The $5 billion Higher Education Endowment Fund announced in last night’s Budget has given the government what it has long lacked in higher education – an iconic policy. University leaders have been fulsome in their praise, and the media coverage has been overwhelmingly positive.
It fits into a pattern I noted last month of some of the most attention-grabbing things in higher education happening almost by accident. I can’t now find his analysis on Crikey’s hard-to-navigate site, but I think Sinclair Davidson had it right this morning – the Higher Education Endowment Fund is less about a government change of heart on higher education than their desire to stash the proceeds of excessive taxation somewhere Labor won’t be able to get it without significant risk. Like an evacuating army, the Coalition is setting political booby traps in the edifices it might leave behind.
With Stephen Kirchner, I would prefer tax reform to Commonwealth revenue hoarding. And while I do think universities could do with some capital investment, this is not the best way of going about it. The Fund puts control in the hands of the Commonwealth to pick and choose which capital projects to support, something that they haven’t done on a large scale for many years. I’m sure anyone who has attended university has seen the exceptionally ugly buildings built in the days when such projects were organised by government officials who did not have to look at them. If we had to have a higher education capital give-away, it would be better to put the money into existing university endowment funds so they could use it without reference to the Minister.
Better still, let universities fund their building projects from their normal income stream or borrowings against it – which is effectively what’s been happening, based on full-fee student revenue, since real cuts to Commonwealth-supported student payments meant that no major capital projects could be financed based on government funding.
Tax cuts are indirectly a way to alter the economics of capital projects at universities, if they have control over their fees. The price worth paying for higher education depends partly on the future economic return to be gained, and that in turn is significantly affected by tax rates. I can’t remember the exact amount of time, but I calculated last year that the tax cuts of recent Budgets would for male graduates working full-time fairly quickly wipe-out the added student contribution amounts charged as a result of the Nelson reforms. So tax cuts make fees more ‘affordable’, and higher fees make it possible for universities to finance major construction projects.
Alas, though, such market-based solutions still seem a long way from the political agenda.