Politics

Overhaul on way for vocational education sector

Vocational education institutes are struggling to stay afloat. Laura Walters looks at how the sector got into this mess, and what the Government is expected to do to fix it.

A major overhaul is on the cards for the vocational education sector, but Education Minister Chris Hipkins says that doesn’t mean closing polytechnics.

Hipkins says the vocational education sector, which includes polytechnics, institutes of technology and industry training organisations, is unsustainable and financially unstable.

On Wednesday, the Government will announce its plans to overhaul the current system, which will include some degree of centralisation and amalgamation.

Currently, the system is failing: four institutes of technology and polytechnics (ITPs) have been taken into statutory management, with a handful more teetering close to the edge.

“There’s actually a very small number of them in reasonably solid financial condition at the moment,” Hipkins said on Tuesday.

The move towards more collaboration, through a more centralised system, is an attempt to share innovation, improve systems, and bring down costs.

But it seems the sector is divided on what that might mean for jobs, and for the minority of ITPs that are performing well.

Unsustainable sector

Hipkins is not the only one to recognise the sector's issues.

The Tertiary Education Commission (TEC) and the Tertiary Education Union (TEU) also acknowledge the system is broken, while National Party tertiary education spokesman Shane Reti agrees some reform is necessary for the polytechnics that have struggled.

Enrolments across the sector are dropping, and labour costs, as well as compliance and regulatory costs, are high.

In recent months, polytechnics and other private vocational training institutes have been falling like flies.

The sector as a whole lost $53 million in 2017. Four ITPs – Greymouth's Tai Poutini Polytechnic, Wellington's Whitireia and WelTec, and Unitec in Auckland – together received $100m in Crown bailouts last year, and are currently in statutory management.

“We don’t want to continue shovelling money into a system that’s clearly not working, where there is fewer enrolments and more money being required regularly from the taxpayer.”

Hipkins said several more were “on borrowed time”.

“And then there’s another group, that wouldn’t take too big of a shift to find them to be in financial difficulty,” he said, adding that the scale of the issue was the reason for the Government’s urgency.

“We don’t want to continue shovelling money into a system that’s clearly not working, where there is fewer enrolments and more money being required regularly from the taxpayer.”

ITPs receive more than $500 million in public funding, each year – about 20 percent of the Government’s tertiary education budget.

But Cabinet papers estimate 80 percent will be making a loss by 2022 on current enrolment figures.

How did we get here?

A raft of Cabinet papers and discussion documents paint a picture of a failing sector which has been the victim of economic, demographic and policy changes in turn exacerbated by poor governance and administration.

A TEC background discussion paper to Hipkins in 2017 said the ITP sector was "now in a position where widespread business change seems necessary to ensure the ongoing quality, attractiveness and sustainability of its vocational delivery”.

The paper set out the chain of events that led to the current situation, including how the move away from sub-degree courses meant the institutions were out-competed for their target students by universities and a growing labour market.

Students' expectations had changed, along with the future of work, while young people were staying at school longer - a state of affairs to which the sector had been unable to adapt its business model, the document said.

ITPs saw significant growth in the early 2000s, concentrated at sub-degree level. While the GFC and “baby blip” temporarily increased enrolments, numbers began to decline as the economy recovered, and profit margins dropped, with providers responding mainly through staff reductions and growing international enrolments.

“Unless something changes, these ITPs risk suffering a shock that tips them over the edge, or will gradually become increasingly less capable of delivering high-quality and attractive offerings to students."

Numbers fell from their peak of 185,305 in 2008 to 129,870 in 2016 – a 30 percent drop.

Last week, Hipkins pointed the finger squarely at National, saying the number of domestic students at polytechnics fell by more than 23,000 between 2011 and 2017.

“During the last six years National was in office, the skills shortage grew from a gap to a chasm,” he said.

The cost per student is high, as are staff salary costs. Added to that are issues with management and governance capability, as well as a drop in government funding in real terms.

While some have tried to collaborate to stamp out inefficiencies and ramp up international student business, challenges remain.

“Over time, unless something changes, these ITPs risk suffering a shock that tips them over the edge, or will gradually become increasingly less capable of delivering high-quality and attractive offerings to students,” the TEC said.

Cabinet documents expanded on the TEC’s comments, with Hipkins saying much of the sector was projected to be in deficit within two to three years under current settings.

He said there was an “urgent issue of viability”, and there needed to be action to build a healthy sector rather than propping up the status quo.

What to expect from the overhaul

As part of its wider education work programme, which includes a review of Tomorrow’s Schools and an NCEA review, the Government is also overhauling the ITP sector and developing a new approach through the ITP 2020 Roadmap.

The Government expects fees-free tertiary education will encourage more people to enrol over the next few years, although it does not yet know the extent of that impact.

Increased funding will likely be part of the solution, but Hipkins said extra funding alone would mask the issues rather than deal with them.

While some ITPs were successful, positive innovations at one provider had not spread, meaning there was not success at a national level.

The options considered by those in the taskforce sat on a continuum from where the sector is now - 16 autonomous ITPs - to a single, centralised system.

In a Cabinet paper last year, Hipkins said ITPs needed to operate more as a system, to realise efficiencies, and make the most of collaboration in course design and administration.

But wholesale centralisation could lead to the sector being bogged down by a lack of flexibility and large amounts of red tape, he said.

Concern for jobs and potential closures

Some high-performing ITPs, as well as the TEU,; are concerned the Government may go for wholesale centralisation.

The high-performing ITPs don’t want to be dragged down, or lose their point of difference, while the TEU is concerned about potential job losses.

Some in the sector expect the establishment of a single, national institute with regional campuses, which could lead to qualifications becoming generic, the removal of competition, and the shutting of some ITPs. 

However, Hipkins would not release any details ahead of the announcement.

Off the back of chatter in the sector, National estimated 1000 full-time jobs would go as a result of the changes, and warned of full centralisation and amalgamation.

“At the moment, if we don’t do anything, we are going to see these institutions continuing to fall over. Then they’ll be retrenching; they’ll be closing programmes; laying off staff."

Hipkins told Newshub Nation late last year he expected "fewer polytechs at the end of this exercise" but walked that back while disputing National's claims, saying on Tuesday the Government's changes would strengthen the network as a whole and did not include the closure of ITPs.

“At the moment, if we don’t do anything, we are going to see these institutions continuing to fall over. Then they’ll be retrenching; they’ll be closing programmes; laying off staff."

The Government's changes would focus on provincial New Zealand, especially where the sector could help support regional economic growth and Provincial Growth Fund priorities, while also seeking to fill skills shortages.

Reti said he appreciated some centralisation and amalgamation in the sector could help struggling ITPs perform better and share innovations.

However, he said providers needed to have the flexibility to cater to their specific regions and the skills needed in those areas.

The Government had to be careful not to throw the baby out with the bathwater, as some providers were doing a good job, he said.

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