Interview on ABC Local Radio Lunch with Ben Knight
Topics: ANAO report on VET FEE-HELP
Ben Knight: Minister, welcome to ABC Radio Summer.
Simon Birmingham: Great to be with you Ben.
Ben Knight: Why did it take so long for the department, for the ministry, for your ministry to work out what was going on and to do something about it?
Simon Birmingham: Well this audit report does show a failure both in the design of the VET FEE-HELP program, especially the expansion that occurred in 2012, as well as the implementation of it. Now, failures were evident in late 2014 and through 2015 and 2016 the Turnbull Government and Abbott Government took around 20 different measures to try to constrain growth in the program. And in fact we’ll see that the 2016 level of loans were hundreds of millions of dollars fewer than 2015. So our actions did work…
Ben Knight: [Interrupts] Why did it just stop though? I mean we’re talking about $2.2 billion here that looks like it won’t be recovered, so taking actions to slow it down is not fixing the problem.
Simon Birmingham: Well certainly we did a lot that did fix many of the problems for this scheme and we did indeed reduce that from $2.9 billion of loans that went out the door in 2015 and to much much less in 2016. Now ultimately I took the judgement call several months ago after the recent election that you couldn’t actually fix this program, too many elements were broken particularly the providers who were in it which is why we’ve now legislated to close it down at the end of this calendar year and start again with a fresh scheme and that learnt many of the lessons that Labor obviously ignored when the established it back in 2012.
Ben Knight: But again, why did it take so long to come to that conclusion? If you have a look at some of the warning signs, you had one provider who was one year getting $5000 in loans and the next year $5 million. So the warning signs were there.
Simon Birmingham: Look, absolutely Ben, and clearly there were failures of administration in relation to the program and when I became the Assistant Minister in December of 2014 we started to receive briefings about the problems and that’s why we took a range of actions that took effect from April 2015, July 2015 and further at the start of 2016. So a number of different measures were put in place to constrain the program and they did have an impact. They absolutely stopped a lot of the rorting that was going on in 2014 and 2015 and brought that to an end this year in 2016. But we decided that you really needed to rebuild this program from the ground up which is what we’re doing. I acknowledge that perhaps it would have been best if that had been done earlier. But of course we tried to not disrupt providers, those who are doing the right thing and students who were doing the right thing, but ultimately that’s what we’ve had to do to actually deal with what was a major problem in terms of public policy.
Ben Knight: And $2.2 billion is a very significant amount of money especially when we’re just days after the release of the mid-year budget update. Are you going to try to get some of that money back? Are you going to pursue some of these companies who clearly were exploiting students and going around the law?
Simon Birmingham: Well the new program the Turnbull Government’s put in place is estimated to reduce those borrowings going out by about $7 billion over the next four years. So firstly we’ve well and truly fixed the problem in terms of putting in place a much much better program than Labor had. But secondly yes, we are working hard with the ACCC and other regulatory bodies to try to prosecute those who have done the wrong thing and to recoup funds where we can and to see student debts waived where that’s possible. Now of course…
Ben Knight: [Interrupts] There are also questions though for the ACCC and for the Tax Office here. I mean the question also goes to the ACCC doesn’t it? Why did that organisation take so long to jump in, again, when you have these massive numbers, these huge cheques that are being written by a federal government department going out, a big warning sign, but also the Tax Office, I mean how is it that the Tax Office was handing out in some cases hundreds of tax file numbers to what were shonky operations?
Simon Birmingham: Again Ben, in 2015 within months of me taking responsibility for this we were writing to the ACCC, offering all cooperation and urging them to look at certain aspects of the program, and I’m pleased that they have built a body of evidence that has seen successful remission of debts already and sees prosecution underway. Now that takes time for those types of regulatory bodies to get that evidence to move in terms of prosecutions but that’s happening. It’s happening in large scale with a number of providers and that is of course the type of action we want to see.
It’s sad that there are people out there who will rort a system like this, who will take advantage of vulnerable students. But it shows, of course, why it is that you need to apply the type of belt and braces approach that we’ve put in place now with all of the safeguards and protections in the new VET student loans program that guarantee we only have the most reputable providers getting in, that they have tight restraints and controls around them and that there are price constraints in place to stop the type of fee inflation we saw under the failed Labor scheme.
Ben Knight: Well you – you talk about rebuilding this loan scheme from the ground up but if you have a look at the figures for the entire system, I mean you’re talking about a scheme where $6 billion governments have spent on this VET FEE-HELP program and you get completion rates of 21 per cent: one in five students. This is a whole sector that needs to be built up. You would be well aware that the sector itself is calling for a complete overhaul. We have a prime minister who’s talking about an economy in transition; this is clearly a major part of wherever it is we’re transitioning to, what is going to happen in 2017 to fix this sector?
Simon Birmingham: Well of course we’ve put in place now a new loans program that will commence next year which will save taxpayers and students borrowings of around $7 billion over the next four years. We’ll have much tighter safeguards to ensure that we actually have quality providers, courses being funded that are relevant to job outcomes and benchmarks to make sure there is student progression so that where is taxpayer dollars involved, we are actually measuring whether the students are progressing, are engaged, before those dollars going out the door. So these are important reforms to ensure accountability in the system. Of course though we’re continuously looking at the way we can improve all aspects of tertiary education, higher education as well as vocational education to make sure that they are relevant to future job prospects in providing training that gives people the best opportunity for the future.
Ben Knight: And we’ve seen training providers who have gone bust, others that have been deregistered, others that are facing court action from the ACCC. There are going to be more of those in 2017, aren’t there?
Simon Birmingham: Well of course the legacy of some of the VET FEE-HELP problems, we’ll see I suspect some more providers absolutely go bust. That is a result of the action we’ve taken to put tight safeguards around the new program and I’ll make no apologies for the fact that people who were doing the wrong thing under the old model, may find themselves out of business under the new model. That is exactly the type of action we’ve taken and why we’ve designed a program that has tough regulatory barriers to entry, high standards in terms of behaviour and really focusses in on the relevance, your qualifications, and of keeping prices and fees down.
Ben Knight: But if you are – but if you’re looking for something measurable, let’s just take the completion rate: 21 per cent of courses being completed. One in five students. What would you think would be a good target for a completion rate say end of 2017? What should we expect to see from the changes that are being made in this sector?
Simon Birmingham: Well, Ben, we’ve put benchmarks in place for providers coming into the system that will see them rewarded for good completion rates in terms of the number of places they can offer or indeed penalised if they’re not getting satisfactory completion rates. There is a quirk I would add though, in relation to vocational education which is that many people will tell you they are enrolled to undertake specific competencies within a vocational qualification. So you’ll actually see right across the vocational education field lower completion rates than we would normally think acceptable in the context of say a university degree, because the individual components of these programs can sometimes be recognised and wanted by employers and students. So you have to recognise there that what we’re particularly looking at are completion rates in relation to progression through individual units of competency through a program and we well and truly expect to see that students, where they start a unit of competency should be being supported so the vast majority of them are completing that unit of competency.
Ben Knight: So more than 50 per cent you’re saying would be desirable. How much more?
Simon Birmingham: Well absolutely more than 50 per cent in relation to actually those starting a unit of competency, I’d be expecting a significantly greater number than that, around three-quarters or so to actually be completing them where they’ve started that.
Ben Knight: Is that going to happen by the end of 2017?
Simon Birmingham: Well these are the types of benchmarks we’re putting in place which certainly provide penalties to providers who aren’t managing to see that happen but we also have to make sure that we then have the right regulation in place to ensure that they are legitimately progressing their students, not just sticking and flicking.
Ben Knight: Alright we’ll watch it, thank you very much for your time.
Simon Birmingham: Pleasure Ben, thank you.