TAFE in trouble – reliant on $170M Qld gov’t annual subsidy for survival

Today, the NCVER published its January to June 2018 data for government-funded vocational education and training (VET) students, and it reminded me that I should further investigate the troubled TAFE Queensland. The data show Queensland TAFE remains last in Australia in terms of market share of government-funded students (see the plot below of the market share in each state for each provider type). In Queensland, only 32% of government-funded VET students are enrolled in TAFE courses, compared with 72% in NSW, and 50% in Victoria, for example.

TAFE_plot1

As a firm believer in contestability, I don’t necessarily have a problem with this, but it does pose an ongoing problem for TAFE Queensland and the state government which continues to heavily subsidise it, including via the $174 million State Contribution Grant in 2017-18. TAFE Queensland’s latest Annual Report notes the State Contribution Grant:

…is aimed at supporting quality training and skills delivery by subsidising public providers in areas of competitive disadvantage in comparison to private providers.

There may be some justification for a community service obligation (CSO) payment of some kind, as TAFE can argue it is the only provider in many rural and remote Queensland localities. But consider the State Contribution Grant of $174 million is additional to the $141 million TAFE receives from the state government to deliver government subsidised training, funds which it is competing with private providers for (see p. 35 of the Annual Report).

Is it plausible that TAFE’s community service obligations mean that it can’t deliver its training for less than 2.2 times the cost private providers are expected to deliver it at? This seems highly unlikely and suggests TAFE remains hugely inefficient, and that without the overly generous State Contribution Grant it would run at a huge operating loss. Consider that, in 2017-18, TAFE Queensland only recorded an operating profit of $1.4 million (p. 27 of Annual Report). That’s a very low rate of return (0.4%) on a $400 million asset base.

Of course, given Queensland taxpayers are paying for the $174 million State Contribution Grant, my sense is that TAFE Queensland effectively represents an annual loss to taxpayers of (at least) tens of millions of dollars and possibly over $100 million, depending on what value can genuinely be placed on TAFE Queensland’s community service obligations.

The TAFE Queensland board and management at least appear to recognise their predicament and aren’t living in denial, with the Annual Report noting:

This year continued to be a challenging year for TAFE Queensland, especially given the tightening of the VET Student Loans legislation and increased competition for funds. (p. 1)

The longer-term trend has been against TAFE. As training has become more contestable, TAFE market share has declined across Australia, and TAFE Queensland has been most affected (see plot below).

TAFEplot_2

Similar to TAFE systems in other states, Queensland’s TAFE system is training far fewer people today than it did a decade ago (see plot below). TAFE Queensland is on state government life support and, no doubt, will continue to be for the foreseeable future.

TAFEplot_3

Note: you can find the historical time series data I’ve plotted in the charts above if you scroll down on the page where the latest NCVER report is found (see link earlier in this post). I’ve created all the plots using the ggplot2 package in R. 

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6 Responses to TAFE in trouble – reliant on $170M Qld gov’t annual subsidy for survival

  1. craigrwilson says:

    A really good public policy contention, well done

    Sent from my iPhone

    >

  2. Glen says:

    Great article Gene, I have had a lot to do with TAFE in Qld over many years offering a business and product perspective to the Plumbing and building courses and can clearly understand why the private certifiers have done so well in gaining market share in Qld. TAFE Qld is a dinosaur, presenting modules the same way it has done for the last 20 to 30 years. The private providers have formed partnerships with industry and suppliers to ensure the latest industry practices are presented and the latest products, but without a doubt the way courses are offered is the biggest difference, the private providers have moved more towards competency achieved on the job, whilst TAFE is still stuck in the classroom blocks running for many consecutive weeks, something that many employers struggle with. Your numbers clearly represent the state run unionised TAFE systems failure to adapt to industry requirements and that will not be fixed regardless of how many millions of dollars the govt spend on it.

  3. Andreas Chai says:

    Thanks for the article – interesting stuff! Any idea why ‘other registered providers’ ticked down post 2015 in Victoria but not in QLD? Seems like TAFE marketshare has recovered quite well there.

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