Hon. Steve Maharey
7 November 2001 Speech Notes
Funding the Strategic Approach: the Commission’s proposals and the Government’s initial response
Address at the release of the Tertiary Education Advisory Commission’s fourth report, Shaping the Funding Framework.
Resolution Room, James Cook Hotel Grand Chancellor, Wellington.
Welcome to the end of the beginning.
Last February some of those here gathered at a press conference where I released for discussion the draft terms of
reference of a new body called the Tertiary Education Advisory Commission. Today that Commission is releasing its fourth
and final report, completing a 480-page, four-volume body of work.
Added together the Shaping reports - covering “Vision’, “System’, “Strategy’ and “Funding Framework’ -- form a
comprehensive rethink of tertiary education policy, focusing on a more strategic approach. In terms of the scale of the
undertaking, its breadth of coverage across the entire system, and the sheer ambition of its vision, the Commission has
now completed the most significant review of tertiary education since the Hawke Report / Learning for Life sequence in
the late 1980s.
And change is needed. We must ask the tertiary education system to play a vital role if we are to succeed as a knowledge
nation. This was eloquently expressed by Sean McDonagh last Friday at APNZ’s Skilling the Nation conference, where, in
relation to the remarkable recovery of the Irish economy, he said:
“In its partnership with economic life our educational and higher educational system is reacting to a changing growing
economy which is at once making strong demands in relation to its skills and knowledge needs and providing additional
resources to enable these challenges to be met”
The current funding system is inadequate to this task because it focuses solely on student enrolments. Other vital
elements such as lifting achievement levels, responsiveness to economic and social needs, and the quality of teaching
and research must also be taken into account in the future.
The Tertiary Education Advisory Commission is also notable for another reason. It was originally established with a view
to it being an ongoing body to complement the existing Government bodies overseeing tertiary education. It was the
Commission itself in Shaping the System, who in a rare moment in the history of government bodies and quangos,
recommended their own abolition.
They recommended they be replaced by a Tertiary Education Commission with full operational functions. As you know, this
is a recommendation we’ve taken up. I’m pleased to be able to acknowledge here today Dr Andrew West and Associate
Professor Kaye Turner, who as the Chair and Deputy Chair of the new Commission (in its current transitional form) are
the living embodiment of the changes that the Advisory Commission has set in motion.
Andrew and Kaye aren’t the only ones picking up the baton, though. I’d also like to acknowledge the various members of
the Charters and Profiles Working Party. I have just received your report and I thank you for your contribution to
making these changes a reality. Thanks also to everybody who has made a contribution to informing our work on the
Tertiary Education Strategy, which will be released in draft form next month.
Let me now return to the reason we’re here today: the much-anticipated Shaping the Funding Framework. I’d like to start
by setting the report in the context of the decisions the Government has already taken about previous Advisory
Commission recommendations. Then I want to outline the process for the Government response to this report. In doing that
I’ll indicate the key areas that the Government is looking for feedback on initially, and give some preliminary areas
where the Government has already taken a view.
The Tertiary Reforms - the story so far
I’ve already alluded to the very strong record that the Advisory Commission has of having its recommendations
implemented by Government. Its first set of proposals, in Shaping the System, were principally:
- A Tertiary Education Commission (TEC);
- Charters to be extended to all publicly-funded providers and ITOs;
- A new accountability document called profiles;
- Different parts of the system to be distinguished through functional classifications; and
- The establishment of centres of research excellence.
Government has agreed to all of these, with the sole exception of the functional classifications, which I believe the
Charters and Profiles Working Party is advising against. Even there, we are clear that the TEC will need to develop some
operational policy that distinguishes the charter and profile requirements of various parts of the system from each
In this year’s Budget, we committed $40.6 million operating over four years and a capital contingency of $20 million to
establish Centres of Research Excellence. I know many of you have already submitted applications for this initiative to
the Royal Society. We have also provided $35 million for a one-off Strategic Change Fund to assist public institutions
to adapt to the new environment - a move that prefigures this latest report’s proposed ongoing Strategic Development
Next month I hope to introduce a Tertiary Education Reform Bill into Parliament to amend the Education Act and the
Industry Training Act. It provides for a Tertiary Education Commission as a stand-alone crown entity, incorporating
Skill New Zealand. It will provide the framework for a system of charters and profiles for all publicly-funded providers
It will also pick up a number of other recommendations from Shaping the System. Any moves to establish a new
institution, change the institutional status of an existing institution, merge institutions, or allow the use of a
protected term will now be subject to a desirability assessment by the Tertiary Education Commission as well as the
present quality assessment by the New Zealand Qualifications Authority. Once these provisions are in place, the
Education (Limiting Number of Universities) Bill that is currently before Select Committee will be allowed to lapse.
The Responsible Minister will have the ability, if good cause can be shown, to establish a specialist college or
institute as a tertiary education institution. Colleges of education will remain as a separate category. There will not
be a separate “University of Technology’ category.
The Tertiary Education Reform Bill will also be making amendments to the Industry Training Act reflecting Government
decisions arising out of the Industry Training Review. That review identified a number of initiatives building on the
actions that the Government has already taken to lift investment and performance in vocational education and training
The Government has also been receptive to the Advisory Commission’s third report, Shaping the Strategy, which proposed:
- A Tertiary Education Strategy;
- A Tertiary Education Scoreboard; and
- A desirability test as the prerequisite for public funding, based upon the priorities set out in the Strategy.
We have already begun talking to external and internal stakeholders about the strategy and we have received a number of
written submissions setting out possible priorities, for which we thank you. We intend to release a Tertiary Education
Strategy, in draft form for discussion during December with a view to finalising it in April. The Strategy will include
a Scoreboard to evaluate progress and will form the basis for the Government’s Statement of tertiary education
priorities, which will be a statutory document informing the work of TEC, including desirability decisions.
Process for the Government Response to Shaping the Funding Framework
All in all, the Advisory Commission has had a record of having its advice largely implemented that most Government think
tanks, advisory groups and review groups would envy. What then will be the process for making decisions in response to
this final report?
We will be largely be reserving our position until we have had a chance to receive submissions from the sector and
stakeholders. We have set a date of 31 January 2002 as the closing date for this. It is important that we press on so
that changes can begin to be put in place for the 2003 academic year.
A slightly different process will be undertaken with regard to the way the report impacts on the Training Opportunities
and Youth Training programmes of foundation education. I have already established a Ministerial Review Group to carry
out a first-principles review of these programmes. Those recommendations in Shaping the Funding Framework that focus on
foundation education, as well as the implications of more general recommendations for foundation education, will be
referred to the Training Opportunities/Youth Training Ministerial Review Group. The Review Group will be releasing a
discussion document next month and the closing date for submissions on this will also be 31 January 2002. The Review
Group will provide a final report to me in March.
At this stage it is our intention to release decisions on the funding principles in response to Shaping the Funding
Framework as part of the finalised Tertiary Education Strategy in April 2002, and then provide further details as part
of the 2002 Budget.
The Government will be listening carefully to feedback and we hope the report will be considered carefully and widely
because it contains a large number of recommendations which will allow us to take a strategic approach to tertiary
education and training. This is vital if New Zealand is going to succeed as a knowledge nation.
Shaping the Funding Framework advances some concrete proposals for the design of the new funding framework we intend to
implement for the 2003 academic year. The new framework will be phased in, which will keep compliance costs down and
help the tertiary sector manage the transition.
Key Areas for Consideration
Shaping the Funding Framework is a substantial and wide-ranging document with 77 different recommendations. It’s
important to consider each of them on the merits, rather than trying to accept or reject the entire report wholesale.
Nevertheless, I realise everybody has limited time and so it would be helpful to indicate the aspects of the report to
which the Government is likely to give consideration first. This will allow submissioners to focus their efforts on
these areas in the first instance.
Let me outline then what I see as the “first order’ decisions about a future funding framework.
A More Integrated Funding System
Currently we have a number a distinct funding systems in tertiary education, the primary ones being the EFTS system, the
Industry Training Fund, the Training Opportunities and Youth Training programmes, and a variety of arrangements for
adult and community education. The Advisory Commission has advocated the development of a more integrated approach to
the funding of tertiary education, drawing upon the best aspects of each of the current funding approaches. The
Government is sympathetic to these aspirations and intends to investigate this further.
Obviously, nobody wants to adopt a “one size fits all’ approach. I think there’s emerging consensus on an approach of as
much integration as possible, with as much distinction as is warranted to preserve the valuable features of each part of
the system and the outcomes that the Government desires. The question is simply what that means in practice.
The Government tends to agree with the view in the report that Adult and Community Education be funded separately for
the time being, but will await submissions before finalising a decision.
Also, as I’ve mentioned before, the extent to which (and manner in which) Training Opportunities and Youth Training are
to be integrated with the other parts of the system is a question that I am referring to the Ministerial Review Groups.
I invite those of you who wish to make submissions on this matter to do so to them, though I’m sure it will also be
factor in many of the more general submissions.
The second key area is one of incorporating a greater element of steerage and alignment with nationwide priorities into
the funding of tertiary education, while balancing that with the need to be innovative and responsive to immediate
stakeholders. As you will be aware, this is an area that the Government has expressed a great deal of interest in.
We will certainly investigate further having specific funding for strategic initiatives, and including a greater element
of steering into the funding formula. We invite your feedback on the mechanisms that the Advisory Commission has put
forward for this task, particularly the Priority Index and the Strategic Development Fund, as well as any proposals of
your own that you wish to advance.
Separation of Teaching and Research
Thirdly, the report proposes separate funding streams for funding and research, with the current enrolment-driven
“research top-ups’ being reconfigured into a performance-based research fund.
The Government will investigate further a more performance-related approach to the funding of tertiary research, and
welcomes comments on the performance-based research fund proposal.
Accountability for Quality and Performance
Fourthly, the report encourages a stronger emphasis on accountability both for quality and for performance in terms of
outcomes. The Government will investigate further the introduction of accountability measures for quality and
performance, and seeks further discussion on the Advisory Commission’s recommendations in this area.
Finally, I would like to emphasise that the Government, along with the Advisory Commission, recognises the need for an
evolutionary approach that minimises compliance and transaction costs. The tertiary education system is a huge and
complex organism and it will not be turned around overnight. We need to think carefully about what we intend have in
place for 1 January 2003 and what needs to be phased in more gradually.
Some Initial Government Responses
There are also some areas where it is important for submissioners to be aware that the Government has taken a viewpoint
right from the start. In particular there are a small number of recommendations that the Government has decided to make
its opinion clear on now to avoid confusion. These are:
- Discontinuing the current student loan interest write-off policy. Making tertiary education more affordable was a key
pre-election commitment made by Labour and the Alliance in response to widespread public concern that cost was becoming
a significant barrier preventing potential students enrolling;
- Reallocating existing funding to public tertiary education institutions for support services for Maori and Pacific
students. Funding currently allocated to improve responsiveness to Maori and Pacific peoples will continue to be used
for this purpose but the Government wants to discuss if it can be allocated more effectively;
- Discontinuing current base grants for all tertiary institutions. The Government needs to investigate the best means to
secure tertiary education’s contribution to regional development and remains committed to the retention of base grants
for regional institutions in the absence of more effective mechanisms; and
- Automatically adjusting funding rates by a Tertiary Education Price Index. The Government is more interested in the
alternative idea of providing greater certainty by signalling funding rates in advance, which has also been advanced by
the Advisory Commission.
Also, the Government is not persuaded that the affordability of tertiary education can be ensured without active
measures to keep fee levels down. We will be consulting with students, staff and institutions to develop a sustainable
approach to fee-setting for 2003 and beyond.
Other recommendations about student support will be considered as part of the Government’s response to the Report of the
Education and Science Select Committee Inquiry into Student Fees, Loans, Allowances and the Overall Resourcing of
In relation to proposals for a relatively extensive rationing by merit of all under-graduate degree places, we are
encouraging a broad-ranging discussion on the best ways to ensure the effective use of national resources and to
encourage learners to choose the educational pathways that most suit their needs.
I will be making further announcements over the next few days on the Government’s view on a number of other issues.
The next few months will be busy ones for us all. Over the next month the Advisory Commission is planning a series of
meetings with stakeholders across the country to discuss this report, and public submissions to the Government are now
Next month the Government will be releasing the draft Tertiary Education Strategy for discussion, and also introducing
the Tertiary Education Reform Bill. I am currently considering the report of the Charters and Profiles Working Party.
And very soon we intend to call for expressions of interest for membership of the board of the Tertiary Education
These are exciting times for tertiary education and also demanding ones. I thank all of you who have contributed your
thoughts and ideas to the process of moving to a more strategic approach.
In a little over a year the Tertiary Education Advisory Commission has made an outstanding contribution to the reform of
New Zealand’s tertiary education system. I want to thank them for their hard work and commitment to rebuilding a strong,
quality, focused tertiary education system. In particular I want to note the considerable contribution made by Hon
Russell Marshall and his predecessor as Chair, Norman Kingsbury.
The Advisory Commission has consulted widely in the preparation of its four reports. This will help ensure that the
system we implement has widespread support. I have outlined some indication of the Government’s initial repoonse to
their ultimate report today. I look forward to hearing your own initial responses.