Spin on university funding

In responding to a claim by former Monash Vice-Chancellor Richard Larkins that fees should be deregulated, one of Julia Gillard’s spokespeople asserted that

The government has invested a substantial amount of additional funding in the tertiary and research sector that will not just arrest the decline in real funding that occurred under the Coalition but actually begin to turn it around.

Note how the tense changes mid-sentence. Somehow the money they have invested already will at at some point in the future stop real funding declining.

In their first budget, virtually all the new higher education spending was just squeezing out private spending, by cutting student contributions for science and maths and abolishing full-fee places.

In their second budget, all but $82 million of the $533 million in new spending for 2009-10 came from abolishing Coaliton programmes or raiding the Coalition-established Education Investment Fund.

And none of this adds to real new resources for existing students. After four years of increases at the tail end of the Howard years, the Rudd government reverted to the Keating era policy of annual real cuts. This is done by indexing university grants and student contributions according to a formula that is 75% safety net wage adjustment and 25% CPI.

I did some quick calculations on what effects continuing this policy will have over Rudd’s first term, based on the government’s indexing information. The first number is the actual increase 2007-2010. To derive the second number I replaced the safety net adjustment figure with the CPI. To derive the third number I replaced the safety net adjustment figure with the increases in education industry wages in the labour price index. Though this would be dominated by schools, it gives a rough idea of how wage costs are likely to have moved.

2007-2010
Actual increase 6.2%
Inflation increase 9.4%
Labour price indexation 12.0%

So in reality the Rudd governent has imposed substantial real cuts on universities. They are promising a new indexation system that will in effect start in 2011. But that won’t make up for the damage done in its first term. It strengthens the case Larkins makes for abolishing higher education price control.