Transcript of The future role of public providers

28 April 2020

Vocational Voices: Season 4, Episode 3

The future role of public providers

Robin Shreeve (00:04)
Government should recognise that training is a public good. It benefits the individual and the industry as much as the individual enterprise. So therefore maybe it should be overtly government-funded, which means that TAFEs don't have to waste so much time on chasing contracts which are notionally paid for by industry but are really paid for by government.

Steve Davis (00:28)
Hello and welcome to Vocational Voices. The official podcast of the National Centre for Vocational Education Research or NCVER for short. I'm Steve Davis and today's topic is the future role of public providers. Our Vocational Voices today are Simon Walker, Managing Director, NCVER. Hello Simon.

Simon Walker (00:49)
Hello Steve.

Steve Davis (00:50)
Robin Shreeve. Adjunct Professor, Federation University and President Australasian Vocational Education and Training Research Association, AVETRA. Hello Robin.

Robin Shreeve (01:00)
Hi Steve.

Steve Davis (01:01)
And Craig Robertson, CEO TAFE Directors Australia. Welcome Craig.
Craig Robertson (01:06):
Thank you.

Steve Davis (01:06)
30 years ago, the Australian vocational education and training system was on tenterhooks as two major reports were released into the management and costs of training for enterprises against a backdrop of award restructuring that was being championed at the time by the Hawke and Keating governments. The Scott Report shocked many by outlining a view that TAFE NSW should be 50% self-funded within eight years due to efficiencies, industry contributions and in particular, a vastly increased offering of fee-for-service training.

Steve Davis (01:42)
Meanwhile, the Deveson Report called for less barriers for industry and private providers and for industry to fund training and workforce development to boost our skilled workforce, even if that training was delivered by TAFE through a fee-for-service approach. Well, how has TAFE embraced fee-for-service and are there myths and assumptions surrounding the size of the fee-for-service market and its efficacy or otherwise? That's what we'll explore in this conversation.

Steve Davis (02:13)
Robin, I'll turn to you firstly, because you've looked deeply into the findings of these reports and the outcomes in TAFE and the VET sector more broadly, perhaps could you start by filling in the background in which Scott and Deveson were conducting their investigations. Were they seeking solutions to problems or were they rather looking for ways to seize new opportunities?

Robin Shreeve (02:34)
Well, thanks Steve. Look the Scott Report was specifically about TAFE in New South Wales. So it was a state-based report whereas Deveson was national. And the Scott Report really came out of the Greiner government and the Greiner government, Greiner made great play of the fact that he had an MBA and he was going to bring commercial practice into government. And it was very much seen as almost Thatcherite in its emphasis on economic liberalism and finding new ways of funding. And there was a perception at the time, and I'm so old I lived through both of those reports, by the government that TAFE in New South Wales at the time was this highly centralised bureaucracy, command and control, which was unresponsive to the needs of industry. And also there was an element in the report as well and a perception that it was far too closely aligned with the very powerful Teachers Federation.

Robin Shreeve (03:36)
So it was seen as inefficient, a drain on the public purse, not giving value for money, and therefore it was ripe for reform. Now, as you say, one of the things that came out and shocked everybody was that Scott came out and said that TAFE should be 50% self funding. Now in his first report, he didn't actually define what that would mean. And remember that we sat around working it out, and one of my colleagues actually said that well if TAFE's 50% smaller it can be easier to self fund because it's smaller. But eventually the report came out and specified and they clearly indicated an increase in fee-for-service training, specifically training for industry. And the example they gave was East-West Airlines in Tamworth. However, they didn't actually do any analysis of the size of the fee-for-service market in New South Wales at that time.

Robin Shreeve (04:39)
The other thing I should point out, because this will seem very odd for people 28 years, 30 years on, at the time you couldn't charge fees to individual students because the Whitlam government back in the 1970s had taken fees off universities and TAFE. So you couldn't say, "Right, we're going to put up the tuition fees for individual students." In fact, we had the nonsense where we used to charge, as a temporary measure, the students an admin fee, which was just supposed to pay for their enrolment. And if people dropped out and wanted a refund, we said, "No, you've already had it because you paid for your admin." In contrast, as you say, the Deveson report was a national report.

Robin Shreeve (05:19)
It was all about modernising Australia's economy and you have to say the modernisation was pushed very strongly by the ACTU and what that was, they recogniaed that workers would have to be retrained to participate in this new economy. And Deveson who I think was chair of Nissan Australia at the time, and also very big in the Victorian vocational education and training system came out with a report, unlike Scott's, he actually looked at the market for fee-for-service industry training. He got Pappas Carter Evans & Koop who were consultants and did a report on it. And he also got the state training authority or whatever it was called at the time in Victoria to do some analysis of what the size of the market was. And he said that at that stage fee-for-service, private sector fee-for-service training was only about 4% of funding in the TAFE sector and he thought it reasonable to go up, not to 50% but to 15%. The New South Wales report was about modernisation, but it was about modernisation of the system and funding for that system.

Robin Shreeve (06:37)
And the Deveson report was about paying for award restructuring. I would say in terms of, subsequently, that some TAFEs have embraced this, but one of the reasons why I wanted to look at this is, as Michael Hartman, one of our colleagues in the VET sector says, "You often get fly in, fly out politicians and senior managers in TAFE who don't necessarily understand the full intricacies of what's going on." And those levels of fee-for-service, as I said, some TAFEs are very good at it. And I'm thinking about Holmesglen, William Angliss in Victoria, but it's far more difficult to achieve than people sometimes imagine for a whole variety of reasons that I'm sure we'll get into.

Steve Davis (07:27)
I'm sure we will. How do the projections and the goals in those reports compare to where we're at today with TAFE? Was the world view and the reality they were based in, has that shifted significantly to what's facing TAFE in 2020?

Robin Shreeve (07:47)
Well, it's interesting that Deveson in one sense was pretty right. I mean TAFE, especially in New South Wales or anywhere in the country has never got to 50% self funding, if that's the way you define it. I mean the landscape has changed. We've got voucher schemes and things along those lines. Deveson said about 15% and Simon's organisation, in terms of the last national figures, says it's about 15 to 20% in terms of fee-for-service training and TAFE in the last figures that we've got. That varies state by state. The Victorians again have maintained their lead over the last 20 odd years and that proportion of fee-for-service training is higher. Now, whether that's to do with their organizational structure, because the ironical thing about it is, is that the Scott Report wants it to go for devolution and he recommended that head office be slimmed down and all power go to what were initially college networks that rapidly became TAFE institutes.

Robin Shreeve (08:51)
And for a quarter of a century we had TAFE institutes devolved administrations in New South Wales, very similar to the Victorian system, never achieved the autonomy that was envisaged, but now in New South Wales we've gone back under one TAFE to a centralised system with a head office command and control economy. So everything goes in sort of cycles, but Deveson was pretty accurate.

Robin Shreeve (09:15)
Then the other thing I would say about those statistics, depends what you count in as fee-for-service. I mean there's private sector funded fee-for-service, which certainly Scott and Deveson thought about with something like for example, where you get a large company like Visy or the Commonwealth Bank paying for training with their own money. In fact a lot of fee-for-service is government contracts, like it could be the Navy or the Army buying resources off TAFE or it could be something like the Adult Migrant English Service. It's 15% fee-for-services as classified by the NCVER, in terms of private sector funded fee-for-service, it's only about half to two thirds of that. So there's always definitional issues in there, but Deveson was broadly right, but it does vary institution by institution. Some have done it very well, some haven't.

Steve Davis (10:16)
Do we need to tighten up on our understandings of that definition of fee-for-service then? Because it does strike me that if we're not capturing everything in that terminology, then it's really hard to compare apples to apples. Simon?

Simon Walker (10:32)
Well I think you're absolutely right. We do have some breakdowns and probably the primary one is that we do split out international students. And I think Robin, I'm safe to say that you're not focusing on the international student market.

Robin Shreeve (10:45)

Simon Walker (10:45)
You're focusing primarily on the B2B activities. And of course, since we've had total VET activity, we can now get a sense of the scale of it. We report students, and that doesn't always translate into dollars. So we've got to be a little careful there. But if I had one wish for the change to the information standard that we used to report and collect our data, it would be understanding who is paying for it. And by that I mean, the distinction between whether it's an individual who may be a full fee paying student or a business. And for reasons which elude me, we've never bothered to get that information in the past. And as we go through right now, a phase of revising the information standard, my one wish, if I only had one, would be to be able to distinguish between those two things.

Steve Davis (11:34)
And Craig, can I ask your reaction to that too? I imagine there's some empathy there.

Craig Robertson (11:40)
Yeah. My sense is that some of the data is inconclusive and so sometimes when I think about fee-for-service and following up on what Simon's saying, and looking particularly at total VET activity, you'd have to say that some of that fee-for-service, or a large portion of it, is regulatory activity. White Card, Responsible Service of Alcohol, and the like. And you've also got to wonder whether how much of it is fee-for-service, recorded as fee-for-service, but may well be apprenticeship incentives money from the Commonwealth primarily to traineeships where RTOs have typically used some of the funds to offer training. And some of that's not what we would typically consider to be B2B. That's some of the challenges that play out there.

Steve Davis (12:32)
Hmm. Robin, in some of the work that you've done, you've elaborated on some of the reasons that TAFEs have found fee-for-service such a difficult challenge, at least some TAFEs. Could you just expand on those for us?

Robin Shreeve (12:48)
Yeah. Look, TAFEs are large providers, but being a large provider doesn't necessarily mean that you've got capability and capacity in every area. And I think at the core of this question, and I'm a great supporter of TAFE and TAFE's got a critical role, is what the priorities for TAFE should be. If I give an example from my fairly recent experience, I was working with some companies and we wanted to bring some workers in and they needed, as Craig has mentioned, a Working At Heights Certificate. Now, so we went along to the TAFE and that's fine. They could provide us with a teacher who's got a Working At Heights Certificate but in doing that, that teacher wasn't standing around, that teacher was actually teaching apprentices throughout the year. So if the TAFE wanted to do the contract, it was going to have to take that teacher off their regular apprentice class, which will upset the apprentices and the apprentice employer and then find a replacement for that teacher in a quite disruptive way.

Robin Shreeve (14:07)
I mean the other issue is, the people we wanted to work at heights, they were going to be working on the 36th floor of a tower block. But some of the teachers that we were offered, sole experience had been with domestic construction and they've got working at heights, but they'd never been above the second floor. So there's students can react to that in terms. So, it is issues like that that you do come across and it's very interesting. So what is the priority for these situations? I mean we found that TAFE was an extremely good apprentice trainer. The staff were nurturing, they knew the industry and things like that. Let's do this.

Robin Shreeve (14:55)
And it's interesting, they've got the same problem in the UK. I've worked in the UK on and off. And David Hughes, who was Craig's opposite number in the United Kingdom, says that some of its FE colleges get criticised for not doing enough fee-for-service. But the reality is in the UK, different to here, that they have large numbers of full time 16 to 19 year olds and those 16 to 19 year olds provide a regular income. They get 12,000 pounds for the academic year. And once they've recruited them, unless they retrain them, it's guaranteed income. Whereas if they were going to do seven contracts at 1,000 pounds each, that's irregular business you're constantly having to find. You can understand why colleges are going to go for the regular income because they've got to keep their staff employed.

Robin Shreeve (15:48)
That's my basic point. It's not as easy as you think. Now some TAFE colleges are really good at it and it's where they specialise, because often it needs highly specialised niche providers to do it. And TAFE have got some niche provider staff. But even if you're the biggest training provider in the Southern Hemisphere, you don't cover every speciality. So that, and it can be disruptive to some of your other work and what's more important? To keep the flow through of apprentices or to do a B2B contract? And people have to make their own decisions.

Steve Davis (16:29)
Craig, I'll ask you to reflect on that for us because if I may, I can see there's two ends of a spectrum here. If you have got the stability of those long-term programs that has benefits that can flow through but can also then give comfort to burgeoning bureaucracy that comes when humans get comfortable versus those short contracts, staccato firing at every little change that's demanded by the marketplace, but then you lose some of the benefits of having the collegiality of being together as sojourners within the TAFE system delivering training. How do you reflect on getting that balance right?

Craig Robertson (17:15)
Let me come to that. I just want to make one broader comment first if you don't mind. It has been very clear over the last little while that the VET sector's been through quite a tumultuous time, including declining participation and potentially declining public investment. Now you would have thought that if the product was really good, private effort would step in and maybe balance out or keep involvement numbers sort of current. And clearly that hasn't occurred. So one real question needs to be, what is it that businesses are interested in buying and do they have a willingness to buy? And following up a bit on Robin's point earlier on, that often that B2B or the fee-for-service is actually publicly-funded anyway by contracts and the like. That's a bit of a challenge.

Craig Robertson (18:12)
But getting to your key question Steve, I actually think it does come down to scale. Where it works, is where there is a big company at one end and obviously a big TAFE at the other end. And so there are some really good examples. So even in the New South Wales context, that Barangaroo project, obviously provided the depth and scale of skilling that was required so that the TAFE could say, "Well, okay, I can do a longterm investment of re-directing staff towards that". And things like even a lot of TAFEs, particularly in Victoria work with hospitals and of course hospitals are big things that have big volumes, so that's what helps with that B2B and fee-for-service. Then of course it's difficult when you get down to, you've got a lot of small businesses that could be episodic timing and that becomes more of a challenge.

Steve Davis (19:18)
And also on that, in working directly with big businesses that I can understand grant the environment for scale and security, we've seen a number of big businesses close shop over the last 10 to 20 years. How has TAFE been going as far as its work with businesses and industry? Because I imagine when a big manufacturer decides to pull out, that has ramifications all the way through, including for TAFE.

Craig Robertson (19:51)
That's right. But equally, as some of those big business close, new activity returns, but probably it's not returning in the form of big businesses. It's more atomised down through the supply chain and the like. Then we come back to this particular challenge of scale. But there are, again some examples around Australia where there is a good working relationship between the TAFE and maybe a regionally-based industry association.

Craig Robertson (20:22)
For example, in the eastern suburbs of Melbourne, there's a good working relationship with the air conditioning engineering association out there. And that's a good example of a medium level relationship. I think where we need to go to in public policy terms is to think through, if we know that most employment and most innovation and productivity is going to have come from SMEs, which make up a large part of our workforce, there's got to be some mechanism by which we can do better aggregation of some of that demand and create some of that B2B. It may not actually be B2B, it might be B2G, like TAFE to a group of enterprises for example. That's probably a better way that could create some of that work.

Robin Shreeve (21:16)
Yeah. Steve, can I just add just about Craig's point about who's actually paying. That's a really interesting question, because there's who's paying and who's benefiting? And industry is sometimes reluctant to pay for training because it thinks, well the benefit's going to individual worker, or alternatively the industries where people move from contract to contract, it's going to the next employer, rather than the employee who's forked out the money.

Robin Shreeve (21:49)
And the other issue is, is that in terms of government paying, I've worked with contractors who are required in their contracts to say, have 10% of their workforce apprentices and everybody thinks, "Oh this is great. It's industry paying for their apprentices." Well, it's not really. Because, all industry does is build in the cost of those apprentices to the government in terms of the government contracts. So if they've got to take on more apprentices than they normally would, and any company who wins the contract has got to do that, they just build that cost into the tender. So the government is still paying.

Robin Shreeve (22:27)
And I sometimes think, especially because we've tried to shift and share the cost of training through things like training levys which happened in that 1990 period, but didn't work. I sometimes think that government should recognise that training is a public good. It benefits the individual and the industry as much as the individual enterprise. So therefore maybe it should be overtly government funded, which means that TAFEs don't have towaste so much time on chasing contracts which are notionally paid for by industry but are really paid for by government.

Steve Davis (23:09)
Well, let's just imagine someone taps you on the shoulder Robin, I'll ask Craig this question in a moment as well, and there is a Shreeve report that will be handed down on how the public providers might reshape their role and remain a vital part of the machinery as Australia's economy goes through some restructuring at the moment, thanks to COVID-19. What sort of things would you be bringing to the table for the VET sector but particularly TAFE and public providers to ponder and incorporate?

Robin Shreeve (23:47)
Look, I think that we need to reinforce what the core business of TAFE is. And to me the core business of TAFE is being a trade apprentice trainer of both female and male trade occupations, whether it's a plumber or a hairdresser. And that's critical. I also think we've got, in the public sector, a huge role to play in workforce participation, preparing people to enter the workforce. And that can be both foundation studies, whether it's reading and writing for adults, or it can be initial foundation training in a technical area. And by that I mean maybe individual support so people can get a job in an aged-care or a childcare facility. It's the initial training really, whether for apprentices or for people, especially those not in the workforce and work I've done in other organisations is that if we increased workforce participation by preparing people for work, it would have a huge benefit on the economy. I think they're the core roles.

Robin Shreeve (24:59)
There's other things that TAFE do, which I think maybe they need to make a decision about. Do we need to chase all this fee-for-service training? Because, it's just a funding mechanism. And recognise that training is more of a public responsibility. I accept Craig's point entirely. That doesn't mean to say it can't be tailored and customised. It doesn't necessarily have to be forced to be actually paid from a notionally and sometimes usury private sector.

Robin Shreeve (25:28)
There's the whole question of whether TAFE should be in higher level vocational qualifications or not. And then it's interesting because Simon's organisation has put out that there is 4.5 million individual students in VET, but I think over 2 million are doing single subjects, which might be a first aid or something like that rather than a whole course. And one of the things that absolutely surprised me, the private sector does more of that than the TAFE sector. So maybe that's something that TAFE could play a greater role in. But I do think it's a question about priorities for TAFE. TAFE is a public provider. It's a social good organisation. I think that it needs to be properly funded to do that, rather than, as I said, sometimes people coming in from outside and thinking they can get lots of money by charging fees for commercial training.

Steve Davis (26:25)
Craig, are you able to share a couple of thoughts from the Robertson report, if there were one, to contemplate for the future role of public providers from your perspective?

Craig Robertson (26:36)
Well, I'd certainly go to the point around workforce participation that Robin has just made. I think we've gone too far down the pathway that we think if we train people in specific skills for an occupation, they've set that person up for life. And if there's anything that we're experiencing now in the midst of this COVID19, is that that's actually a bit of a false economy. So what we really need to work towards is we've got to make sure the public provision, publicly funded provision, fills those deep capabilities, as Robin was mentioning literacy, numeracy, even digital skills and the like. Then, it's an interesting question about who holds responsibility for what you would consider to be industry-based, or industry translatable skills versus business related skills? Now I think it does make sense that the VET sector does look at providing industry standard skills but I think it's gone a little bit too far to say, but this is what a particular business wants and therefore the public purse would pay for it.

Craig Robertson (27:48)
So I think sort of going forward, is we should have a better investment into the deep capabilities of an individual. Certainly we should teach them to, and train them to industry standards. But I then think there is a new compact that's required with business to say, some of this stuff we do and used to do that once a graduate has entered into the workforce. And I think that will give Australia a stronger base of adaptable citizens really. And I do liken it to the point that Robin was making, we're probably in a new sort of stage of the Australian economy similar to when award restructuring was around. Because, at that point Australia decided to bring down trade barriers. And it knew that people were going to be dislodged, and that risk from the labor market, and the risk of not being able to get back into work. So we've really got to rethink what that training offer is.

Craig Robertson (28:54)
Then the last point I'd make on TAFE is this notion of them being a comprehensive provider. In other words, they've got a range or industries that they cover, a range of technically competent, highly competent trainers, and they've also got people who understand where industry is heading, because they've come from that industry themselves and they're an observer of that industry. So there is a deep capability within those TAFEs to be able to say, "Let us work at the local level with industry to be able to help those industries and their business members to really develop new productivity and capability."

Steve Davis (29:37)
Thank you for that. I would imagine that reading both the Shreeve report and the Robertson report in 30 years would be just as equally entertaining and interesting as referring to the Scott and Deveson reports today. Craig Robertson, thanks for joining us.

Craig Robertson (29:51)
Thank you.

Steve Davis (29:52)
And Robin Shreeve, thank you.

Robin Shreeve (29:54)
Great pleasure. Thank you.

Steve Davis (29:54)
And thank you Simon Walker.

Simon Walker (29:56)
Thanks Steve.

Steve Davis (29:59)
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