Interview on 2GB Money News with Ross Greenwood
Redesigning VET FEE-HELP; Dodgy vocational education providers
25 August 2016

Ross Greenwood: Welcome back to Money News right around the country. We have told you for months and months, certainly over 18 months I think we’ve been telling you about the crooks and the shonks that have entered into the private education space. The real problem has been despite what was clearly an ill-fated scheme when it was set up by the Gillard Government, it was allowed to continue under the previous Governments, and so as a result, you’ve now got a situation where by the end of 2015, more than $3 billion in debts have been accumulated to Australian taxpayers, many of which will never be paid off, and the interesting part about this is in many cases, the fees to students triple. Now, what occurred was it became effectively a cash-generating machine for those education providers who could convince young people – indeed, old people as well – to go into a training college to get some form of a diploma, but actually then put it onto the public purse. The money would go to the education facility. They often paid big commissions out, and guess what? The taxpayer would be lumbered with the bill, and the poor person who got the education might not ever get a job that would see them pay back that debt. 

Well, the Government now is continuing to crack down on the sector, and I’ve got the Education Minister Simon Birmingham, who today made a significant speech, on the line right now. Many thanks for your time, Simon.

Simon Birmingham: G’day Ross, it’s good to be with you.

Ross Greenwood: Look, you used to be on this when you were the Assistant Training Minister. I can remember that. You sought to crack down on many of those companies that had been handing out laptops and going into remote communities and offering all sorts of stuff, knowing that many of those people would never complete those training degrees or courses that they’d signed up to. Is this the latest chapter to try and close down the crooks in the industry?

Simon Birmingham: Well Ross, this is very much about finishing the job. We recognised from early last year that there were real problems in the operation of the VET-FEE HELP scheme. And we were determined that we would work to fix that scheme, and we put in place a number of measures through the course of 2015 – banning the offering of inducements like free laptops, changing the way providers were paid, putting in place minimum standards for education and qualifications for students – all of which we hoped would make the Labor scheme one that was sustainable and workable. But by the time we got to the end of last year and the start of last year, it was pretty clear that we had to take even more drastic action, which was when we decided to freeze the amount that any single provider could take in terms of student loans as funding for them, and committed to redesigning the scheme. And what I did today was really outline the principles against that redesign of the scheme will occur, and commitment to make sure that it is in place by 2017 so we have a brand new scheme supporting these students in vocational education and we clear out the shonks and the fraudsters who’ve been ripping off taxpayers and taking advantage of vulnerable Australians. 

Ross Greenwood: Bottom line, what are you trying to do to their business model?

Simon Birmingham: I want to smash the business model of those who’ve done the wrong thing: people who have been taking advantage of vulnerable Australians – signing them up to courses that they had no intention of completing, were ill-equipped to undertake, or in some instances, didn’t even know they were being signed up to – don’t deserve to be in Australia’s vocational education industry. We have a number of cases that the ACCC has got before the courts at present that the Government is working with the ACCC on, and we’ve already thrown a few providers out. But we will essentially go back to basics in terms of creating a new scheme, and a new scheme means you can set new barriers for who gets in to be a provider within that new scheme, and those barriers will then make it easy for us to say no to a bunch of people who were let in under the Gillard Government’s model. 

Ross Greenwood: The sad thing that you and I both know is that even some- let’s call them reputable providers have in some cases had what I’d call very questionable practices. Now, they might themselves be trying to clean all of that up, and it’s high time that they do and that they have, but the fact of the matter is it’s let not just pretend it was one or two rogues. It was pretty much system-wide, wasn’t it?

Simon Birmingham: Ross, look, we certainly did see phenomenal growth across the private sector, even in the public sector to be honest. New South Wales TAFE went from issuing $90 million of student loans in one year, to issuing $190 million of student loans the next year. Now we see generally the TAFEs have performed better in completion rates and aren’t being accused of some of the types of things that profit-driven providers may have been, but nonetheless, huge, huge growth that does signal warning bells in terms of what it means for the distortion of what training is being offered and the relevancy of that training to employment outcomes. 

So right across the board we have seen people caught by a model that, much like the Pink Batts scheme that the previous Labor Government had as well, created all the wrong type of incentives for bad behaviour, and we have to now build a new scheme that has tough barriers to entry so we only get reputable providers who have experience and credibility with employers offering training, that it only applies ideally to courses where there is a strong likelihood of good employment outcome or improved job opportunities for participants, where there’s regulation and restriction around the prices that can be charged. These are the types of issues that we’re working through now, and that I hope the Government will have resolved in the not-too-distant future so we can definitely have this scheme up and running in 2017.

Ross Greenwood: Okay, I did mention earlier on at the end of last year that the debt, the total debt that had been incurred was around $3 billion. Where’s it at right now?

Simon Birmingham: Look, off the top of my head I can’t tell you. It would be more than that, because in fact it’s accumulating at about $3 billion per annum last year and this year, about $2.9 billion …

Ross Greenwood: [Interrupts] $3 billion per annum?

Simon Birmingham: That’s right.

Ross Greenwood: Seriously? I mean, this is taxpayers’ money literally being washed down the drain. So that’s incredible. Now I did note yesterday that Bill Shorten made a speech and also made a commitment to try and cap the expenses on this. I spoke last night to Andrew Leigh, the Shadow Assistant Treasurer. Here’s what he told me.


Andrew Leigh: Most of this debt’s taken on the period since the Coalition came to office, but let’s not point fingers. We’ve been urging the Government for years to crack down on the shonks. But the fact is, putting a cap is an effective way of cracking down on some of the shonks and the sharks in the VET sector, and making sure that the reputable providers are able to compete in that space.

[End of excerpt]

Ross Greenwood: So Simon Birmingham, do you believe that the Labor plan for a cap on the amount of $8000 per year is also a reasonable way to go?

Simon Birmingham: Well, they have it partly right. We didn’t rush out in the election campaign to announce restrictions in this space and claim savings attached to it, though there will be savings that ultimately result from it, because we wanted to get it right. And to get it right, you’ve got to do more than just cap the prices, for a few reasons. Firstly, as I said, you actually have to restrict who’s offering it. At no point having bad providers still there dishing out $8000 loans instead of $20,000 loans, that’s still $8000 a person completely wasted. So you’ve got to restrict who’s actually in there offering those loans. We want to have a look at whether we can limit the areas or the fields of study in which they’re offered, so they’re more relevant to job outcomes and to what our economy needs. Then you can have a look at pricing. 

The problem with Labor’s model of a simple $8000 cap is that legitimately some of these courses cost more than $8000, in fields like agriculture or aviation or different fields that are more expensive to deliver. Even nursing disciplines are probably more expensive to deliver than that. So you would create a circumstance where students were then left with an upfront fee that would make it inequitable for students who can’t afford to pay to access these areas of education. So we want to …

Ross Greenwood: [Interrupts] I tell you what, good to have you- I was going to say, good to have you on the program, Simon. The Education Minister Simon Birmingham there, and just get that through your minds: at the moment, until this is actually in some way curbed, $3 billion a year in taxpayers’ money going to these schemes, and in many cases, people will not complete it or never pay back a dollar of those loans. And Simon, good to chat to you on the program.

Simon Birmingham: Thanks Ross. A pleasure.