Australia ‘caught out’ by cost of lifting student number cap

England urged to learn lessons from country’s experience of steep rise in undergraduates after relaxation of controls

August 7, 2014

Australia’s government consistently underestimated the cost of removing its undergraduate numbers cap, according to a new report aimed at highlighting the lessons that England might learn from Australia’s experience.

The report, Unleashing Student Demand by Ending Number Controls in Australia: An Incomplete Experiment?, has been written for the Higher Education Policy Institute by Andrew Norton, programme director in higher education at Melbourne’s Grattan Institute thinktank, who recently co-chaired a review of the demand-driven system for the Australian government.

Last December, George Osborne, the UK’s chancellor, announced that the undergraduate numbers cap in England would be removed from 2015-16. Mr Osborne said that this would be paid for by the sale of the student loan book, but government sources have since downplayed the link and Vince Cable, the business secretary, said last month that he had scrapped the sale since it would not help government finances.

Mr Osborne estimated that student numbers would rise by 60,000 a year in an uncapped system and, according to the Business, Innovation and Skills committee, the cost of expansion until 2018-19 is currently estimated at £5.5 billion.

Australia’s numbers cap was fully removed in 2012, but the relaxation of quotas began in 2009 and enrolments grew by 132,000, or 25 per cent, between 2008 and 2013.

According to Mr Norton – a higher education adviser to Australia’s previous Liberal-National government under John Howard – such steep rises caught the government by surprise, leading to “major upward revisions” in estimates of the cost of the demand-driven system.

Mr Norton also suggests that while “a demand-driven system is not inherently linked to fee deregulation, it does lessen some concerns about removing constraints on prices. Deregulating fees but not the allocation of places is a recipe for inflation, which the English experience in 2012 seems to confirm.”

Nick Hillman, Hepi director and former special adviser to David Willetts in his time as universities and science minister, said: “Removing student number controls is a logical conclusion of the liberalisation of higher education that has taken place in England under the coalition.”

But he added that England’s policy “was put together quickly and remains fuzzy…England rapidly needs to search for the positive and negative lessons in the Australian experience”.

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