Ideological contortions on VSU

A quick student politics quiz:

1. Which student political movement believes that student charges should be increased:

a) The National Union of Students
b) The Australian Liberal Students Federation

2. Which student political movement believes that additional student charges would a significant disincentive to participating in higher education?

a) The National Union of Students
b) The Australian Liberal Students Federation

If we are to believe the VSU inquiry submissions of NUS and ALSF the answers are (a) and (b). These ideological contortions are needed for each group to arrive at its preferred outcome – NUS getting their fingers back in students’ pockets and ALSF wanting those fingers kept out.

I think ALSF makes a respectable case that universities should unbundle at least some student services, particularly money destined for organisations claiming to represent students. VSU has brutally shown how few students support their official representatives. As I have argued before, the representative role of student unions has been largely superseded by other forms of student feedback, such as student surveys. Student elections are sampling errors. Student unions may have an advocacy role in specific cases, but they should not be taken seriously as the voice of students in general.

What I find unconvincing in ALSF’s paper is their at least implicit argument that price control should be employed to achieve this outcome. Since they are not advocating direct controls on university expenditure – indeed, in defending their position they note that universities have financed student services under VSU – price control is the mechanism that gives the VSU bill bite, since universities are reluctant to divert scarce funds derived from price-controlled student fees to non-academic services. It is rather ironic that the title of ALSF’s paper, ‘Free to Choose’, is an obvious reference to Milton Friedman, one of the greatest ever critics of price control.

As with other results of price control – cheap rent, cheap bread etc – cheap education has obvious attractions, and cheap education without subsidising leftist political hacks is even better. The problem, of course, is that people end up not being able to buy the things they want, because producers won’t supply the desired goods in sufficient quantity or quality.

Clearly I still have some work to do in persuading my friends in Liberal students that price control is socialist thinking for socialist-era higher education.

20 thoughts on “Ideological contortions on VSU

  1. Your general points are fair enough, but I dunno about:

    “VSU has brutally shown how few students support their official representatives.”

    It seems to me that VSU is no test of this at all.

    Suppose what official representatives produce for students is either (a) a jointly consumable, non-price-excludable good (which may be positively or negatively valued at the margin by students), or (b) something of value only to the denizens of the sandpit. You go from compulsion to none and observe – in a large number case – that few contribute. I’m not sure how you know whether people don’t contribute because they don’t value what’s produced or because they free ride.

    I’m not arguing for (a) or even (a) more than (b). I’m not even arguing that those with a negative valuation on (a) aren’t entitled to feel pretty unhappy about compulsion. I just don’t think that not many people paying for “representation” is evidence of anything.

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  2. Andrew – What exactly in our submission, implicitly or explicitly, suggests that prince control should be employed to achieve this outcome? I’m sorry but I’m not following this point. If anything, the paper argues – as you note regarding unblundling – that universities should have greater flexibility and freedom regarding the allocation of services etc.

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  3. Tim – Take a look at the second paragraph of the ALSF submission, in bold: ‘The Australian Liberal Students’ Federation strongly opposes the reintroduction of compulsory fee collection for student organisations under any name.’ This means that you would oppose repealing section 19-37(1) of the HIgher Education Support Act 2003, which prohibits compulsory charges specifically for student organisations.

    But there is nothing in the Act that expressly prohibits universities funding student organiiations. The reason universities don’t fund them to the extent they used to is that they don’t have enough money, and the reason they don’t have enough money is section 93-10, which sets maximum student contribution amounts.

    Under the old act, the amenities fee was a de facto partial deregulation of fees, which was abolished by the VSU legislation

    So the practical effect of the VSU reform depends on the restrictions under section 93-10, which if liberalised would lead to compulsory fee collection under another name.

    And on disincentives, see p.4:

    ‘this fee represents a financial burden and amounts to a significant disincentive to participating in higher education.’

    As I have said many times, neither side has really thought through the implications of the massive changes in higher ed since the 1970s. Back then, there was only one fee – the amenities fee. Now that almost all students pay fees, there is no need for a separate fee unless there is price control to get around or universities decide to unbundle services.

    I think you make a persuasive case for unbundling, but from a market perspective I believe that price control is not warranted to force the issue.

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  4. Mark – Though what is interesting here is that even though in practice student organisations bundle their representative services with private goods such as discounted access to goods and services they still can’t sell it in significant numbers. And they could never get more than a tiny fraction of students to vote, even though that was free. I think both provide evidence that they don’t want the service are not free-riding.

    In any case, at the national level it is difficult to think of a policy success NUS has had, so there is nothing to free ride on. To be any good, a representative group has to be able to deal with whoever in in power. NUS cannot.

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  5. I note you point regarding ‘significant disadvantage’, however, from what I understand, the problem lies with the fact that univerversities are so tightly regulated. We argue that in a deregulated market universities can chooes to invest significant funds into student ‘culture’ if they wish – utalise it as a competative advantage etc. This is nevertheless different to them forcing students to join an organisation against their will, which is the essential element of the VSU argument.
    I certainly take on board your comments about s93-10 setting maximum student contribution amounts, and if this was changed them universities may well sink more money into these organisations, but I don’t think that this amounts to the same as CSU firstly, and secondly I think that under the present model universities can still choose to priorities student organisation funding above other areas. In anycase, rather than focusing on VSU, activists etc should focus on the fact that we have capped HECS etc. Free markets, free minds! 🙂

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  6. I’m against upfront fees that are barriers to people participating in higher education – a few hundred dollars could well be a significant sum for students. Any “services fee” should be easily able to be paid.

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  7. The pre-Voluntary Student Unionism (VSU) system was a system of taxation to alleviate the burden on government funding of universities.

    A tax is defined in law as a compulsory exaction of money for a public purpose (Air Caledonie International v Commonwealth). In law, it also doesn’t need to be collected by a public body (Australian Tape Manufacturers Association Ltd v Commonwealth). So the opponents of VSU were right. The compulsory fee is essentially a tax.

    And now it looks likely to be reintroduced. They say it’s going to be only $100. But no doubt the fee will result in vested interests that want to benefit from the compulsory tax, and so it will probably be increased in due course back to pre-VSU levels. $100 is not a joke when you only use $20 worth of services.

    Because the current government doesn’t have the political courage to increase the student contribution amounts across the board, they will impose a less controversial regressive tax on students instead. And they already tax parents to subsidise the HECS/FEE-HELP loan scheme.

    So I officially began to pay tax when I turned 18 and enrolled at Melbourne University. In 2006, I paid $500, and I didn’t even have a job at the time. All I used were a couple of BBQs. If I had joined more clubs to take advantage of the money I paid, my studies would have suffered. All my health, dentistry and other needs were taken care of off-campus for cheaper.

    I guess this is the government’s way of training students to be compliant citizens in the future.

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  8. The ALP are breaking an election promise here. If the Liberals had any balls they will promise, when re-elected to government, to require universities to refund any compulsory union fee, service fee, and any other fee levied under the pretence of non-academic student services to past and current students plus accumulated interest at the credit card rate (currently about 19%). Failure to keep accurate records for the purposes of refunding money shall be a criminal offence. Will these people never learn? Last time the (former) government ended up having to take a sledgehammer to this peanut; even then they wimped out on this very important and fundamental issue.

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  9. Sukrit – I don’t think the university-set amenities fees are usefully described as taxes. In both those cases you cite laws passed by Parliament were the legal basis of tax; though most universities are unusual corporations in having individual statutes they are not given any taxing powers, just the power any corporate entity has to charge for their services. If they tried to impose a charge unrelated to services offered it would be ultra vires.

    The amenities fee may be a dud deal from your perspective, but it did give you a range of specific entitlements, ie it is closer to a contract. In the Australian Tape Manufacturers case people paying the levy received no entitlements at all in exhange for their money, with the cash going to a separate ‘public purpose’ as determined by the government. In the Air Caledonie case there was something in exchange (ie being let into Australia) but for citizens at least that is an entitlement.

    If the government decided to itself impose a $100 levy on students which it then paid to student unions it would I think be a tax, but a variable fee set by universities and collected by universities in exchange for a bundle of services is a fee.

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  10. Sure, I wasn’t saying legally it’d be held to be a ‘tax’. But is there anything objectionable about the High Court’s definition of a tax, generally speaking?

    Here’s how I see it. The Government has a policy of ensuring students have access to a minimum level of on-campus services. Yet universities are already strapped for cash, and can’t spare the HECS contributions for extracurricular activities. And the government doesn’t want to allow greater flexibility in the fee structure because that would be unpopular among the broader population.

    So what do they do? They impose a regressive ‘tax’ on students. This ensures that: (a) the government only has to deal with opposition in relation to a distinct sub-issue, rather than the broader higher education equity debate; (b) the government doesn’t have to face the opportunity cost of diverting spending from other areas (e.g. health, defence) into higher education.

    Just like we have the corporate tax, the income tax, the GST, tariffs and excise taxes, it seems to me that unions were authorised to collect a “student tax”, to be used to fund a specific policy objective.

    I think a fee is best used to describe a voluntary transaction, e.g. I paid my library membership fee, and got specified services (whether bundled or unbundled) in return. With a tax, all the money goes into a general pool and you don’t get anything you specifically wanted in return.

    Furthermore, if someone had university age kids who couldn’t pay the fee themselves, the amenities fee could be an additional compulsory exaction (i.e. parental income tax + amenities fee). I know it’s under contract, but we only have 2 private universities in Australia.

    Conclusion: the student charge is a politically feasible way of implementing government policy in relation to university services. The other alternative you have suggested is to include it in HECS, but that isn’t feasible. So they force students to pay the student tax instead, and in return, they get free BBQs or stuff they might not have wanted in the first place.

    Just my two cents…

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  11. Hang on… prior to the VSU legislation were universities forced to impose a compulsory student levy (of varying $ amount) under legislation? Or were the universities given autonomy to decide?

    If universities were given a choice, then people can ignore my comments about the amenities charge being more like a ‘tax’ than a ‘fee’. i take it back.

    If the universities were forced to charge students under legislation however, then I still think it’s more like a tax than a fee.

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  12. Sukrit – To me the two crucial things about a tax are:

    1) it is charged by the state or on the authority of the state (eg local councils, creations of state statutes. Universities are ambiguous because they are created by statute, though they are actually corporate entities.)

    2) it is not a fee for service.

    Obviously these criteria leave borderline cases. I think the old HECS system was a borderline case. The HECS charge was set by the government and went to the government, and collected through the tax system in most cases, but a third party (a university) gave students a service as a result. On balance, I think it is closer to a tax than a fee, but it’s not a pure tax like income tax which does not create any rights to receive services.

    When you get a bad deal – because the university has bundled services you do want with services you don’t – it may *feel* like a tax, or at least how taxes feel for the 25% or so of Australians who pay significantly more in tax than they receive in benefits. But that doesn’t mean it is a tax.

    No Commonwealth legislation has required a levy for non-academic services. In WA for a while I think there was a requirement. I will have to check my files to see exactly how it was done.

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  13. “And the government doesn’t want to allow greater flexibility in the fee structure because that would be unpopular among the broader population. So what do they do?”

    Do it anyway. If you want to live in a country with 100% tax on everything where nothing at all works and we all go broke, then do everything the broader population wants.

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  14. Shouldn’t the decision about charging a services fee be left up to the university? Nobody likes the word “compulsory”, but if the university is selling a service, then they should be free to charge a “compulsory” fee.

    I supported VSU when I was at university. But the appropriate way to support VSU is to lobby your own university. Not lobby the government into micro-managing the universities.

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  15. I agree that in an ideal world universities would not be micromanaged by governments, however, in the current prescriptive, over-regulated tertiary education system, it is the only way to achieve this. I hope that in the future universities shall become more free, and more flexible, and we can leave such decisions in them, but thats not the current paradigm. I would also underline again that the VSU does not ban any university from still enforcing student unionism, it simply restricts their funding if they choose to do so.

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  16. “VSU has brutally shown how few students support their official representatives.”

    No, it merely shows that students don’t like spending money. Not a real surprise when student income support is lower than even the dole, but, with greater costs accruing.

    Pre-VSU was actually the better test. Under those regs, students could pay their money to the student union or conscientiously object and pay the same amount to the University for their services. A few did, but, only a tiny minority. You can chalk some of that up to some students not knowing about the option, but, if student unions were really on the nose, the numbers would have at least been in the double figures.

    The fact is, people recognise the excesses that unchecked unions can get up to, but, the excesses of the unchecked powers unions were set up to resist are a fair bit more scary. Incidentally, that’s why WorkChoices fell in a screaming heap too.

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  17. Pete – I don’t think conscientious objection was a good test, because most students simply had no interest in student unions: they did not vote, would not have been able to name any of the office bearers, and never needed any of their representative services. It was active objection to student unions, it was just complete indifference to them.

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  18. Andrew@19: Whether they paid the student union or the University administration, they’d have had to put in a similar amount of effort in doing so.

    Even if they cared not a jot either way, there’d still have been a more equal split than 90%:10% (and I’m being extremely generous in that estimate).

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