Cross-subsidisation ‘provoked Australian funding overhaul’

Author of a comprehensive appraisal of university finances says officials want universities to keep money flows on the straight and narrow

February 17, 2021
John Howard
Economist John Howard’s new book is ‘Rethinking Australian Higher Education’

The Australian government’s latest higher education funding changes were spurred by authorities’ frustration with universities’ unruly internal financing arrangements, according to the author of a new book on the sector’s future.

Economist and management consultant John Howard says the Job-ready Graduates (JRG) package was partly a crackdown on rampant cross-subsidising in universities, and he warned that institutions should brace for more such interventions.

“The government basically wants money for teaching to be used for teaching,” said Dr Howard, a visiting professor at the University of Technology Sydney and former pro vice-chancellor of the University of Canberra.

The JRG package, which passed parliament late last year, has aligned courses’ funding with the estimated costs of their delivery. This ends a long-standing practice of cross-subsidising research, which is not fully funded in Australia, from some degrees’ profit margins.

Dr Howard said he had observed similar imperatives as board chair of the Taree Universities Campus, funded under the Regional University Centres programme, which issued “quite specific” instructions on the use of the A$1.6 million (£900,000) of federal money allocated to the campus.

“The government wants to know what other income you’re getting and how it’s being spent,” he said. “You can spend the money on tutors, facilities, IT and so forth, but if you want to spend it on something else, you raise the money separately.”

He acknowledged that this presented problems for university administrators, following the axeing of dedicated funding streams for capital works and maintenance. “Buildings, equipment and so on should be funded specifically, as they used to be,” he said.

“The commonwealth got off the hook because universities were able to tap into the international education market, but from a public policy point of view, that’s just lazy.”

The JRG claims its own chapter in the book, Rethinking Australian Higher Education. Dr Howard’s central premise is that the 30-year-old unified national system has been a “massive failure” and should give way to a “diversified” system.

Political scientist and former University of Melbourne vice-chancellor Glyn Davis, who wrote the book’s preface, welcomed the “unusual depth” of Dr Howard’s data while disagreeing with some of his conclusions.

“It’s great to have somebody look carefully at the finances and express a view,” Professor Davis told Times Higher Education. But universities are “really complex businesses”, he stressed.

Dr Howard argues that universities actually run two “fundamentally different” businesses – international and domestic – which should be separated for management and reporting purposes. “If they did that, they’d be in a far better position to [demonstrate the] costs of running the domestic education business and tell the commonwealth, ‘you’re not paying your way’,” he said.

He said some universities could be losing money from their international operations, but it was impossible to be sure “because the numbers aren’t there”. While revenue flows from international education “look impressive”, the full costs of salaries, marketing, agents’ fees, student support and buildings are not reported.

Equally difficult was determining how much of this revenue was used to artificially inflate universities’ research reputations by hiring foreign academics with exceptional publication profiles.

“It’s really hard to go into a set of university accounts and find out how much of the salaries are going to high-performing international staff. But there’s no doubt that universities hire eminent professors to play the system.”

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