Chapman Details Uni Fee-Hikes Tax

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UNIVERSITIES would have to pay a 20 per cent tax on fee increases above the current student price caps, rising to 60 per cent on fees more than $5,000 above the caps, and 80 per cent on fees more than $10,000 above the caps, according to an example put forward by HECS architect Bruce Chapman in his submission advocating a tax to discourage excessive price hikes in a deregulated market.

The example assumes that the government doesn’t cut teaching funding by 20 per cent. If the cut was left in place the initial threshold could be set at a lower level. Professor Chapman stressed that the scenario is for illustrative purposes only in showing how the tax could work.

Professor Chapman has worked up the idea in partnership with higher education expert David Phillips, who has said the government is seriously considering the idea. While the submission makes clear that it is Professor Chapman and Mr Phillips’ idea and not the government’s, they nevertheless developed it with the help of the department.

“Transparently, the policy proposal is not the Government’s position. It is a suggested change to it, aimed at correcting for what many believe to be a risk and concern in the Government’s suggested reform. But, with the agreement of senior officers and the Minister’s office, Departmental officers were of assistance in developing the proposal and the illustrative example,” Professor Chapman says in his submission.

Professor Chapman’s submission makes it clear that the Group of Eight universities would be hit the most by the tax, reflecting expectations that they will have the most pricing power under deregulation. Under the fees tax, the Go8 would be expected to contribute about 55 per cent of the revenue raised from the sector as a saving for government. In contrast under the government’s plan to cut funding to the sector by 20 per cent, the Go8 will be contributing about 30 per cent of the total savings.

Professor Chapman said the proposal for a fees tax was needed because of the risk of excessively high prices driven by cheap student loans and the propensity for price to be conflated with status and quality. The advantage of the tax was that it would still allow universities the freedom to set their own fees while discouraging them from taking advantage of HECS and subsidies by setting excessively high prices.

“It is difficult to believe…that fee deregulation in the form proposed in the Budget will result in moderate-only price increases overall, and in important parts of the higher education market the potential for very high price changes seems very real,” Professor Chapman said.

However Professor Chapman isn’t calling it a tax. Instead he has called it a “University Subsidy Contingent Scheme.”

“Policies such as UCCS, if designed well, have a real potential to limit price rises to socially reasonable and fair levels,” he said.

This news story is reprinted from www.theaustralian.com.au

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