TAFE SA BILL

Second Reading

Adjourned debate on second reading.

(Continued from 15 May 2012.)

The Hon. T.R. KENYON (Newland—Minister for Employment, Higher Education and Skills, Minister for Science and Information Economy, Minister for Recreation and Sport) (11:04): I would like to start by thanking all those who have made a contribution to this bill so far, and I imagine there will be further contributions in the committee stage. I will endeavour to respond to concerns as we go through. The member for Unley made a number of points and I will try to address them as I go through. TAFE SA is in a competitive environment and the member for Unley raised questions about how TAFE SA will retain or grow its business in a more competitive environment. As the honourable member noted, there will be continued subsidies and support mechanisms to help TAFE SA transition into Skills for All.

The Victorian experience has had its ups and downs but even in that time my advice is that TAFE has grown. From my point of view, TAFE has a single great advantage and that is its reputation for quality right around the state. That reputation for quality will be its biggest single competitive advantage. I am advised that it currently provides around 80 per cent of training. Obviously, with an increase in private sector participation its market share will necessarily drop, but the whole point is to have more training and to have greater involvement of the private sector. So, by definition, as the market grows and the increase in private sector participation in that market grows, TAFE's market share as a percentage of the market will drop away but that does not mean necessarily that TAFE will not be growing. We think that TAFE is well positioned to grow.

However, there are a number of issues. Obviously, TAFE is a government-run training provider and, as members would be aware, it comes with the hallmarks of government, which are larger costs than the private sector and a little bit of inflexibility in the way that it operates—and these are some of the challenges that TAFE faces. The measures we have put in place to assist TAFE through that process are based on the Victorian experience.

I will get to the higher subsidies that the member for Unley mentioned in his contribution, but one of the reasons for the higher subsidies is that TAFE has higher costs. Coming into this process of Skills for All on 1 July, TAFE has higher costs; that is, higher wage costs because it does not employ people at the same price as private providers (they pay more), it has a fairly rigid delivery mechanism (as the member for Unley pointed out) and it has a lot of campuses. It has two obligations: it has an obligation to provide almost all types of training and it also has an obligation to provide it in a lot of areas, particularly in regional areas.

That places a cost burden on TAFE over and above the burden placed on a private provider because a private provider, again by definition, can choose to come and go in the market, it chooses where it sets up and it necessarily bases those decisions on profit, or at the very least breaking even and not losing money. That is no bad thing and that is what they are doing but what that means is that private providers will seek those courses where they think they can make a reasonable return.

There are some courses where that is more difficult to do, some courses where there are high capital costs such as engineering and welding courses, areas which require a workshop and tools and those sorts of things. TAFE bears the burden of that and it bears that burden across multiple locations around the state and in country areas particularly. It has a higher cost base right from the start. That is the reason for the higher subsidies—which I will get to at a later point—and it is also one of the mechanisms to help TAFE compete in that environment, understanding that it has higher costs.

There will need to be an attitudinal change in TAFE; that is well understood. TAFE is now in a competitive environment, or it will be from 1 July. It will need to seek out markets; it will need to seek out students; it will need to be more flexible and more responsive. That is the very point of the Skills for All program: to increase flexibility that responds to student demands. TAFE will be working on that within itself, and the government will be assisting TAFE to change that attitude, to change a bit of the culture in TAFE, to work through those issues right across TAFE.

One final point is that TAFE has appointed a number of business development managers to its organisation to help it develop, to help it make that cultural change and move it into that new competitive regime.

Mr Griffiths: How long will they be in place for?

The Hon. T.R. KENYON: Do you want to do that in the committee?

Mr Griffiths: Yes. I'm just trying to help you. It's just that there are big gaps; I thought I would fill it in.

The Hon. T.R. KENYON: I just want to make sure my notes are good. TAFE is already making a lot of changes to the way it works. The cost of delivering TAFE courses, it has to be admitted, was one of the highest in the country, and now that is coming back down and it is approaching the national average.

I think there has been approximately a 17 per cent reduction in delivery costs per hour of training and about a 15 per cent increase in training delivered at that time, so TAFE is becoming more efficient, which is good—it needed to—and that process is going to need to continue because, as the member for Unley pointed out, the subsidies for TAFE are higher. They are set to be higher, but they are also set to come down over time as TAFE gets more efficient, more responsive and more flexible.

I know I agree with the member for Unley when he says that the quality is a very important component. One of my great focuses in this whole process of changing to Skills for All is that we get quality right. There is no point in the state spending—and taxpayers spending—very large sums of money on training if that training is not worth a lot at the end of it, if no-one wants to employ the people who come out at the end. That needs to be guarded against.

We have implemented a layer of auditing as part of the Skills for All process over and above the federal government's process and I think it is fair to say that Victoria has just started doing the same thing, or is about to do the same thing. We will do the same thing as a result of their experience in moving to this. Again it is another area where we learned from Victoria, and we need to be careful about who the state spends its money with to ensure that that quality is there.

Training providers wishing to access public funding under Skills for All must apply and meet rigorous assessment criteria to become a Skills for All training provider. As I said, this is in addition to the registration as an RTO (registered training organisation) through the Australian Skills and Quality Authority (ASQA), which is the national vet regulator.

The Skills for All training provider applicants must provide evidence against a range of selection criteria that are over and above the requirements for registration and include a satisfactory regulatory record and, where applicable, public funding record as an RTO; sufficient numbers of past graduates to support evidence of RTO performance and capability; learner and employer satisfaction with training and assessment services; engagement with industry to ensure quality outcomes; and evidence that course delivery specifications are sound and comparable with other providers.

Only providers that meet these selection criteria will be offered a contract as a Skills for All provider, and the term and scope or number of qualifications that are offered by each provider will be determined by the extent to which their application meets all the criteria and the risks that are identified through the assessment process. If Skills for All training providers are identified as noncompliant or have breached their contract, the department will investigate and will attempt to get the RTO to make good, but, in the end, if that is an unsatisfactory process, it could then initiate a process that could terminate their agreement with the minister.

The department is also establishing a service level agreement with ASQA. This agreement will allow sharing of information between the department and ASQA to ensure that the department is advised if a Skills for All training provider is assessed by ASQA as being noncompliant with the national registration standards. Similarly, if the department identifies quality concerns with a provider it will refer the matter to ASQA for investigation to determine if the provider is operating in accordance with the standards.

There has been some discussion in the past few weeks about Victoria's experience with a similar program. While Skills for All does have similarities with Victoria as well as reforms emerging in other states, there are some distinguishing features and I have been through some of them already. Under Skills for All the training subsidy is more generous and inclusive of people wanting to retrain at the same or at a lower level, so people who may be looking for a change in career or who are looking to do something completely different are still entitled to access to training subsidies. The Victorian training guarantee has an entitlement for people under the age of 20 to undertake subsidised training. For people aged 20 and over the entitlement is generally only available for training at foundational skills level or for any qualifications higher than those already held.

Another difference is that under Skills for All the course fee for all training up to and including certificate II level, foundation skills courses, priority courses and prevocational courses will be fully subsidised by the government. In contrast, the Victorian government does not fully subsidise foundation level courses or training up to and including certificate II level.

Under this bill, as members would know, TAFE will be established as a single statutory authority comprising three institutes. What we are attempting to do is make sure that the system-wide benefits of TAFE are preserved and that you do not have 14 institutes and four TAFE divisions of universities competing against each other without any coordination. We are not trying to get TAFE to compete against itself, we are trying to get TAFE to compete in a market.

The member for Unley raised a number of questions about the schedule of the bill that contains the terms and conditions of prescribed employees. Under the schedule, the mechanism for transferring employment terms and conditions of employment is different from other statutory authorities because the employment of TAFE SA staff who will be transferred to the employment of the chief executive of the corporation is documented in the legislation in a unique way. We are not putting any employment conditions into the bill that are not already in the relevant bills that exist at the moment. We are trying to make, as much as possible, a clean swap to take TAFE and its relevant legislation as it stands, move it into a new legislative environment, and then move on from that point.

The enterprise bargaining agreement is the terms and conditions of employment and the only time the current act comes into play is where the EBA is silent on those matters. Largely, the terms and conditions in the current acts have been superseded but it was not my intention to come in here and just delete all of those without significant consultation. I think it is best to do that through the enterprise bargaining process. It is best to make sure that that is done with full agreement and I did not want to let the transition to a statutory authority get in the way or be held up by going through that process. Those terms and conditions do not hinder TAFE as it currently stands, and they will not hinder TAFE into the future. They are a bit of a legacy, and we can move through them as we reach agreement to do that, but for now we are concentrating just on getting this statutory authority set up and operating.

The member for Unley also made some comments about growth in salaries in DFEEST. My advice is that those numbers have been distorted somewhat. They are total packages. While there has been an increase in the number of people paid over $100,000, the reason for that mainly is just the incremental rises in salaries as part of the enterprise bargaining process, but also when people receive a targeted voluntary separation package, the total value of their package is also reflected in those figures. There are only 13, but the vast majority of that rise in the number of people over $100,000 has just come from incremental rises in enterprise bargaining agreements.

I can tell the house that in 2010-11, under new reporting criteria, the number of employees with remuneration at the base executive level or above was 52, and after removing leave pay (that is TVSPs) the number reduces to 42. This compares to 38 in 2009-10, when compared under the apples with apples arrangement with revised criteria. As at March 2012, the department had 31 executives, which is consistent with the FTE executive reduction strategy target the government is committed to.

The member for Unley also spent quite a lot of time talking about subsidies and the comparative subsidies between TAFE and the private sector. I have been through some of the reasons for that and basically there is a higher cost burden placed on TAFE as a result of the way it is set up. It has a greater number of campuses and it has community service obligations to provide a full gamut of courses across the state, or at least in a reasonably accessible way across the state.

User Choice funding is already in place, which is a training program funded by both the commonwealth and the state. It is a joint program. There are different rates under that program. Industry is already used to these arrangements. We have had 300 providers apply for approval as a Skills for All provider. Eleven of them have responded and provided reasons and suggestions why the subsidy rates are an issue. On the whole, there has been acceptance of the rates as they stand and, of course, over time we will be reducing those subsidies paid to TAFE.

Third-party provision is going to be a matter for the department, because the department will retain control of the assets. The Department of Further Education, Employment, Science and Technology will continue to own the TAFE colleges. The TAFEs will operate in those colleges and the private providers will apply to the department for access to those facilities. Again, coming back to the issues of efficiency and utilisation of assets, I agree with the member for Unley that they need to be better utilised. These are significant assets. They are community-owned assets, and the community expects good utilisation of these assets. That will be one of the challenges under the new regime, making sure that, as effectively as we can, we utilise the assets that we have, that they are used as often as possible at a fair price and with reasonable access for third-party providers.

The member for Unley also mentioned TAFE only qualifications. There are currently, I am advised, 249 TAFE only courses out of approximately 1,400, and that represents 18 per cent of the total list. That number will, again, reduce over time. The reasons for the inclusion of the TAFE only list vary from course to course, but a number of them are superseded qualifications and they are just teaching them out. So, they take the people who are currently involved in those courses and make sure they complete their studies. Preferably, we will try to move them to the new qualification if we can, because it would be better if we could give them current qualifications when they graduate rather than something that may be superseded, but it is just working through those superseded qualifications.

Qualifications regularly change as part of the process of doing that, and that is an interaction with the federal government that we go through so that there are common qualifications right across the country. Again, that list will come down over time, and I expect we will get to a point in the not too distant future where that will occur within one year. So, within one year there will be no TAFE SA only courses. It is a temporary transfer arrangement, but one that will disappear soon enough.

The member for Chaffey mentioned a firearms course currently undertaken by TAFE. I have spoken with him about that. There is the added complication with firearms courses that they need to have the approval of the police as well as part of the process. Providers need to be an RTO, they need to meet Skills for All qualifications, and they then need to be approved by the police. I have undertaken to look into that matter with the member for Chaffey and work through that issue with him.

The member for Stuart mentioned Cinema Augusta, and the situation there is pretty much as he outlined. We have negotiated with the Coles. We have told them that we are prepared to lease that cinema to them at a fairly low rate if they are prepared to absorb the costs of the maintenance for that site so that it does not become a burden on TAFE. We would rather spend our money on training than maintaining a cinema for a third party to operate. They are very clear on that.

That is not a usual lease arrangement. We will have to work our way through and seek an exemption under that—the Coles know that—and I am prepared to work my way through that. If that lease is refused, we will have to go back and try to work out a more commercial arrangement. In the end, the goal I am attempting to achieve is to have the Coles make a commercial decision as to whether or not they want to continue operating the cinema after we have absolved ourselves of the cost of keeping that cinema operating.

Specifically, the member for Stuart was concerned about how that would work with the transition to a statutory authority. As I outlined earlier, TAFE will maintain control of the facilities, so arrangements made with TAFE now will continue because those arrangements will be made with the department; they will transfer to the department as the owner.

To clarify: TAFE at the moment are one and the same thing, essentially, with the government. As they separate out, the control and arrangements for the leasing of the cinema and other assets will rest with the department. There will be a constant there in that the department will continue to exist, so they will have security of tenure.

Once they sign an arrangement with DFEEST, then that arrangement will continue with DFEEST and will not be part of TAFE. The control will not rest with the TAFE board; rather, it will rest with the department and, ultimately, through the department, the minister. So, with those words, I again thank members for their second reading contributions, and I look forward to any further contributions people may wish to make in the committee stage.

Bill read a second time.

Committee Stage

In committee.

Clause 1 passed.

Clause 2.

Mr PISONI: Just on the commencement of the act, minister, you mentioned that business development managers have been engaged. Are you able to advise whether they are permanent employees of the new corporation, whether they are seconded employees of DFEEST or whether they are contractors? Also, how many are there, and what are their salaries?

The Hon. T.R. KENYON: The answer to your question is: it depends a little bit. Chief financial officers are the people within TAFE institutes, so each of the three TAFE institutes has a chief financial officer. They are executive contracts, so they are employees of the department under an executive contract—a standard contract. The other employees are business development managers and education managers, who are also playing a role in business development; they are permanent employees of TAFE.

Mr PISONI: So what you are saying is there are no additional staff coming in to fill those business development manager roles?

The Hon. T.R. KENYON: The chief financial officers are additional staff, so they have been placed in as part of the setting up of TAFE as a statutory authority, and they are on executive contracts.

Mr PISONI: And the value of those contracts, minister?

The Hon. T.R. KENYON: Are you asking what level they are at?

Mr PISONI: Yes. Basically, what is their salary structure?

The Hon. T.R. KENYON: SAS Level 1, is the correct term.

Mr PISONI: For Hansard, can we have that in dollars, please?

The Hon. T.R. KENYON: About $170,000 to $180,000 a year.

Mr PISONI: And that is the package, not the salary?

The Hon. T.R. KENYON: That is correct.

Mr PISONI: How many executive level staff will move from DFEEST into TAFE SA, once the act is proclaimed?

The Hon. T.R. KENYON: Ms Elaine Bensted will be transferred from DFEEST to become the CEO. She is acting in that position at the moment and has been running that. We have sort of separated them administratively internally. She has been running that as the CE of TAFE. She was a deputy CE, so she has moved across to that level. We will advertise that role at a later point.

It is possible that some financial capability—so some financial executives or people—will move across from DFEEST to TAFE, but a lot of the financial services will still remain within DFEEST. There will be a service level agreement between TAFE SA and the department that will provide a lot of the financial services and HR services to TAFE. It may be that, over time, TAFE decides to take that on itself but, for the moment, we are trying to ease that transition across.

Mr PISONI: What level of debt will TAFE be carrying? Perhaps you could also explain, for the last five years, what the cumulative deficits have been for TAFE and how they will be dealt with, either before TAFE is transferred to the corporation or later, and how future deficits may be dealt with.

The Hon. T.R. KENYON: Member for Unley, we do not have a level of debt figure for you at the moment, but I will get that to you. The financial deficit in the last financial year is approximately $6 million, which is around 2 per cent of its budget. Ultimately, once the statutory authority is up and running, TAFE will need to manage its budgets in such a way as to be responsible for its deficits and its surpluses. They will obviously been done in close consultation with the government and, ultimately, the government will have to stand behind TAFE. Certainly my intention is for TAFE to move at the very least to a break-even position. Very small slight surpluses, which would give it a little bit of a buffer, would be a better situation. It will not be too different from any other statutory authority in that it is required to break even or make a slight profit, and that is the situation with that.

Mr PISONI: Have you been advised or are you planning to make any changes to employment conditions in the current EBA negotiations for TAFE employees?

The Hon. T.R. KENYON: In fact, just as I was walking out of my office this morning to come to parliament the representatives of the Australian Education Union were walking into the building to begin negotiations, so those negotiations are underway and, until we have concluded them, it is not possible to say what the final conditions of the EB will be. That is a matter of negotiation between the government and the AEU or the representatives of the employees. I cannot give you a definitive answer on what the final conditions will be.

Mr PISONI: Have you been advised that it is recommended to make changes to the EBA in order to begin TAFE on the path to becoming more cost-effective and to take control of its budget and be more competitive? Have you been given any of that advice as minister?

The Hon. T.R. KENYON: My focus, the focus of the government and the department at the moment is to use the full flexibility built into the current EB more effectively. I do not particularly want to go into the details of the negotiation process between the government and the union over what we would like and what they would like in the parliament. But the member makes the point, over time there will need to be more flexibility in the employment arrangements of TAFE, but we are not rushing headlong into that. I can categorically say that will occur through an enterprise bargaining process, so if there are to be changes they will be made through an enterprise bargaining process and we will work our way through that.

Mr PISONI: With all due respect, my question was about whether the minister was advised that there should be changes to the EBA.

The Hon. T.R. KENYON: I have certainly received advice that one of the major costs on TAFE is its employment arrangements and that the way to change those is through the EB. There is no secret in that matter that if you want to reduce the costs there needs to be more flexibility in the EB, and that is something that we will try to achieve over time.

Mr GRIFFITHS: If I can just pick up on a couple of the answers provided by the minister in some recent questions from the member for Unley, firstly, the minister referred to the preference for TAFE to break even and to make a slight profit. I am intrigued though: what will happen if it does not do that? Are you going have a monthly reporting back to you as the responsible minister about financial issues? How often, therefore, will you have to take some issues to cabinet for funds to be released potentially to ensure that it is propped up so that it is at a break-even point?

The Hon. T.R. KENYON: My advice is that it will be monthly reporting on financials and quarterly reporting on performance agreement arrangements. You make the point: if it goes into a deficit, the government will have to make arrangements to address that. It is a publicly owned corporation and it will play an important role into the future, but I would expect that the board and TAFE will hit that break-even point, that they will use their money as efficiently as they can and hit that break-even point.

We are asking them to set realistic budgets, but they will have to make a number of business decisions about how they operate. As the member for Unley has pointed out, there is a lot of scope within the operations of TAFE to do that: greater utilisation of facilities and better use of resources. I think we have proved that we can do that. As I said earlier, we have had a 17 per cent reduction in cost per hour of delivery of services and I think we are going to have to keep going down that track.

Mr GRIFFITHS: I recognise that TAFE is a cash-flow sensitive organisation though, particularly as the majority of its courses are focused within a 40-week period of the 52-week year. I think that is how it works. I understand there will be monthly reporting back. That is fantastic, but is there going to be a trigger point where deficit projections will prompt you to take some form of action? Have you put an internal control in place to ensure that it will never become an excessive amount that is going to embarrass you, the government and the Treasurer, who is going to need to find some more money to prop things up? What sort of controls have you determined will be in place for this system?

The Hon. T.R. KENYON: The controls are, essentially, the monthly reporting of financials and then performance against the performance agreements. Basically, there will be continual monitoring of the situation. You have to say to yourself, every time you read those reports, if everything is going well that is excellent, but if it is starting to go bad then that is when you are going to need to make a decision. We have basically a monthly opportunity to think that issue through. The opportunity to do that will be at the point when you start receiving your monthly financial reports and your performance against the performance agreements. That is when you will have to make decisions as they come up, because it is hard to anticipate now what they may be and what the causes for it may be. I think there needs to be some flexibility built in to that to make the decisions as you need to, as you go along.

Mr GRIFFITHS: I do not want to be pedantic about this, but I understand those concerns that you have. For me, it is as though an internal control needs to be a trigger point of a certain dollar figure, where there is a projected deficit or an actual deficit from a month-by-month operation, that needs to prompt you to take a firmer hand or to be prepared to offer a high-level investigation and, indeed, to have a conversation with the Treasurer about a potential risk being exposed here. I am interested in what you as the responsible person have determined should be in place.

The Hon. T.R. KENYON: In the first instance the commercial board or the board of the statutory authority are responsible as directors for the financial performance and the financial position of the statutory authority. They will have obligations to report back to me and they will be doing that monthly, as I said, and quarterly for the performance agreements. So, it will be the board at first whose job it is to work their way through that and then it will be my job to oversee that at the top. Under the Public Corporations Act, Treasury also has the right to request special reports and to review the way the corporation is running.

I understand the point that the member for Goyder is trying to make, but the internal controls at the first instance will be the responsibility of the board and then I will monitor that, and the department will monitor that, through the receipt of reports at monthly intervals for financials, and that will give us the opportunity to make decisions. It is hard to set down iron laws when the nature of what may be a problem in the future cannot really be fully determined by parliament, the minister or a department. You could have particular circumstances where revenues may drop away very, very quickly simply as a result of an Asian currency crisis where we are relying on strong inflows of foreign students for income. If that dropped away very quickly that could cause a problem, but it is hard to anticipate that, other than going through the monitoring process and having the board be very rigorous in its assessment of its financial position.

Mr GRIFFITHS: I ask the questions because I am a bit of a process-driven person. I understand that it is difficult to try to pre-empt what might occur in future issues and try to put a process in place. The minister's comment about the oversight responsibility of the Treasurer and his ability to ask for reports does not necessarily allay my fears, given that the Treasurer thought we had observers on the Zoos SA board. If I can go to another one of the minister's previous answers where he talked about DFEEST taking on responsibility for HR and financial issues within TAFE. Is that going to be on a fee-for-service basis, or is that part of the physical support that DFEEST will provide to TAFE operations?

The Hon. T.R. KENYON: It will be a fee-for-service arrangement. It will be a service agreement between TAFE and DFEEST. A contract price for that will be negotiated. Ultimately, TAFE has the right to choose who it purchases those services from, or whether it decides to take it on and do it internally and employ its own people, that is up to it, but in the first instance where there has been that interaction between the department and TAFE up until now we will slowly separate that out as we go. The first formal way of doing that is to have that service level agreement so that there is a purchaser and a provider.

Mr GRIFFITHS: Just for the record, that agreement will be for what period initially?

The Hon. T.R. KENYON: Initially, our intention is to have a one year agreement and once the board is in place we will let it have a look at those arrangements and work out whether it would like to continue with them. We will give that responsibility back to the board at an appropriate point.

Mr VAN HOLST PELLEKAAN: I am seeking some further clarification and assurance with regard to the Port Augusta cinema issue. I did hear the minister's comments before, and I thank him for those comments. I would also like to point out that while this is a business issue it is also a very important community issue. This is not a business that makes the people who run it millionaires. The key issue for me here is the fact that it is an incredibly important service to Port Augusta and the surrounding district.

I heard the minister say before that if the Coles are able to enter into a lease agreement then the impact of this bill, the corporatisation, the statutory authority, will have no impact on that ongoing agreement. I would like you to tell me, please, that it will also have no impact upon them entering into the lease. I did hear what you said about the fact that you need to seek special permission for that lease to happen, and I understand that, that has always been the case, but I would like to know, very clearly, that this bill will have no negative impact whatsoever on their ability to enter into that lease along the lines that we have discussed.

The Hon. T.R. KENYON: Yes, I am happy to give that assurance to the member for Stuart. As I outlined before, the department (DFEEST), which answers to me, will be managing the assets, the campus, as it were. Those arrangements will have to be negotiated, therefore, with the department. I have made that commitment and I will carry it through.

Mr PISONI: Will the department have been up to date with its targeted voluntary separation packages prior to divesting itself of TAFE, how many of those targeted separation packages were for TAFE employees and have they been met?

The Hon. T.R. KENYON: Currently, the department and TAFE combined have 80 surplus employees. I am not able to separate them out to TAFE and DFEEST at the moment; I do not have those numbers here. The majority of them, though, are likely to be from TAFE given that, at the moment under the current arrangements of a combined TAFE and DFEEST, there are approximately 3,000 employees and 500 of them, approximately, are inside DFEEST proper and the other 2,500, approximately, operate within TAFE.

Obviously, Treasury is demanding from us further TVSPs as part of previous budgets, and we have those commitments to meet. Some of them will come from within the department and some of them will come from within TAFE. Again, TAFE will need to adjust its operations to become more efficient, and the TVSP program will be part of that.

Mr PISONI: Is the minister able to bring back to the committee the list and job titles of those surplus employees—the department of education has done it previously—and, of course, with their salaries so that we can get an idea of the total value of the surplus employees?

The CHAIR: Can we have that question again, please?

Mr PISONI: I asked the minister whether he can bring back to the parliament—I do not expect him to have this answer here and now—a list of the 80 or so surplus employees who are with the department at the moment, their job titles and their salaries.

The Hon. T.R. KENYON: Yes, we are able to provide that, and I will get that to you.

Clause passed.

Clause 3.

Mr PISONI: This question relates to the new position of Chief Executive of TAFE. The minister explained earlier that the deputy CEO is in charge of TAFE at the moment. Will there be an increased salary from the deputy chief executive's salary for the new Chief Executive of TAFE?

The Hon. T.R. KENYON: My advice is that, in fact, the former deputy chief executive officer of DFEEST, Ms Elaine Bensted, has transferred across to TAFE SA under her current salary and conditions; so there is no change there. She is now the Chief Executive of TAFE SA. Ultimately, who is the CEO and the rate at which they are paid will be a decision for the board once the board is set up and the corporation is operating, and that will be in the same way that other public corporations set their payment and remuneration terms for their CEO.

Mr PISONI: What is that salary now, minister?

The Hon. T.R. KENYON: Also, I should mention that under the charter of operations between TAFE SA and the minister, the minister will have to approve the terms and conditions of the CEO. My advice is that the current salary package is worth around $280,000 for the CEO of TAFE but, with the member's indulgence, we will check that and get back to him if that answer is incorrect.

Mr PISONI: On the TAFE SA grounds, I note the interpretation says that it means all land occupied by TAFE for which TAFE has care, control and management. Is TAFE responsible for all maintenance and capital programs, and will it also be responsible for the holding costs of those assets, or is that something that the department, or some other department, will hold for them?

The Hon. T.R. KENYON: The normal lease arrangements between the department and lessee, the entity of TAFE in this case, will apply. The day-to-day maintenance of things that a renter of a property would normally undertake will be undertaken by TAFE, then there will be an arrangement for maintenance and control of the buildings and everything else. We will come to arrangements about how that will be met but, ultimately, it will be the responsibility of the department. So the operational matters and day-to-day maintenance will be taken care of by TAFE but the department remains the owner of the facilities.

Mr PISONI: So I can be clear, minister, are you saying that the holding costs of the assets—which, certainly, industry believes is one of the reasons for the larger Skills for All subsidies to TAFE to provide courses, the larger amount of money compared to what is available in the private sector—is not actually the responsibility of TAFE, that is, covering the full costs of those assets, and they will be covered by the department, or somebody else?

The Hon. T.R. KENYON: The department will be charging TAFE a facilities charge, which will account for holding costs and depreciation, as you mentioned. There will be a payment by TAFE back to the department.

Mr PISONI: Will it be actual costs or a partial offset?

The Hon. T.R. KENYON: It will be the actual depreciation and holding costs of the facilities.

Mr GRIFFITHS: I am interested in capital works that might be needed. If there is an expanding opportunity for TAFE to provide training courses in any one particular area, and then through its network they acknowledge there is a need to invest in some form of physical structure, do they themselves then have responsibility to self-finance that and make it an amendment to a lease agreement for the new structure to be built, or do they put in a budget bid through you that goes as part of the state government and cabinet consideration?

The Hon. T.R. KENYON: If TAFE wants an expansion of the facilities, it will need to negotiate that with DFEEST, but DFEEST owns the site and if they want new assets on the site they will be responsible for building them. There is a capital budget within DFEEST. If it cannot be accommodated within the capital budget of the department, it would then need to go and make a budget bid through the normal cabinet processes, so the latter option in your question. The department will need to fund the construction of new facilities. I do not think that precludes an arrangement between TAFE. If TAFE can find another funding source to build on the site, again that would be a negotiation between the tenant and landlord. There would need to be an arrangement about how that asset is treated in the event that TAFE vacates the site, and all of those contingencies, whereby the normal commercial arrangements would be in place.

Mr GRIFFITHS: As an extension of that, and it may be a possibility, is TAFE actually able to go out to the marketplace to borrow funds? It would have to present a business plan that proves that it has a positive revenue stream that identifies its ability to pay back funds, but as I understand it, it is an incorporated body, can it go out to the marketplace to secure funds? If it goes through your system, but invariably there are no funds available as part of DFEEST capital works projects for TAFE to have buildings built, and it identifies the importance of it, can it go out to the marketplace to borrow dollars?

The Hon. T.R. KENYON: Legally under the Public Corporations Act it is able to take on debt and borrow money, as long as they comply with the Treasurer's Instructions around taking on debt. However, in the first instance, under our charter arrangement (we have a charter with the TAFE board) we will be restricting that. We would rather them get themselves settled first and then think about that sort of thing, but initially we will be restricting the ability to take on debt. Under this act, and as with any public corporation, as long as they comply with Treasurer's Instructions they are legally entitled to take on debt.

Mr GRIFFITHS: So that I am sure, 'restricting' means zero and not just a figure that might be in some agreement, like $2 million or something like that?

The Hon. T.R. KENYON: It will be none at all without the written approval of the Treasurer and the minister.

Mr WHETSTONE: Minister, how many members will be on that board? Can you elaborate on the process by which those board members will be selected, and what will the budget be for that board?

The CHAIR: I will have to redirect that question to clause 7. If you are going to ask a question about the director and the relationship to the board, that is fine. There is a specific clause that deals with the establishment of the board, etc., so we will ask those questions then. It is fine if you want to ask a question relating to the interpretation of a director but, in terms of the structure, etc., I am happy for you to ask a question about that under clause 7.

Mr PISONI: Point of order, Mr Chair. The actual interpretation is, 'Director means a member of the board of TAFE SA', so I think it is fair and reasonable for the member to ask for details regarding the qualifications of the director.

The CHAIR: The actual requirements of the board, etc., is actually under clause 7. You would have read the draft bill so you would know that. My ruling stands.

Mr PISONI: Point of order, Mr Chair. You have allowed questions on the interpretation of the chief executive and the interpretation of TAFE grounds, but you are not allowing questions on the interpretation of a director. It is quite clear here: it states, 'Director means a member of the board of TAFE SA.' We are seeking clarification as to what a director is.

The CHAIR: The question was about the qualifications required of a board member. That is clearly covered by clause 7. I have been a bit relaxed with the earlier questions. The question is valid; it can be asked under clause 7. We need to move on.

Clause passed.

Clause 4.

Mr PISONI: This refers to the establishment of the TAFE Corporation. Will TAFE have to apply for approval to the Department of Industry, Innovation, Science, Research and Tertiary Education as an approved VET provider in order to offer VET FEE-HELP to all students, and will the process of this application for TAFE be the same as it is for private providers?

The Hon. T.R. KENYON: The short answer to both of those questions is yes. It does have to apply; it applies to the federal government. That process is currently underway, and it will come under the same processes as with private providers.

Mr PISONI: How will TAFE SA satisfy the financial quality and governance requirements of VET approval under the Higher Education Support Act 2003?

The Hon. T.R. KENYON: I think the easiest answer to that is just to say that the government stands behind TAFE, and the federal government will want to assure itself that it does stand behind TAFE. That will be the way we deal with it. Quite clearly, TAFE will continue to be owned by the government (the state), and the government is not making any attempt to walk away from that. Obviously, we will have to assure the commonwealth of that, but I do not know that it is necessarily a difficult process.

Mr PISONI: Minister, I am quite sure—

The Hon. T.R. KENYON: Sorry to interrupt you, member for Unley, but under the Public Corporations Act there is also a guarantee by the Treasurer, so public corporations have a guarantee by the Treasurer.

Mr PISONI: How will TAFE report to the Treasurer on its governance requirements?

The Hon. T.R. KENYON: TAFE will report to the Treasurer and me with monthly reports on financials, as previously mentioned, and quarterly reports against performance agreements and criteria. Obviously it will have to put out an annual report as well. For the purposes of budget reporting, it will appear as part of the DFEEST section in the budget papers.

Mr PISONI: And an annual report will be tabled in the parliament?

The Hon. T.R. KENYON: Absolutely, yes.

Mr PISONI: The preamble states that full VET FEE-HELP will be available to VET students in South Australia who study at least diploma level, where study is publicly subsidised through approved training providers. VET FEE-HELP eligibility states that to access VET FEE-HELP you must study with a registered training organisation that has been approved as a VET provider under HESA. There is no mention of publicly subsidised courses. Will VET FEE-HELP alter its requirements to this effect? If so, private RTOs who currently hold VET FEE-HELP approval may face a restriction on their business should they choose not to participate in the Skills for All market. Is the minister able to clarify those concerns, that have been raised with the non-government VET sector?

The Hon. T.R. KENYON: It is perhaps best if I take that question on notice and get a more detailed answer, because it is mainly the province of the federal government. There is a heavy involvement with the federal government because it is funding it. If I can take that question on notice and get back to you with a detailed answer I think that is the best way.

Mr PISONI: I understand that, and thank you for that. Will HECS deferral be available to students who choose to study with private providers, particularly where there is a student and/or employer contribution required? I understand that the HECS deferral is available for TAFE—and you might want to confirm that I have that right—but there is concern in the non-government sector that it is not clear whether deferral will be available for students once they qualify for that HECS funding if they plan to commence their VET training with a private provider.

The CHAIR: For my clarification, the question is not an invalid question—it is a valid question to ask—but how does it relate to the establishment of the corporation, and why would you not be asking it under clause 6, which talks about students and training?

Mr PISONI: The establishment of TAFE as a corporation is a requirement for TAFE to be able to offer HECS funding through the federal government.

The CHAIR: Okay. Minister.

The Hon. T.R. KENYON: My understanding on that question is that the arrangements for this are administered by the federal government and that they apply equally to TAFE and private providers. Again, I will check that and make sure that that information is correct.

Mr PISONI: Just on that same matter, minister, will government subsidy for eligible students be the same regardless of where they choose to study, that is, whether it be a TAFE institution or a private institution?

The Hon. T.R. KENYON: In terms of commonwealth government subsidies—is that what you are talking about?

Mr PISONI: The HECS funding.

The Hon. T.R. KENYON: My understanding is that, in terms of federal government subsidies, they are the same and, of course, our arrangements in terms of the subsidies we provide to training providers are differentiated between TAFE and private providers in terms of the underlying subsidy that we provide. For the purposes of VET FEE-HELP, my understanding of the situation is that the commonwealth is providing an equal subsidy. Again, we will further investigate that and make sure we give you the correct information.

Mr GRIFFITHS: I have another question in relation to clause 4(2)(c) where it talks about TAFE SA being capable of suing and being sued. I am interested whether any current legal action has been taken against TAFE SA and, if so, does that action remain as a potential liability for DFEEST or is it absorbed as part of a potential liability if it is lost by this new TAFE SA structure?

The Hon. T.R. KENYON: Any legal action that is currently ongoing between TAFE and another member of the public or another corporation will transfer across with TAFE, so it will remain a part of TAFE and the board will have to deal with that situation. I apologise to the member for Goyder. My advice is that any current legal action is taken to be against the minister and that court proceedings will continue with the minister. TAFE will be a new entity, a clean sheet, and any further legal action from that point will be the responsibility of the corporation and the board.

Mr GRIFFITHS: I am grateful for the correction made because I must admit that I was alarmed by the first part of your answer. Regarding insurance obligations for the new TAFE SA structure, will they be covered as part of some self-insurance that the government currently has or will they need to go out to the marketplace to ensure that they have professional indemnity and public liability in their own operations so that that becomes part of their cost of operations?

The Hon. T.R. KENYON: Perhaps we can take that on notice and get a detailed response to you on that one just to make sure that we have covered off every area. It may be that those liabilities are split between the department and TAFE, but I will get you a full answer.

Mr GRIFFITHS: It is a matter of timing. So, the answer will be provided to the responsible shadow minister in time for the debate between the houses? We will have this information next week at the latest?

The Hon. T.R. KENYON: Yes, we will provide that information to the responsible minister and, for your own interest, we will make sure that you get a copy as well in time for the debate in the upper house.

Mr WHETSTONE: Minister, will the government freeze the level of competitive funding for the private provider RDOs in the context of its commitment to being the largest provider of publicly-funded training in South Australia?

The Hon. T.R. KENYON: No, there is no intention to restrict the money available to private providers. It is a demand-driven system, so the private providers will have full access to the funding they need if the demand is there from students. Having said that, I indicate that one of the lessons from Victoria is that there was a flurry of study in courses not necessarily prioritised by the state as critical skills, and that is a situation we try to avoid. We have reserved the right to have caps on funding for specific qualifications, so it will not make any difference whether it is a public or private provider. But we do not want to see runaway training in an area that is not a significant priority for the state.

In Victoria, they had a particular issue with fitness training, people being personal trainers. They are now moving, I think, to a system of caps as well. We will be monitoring training on a qualification basis or category and making sure that it meets the government's training priorities. Where it looks like they are blowing out, we will cap the funding available in a certain qualification area, but it will not be differentiated between private or public providers; the limit will be on the funding for the qualification, not on the provider.

Mr WHETSTONE: Minister, how will TAFE SA respond to the new needs and demands, given the in-built inertia, with its large top-heavy administration?

The Hon. T.R. KENYON: As I have said before, I think it is going to have to continue on with the process that is underway already. The costs for providing instruction have reduced by about 17 per cent over the last couple of years, on a per hour basis and, at the same time, qualifications completed have gone up by 15 per cent, and we would like that process to continue. So, that process is already underway, and there is going to have to be a continuation of a revision of costs and assessment of process and operations to make sure that courses are provided as efficiently as possible.

We should not back away from the fact that there will be challenges for TAFE in the transition to a more flexible regime. It is used to operating in a more rigid system and a more rigid environment, as the member for Goyder said, with terms and semesters and those sorts of things, and it is going to have to learn to operate in a more flexible way. That is one the challenges facing TAFE, there is no doubt about that; there is no point backing away from that fact.

Mr WHETSTONE: Will TAFE SA be funded solely by federal and state subsidies?

The Hon. T.R. KENYON: No, it will also have fee-for-service arrangements with industry. It may be approached by an industry to provide a certain service for a fee, as it currently is. TAFE receives significant income (as do a number of private providers) from overseas students. Hopefully that will continue and, with any luck, expand.

There is no restriction on the opportunity to provide training outside of the subsidy system for the benefit of TAFE. That is one of the great opportunities that is available. TAFE has a very good reputation for quality and it should feel free to trade on that reputation and make the most of it, to provide as much training as it can.

Mr PISONI: I have a supplementary on that question, if I may. You mentioned income from overseas students: are you able to advise if there is any responsibility for TAFE to ensure that overseas students who are studying here are complying with their visa requirements, such as having health insurance, etc.?

The Hon. T.R. KENYON: TAFE SA will have obligations under federal law and federal requirements and they will be the same as private providers. The federal government currently has a regime. There are already obligations on RTOs, including TAFE, to provide information to the Department of Immigration and Citizenship (DIAC). That will continue and they will be subject to any regulatory changes that the commonwealth may make. The commonwealth seems to be heading in the direction of placing greater obligations on RTOs around compliance with visas for overseas students, and that burden will be the same on TAFE and private providers, and they will be directly to the federal government.

Mr PISONI: Just for those who might be following this debate on Hansard, what are the obligations now on TAFE to ensure that their overseas students are complying with these requirements?

The Hon. T.R. KENYON: I am not able to provide that detail now but I will get back to you with that information. Some issues are around change of address and stuff like that but it is best that I get back to you with a fuller answer.

Mr GRIFFITHS: In reference to an answer provided by the minister in regard to caps put in place on subsidies that are available for the private and public training providers, I understand the great challenges to ensure that South Australians have the skill set they need for future work opportunities here but will there be some training areas where yes, there will be a course available but there will be no user-choice funding—is that still the term used for funding support?—available at all to support the costs of that and it will be totally under fee-for-service, or will there be all subject choices that have some user-choice options still available to them?

The Hon. T.R. KENYON: There will be, in all likelihood, a small number of courses where there is high demand for the course, a willingness to pay for the course and not necessarily a lack of skilled labour in that area. We will continue that situation. There may not be subsidies for those courses. We may still charge full fees for them; we will give ourselves the flexibility. TAFE will have the flexibility, as will private providers, to undertake those courses when, obviously, there would be no significant impact on the labour supply.

Mr WHETSTONE: What basis is used to calculate the Skills for All subsidy levels for TAFE SA and the private providers?

The Hon. T.R. KENYON: This has taken up a lot of time within the department. Trying to appropriately cost courses and qualifications has been one of the major exercises of Skills for All, so perhaps you will indulge me if I give you a little bit of background on how it worked. There are approximately 1,400 qualifications and each qualification is made up of a series of competencies—training modules, essentially—that you group together to form a qualification. A certificate I course would have maybe 10 or 20 competencies and together they form the qualification of certificate I.

Each one of those 36,000 competencies that make up the 1,400 courses or qualifications has been investigated for the cost of delivering it or maintaining the continual supply of it, and we have used our own knowledge as part of TAFE to understand how much it costs and also worked fairly extensively with the private sector about the cost to them of delivering these competencies.

Once we had assembled the subsidy list, we then went out again to a number of private providers as well as TAFE to just check them against their cost base and everything else. There has actually been a reasonable amount of modelling and consultation between the government and TAFE and the government and the private sector—so it has been done by DFEEST, rather than TAFE itself—and there has been that modelling about how it would work and also that consultation between them about: is this a reasonable assessment of cost? That is how we arrived at those subsidy lists.

Clause passed.

Clause 5.

Mr PISONI: Will TAFE be required to apply for approval as a Skills for All provider through the same process as private RTOs, or is that something that they will get automatically—or will continue to have, if they already have it—once they become a separate corporation?

The CHAIR: Clause 5, as I read it, talks about the accountability of the corporation under the Public Corporations Act. I am happy to entertain that question under clause 6, regarding operations. Questions under clause 5 should only be questions regarding the accountability audit etc., of the corporation. Any questions in that area?

Mr PISONI: I jumped the gun.

Clause passed.

Clause 6.

The CHAIR: That question can be answered now.

The Hon. T.R. KENYON: We will manage our registrations of Skills for All providers through an application process and then a contract. TAFE, in the first instance, will operate under a memorandum of understanding because it is unlikely to be further completely separated out from the department and established as a full statutory authority when Skills for All kicks in. They will operate on a memorandum of understanding with DFEEST that will have the same terms and conditions as the contract provided to private training providers. Private providers will sign a contract with DFEEST and, in the first instance, TAFE will have a memorandum of understanding with DFEEST. Once it is established as a statutory authority and is fully operational, it will then sign a contract that will be the same.

The approval process for being a Skills for All provider has been different. It has not gone through exactly the same process as private providers have because it is still part of the department, and the department's knowledge of TAFE, as it is, is pretty thorough. It is an unusual situation in that we are again in the process of separating out the two entities, so it is going through this process as, nominally, part of the department. It has had to provide a lot of information to the department as part of this process, but it has not been exactly the same as a private provider.

Mr PISONI: Paragraph (d) talks about intellectual property. Who will have ownership of any intellectual property or other property created or developed by employees, contractors or others representing TAFE SA?

The Hon. T.R. KENYON: TAFE SA will have ownership of that intellectual property.

Mr PISONI: Paragraph (e) refers to TAFE being able to perform any other function as assigned by the minister. Have you been briefed on what other functions TAFE may be required to perform later, whether it be in the medium or longer term?

The Hon. T.R. KENYON: I certainly do not recall that, and my advice is I have not been. It is a catch-all clause, basically. I think most statutory corporations would have a similar clause. It is really just a bit of flexibility built into the act.

Mr PISONI: How will the minister measure the productivity, value for money, efficiency and quality of TAFE services for the public funding contributed? Will there be a measure of comparison between Skills for All money distributed to TAFE compared with that distributed to the non-government VET sector?

The Hon. T.R. KENYON: As part of the contracts under Skills for All, there will be quality control clauses that allow us to collect data and also conduct surveys of students and employers about satisfaction with the training. There will be data collected on completion rates. We will be able to monitor the cost per hour of TAFE. Obviously, it would be harder to get that same cost per hour out of private providers, but we expect we will be able to get pretty good cost per hour costings out of TAFE.

Those details are all currently published and they will continue to be published. There will be quite a lot of data collection. As much of that as possible we will make public, data from both private and TAFE. One of the best quality control measures is to have as much of that information publicly available as possible. We are also hoping that there will be other quality control measures that may be implemented over time.

Mr PISONI: Obviously, there will be a cost involved, and I take it that DFEEST would be auditing those measures. Will that be funded through part of the $194 million Skills for All funding announced, or will that be on top of the $194 million?

The Hon. T.R. KENYON: Our intention at the moment is to fund them through the department. Quality control measures and data collection services will all be funded by the department, other than the cost of keeping records that providers will need to maintain anyway. They will have these records, and the cost of maintaining those records and then just providing that information to the department will be borne by the providers.

On the whole, the majority of the data or the quality control measures will be funded by the department. That may change over time, depending on what measures are introduced in the future. I cannot speak for a future minister or government about quality control measures they may implement, but they may do that down the track and they will have to make decisions about how they fund them.

Mr PISONI: What is the time frame for reducing the difference in government support for TAFE SA through Skills for All and that of the private sector? In other words, is there a nominated time frame, or have time frames been discussed, about reducing the government support that is there through additional funding of identical courses for the TAFE provider compared to the private provider?

The Hon. T.R. KENYON: It is not our intention to ever reach a point where the subsidy provided to TAFE will be exactly the same as the subsidy provided to private providers. I have outlined in the second reading speech the reasons for that, but mainly it revolves around the greater community service obligations placed on TAFE and that it is required to be in more places. It does have an obligation to regional South Australia that cannot reasonably be placed on private providers, and that has its own cost base.

It means there are more campuses that private providers might not necessarily have to provide. It means that it needs to run courses that may not be particularly financially lucrative or profitable but are really required around the state for purposes of addressing skill shortages and the like. So, because TAFE is absorbing that community service obligation, we never expect to reach the point where the subsidies for TAFE and the subsidies for private providers will be the same.

Having said that, we do expect that difference to reduce over time and, certainly, bit by bit over future years. I would anticipate that next year will be slightly less than this year, and so on and so forth for a number of years. Obviously we are not trying to destroy TAFE and we are not trying to make life for TAFE unnecessarily difficult, we are just trying to assist it through the process of reaching a more efficient and flexible operation. That necessarily requires a higher rate of subsidy to begin with, and the gap between the two will close over time, but we cannot see a point where they will be equal simply because of the demands on TAFE that do not exist for private operators.

Mr PISONI: I refer to paragraph (d)(ii). It has been suggested that this is inconsistent with the VET framework. RTOs, including TAFE, are not the arbitrators of practical training requirements in all instances, especially when the qualification leads to a licensed outcome. The licensing authority proscribes the characteristics of practical training components of the qualification leading to that licence; for example, a Diploma of Nursing must be accredited by the Australian Nursing and Midwifery Accreditation Council.

It has been raised with me that the provision in paragraph (d)(ii) to 'provide for the participation of students, on such conditions as TAFE SA thinks fit, in a commercial, community or other enterprise or activity carried on by some other person or body' lacks the acknowledgement that TAFE cannot provide a student work-ready without the cooperation or authority of the licensing body.

The Hon. T.R. KENYON: My advice on that is that the purpose of that clause is to allow TAFE the power to interact with third parties to provide work experience or other arrangements relating to their training. For instance, there is a student restaurant at Regency and, while serving in that restaurant may not specifically be part of the training qualification itself, it is a useful activity for students to undertake, and it would make sure that is available to them.

My advice is that it is an enabling clause that allows them to take part in activities other than the very strict definition of training, that is, turning up at a classroom and undertaking study inside the classroom. It is just to allow a fuller experience as part of the education.

Mr WHETSTONE: Minister, who will set the rates that TAFE charge private RTOs for the use of the TAFE facilities? Will it be market rates? How will the private RTOs be assured of fair competition or no disadvantage?

The Hon. T.R. KENYON: As I was saying earlier, member for Chaffey, the facilities will be owned by the department, and so any RTO or third party attempting to use the facilities has two options: if they choose to, they can negotiate a sublease with TAFE, or they can approach the department, who is the owner of the asset, and negotiate with them.

My advice is it will be a commercial negotiation, but not necessarily a commercial rate, because we are dealing with training organisations after all, and often they do not have the capacity to pay full commercial rent. There needs to be an element of commercial neutrality, and that is the reason for the department owning the assets, rather than TAFE itself.

Progress reported; committee to sit again.