Rethinking the Welfare State: The prospects for ... - e-Library

Rethinking the selfare state 178
a discount of 15 percent, or a debt could be incurred that would be repaid through the tax
system once the individual was earning a minimum of A$30,000. 59 The HECS program is
administered by the state and has experienced low administrative costs. 60 Despite the
adoption of the HECS program, the Australian university system continued to suffer from
underinvestment as a result of continuing restrictions on tuition levels. In 2002, the
government instigated a review of higher education in response to concerns over
deteriorating quality. As a result of the review process, several reforms have been made
to higher educational policy that will allow institutions to determine their own levels of
student contributions; a new system of income-contingent loans for students; and the
introduction of performance and incentive funding to “encourage universities to
differentiate their missions and to achieve reform in the areas of learning and teaching,
equity, workplace productivity, collaboration and quality.” 61 Importantly, empirical
review of the HECS program (and related regulatory changes) reveals that “the
socioeconomic make-up of the higher education student body was about the same in the
late 1990s as it was before HECS was introduced.” 62
Following Australia’s lead, New Zealand implemented an ICLP in 1991, which
operates by making loan repayments dependent on an individual’s income. Payments are
collected through the tax system and there is a progressive percentage rate of collection
as income rises beyond the threshold. 63 Despite their operational similarity, the New
Zealand system differs from the Australian system in a number of key respects. First, “the
loans are designed to cover both university fees and some living expenses.” 64 This is an
important difference. For many students, living expenses constitute a significant out-ofpocket
expense that they will incur in attending a post-secondary institution, and the
failure to ensure that students have sufficient access to loans to cover these expenses will
discourage attendance in programs that students deem to be first best given their interests
and aptitudes. Second, the scheme originally applied a market rate of interest to the
loans. 65 Third, universities are allowed to set their own tuition levels. 66 Thus, universities
can charge fees that are higher or lower than those at other institutions, and can also
charge varying fees for different courses. 67 It is also worth noting that “there are no
limitations under the scheme related to the parents’ income.” 68
In 2000, the government introduced a zero nominal rate of interest for the period that a
student was enrolled at a post-secondary institution, and allowed for variations to the real
rate of interest depending on graduates’ employment circumstances. These changes have
increased the administrative complexity and costs of the loan regime. 69 However, the
program is regarded as successful and, in particular, has demonstrated that reliance on the
tax system as the collection mechanism is effective. 70
In light of the demonstrated prospects of the voucher instrument to support increased
choice and accessibility goals in relation to post-secondary education in a number of
different jurisdictions, we elaborate on this proposal, and discuss several critical design
issues. Again, as in the case of other policy contexts, it is our view that although the
state’s role would change significantly in this model, its involvement and support is still
fundamental for achieving a more equitable and efficient system of university education
than is presently available in those states relying on the traditional model of delivery or
demand-side models suffering from flawed design.