Vocational education and training reform

29 Jan 2015

An approach that puts emphasis on increased contestability and student choice can maximise the public value for the government’s investment in VET, according to this report.

Executive Summary

The NSW Government recognises the need for an educated, skilled workforce to drive a productive economy, support workforce participation and grow industry and business. Its goal is to increase the proportion of working-aged people with post school qualifications at Certificate III level and above, from 55.8 per cent in 2010 to 83.7 per cent in 2020, an increase of 50 per cent.

Over the last decade, the Commonwealth has contributed to Vocational Education and Training (VET) reform through a series of National Partnership Agreements. The most recent of these, the 2012 National Partnership Agreement on Skills Reform (NPASR), required an entitlement for subsidised training. Governments will pay the subsidy to Registered Training Organisations (RTOs) that attract and train students. Governments agreed to provide greater competition in an accessible, transparent, efficient and quality training sector that is responsive to the needs of students, employers and industry. Under NPASR, the Commonwealth will pay New South Wales $561.6 million over five years from 2012–13 for delivering the reform, including the goal of increasing the number of people completing post-school qualifications by an average of around 16,000 (14 per cent) each year.

Governments used the flexibility provided under NPASR to implement the reforms in different ways. Victoria began before NPASR commenced, setting up a demand-driven system in 2008 with low barriers to RTO entry. Five years later 100 per cent of the VET market was contestable, training 207,000 (72 per cent) more students at a cost of an extra $764 million (65 per cent). Since 2013, Victoria has sought to reduce VET expenditure, improve quality and value for money and fund the rationalisation of the public provider TAFE. Other States have also sought to cap expenditure and ensure quality and a reduced but ongoing role for TAFE. Governments subsidise different qualifications for different student groups for different amounts.

New South Wales is the latest State to implement the reform. The Minister for Education announced the Smart and Skilled reform in 2012, which introduced a VET entitlement from 1 January 2015. The VET reform aims to get more people trained while maximising public value for the government’s investment. Unlike Victoria, New South Wales intends the reform to be budget neutral.

In 2013–14, the NSW Government spent $2,185.5 million subsiding VET for around 500,000 student enrolments. TAFE accounted for over 85 per cent of the VET spending and 77 per cent of the student enrolments. The Government expects the VET reform to gradually reduce that proportion but for TAFE to continue to be the major provider.

Apart from meeting its commitment to introduce an entitlement without spending more, the government’s other major policy objectives under NPASR are to:

  • sustain TAFE in a competitive market
  • introduce consumer driven contestability
  • ensure VET is available across the State and to disadvantaged groups
  • provide high quality training.

This audit assessed the effectiveness of the Department of Education and Communities’ (the Department) framework for VET reform and whether it has the potential to achieve these objectives. More details on the audit objective, scope and focus are outlined in Appendix 1.

We undertook the audit before the new VET Smart and Skilled reform commenced on 1 January 2015.

The Department’s framework for VET reform has the potential to effectively achieve the government’s immediate objectives for the reform, which are associated with meeting its commitments under the National Partnership Agreement for Skills Reform without spending more.

We found that the government is addressing VET reform objectives in the following order of priority:

  • no extra cost (budget neutrality)
  • TAFE viability
  • quality VET
  • access to VET for regions and equity groups
  • more contestability
  • student choice.

Overall, we conclude that a more balanced approach, by putting more emphasis on increased contestability and student choice, is more likely to maximise the public value for the government’s investment in VET.

In addition, the VET reform framework does not address the government’s longer-term goal to increase the proportion of working-aged people with post-school qualifications at Certificate level III and above by 50 per cent by 2020. New South Wales is most unlikely to reach this State Plan goal on current trends. The VET reform’s budget neutral objective, its pricing structure and the incentives for efficiency mean that it is unlikely to generate the funds needed to meet this State Plan goal.

It is appropriate that the framework separates responsibility for purchasing and providing training. However, this separation is incomplete. The government continues to provide TAFE with direct non-contestable funding. The budget for this direct funding is not subject to clear purchaser oversight, nor is it clear how long it will continue or what TAFE will deliver for it. In addition, the benefits of the VET reforms depend on achieving the efficiency outcomes of the TAFE reforms. While the Department has addressed benefits management principles in its documentation, it does not have a benefits realisation plan and register to ensure that it can demonstrate which VET reform benefits have been achieved in four years’ time.

The Smart and Skilled reform is a complex initiative. The Department is developing the key systems, tools and processes necessary to purchase and manage training in 2015 and to inform students’ choice of provider. The implementation of the Smart and Skilled reform and its enabling systems has been delayed and remains on a tight timetable. The Department has used suitable project management controls to ensure that the Smart and Skilled reform commenced on its revised 1 January 2015 launch date.

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