How would Labor's student funding guarantee work and what does it mean?

Labor has released a higher education policy intended to restart a discussion stalled by the failure of the Coalition’s deregulation package to pass the Senate.

Shadow minister Kim Carr said education policy should be Labor’s “natural terrain“, and Labor will be looking to tap into the well-rehearsed public antipathy towards the government’s attempts to deregulate fees.

What is the student funding guarantee?

There are several features of interest in the Shorten-Carr plan. It emphasises drawing in students from low-participation populations and through non-traditional entry pathways. It rightly argues that participation means little without achievement, and so it foreshadows measures to help universities support students who need it.

The Labor policy also proposes an independent Higher Education Productivity and Performance Commission to improve collaboration between universities and government in the operation and development of the national higher education system.

But the item that will attract the closest attention of vice-chancellors and treasury officials alike is the promised funding arrangements, particularly for the hotly contested Commonwealth Grants Scheme (CGS). This is the federal funding stream to universities for undergraduate students, which is the target of a 20% cut in the government’s deregulation agenda (and still reflected in the federal budget).

The CGS is worth about A$6.5 billion in 2015, providing over 600,000 places at a rate of just under A$10,900 per student.

Labor seeks to establish a funding advantage over the Coalition’s projected cuts, by promising to maintain the real value of funding per student. Possibly even more significant than this, though, is Labor’s plan to submit its funding promise to a legislated guarantee that provides security of funding over the long term.

It might be objected that funding levels are already captured in legislation and are not so easy to change – just ask Christopher Pyne whose attempt to cut the CGS has stalled in the Senate. So why would Labor go to the trouble of spelling this out, and what does its emphasis signify?

What is Labor trying to achieve?

Observers may recall the attempt by Labor to impose a so-called “efficiency dividend” on the CGS in April 2013, when Craig Emerson was minister. Vice-chancellors certainly remember it. This was the move that “broke the sector’s heart”, as one vice-chancellor put it to me.

Many other sector leaders have independently reinforced that sentiment, some rather more colourfully, and are inclined to greet promises of increased funding with one raised eyebrow – even from Carr, with whom they have a sound relationship. How does the sector know a future treasurer will not find a way to claw back this support? How can universities be sure a future education minister won’t roll over, do a deal, and throw student funding under a bus?

It is not a trivial point. There is a lot at stake, as running universities is a long-range business: costs are difficult to manage over the three-year electoral cycle, let alone from one federal budget to the next. The sector needs to know the levels of funding it can expect, not only in terms of absolute dollars, but also their predictability.

Labor’s legislated student funding guarantee attempts to buy this confidence. By prefacing legislation with its political commitment, Labor will effectively bind itself well beyond the technical constraints of an act of parliament.

The key advantage of this legislated guarantee will be found in how the CGS is treated within government processes. By positioning his funding commitment as an expression of the parliament’s will, rather than the whim of an Expenditure Review Committee, Labor leader Bill Shorten is willing to surrender the kind of political discretion that has led to heartache in the past.

This places the funding envelope outside the annual government budget negotiations and prevents the CGS from being eroded or offset against other emergent government priorities. For the first time in many decades, the undergraduate funding stream would not be on the table come budget time – there would be no point. This commitment would put it beyond reach.

It is extremely unlikely that a future Labor government would be able to secure the consent of the Senate to reduce funding, especially when supported by unequivocal guarantees going into an election. Such a strategy may also provide some degree of comfort over the longer term, beyond the life of a Labor government that had bound itself in this way.

John Byron consults to various Australian universities on higher education and research policy and strategy. He is a member of the Australian Labor Party.