New Zealand has opened a free market in higher education with the announcement of a demand-driven student funding system that some have denounced as a "voucher" system.
The universal tertiary tuition allowance is the first decision from the coalition government's review of tertiary education. It falls short of the full voucher option raised in a green paper; but it gives equal funding status to approved private institutions and removes the funding cap for public institutions.
Universities have cautiously welcomed the allowance, while private providers are delighted at getting equal funding status.
The new system, costing an extra NZ$250 million (Pounds 82 million) over three years, removes the cap on tertiary funding. From 1999, public institutions should no longer carry unfunded students.
From 2000, the government will fund equally all students enrolled in public and private approved institutions. Students see this as the first step to privatisation, but Warren Creech, New Zealand's education minister, dismissed the claim as "paranoia".
Currently the 39 public institutions bid for funding once a year based on projected enrolments. The funding cap means some institutions carry hundreds of unfunded students.
Rather than an annual bulk grant, institutions next year will get monthly payments based on actual 1998 enrolments. At the end of the year they will get a "wash-up" payment based on their final 1999 enrolments.
Details will not be known until a white paper in August that will set out the decisions on research funding, governance and the actual 1999 tuition subsidy levels.
Bryan Gould, vice-chancellor of Waikato University and chair of the vice-chancellors' committee, welcomed the removal of the cap on student numbers. "It leaves intact the basic principles of the public funding system and falls well short of a true voucher system. There may, however, be fish hooks in the August white paper, so it may be a little early to be throwing our hats in the air."
Margaret Yates, of the Association of Private Education Providers, dismissed as "premature" fears that private providers would cherry-pick the courses that could be delivered cheaply, leaving the low-profit courses to public providers.
Students expressed concern at the impact on already stretched university resources and predicted that institutions could cram more students into lecture halls and affect education quality. Association of University Staff executive director Rob Crozier predicted that the tertiary system would become more dependent "upon the whims of students".