New Zealand's Government has sent a clear message to universities that it wants more say in deciding which courses it funds.
Michael Cullen, the Tertiary Education Minister, gave assurances that institutional autonomy and student choice would be preserved but said that universities and polytechnics would have to negotiate multi-year funding plans linked to strategic national goals and quality assurance.
Outlining the reforms to higher education leaders last week, he said that the current funding system, with cash allocated according to student enrolment on individual courses, had created undesirable consequences.
"We were beginning to see a rather dark underbelly emerge," Dr Cullen explained. Too many students were either not completing courses or not qualifying with skills needed by industry, he said. Institutions were not working with businesses to identify and fill skill gaps. Instead, they competed among themselves to offer cheap-to-run "middling degrees in law, business and communications".
The new arrangements, which would come into effect in 2008, would build on the system of negotiated institutional profiles that formed the basis of the Government's last major reform of higher education in 2002. But those changes did little to stop accusations that institutions were manipulating the system to fund courses of questionable value for maximum returns.
Dr Cullen said: "The theory held that the aggregated decisions of students represented as accurate a forecast as was possible of the pattern of labour market demand over the medium to long term. That being the case, one need only fund on the basis of enrolments and each cohort of students would be led by an invisible hand to acquire the optimal set of qualifications. In reality, the links in this chain have proven too tenuous."
The new plans also indicate that the Government is concerned about quality assurance. Dr Cullen said he did not have confidence in the effectiveness of the New Zealand Qualifications Authority, which approves non-university qualifications. Cabinet papers say quality assurance and monitoring systems will have to be strengthened under the new system.
Higher education bodies reacted positively to the announcement, particularly the proposals for multi-year funding and a greater recognition of the distinctive contributions of particular classes of institutions.
Polytechnics have often struggled to survive in smaller regions in recent years, and they were pleased by the minister's commitment to local education provision.
Roy Sharp, the Vice-Chancellors' Committee chairman, said the proposals were a major step forwards. "Universities are keen to enter dialogue on how they should be funded so their distinctive and important contributions to national economic and social goals are maximised," he said.
Dr Cullen also suggested lifting the requirement that degrees must be taught by people involved in research.
He gave the Tertiary Education Commission, the agency that funds higher education, responsibility for monitoring institutions' financial performance.
Dr Cullen said he hoped to unveil detailed plans in June.