Campaign finance reform back on

I had hoped that Labor’s long-stalled campaign finance reforms would be left behind in the rush of legislation before the election. But that has proved to be an over-optimistic view, and media reports this morning suggest that they have done a deal with the Coalition to get an amended version of the legislation through.

Essentially, it looks like the parties are awarding themselves more public funding and reducing the donations disclosure threshold from $12,100 to $5,000. Labor had wanted to lower the disclosure threshold to $1,000. While I don’t think there is any need to change the disclosure threshold, $5,000 is certainly a lot better than $1,000.

Apart from the problems around disclosure, the threshold is (for no obvious reason) used for other purposes in the legislation, such as the total amount of spending required for third parties to have to enter the campaign finance system. If they spend more than the threshold, they face complex reporting requirements.

Here I think $5,000 is too low, even on the arguments put by advocates of tighter campaign finance laws. Small-scale activism leading to a $5,000 spend on election issues poses no plausible threat to the integrity of government or to political fairness. To the contrary, having the AEC harass minor activists reduces political fairness.

The $2.3 billion higher education ‘saving’ that nobody is talking about

In April, there was fury in higher education circles over billion of dollars in cuts to higher education-related spending (how much depends on how many years of the forward estimates you count). But comparison of the 2012-13 and 2013-14 budget papers suggests that the government is anticipating another large saving that nobody is talking about – revised down estimated future costs of the HELP loan scheme.

The chart below shows that over the future overlapping years of the two budgets (2013-14 to 2015-16) the saving will total about $2.3 billion. A small part of this reduction is the announced removal of the discount for paying student contributions up-front and the bonus for repaying early. But most of it is a big reduction in future anticipated interest costs.

HELP saving

The method they use for calculating the interest cost is apparently in accordance with accounting standards, though it is very confusing and does not aid understanding of the policy issues. The method we have used at Grattan (pages 42-45) is more straightforward (so far we arrive at similar numbers to the Department). We look at the difference between the interest the government is paying on its debt and the CPI inflation interest they are charging on outstanding HELP debt. The difference between them is the interest subsidy (or profit; it’s happened once).

Essentially, the government is borrowing quite cheaply at the moment, and they anticipate that this will continue in the few years covered by the forward estimates. But due to the huge amounts outstanding on HELP even small movements in bond rates could have major cost consequences. At the end of the forward estimates period, every 1 percentage point gap between the bond rate and CPI would add around $500 million to the interest subsidy.

The loan scheme gets little attention from universities; money they or currently enrolled students don’t receive is invisible to them. But HELP is a major part of higher education funding, and controlling its costs needs to be part of an overall higher education funding policy.

Greg Craven on education and federalism, then and now

Greg Craven on state government control of education, 2007:

Despite a total lack of experience in education, it [the Howard government] has created Commonwealth Technical Colleges, tried to control state school curricula and muttered darkly about controlling state education systems.

Canberra has only been able to intrude because it has the money, not the authority. Perhaps it should leave the money and run. Is it really impossible to argue that an elected Victorian government has a genuine interest in the education of Victorian children and that – horror – it might even bring local insight to the process? …

The mantra “Trust me, I’m with the Commonwealth” has the plausibility of a four-dollar note.

Greg Craven on state government control of education, 2013:Read More »

Science demand keeps increasing, despite a higher student contribution

Science has been one of the most popular university courses over the last few years, with strong increases in applications year after year since 2009. The demand shift coincided with a slashing of student contributions by about 40%. This had seemed to be a possible exception to the general empirical rule that changes to student contributions don’t affect demand (some of the history is in Graduate Winners, pp 77-79).

As part of a long series of measures to reduce higher education spending, science student contributions were put back up to pre-2009 levels for 2013, an 80% price increase in one year. If the discount was driving demand, we would expect to see higher student charges reduce demand. New statistics released today show that this has not happened.

In fact, as can be seen in the chart below, numbers continued to grow strongly. They were up another 4%, in a market that was up only 0.5% overall. Only agriculture grew by more in percentage terms, and only health grew by more in absolute numbers. Science offers increased by 3.3%, with overall offers up 0.6%

science appsRead More »

Increasing higher education spending, even after cuts

The higher education budget papers let us see in more detail what is going with spending after last month’s cuts.

The chart below tracks successive budget forecasts on the core tuition subsidy program, the Commonwealth Grant Scheme, since the demand-driven system was announced. In the early years especially there was a significant under-estimate of costs. Cuts announced over the last 6 months essentially put the budget back on the trajectory it was on in 2011. Over the forward estimates to 2017, spending on the CGS will still increase by an estimated $945 million on 2013.

CGS

The trouble with these open-ended programs is that a government can spend nearly $1 billion more and still get condemned for cuts, because the new places are not ‘announceables’. This chart puts the increases in Commonwealth-supported places into historical perspective, going back to 1989. Uncapping of CSPs has led to a massive increase in their numbers. They are up 23% between 2009 and 2013, and expected to be up 35% between 2009 and 2017.

CSPP 89-17

Union and business political activity under threat in Queensland

One of my main interests in campaign finance law has been the increasing attempts by political parties to limit ‘third party’ opposition. Governments dislike the campaigns being run against them by interest and issue groups, and since 2006 a series of laws have been passed to obstruct or discourage third party political activity.

Queensland went down this path in 2011, introducing laws restricting political donations from and to third parties, and limiting their spending during campaign periods.

And now there is a new attempt to impose yet more controls. This time the Queensland government proposes using industrial rather than electoral law to implement its policy. This means that it will affect unions and employer associations, but not other third parties. In practice, unions and business tend to be the biggest-spending third parties.

If this bill passes, Queensland unions and employer groups will have to run Electoral Commission ballots if they want to engaged in political expenditure of $10,000 or more in a year. The political expenditure is defined broadly to inlcude a political cause of belief, and not just partisan campaigning (full definition below the fold). Presumably this would cover routine unions campaigns such as those currently being run by the Queensland Council of Unions.

For the expenditure to be approved, 50% of eligible voters must cast a ballot, and of those more than 50% must approve. The cost of the ballot has to be covered by the organisation proposing the expenditure.

Effectively this law imposes huge decision costs on unions and employer groups, since especially mass membership groups like unions will have to spend a lot just informing their membership of the issues. Otherwise, they are unlikely to get the 50% turnout required. The inevitable (and presumably intended) result is that there will be many fewer third party campaigns in Queensland.

The bill is supported by the minister with the usual rhetoric about transparency and accountability. But members of political organisations do not necessarily want to be involved in the detail of campaigns or activism. Joining is an act of delegation, paying others to sort out the detail of a cause or interest the member supports.

Political campaigns are normal business for unions and employer groups. If their members are unhappy with these campaigns they can say so, and vote out the leadership or leave the organisation if they are not satisfied with the leadership’s response. This is all the accountability that is required.

Read More »

Most HELP debtors are not currently repaying

Yesterday the ATO released tax statistics for the 2010-11 financial year. With the education department seemingly no longer publishing its annual higher education report the ATO tax statistics are the main source of information on some aspects of the HELP loan scheme.

Only about a quarter of HELP debtors, or 383,000 out of 1.57 million, made a repayment in 2010-11. The ATO classifies 593,000 people as ‘paying off’ their debt, presumably counting people who have made a repayment but have since fallen back below the threshold or have disappeared overseas (the number of people who are listed as overseas or with an unknown postcode more than tripled to 32,365, but I think this number is unreliable).

The reason is that HELP debtors are clustered in the lower income groups, as seen in the figure below. Many of them will still be students, but the largish number (122,000) in the $40,000-$49,999 range suggests that fiddling with the threshold for repayment, which was $45,000 in 2010-11, might substantially increase the number of people repaying. At the other end of the income spectrum, 5 HELP debtors had taxable incomes exceeding $1 million.

HELP debtor incomes 2011

The number of HELP debtors with $50,000+ debts increased from 15,143 in 2009-10 to 23,664 in 2010-11. This probably reflects FEE-HELP borrowers and more people staying in the system for long periods of times, such as those doing initial professional entry qualifications under the Melbourne Model.

Repayments through the tax system are increasing, as seen in the figure below. Repayments increased by more than repayers (7%/3%). But there is still far more being lent than being recovered (they don’t report on financial years, but I would estimate $3.5 billion in lending versus $1.3 billion in compulsory repayments).

HELP repayments

How ‘public’ should public universities be?

There has been debate about the University of Melbourne’s response to a sex-segregated Islamic event held on campus. But it was an unusual debate, in which the radical feminist Sheila Jeffreys and Opposition Leader Tony Abbott were on much the same side.

U of M VC Glyn Davis pointed this morning to the tensions between gender equality and freedom of association raised by this case.

Some commenters on my Facebook page argued that as a ‘public’ university made a difference to how we should weigh up the conflicting considerations – that even if we should tolerate sex segregation in society generally, it should not happen at the ‘public’ University of Melbourne:

This is, however, a publicly funded university and I assume it’s more then likely that the venue was provided at lower/no cost then a private space; effectively meaning the event was subsidised by the taxpayer. For the sake of reputation of the institution, as well as applying best principles, events that entail gender segregation should be clearly not allowed on campus.

The likes of Glyn Davis must remember that they are public servants.

Most universities in Australia are more akin to government departments than private enterprises, they are established by legislation that allows for extensive control over the way they conduct themselves.

‘Public university’ is not a legal concept. The University of Melbourne’s legislation rather pointedly refers to it as ‘public spirited’ rather than public. University staff are not employed under public service legislation, and the governmnent of the day has no say in academic or professional staff appointments.

In practice, the term ‘public university is used to describe the universities listed in Table A of the Higher Education Support Act 2003. But it is not a term that appears in the legislation.

Table A universities do have greater access to public funds than private higher education providers. Most (though not all – Australian Catholic University is the exception) are subject to some public sector requirements in their own state, perhaps most significantly administrative law obligations such as freedom of information.

But I would generally defend the ‘public spirited’ rather than ‘public’ formulation in the U of M Act. There are good small-c constitutional reasons for thinking that universities should be substantially autonomous of government, places of independent thought and speech. Governments have historically tended to accept that view. Though state governments appoint university or council senate members, they only appoint a minority. State governments especially have taken a laissez-faire approach to academic matters.

To me, public funding should be seen as transaction. Governments are entitled to get what they pay for (such as a number of student places), but this should not give them broader rights over the institution. That some taxpayer money might have been used in building the lecture theatre where the Islamic event was held does not give government any on-going veto power over how the theatre should be used.

None of this means that universities should be immune from criticism. But to me the fact that the U of M was set up by a Victorian government statute, or that it receives Commonwealth funding, does not add anything to the case for preventing sex-segregated events on campus.

Should unis voluntarily cap student numbers?

From my perspective, the demand-driven funding system is Labor’s main higher education achievement (it’s described at pages 56-58 of this report). Over time, I expect it will drive a more efficient allocation of student places and through creating competition improve teaching and student services. Already we can see that a student’s chances of getting an offer in their first-preference field of study has improved in most disciplines:

offer rates
Source: DIISRTE. The figure shows offers in each field of study as a % of all first-preference applications for that field of study.

But uncapping the number of Commonwealth-supported students is costing a lot of money, a factor in recent higher education cuts. An article in yesterday’s AFR reveals that the universities want a de facto re-introduction of caps – not through changing the higher education funding legislation but through universities agreeing to constrain student numbers.

This would be a backwards step. The fear of losing students to competitors is a key driver of responsiveness to students, and a cartel-like restriction on places would be nearly as bad as the old regulated control.