Senate debates

Monday, 30 November 2015


Education Services for Overseas Students Amendment (Streamlining Regulation) Bill 2015, Education Services for Overseas Students (Registration Charges) Amendment (Streamlining Regulation) Bill 2015; In Committee

8:14 pm

Photo of Kim CarrKim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | | Hansard source

by leave—I move:

(1) Schedule 5, item 3, page 78 (line 15), after "the course.", insert "The provider must keep those fees in a separate account."

(2) Schedule 5, item 9, page 79 (lines 13 and 14), to be opposed.

(3) Schedule 5, item 13, page 80 (lines 4 and 5), to be opposed.

(4) Schedule 5, item 15, page 80 (lines 8 and 9), to be opposed.

(5) Schedule 5, item 18, page 80 (lines 21 and 22), to be opposed.

Could I indicate that in voting for these positions, if senators wish to support these amendments, they will be voting 'yes' for the first amendment and voting 'no' for amendments (2) to (5). I will put them as two separate blocks.

First of all, could I ask the minister a simple question: you mentioned that the savings for these measures for colleges will be $75 million. Is that per year or over the forward estimates?

8:15 pm

Photo of Richard ColbeckRichard Colbeck (Tasmania, Liberal Party, Minister for Tourism and International Education) Share this | | Hansard source

That is per year.

Photo of Kim CarrKim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | | Hansard source

In speaking to my amendments, can I indicate that savings of $75 million in an industry worth $18 billion per annum are quite small—quite small indeed—and the costs of getting this wrong may well be considerably more than $75 million to the affected colleges, particularly in the private industry operating within the international community.

In speaking to support these proposals I think it is worth reminding the government that its rhetoric about regulators operating in a robust manner—being able to act quickly to stamp out poor behaviour—flies in the face of lived experience. I am very concerned about the fitness for purpose of our regulators in higher education. I am very concerned as a result of the direct evidence that is presented to us almost on a daily basis.

Today, Vocation has announced that this college is closing up shop. There is no money in the bank and students are being sent on their way. How long has the government known how serious a situation Vocation was in? How many hundreds of millions of dollars have been paid to Vocation and its various subsidiary arms? Why did it take so long for the government's regulators to see the problem that the Senate committee managed to identify quite quickly, and that newspaper columnists seemed to be able to identify quite quickly? Our regulators, the minister says, acting in a 'robust' manner, can act quickly—but, of course, that is certainly not the case.

If you take the situation with regard to the Australia Post example, the principals of two of the international colleges directly involved with that have now been charged with fraud. One of them had a streamlined visa approval—a streamlined visa approval—to channel people directly into these rorts, while the other college recently had its accreditation re-established without a site visit from the regulator. So it is a bit hard to have confidence in the regulators, given the evidence that we see before us on a regular basis. When the government says: 'We are moving these measures to deregulate this industry still further' then, faced with the evidence that is before us, I am always going to be concerned. This is particularly so when we are looking at a measure that was only introduced three years ago by the previous government to secure the moneys that students paid in advance of starting their course.

I will go through the detail of that in a moment, but I remind the minister as to why that fund was established. In principle, it was established to weed out the fly-by-night operators in international education—those colleges that did not have the resources to be able to fund a proper program; those colleges that lived from hand to mouth and had to use the deposits of students to fund their operating expenses. They are the people we do not want to see operating in this industry.

Let me go through the detail. The Tuition Protection Service and the OSTF only came into existence on 1 July 2012 to assist and support international students on student visas whose education providers were unable to complete the delivery of their course of study. The creation of this body and the Overseas Student Tuition Fund was a direct outcome of the Baird review. The Baird review arose because of the widespread malfeasance in this industry. The review said:

Adequately and appropriately supporting students in Australia is at the heart of the sustainability of the sector.

Further, the review found:

The recent dramatic growth in students coming to Australia, alongside the increase in vocational education and training (VET) providers offering a narrow range of courses linked to migration outcomes and sourcing students from a limited number of countries, has increased the risk of closures. This has put considerable pressure on the current tuition protection framework, with fears it is unsustainable. Consultation with key stakeholders and independent actuarial advice has informed the recommendation to replace the current arrangements with a single tuition protection service.

The review noted the inadequacies of the previous arrangements:

Recent provider closures and a lower rate of TAS placements have resulted in increasing calls upon the Fund with the potential to deplete the Fund's reserves, thereby diminishing the Fund's capacity to respond to future provider default events as required.

But when the TPS was set up by the Labor government of the day, the government said:

The centrepiece of the Amendment Bills is reform to strengthen tuition protection to ensure students receive tuition they have paid for or, as a last resort, a refund.

It is important to note, I might say, Minister, because it is so easy to forget just three years on. The explanatory memorandum said:

To further protect students, the pre-paid fees amendment is proposed to require all providers who do not receive a recurrent government funding to place pre-paid course fees for the first study period into a designated account. This account can only be drawn down when the student's first study period begins. By keeping pre-paid fees separate to day-to-day operating expense accounts, refunds will be more accessible before the student commences.

The minister introducing this legislation, the former member for Kingsford Smith, the Hon. Peter Garrett, said:

This will stop providers from using pre-paid fees for operating expenses … and encourage more sustainable business models.

Together with limiting refunds, this will mean providers are better able to meet their student refund obligations and there is less recourse to the TPS.

The defenders of abolition suggest that it is not needed, and as the minister stated in his summing up remarks, because the overseas student tuition fund fulfils the role of the designated accounts. That is simply not the way in which the designated accounts were designed to operate nor is it the way in which the overseas student fund was designed to operate. It is envisaged as a last resort not as a right. I repeat the point that I made in the second reading debate: if it operated in that way then the crisis that engulfed the industry between 2008 and 2011 would have seen the funds completely depleted.

So the evidence is really clear here of what happens if you are negligent in this regard. The designated account was intended to be the first level of protection for students in the event of provider closure. I want to repeat this: we simply cannot afford an industry that has operators in it that live hand to mouth, that have to dip in to the deposits of students to maintain their operations. That cannot be the way in which we encourage this industry to prosper. I am sure the sector understands the implications of this. If you say to most of these private providers, 'Would you like access to the students' money ahead of time?' of course they are going to jump at it, they are going to jump all over it. They are the same people who jumped all over this government for the last two years when it came to VET FEE-HELP. They are the same people who rip off students and undermine all the good providers.

The Tuition Protection Service in its statement, while acknowledging there will be those who want to remove the designated accounts obligation, argue it remains 'an area of potential risk for the TPS'. These are the people you are relying upon who are telling the Senate that this is an area of potential risk. The Tuition Protection Service say that they would prefer the retention of this integrity measure. I trust senators will note the opinion of the Tuition Protection Service. Their submission noted that the worst outcome would be the abolition of the designated funds obligation together with the removal of existing limits on prepaid fees. That, of course, is precisely what this bill is doing. While we have deep reservations about this, we are not moving an amendment on that but we do say to the government very bluntly that we are awake to this and are very anxious about how that will operate.

In its submission, the TAFE Directors told us:

In the current environment where there is so much public concern surrounding the actions of some less reputable private education providers, TDA feels it imperative that the requirement for retaining pre-paid student fees in a ‘designated account’ remains.

The NTEU said:

Supporters of the proposal to remove the designated account and 50% rules as a way of reducing provider compliance costs and red tape argue that it is justified as the international sector is more stable—

We have seen the evidence of that. That is just not the case that the sector is stable. Yes, it might be more stable than the crisis of 2009, but I would have thought most earthquakes would be than those events. I do not want to see those events ever return.

The NTEU went on to say:

While we acknowledge that there have certainly been improvements, supporters of the changes argue that the Regulatory Impact Statement (RIS) is premised on the assumption that the risk of the circumstances (that is, the turmoil the sector experienced over the period 2008 to 2011) which was the catalyst for these and other changes is now very low or non-existent. However, given the recent evidence of widespread problems within the private vocational sector … we are concerned that both the Government and the sector are seriously underestimating the current levels of provider risk. As such, the assumption that it is fine to pull back on regulatory protections is being made under a false premise.

Ged Kearney, President of the ACTU, advised the committee:

We oppose the removal of these provisions because they unnecessarily weaken protections for overseas students studying in Australia and threaten to undermine the international reputation of Australia’s tertiary education sector.

In light of the continuing evidence of predatory behaviour and exploitation of vulnerable students in the private for-profit vocational training sector, as documented in the recent Senate Committee report into this subject, now is not the time to be complacent about the need for such protections.

Even the Tasmanian Department of Education, the Liberal Tasmanian government, a government to which you are related, Minister Colbeck, as I understand, told us:

The designated accounts ensures that private providers are able to guarantee consumer rights of students and times of provider failure … The designated account should remain to provide this protection in the more viable Private sector.

So Labor maintain that the abolition of the designated account requirement is, in fact, dangerous. It has only been in operation for three years. It is the interaction of the designated account in the ESOS Act and the OSTF which has yet to be tested. The removal that this government is pursuing is blind ideology. Their assumption that the private sector should be treated the same as the public sector is wrong given the long and repeated history of failure by the shonky providers within the vocational education system.

This measure is grossly premature and grossly irresponsible. We would urge the Senate to support the propositions I have moved today to vote 'yes' to the first amendment and 'no' to the second block of amendments that I have proposed.

8:29 pm

Photo of Robert SimmsRobert Simms (SA, Australian Greens) Share this | | Hansard source

The Australian Greens support the amendments proposed by the Labor Party because they are an improvement on what is bad legislation being proposed by the government. However, it does not change our view on the bill that the government has put before us today, and Labor's amendments fall short of addressing the issues with this bill. They do not stop the removal of the 50 per cent cap on up-front costs, for instance. They do not deal with the issue of weakening reporting obligations, and so they still expose students to risk.

The government have said that they have reason to be confident that the sector is in a good position and that somehow the sector is addressing the issues that have plagued it over the last few years. Well, let's be very clear on this: the evidence certainly does not support that view. There is barely a day that goes by when there is not another humiliating scandal plaguing the VET sector in this country. There is not a day that goes by when there is not more news of students being exploited and ripped off.

The government talks about wanting to remove the red tape. Well, it is removing the red tape and rolling out the red carpet for shonks and rip-off merchants. That is what is going to happen if the government goes down this path. It is absurd to be going down the path of removing protections for students when the government has not got its house in order in terms of ensuring that there is quality for students and that students are going to be protected.

I have heard a bit of discussion during this debate about the idea of Australia relying on international students and building a reputation for excellence within the field of international students. Obviously Australia has some terrific education institutions, and we are competing internationally, but one sure way for us to damage our reputation on an international level is to remove the protections that ensure that students get a quality product here in this country. We do not want to see a situation where students are buying an expensive lemon and they are being ripped off and that is the product that they take back to their home country. We do not want to see that model, yet that is the path that the government are taking us down if they remove these protections.

I think Senator Carr is right when he talks about this government's ideological obsession with deregulation and what that means. We need only look at what it has been doing to the higher education sector over the last several decades. I recall all too well the Howard government's deregulation efforts when the Liberals were last in power and, of course, the deregulation agenda that they have been pursuing in this term of government, which they have put on ice but intend to revive after the next election should they be returned. All of this is part of an ideological obsession with this idea of leaving students at the mercy of the market and letting the market decide. That is the Liberal Party's agenda: using education as a means to make profit and wealth for big business and big providers and selling out the interests of students and, all too often, the most vulnerable members of our community. In this instance, we are talking about international students, people who come to this country often lacking resources and sometimes language skills. These are the people who are going to be ripped off by some of the shonky operators. It is integral that we have protections in place, and the Greens are always going to continue to advocate for those.

8:34 pm

Photo of Richard ColbeckRichard Colbeck (Tasmania, Liberal Party, Minister for Tourism and International Education) Share this | | Hansard source

I thank Senator Carr for his amendments, and I indicate up front that the government will not be supporting them. I think Senator Carr actually belled the cat on his own amendments when he started talking about a business by the name of Vocation that has just gone belly up. The point that he made in talking about that business was that it had no money in the bank. This is one of the problems: it had no money in the bank. That means no money in its designated account, so where is the protection? That is one of the issues with the designated account process. I might add for completeness that Vocation did not have any international students, which is a good thing in this circumstance under this piece of legislation.

Photo of Kim CarrKim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | | Hansard source

So it didn't need a designated account is the point you're making, is it?

Photo of Richard ColbeckRichard Colbeck (Tasmania, Liberal Party, Minister for Tourism and International Education) Share this | | Hansard source

If it did, it would have needed to have one, but the fact that it had no money in the bank would have meant that the designated account would have effectively been useless. On the point made by the Greens in their discussion about some ideological process around deregulation, the point is that we want to see the appropriate regulation but we do not need to see duplication of regulation.

I paid credit in my contribution earlier to the previous government for the establishment of the Tuition Protection Service, because it is actually a good system. It is a world-leading system. The important thing to understand about where it sits now is that, as Senator Carr indicated in his speech this morning, it started with a relatively small amount of money: it started with a $5 million injection from government. I agree with Senator Carr's comment this morning when he indicated that he did not want government—we should say 'taxpayers' –to be propping up shonky operators, but in the context of the Tuition Protection Service that is not what is happening. That $5 million that was put in by government when the Tuition Protection Service was first set up is now three-quarters paid back, so that is being returned to government at an appropriate rate as the Tuition Protection Service grows, and the rest will follow. So the Tuition Protection Service is effectively industry funds paid by industry into a fund to provide protection against any failure from industry. So it is actually doing what Senator Carr wants it to do by the growth of the fund.

At this point in time, based on the latest information that I have available, the Tuition Protection Service has some $19.296 million in it—plus, to provide additional capacity should it be required, a $30 million insurance policy that sits on the back. The premium for that insurance policy is also paid out of receipts that are taken from education providers. So what we actually have and we will have once the $5 million is fully paid is a service and a system where education providers are providing the guarantee for any failures within the system. I think that is a good system. Rather than rely on the taxpayer, which I agree with Senator Carr that neither of us wants to do, we have a system where, through risk ranking of premiums or payments into the Tuition Protection Service—and I noted in my contribution earlier that private providers already pay more than public providers—there is also the capacity within that process to risk-rank providers. Where the Tuition Protection Service believes that there is a greater level of risk with one provider than another, they can be charged a higher amount for input into the service.

So I think that what we have in the TPS at this point in time is a very good system. Rather than bringing everybody in the system down to the lowest common denominator—the amendment that Senator Carr wants the chamber to agree to brings everybody down to the lowest common denominator, particularly the private providers, and, as Senator Carr indicates, there are very many good private providers—it provides the capacity for the system to provide a risk ranking against those who might present more risk to the system, charge them a higher amount and therefore reward the good behaviour of the good providers. By retaining the designated account, everybody in the system, regardless of whether they are good or bad, has to retain the additional expense of having that account. Worse, if they are a bad provider and if they are in financial stress, there may not be anything in the account, so you end up having to call on the TPS anyway. So you end up with a duplicating system, one that applies additional cost into the overall education provision service.

Senator Carr, you might think that $75-odd million is not a lot of money. In the context of $18 billion, it might not be seen as that. But this is a competitive international market. There is no question about that. It is a competitive international market, and making our businesses, our industry and our education providers, whether they be public or private, as competitive as possible in that international market does matter. It does matter. Education is now a global industry, and we are playing a very important part in that. As you indicate, Senator Carr, we have a very good reputation in that space. And the government, despite what you might like to say, want to ensure that we maintain that. But we want to maintain that with sensible regulation. We want to retain that with regulation that does not produce duplication. We want to maintain that with a regulatory framework that supports and rewards good behaviour.

We have, in the Tuition Protection Service, a system that can do that. We can raise or lower the amount of funding that we require to go into that system to ensure that there is an appropriate sum to provide the protections required. If you look at the amount of money, even with the concerns and the problems that have occurred over recent years and that have been taken out of the TPS so far, it amounted in 2012-13 to $649,941 and, under default funds before 1 July 2012 and under section 50B of the ESOS Act, $358,005, so in 2012 it was $1.07 million. In 2013-14, there was a total of $187,000; in 2014, $121,288; and, to 30 September 2015, $833.That is a total of $1.317 million.

So we have, as I said during my presentation, a balance of just over $19 million in there. There is the capacity to manage that and of course, as I indicated, a $30 million insurance scheme that sits over the top of it. So at the moment we have in the system a capacity of $50 million. That is being funded by the providers. I think that is the appropriate way to do that. They cannot escape it. They have to put their money in. There is no question about the designated account, because this is something that the TPS has control over.

I urge the crossbenchers to consider this quite carefully. This is part of a well-considered, well-consulted-on package of reforms. We think that there is the basis to go down this track because of the way that the TPS has been set up, because of the protections that it provides and because of the one example that Senator Carr gave about a business that went broke and had nothing in the bank. Had they done that as a provider of international education services there would have been nothing in the bank in the context of the designated account, so the TPS would have had to have been used in any circumstance. We do not believe that it is necessary to have both. We think that the structure and mechanisms of the TPS provide the protection that is required. As I said, I congratulate the previous government for the way they established the service.

8:45 pm

Photo of Kim CarrKim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | | Hansard source

The minister has misrepresented what I am saying about Vocation. I was saying that Vocation today announced that it was closing its doors and sending students on their way with no money in the account. Yet the government claimed they have robust regulatory supervision, and clearly they did not when it came to Vocation. And, as you have said, Vocation did not have any international students. That was not the point I was making. You are grossly misrepresenting my position. I am saying that you are relying upon regulatory authorities which have yet to demonstrate to my mind and to many others that they are indeed fit for purpose.

Let me refer specifically to the risk factor here. The explanatory memorandum notes:

While the designated account requirement was introduced to reduce risk to the TPS, …

The Parliamentary Library points out:

While the ESOS agency can choose to impose additional safeguards in relation to providers considered to be a high risk, the ultimate effect of … these provisions may be that the TPS is required to step in more often where providers fail to … refund those fees …

I am quoting from the Bills Digest, page 12. The issue here is that we have narrowed down our amendment to this particular issue around the designated funds. We have concerns about other aspects of this bill, this deregulation push, but this issue here stands to be a matter on which the Senate can make a judgement.

This is not the creation of a new fund; this is a protection of an existing fund. These amendments have the effect of keeping the fund that has only been in operation since 2012 in place, because the measures the government is proposing, I am suggesting, are premature. And in light of the evidence of the failure of our regulators to be able to deal effectively with the vocational educational system then it is indeed reckless.

The CHAIRMAN: The question is that amendment (1) on sheet 7801 be agreed to.

8:54 pm

Photo of Gavin MarshallGavin Marshall (Victoria, Deputy-President) Share this | | Hansard source

The question now is that items (9), (13), (15) and (18) in schedule 5 stand as printed.