentially capped one of their funding streams at 2017 levels for a couple of years, which we’re able to do without having to get the Senate’s approval seen as they’ve been so obstructionist.

Steve Price: Your government’s in the middle of a debate about: we’re creating jobs, the unemployment rate’s coming down, the number of jobs created – as the Prime Minister keeps telling us – is growing and it’s at record levels, but most Australians listening to me this morning have not had the sort of wages growth that they perhaps had five years earlier. And yet these university administrators seem to have had incredible salary increases. Why has that happened?

Simon Birmingham: Steve, that’s a very good question and it’s one where I look at the extent of marketing expenditure across universities that range to around $1.7 billion over the last few years, the growth in overheads. What our research tells us is that unis saw some 15 per cent growth in their per student funding over a period of time, yet that certainly hasn’t flowed into increased expenditure on the actual teaching, or learning support, or students at universities. So, money’s going elsewhere, in administration, in marketing costs, and so forth. And I find it staggering that when we, last year in the budget, called for an efficiency dividend of a very modest couple of per cent or so to be applied to universities, they said they couldn’t afford it. They said it was going to have a negative impact, and the Labor Party amazingly agreed with them, despite the fact that they had previously called for the idea of an efficiency dividend.

So, we’re now having to try to constrain that out of control spending growth in a different way. And we’re determined to do so because we think taxpayers deserve value for money, that universities ought to be focussed on efficiency in their spending and quality of outcomes for their students. And it’s a good thing that we have more Australians going to university. That reflects changing nature of much of our economy, but we want to make sure that those students are getting the quality, relevant experience, they’re satisfied, their future employers are satisfied, and importantly taxpayers are getting value for money.

Steve Price: I happen to think that we’ve got too many people going to university; we need to pull the numbers back and raise the levels again. I know you have a similar view to that. Can I ask you why these marketing departments at these universities seem so determined to spend so much money on things like sporting teams, for example? You’re a South Australian, Senator, I note watching the fabulous Tour Down Under last weekend that the UniSA has a professional bike riding team. We’ve got the University of New South Wales sponsoring the Canberra Stadium, you’ll see that when you go back to work in Canberra in a couple of weeks’ time, they sponsor the stadium there. UTAS sponsors a stadium in Launceston. Swinburne sponsors my footy team, the Richmond Tigers, by naming their oval. Why do universities need to stick their names on sporting teams and sporting ovals?

Simon Birmingham: It’s a damn fine question, and it’s why in trying to get efficiencies in universities I’ve singled out marketing costs. And my message to vice-chancellors, university administrators is: don’t talk about whether you have to find savings in terms of things that impact on students and their education. Start first and foremost by looking at your administration budgets, at your marketing budgets. Do the types of things to find efficiencies that ought to be necessary, and ought to be found. That these are taxpayer dollars – at least 58 per cent of them are, 58 cents in every dollar comes from Australian taxpayers – they ought to be being spent wisely. And some of these marketing activities that appear to be under way, you have to question what on earth the value to a university is to do that.

Steve Price: Well, any business under stress, one of the first areas that gets attacked is its marketing budget, because you say to yourself: well, we’re doing okay, there’s cash coming in through the door, but we see that down the track we’re going to have to make some savings. Perhaps we shouldn’t spend as much on marketing.

Simon Birmingham: Yeah. Now as I said before, Steve, they of course do generate a lot of revenue…

Steve Price: [Interrupts] But who controls this stuff, though? I mean, you say that the state governments have some control. I mean, the Federal Government’s writing the cheques.

Simon Birmingham: Well, we are, which is why we’ve now limited the size of the cheques. The demand-driven system that was operated and put in place by Julia Gillard allowed unis effectively to write their own cheque each year. What we’ve said after some time of trying to get other reforms through the Senate that have been blocked time and again by the Labor Party, is that if we’re not going to achieve reform on that front, what we will do is we will limit the size of the cheque, and that’s exactly what we’ve done by saying there won’t be a growth dividend in 2018 or 2019 to one of their streams of funding, it will simply be capped; which the legislation allows us to do.

It doesn’t allow us to take it backwards and nor are we proposing that, but it allows us to limit it at least to 2017 levels for a couple of years. And that’s effectively an efficiency dividend then being applied on unis by another mean. And although they’re ridiculously saying that will have an impact potentially on students or student numbers, my message to them is: there’s plenty of evidence – indeed their own academics have even in some cases published papers saying that there’s $500 million worth of potential savings that could be found across the university sector if they just operated at greater efficiency and greater productivity.

Steve Price: Yeah, Labor and the Greens are just being political opportunists. Minister, thanks for your time.

Simon Birmingham: Pleasure, Steve, any time.

Steve Price: Simon Birmingham there, Education Minister.