So deregulation in Australia now looks to be dead and buried.  But in its death throes, the debate finally coughed-up some interesting ideas about how to pay for higher education.  Here’s the re-cap:

Not long after my last article on this subject, the coalition decided to put a second deregulation bill to a vote in the Senate.  The first bill failed by two votes.  The second one, after months of lobbying and arm-twisting, failed by four.  This suggests a couple of things:

1)      Minister Christopher Pyne and the Liberal party are as thick as two short planks when it comes to parliamentary management;

2)      If you give the opposition ten full months to yell “$100,000 degrees!”, you’re going to lose.  That some degrees were going to cost $100,000 was probably inevitable, but the idea that more than a handful would do so was risible.  The problem is that there’s really no way to model the consequences of deregulating a good such as education, which is at least partially a Veblen good.  As such, there’s no great way to refute those claims.  In other words: if you’re going to deregulate, do it quickly.

So the universities aren’t going to get any new money from students, which is a bit of a problem since there isn’t a whole lot of money coming from government either.  Pyne cancelled a planned 20% cut from the 2014 budget to university finances as a sweetener to get the deal through, but now that the deal has tanked there is genuinely no telling what the government’s next move might be (and the 2015-6 budget is right around the corner).

Now, right before the bill went down, ANU economist Bruce Chapman – the inventor of HECS back in the late 1980s – entered the fray.  He was an opponent of deregulation precisely because price increases, which students could pay using HECS, wouldn’t really act as a price signal, and hence would allow institutions to run-up fees far more than was socially useful.  But unlike the Labor Party he used to work for (it’s terribly difficult being a Labor loyalist in Australia these days, because of their ineffable uselessness), Chapman actually engaged with the government and suggested an alternative.

Effectively, Chapman suggested deregulation, plus a luxury tax: institutions can raise fees, but government can (and should) reduce public funding at something less than a dollar-for-dollar rate in response. Basically, if Melbourne raises an extra $10 million in fees, the government could cut their public subsidy by $5 million.  This allows institutions to use the market to get more money, but also puts some brakes on the process.  Institutions will still get their money, but students on the whole will probably pay less than they would under full-deregulation, the government will be on the hook for less HECS debt, and the financial gap between more and less prestigious institutions will be smaller.  It’s not an entirely novel idea – the Browne Review in England proposed something similar in 2010 – but it nevertheless has merit, and  deserves some examination here in Canada, too.

Pyne now says the Chapman proposal could form part of his third (!) deregulation bill, but university presidents have had enough, and have stopped backing deregulation (some interesting comments on this here from Hannah Forsyth).  You can go nuts working out their tactical motivation for abandoning the government at this point, but to me it just looks like they’ve decided this government is a goner, politically – why waste political capital backing anything from the present government, which would certainly be eviscerated by the next lot?  Better to negotiate elements of a Chapman package with Labor once they’re in power, and can claim the idea as their own.

At the dying end of this business came another interesting idea about how to set fees, this time from the excellent Andrew Norton.  He argues (here) that an egalitarian approach to setting fees would be to equalize them on the basis of average time-to-repayment.  Since time-to-repayment is a function of income in Australia, the equivalent here would simply be to set them as a function of average income, an idea I explored back here.  On recent trends, Arts fees should be falling, and Engineering fees should be rising.  Yet somehow, over here, such a simple idea seems beyond the pale of discussion.

Australia’s higher ed policy landscape is crazy in many ways, not least of which is the way university presidents tend to form circular firing squads on many issues.  But their vigor in discussing big policy issues in higher education is bracing; a welcome contrast to all the hiding from reality going on in Canadian governments.