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House of Assembly - Fifty-Second Parliament, First Session (52-1)
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VOCATIONAL EDUCATION AND TRAINING (COMMONWEALTH POWERS) BILL

Committee Stage

In committee.

Clauses 1 to 3 passed.

Clause 4.

Mr PISONI: This clause refers to the adoption of the national VET regulation. I just have some questions on the implementation of that. First of all, will those who are registered in South Australia automatically be registered federally? Will there be any fees incurred in doing so? Also, what is the timeframe in which it must happen, and will there be a grace period for RTOs?

The Hon. T.R. KENYON: Under the federal act, my advice is the transition will be automatic and they will be transitioned with exactly the same regulatory status as they have in South Australia. So, a South Australian provider accredited to provide certain types of training will then be accredited to provide exactly that type of training under the federal system and it will be automatic. So, it will just be a straight transfer across. There will be no costs associated with that and it will take effect immediately upon the proclamation of the act. So, once it has passed parliament, it can be proclaimed very shortly after that and it will then take full effect at that point.

Mr PISONI: Thank you, minister. I just have some queries on the full cost recovery. You mentioned in your response to second reading speeches that the state regime was already moving to full cost recovery. Are you able to advise the house if the cost of providing this regulatory service federally is the same as the state providing it?

I ask that question because we know the terms and conditions of employment for commonwealth public servants. For example, their superannuation is substantially higher and leave benefits, I think, are more generous for federal public servants than they are for state public servants. So, I am asking the minister whether there will be a higher cost to recover because this will be run by a federal department as opposed to a state department.

The Hon. T.R. KENYON: It is a hard question to answer with complete accuracy, because it is, in some ways, a hypothetical question. We will move into a full cost recovery position, which we have outlined to providers, and the commonwealth is moving in the same phased way. So, they are underwriting the cost of it for the next three years as they move towards full cost recovery.

Because we have not reached our full cost recovery cost yet, it is difficult for us to compare what it will be with the commonwealth. So, it is a little bit unknown, but there is certainly the possibility that, for like-for-like services, it would be more expensive under the commonwealth. I cannot give any definitive yes or no because it is a bit unknowable in a way, because we have not been at that point yet.

Mr PISONI: The transfer of staff from DFEEST to the commonwealth: first of all, how many staff will there be, and will they come off your TVSP targets announced in the budget? Will they be receiving any additional payments, other than accrued entitlements, on transfer?

The Hon. T.R. KENYON: Sorry, can you just ask that second part of the question again?

Mr PISONI: Will the staff who transfer from your department to the federal regulatory body receive any entitlements over and above what they have accumulated? In other words, will they be receiving any transition payments or any redundancy payments?

The Hon. T.R. KENYON: My advice is that the federal regulatory office will have approximately 16 full-time equivalent staff—it is still to be completely settled—and I am told that 10 of our FTEs will be going across. They need to apply for those positions and most of them will be. Some may choose not to, but that is up to them. They will be counted as part of our savings in terms of the number of staff, so it will be a staff reduction, but they will not be receiving a TVSP; they will just be changing jobs, so there will be no redundancy payments for that.

Mr Pisoni interjecting:

The Hon. T.R. KENYON: No, no transition payments. I think there are arrangements with the commonwealth that public servants who transfer from federal to state and state to federal take their leave entitlements with them, so they will take over annual leave entitlements and sick leave entitlements with them. They will just transfer them.

Mr PISONI: Is that automatic?

The Hon. T.R. KENYON: My understanding is that that is the arrangement.

Mr PISONI: Can they cash them out?

The Hon. T.R. KENYON: No, I do not think we do. I think they are recognised between them. That is my understanding. I will check that and, if it is any different, I will let you know.

Mr PISONI: There are virtually two types of students who attend RTOs: those who fund themselves, who are not in employment, and obviously they will be paying these fees; and then there are students who are apprentices or employed and the training is part of their apprenticeship or their traineeship, for example. What is the intention of the government? Is it intended that the students pay those fees, or that the employer pays those fees for training?

The Hon. T.R. KENYON: My advice is that the bill will not have any effect on the way fees are paid.

Mr PISONI: I understand that, but I am asking what is the government policy? Is it government policy that when training fees go up—for example when you put TAFE fees up in the budget—and when making those assessments, that employers or employees pay the fees?

The Hon. T.R. KENYON: The fees are not affected by this bill but, to answer the question, Skills for All will increase the amount of money that is available to subsidise apprenticeships and training. The government will be paying a much larger part of training courses now than it currently is, but any arrangements that are currently in place in terms of the split between employers and employees providing or paying the fees will still remain. It is not affected by this bill.

My understanding is that there will be a lot more negotiation. The short answer is that no current arrangements will change, so in many ways it is open for negotiation between the employer and the employee about who pays fees. My understanding is that it is the case now that the employer may choose to pay fees on behalf of the student, or a student may have to pay the fees themselves and that will not change. But this bill does not affect that at all because they pay it directly to the service provider and it is an arrangement between the employer and the employee. There is no payment of fees to the commonwealth as part of this bill.

Mr PISONI: I understand that. I was using the opportunity to try to get the government's policy, or the government's expectation, on the payment of fees, and I am asking that question because of answers that I have received over the years, as an employer in particular, when querying TAFE fee increases. Just to make it clear: there no policy, or the government is silent on the expectation, as to whether an employer or an employee should pay training fees when they are employed?

The Hon. T.R. KENYON: I will go back. Under Skills for All, the amount of training that is subsidised by the government would be heavily increased so the instances where a student is required to pay fees will be reduced. Certificate I and Certificate II will be free, fully subsidised. There will be maximum and minimum fees allowable under the system so that fees should not skyrocket. It is currently the case that there is negotiation between the employer and the employee about who pays TAFE fees, and that will remain. The government policy is that there will be no change to those arrangements, other than the total amount of fees paid by people outside of the government, so for employer and employees the total TAFE fees that need to be paid are going to be reduced.

For those above Certificate IV, diplomas and the like, there will be income-contingent loans so that full cost will not become apparent until, like HECS, the person who undertook the training, the student, is employed and earning a certain amount of money and they start paying it back. In some instances where there is advanced training over and above Certificate IV, there will be no upfront fees payable as well so, again, that question may, in fact, disappear, because it will come back to the student down the track.

The government's policy is that Skills for All will reduce the amount of money that students and employers have to pay but, as to how they are paid or who pays them, that is a matter for negotiation, and it has always been; and that remains.

Mr PISONI: In regard to Skills for All, the payment goes to the employer, is that right, and then the employer pays the training organisation?

The Hon. T.R. KENYON: The money goes to the training organisation that is providing the training. They charge a fee, and I will use some numbers that are completely plucked out of the air. The cost of the training may be, say, $4,000 for a Certificate I course. The entitlement is covered so the government pays the registered training organisation directly the total amount of money of $4,000, I think I said, and that is it. The student does not pay it. They just sign the forms to say they are studying that course, they enrol in the course and the RTO basically charges the government directly. There is no payment by the student which has to be recouped and there is no money handed over by an employer to the RTO. The money goes straight to the RTO.

Mr PISONI: I have a constituent who runs a franchise who engaged some Skills for All money. They received that money and organised a training organisation to train their staff and there was a surplus left for them for taking on the training. The franchisor, the head office, then got wind of the fact that there was a profit and insisted, although the franchise agreement remained silent on training, that they only use a training organisation that the franchisor had done a deal with to get a kickback from the training organisation.

In other words, the training organisation charged inflated fees to the employer who was the franchisee, and of those inflated fees returned a commission back to the franchisor. I am using this opportunity, minister. You may not be able to answer the question immediately, and I would ask that you perhaps bring back an answer as to whether that is, in fact, a legal process or whether that is in breach of terms and conditions in some manner.

It may not be part of your department's responsibility; however, I would be concerned that the employer is not receiving the benefit of training an employee in that instance, other than, obviously, the improved services. But the whole intention of the contestability element of Skills for All is to lift the bar in training so that people can in fact choose who they want to train and not be dictated by franchisors or others who they must engage for the training of their staff.

The Hon. T.R. KENYON: We will chase that up, and we may get in contact with you for more details at a later point. I just make some statements. Skills for All has not started and does not start until 1 July, and payments will not be made to employers: it will be direct to RTOs, so, it will avoid that. I make two points: first, minister Koutsantonis recently debated legislation about a small business commissioner. That would be, I think, something they would be able to take up with the small business commissioner because it is caught up in the franchise agreement. In fact, it is not caught up in the franchise agreement, yet the franchisor is still trying to enforce their will on the franchisee. I suspect that would be an excellent case for the small business commissioner.

Secondly, in this particular case the training organisation insisted upon by the franchisor would have to be an approved training organisation under Skills for All before they could receive any money. An interesting question is the way franchise agreements are tied up and the insistence on certain providers, and things like that. With the indulgence of the committee, we will probably have to come back with some more thinking on that. We will get back to you on that, but it is a good point.

Ms CHAPMAN: Minister, I was listening with interest to your understanding of what the cost structure is going to be. In particular, I think that you understand that, yes, there will be a cost. You are not quite sure what it is, but you do acknowledge that there may be some increased cost for the RTOs here in South Australia under this regime. Have you actually been provided with the modelling of costs, apart from the $1.4 million revenue that will be lost and a similar amount of costs that you have provided to us?

The Hon. T.R. KENYON: No, I have not seen that modelling, is the short answer. I just make the point that it would not matter whether they were under the current regime or moving to the federal regime; the increasing costs will be the same. I should not say 'exactly the same', but there will certainly be an increase and there would have been a similar increase under the current state regime or the federal regime that we are moving to because we, the state government, were moving towards full cost recovery, anyway, and that was being phased in over the next three years; and the federal government is also intending to phase it in over the next three years. Even if we retained a separate system there would still be an increase for South Australian providers, regardless.

Ms CHAPMAN: Notwithstanding your government's decision that you are going to move to a cost recovery on this, the fact is that there is a net cost to the government at present and that is not being paid for by the RTOs. There may be a meritorious argument that supports a cost recovery model, and that would depend on a number of things, including whether your costs as a government are reasonable to be imposed, whether the level of regulation is necessary, and whether the pull of RTOs under this model is going to be diminished as a result of any transfer of national bodies under the new national scheme.

All of those things will need to be considered. It seems to me that, if you have not seen any modelling, have you asked to have identified what the cost will be irrespective of whether you say under your new regime you would have asked them to pay in full anyway? What is it going to cost in two or three years' time at the end of this commonwealth agreement to pick up the tab? What is going to be the new cost relative to what it costs now for an RTO to register and to maintain an annual compliance?

The Hon. T.R. KENYON: One of the key things about moving to our Skills for All regime is that it is a much more market-driven system. As soon as you have a market-driven system, you are going to have a high number of unknowables in terms of who is going to be around and who is not to be around, who is going to decide to continue training and who is going to opt out of the training market. That is the whole point of a market-driven system—that there will be a lot more flexibility.

The benefit is that there will be a lot more flexibility, that training adapts to the needs of the people wishing to be trained much more quickly. The competition inherent in a market system should drive down the price of providing that training, increase the flexibility in the way in which the training is provided and make it far more convenient for students looking to understand that.

The cost recovery model is well understood in other markets. Fisheries is a notable example, but right across most of our primary industries and the mining industries they understand cost recovery of the regulation. In my experience, every time the reasonableness of the costings has been questioned the independent bodies that have audited regulatory authorities have concluded that they are not overcharging and that they are, in fact, charging a reasonable rate for the services being offered. That is our experience across government. It is certainly something I will be looking for as part of this.

Only until recently has it not been a problem because we have not had to regulate ourselves. It has always been the government that has provided technical and further education through TAFE. It is only recently, in the last 10 years or so, that private enterprises have entered into this market. It is not unreasonable that we would then charge people for the regulatory services that we provide. Interestingly, it should also be noted by the committee that that will also apply to TAFE. TAFE will also have to pay these regulatory fees because they will be competing in the market, and as much as possible we need to apply the same conditions to TAFE as we will to private providers.

There are some notable exceptions, and I have talked about them before. TAFE is burdened with some costs that other private providers are not. They have a community service obligation, so they need to provide training in some areas, regional areas particularly, where it may not be economical. Also, they tend to be the people who provide the highly capital intensive courses, such as mechanical engineering, where you need a workshop and things like that. Recognising that there are some burdens on TAFE, we have to adapt the system to reflect that, but as much as possible we want it to reflect the market conditions.

Because it is a market-driven system, and because there is so much flexibility in the system, it is not really possible for me to give a precise figure on the total cost of how much regulation we will charge, especially as that is now moving to the federal government. We made estimations on how much we thought it would cost to regulate that, and I have those numbers. They are more savings. If you give me a moment I will get those numbers for you. In financial year 2012-13 the cost of providing the regulatory services would be $1.461 million. In financial year 2012-13 we budgeted to recover in regulatory cost recovery $1.123 million for 2012-13, so slightly less. By 2013-14 we should be in sync and it would be costing us as much as we spend.

Having said that, it is hard to outline how individual companies will be affected. We do have some modelling which is new fees compared to old fees so commonwealth fees versus state, so ASQA fees (the federal body) versus state fees at current levels, but we have not done it down to the individual company level. I do not think it is possible to do that because there are such substantial changes under the Skills for All that are coming in that it is going to be very difficult to predict with any great accuracy at all how individual companies will be affected and whether they will remain in training or not.

The experience in Victoria has been that private RTOs have heavily increased their share of the market, which is to be expected because they are allowed into more areas of the market, and they have increased the amount of training that they have done. TAFE's experience was the same: while it lost market share because new entrants were coming into the market, it increased the amount of training that it did by about 16 per cent over that time. So everybody increased the amount of training that they did and they increased their revenues because more training was provided because more money was in the system to provide training. The ultimate goal, of course, is for us to provide more training. That is what we are trying to do: have more people trained and raise the level to which they are trained.

Ms CHAPMAN: I have no objection to that, minister. It is obviously important to be able to train, and retrain, not just our workforce but the community as a whole. That is an excellent objective. What you have identified is the very point I complained of, though, in my contribution. That is, providing us with what your cost of the current system is and what you expect to receive in revenue over a period of time which is ultimately to avoid the deficit if it stayed here in South Australia, what is the government's cost on this operation? Certainly we are going to be moving to a new set of rules and the expectation is that it would be at a higher cost, not just because of a cost recovery but there is actually going to be more regulation so of course it is going to be more expensive.

We need some assurance that the RTOs that are going to be affected by this legislation have got some capacity not only to pay it, but to compete. Whilst you mentioned that Victoria's experience is that the RTOs have actually enjoyed a growth in the market and a greater market share, of course they are under a different model to us. They are actually going on their own and they do have the opportunity and the obligation to go into the national system if they are across borders, but they also have the option in Victoria to stay on their own. So, they have the benefit of that. That gets into the model issue. But back to the money, as TAFE is now going to be a payer of these regulation fees, what is the estimated cost in, say, the first year of operation that here the state TAFEs will have to pay the federal regulator for their regulation?

The Hon. T.R. KENYON: I do not have that information on me, but we will take it on notice and get it to you. I again make the point that one of the criticisms of the Victorian system has been that the quality has not been there in some of the training providers. The federal government is planning to regulate more heavily, and that is a good thing in many ways. This system will rise and fall. The skills for all and market based training will rise and fall on its quality. In the rush to provide more training I do not think it is a good result if more training is provided but the standard is lower.

One of the key lessons out of Victoria is that the focus on the provision of training and the providers of that training are vitally important. The federal government seems to have learned that lesson. As long as the regulation is adequate and it ensures a high quality system, that is a reasonable cost to impose on providers of training who will benefit enormously from the new system because there will be more money in the system and they will be able to train more.

Clause passed.

Clause 5 passed.

Clause 6.

Ms CHAPMAN: I will refer to clause 6(1)(c), which is the issue of cancellation. Under this scheme all of our TAFE and private RTOs will be regulated by Canberra. Can the minister say that the rules by which TAFE will be judged, both for attainment of registration and for deregistration purposes, will be the same?

The Hon. T.R. KENYON: My advice is very clear that TAFE and private providers are currently held to the same standard now, and that will continue into the federal scheme.

Ms CHAPMAN: The other matter relates to whether there is any provision to protect the small RTOs that operate in South Australia, that is, those that operate within the South Australian borders, and their future, other than by application to the ACCC. Once it is all in the commonwealth arena potentially we could have a Coles Myer situation where the market share is dominated by the public sector, which of course is our TAFE industry—and no-one will want to see that adversely affected for obvious reasons—but equally the smaller RTOs may not be able to survive against the development of the national ones.

This market share issue is a very serious one and, once we go national in the regulation and in the capacity to be able to cancel the right to practise a business of this nature, we enter the real commercial world, and that is currently under the protection of the ACCC. Personally I see the ACCC as either under-resourced (maybe that is its excuse), or ineffective in a number of areas. I want some reassurance that the government has looked at the issue of how it will protect the little RTOs as distinct from the national operating ones.

The Hon. T.R. KENYON: The main tool for us to use to protect smaller RTOs, and TAFE as well, is the imposition of a minimum fee for a course. So, there will be a maximum fee and a minimum fee to provide exactly that protection, and that is under Skills for All, not under this bill. Under the Skills for All arrangement, there will be a minimum fee precisely to stop that sort of loss leading or the undercutting to create market share or to buy market share.

There is also going to be a lot more money available in the system. Small providers, who, inevitably, are more flexible and nimble, with deft management should be able to take advantage of changes much more quickly than large providers in terms of the training market and training demand. Notwithstanding their flexibility, the main defence for them is the minimum fee.

Clause passed.

Remaining clauses (7 to 10), schedule and title passed.

Bill reported without amendment.

Third Reading

The Hon. T.R. KENYON (Newland—Minister for Employment, Higher Education and Skills, Minister for Science and Information Economy, Minister for Recreation and Sport) (12:38): I move:

That this bill be now read a third time.

In moving the third reading, I would very much like to thank my departmental staff, who have been very patient with a new minister and helped me through this particular stage of the bill. I would like to thank the staff in my office as well. Again, trying to get your head around a bill in a very short space of time is not easy, and they have done that.

I would also like to point out the work that has gone into this, and into Skills for All, in particular. This morning, I was reflecting with some of my staff upon the huge changes we are making and the contribution made by the now Treasurer, and previous ministers for further education and training as well—the member for Napier and the current Minister for the Sustainability, Environment and Conservation, Paul Caica, the member for—

The DEPUTY SPEAKER: Colton.

The Hon. T.R. KENYON: —the member for Colton; thank you, Mr Deputy Speaker—because Skills for All is a substantial change and a national training system is a big thing. It was one of the most obvious changes that needed to be made, yet, as is often the case with obvious changes, they are not as easy to make as they should be. They required a large amount of national cooperation across the states, territories and the federal government, and that work was carried on under those ministers who preceded me.

It is important work and, while I have been pushing this bill through today and in the last few weeks, it rests, as with all of our work, on the shoulders of others. If it were not for them, it would not be happening. So, I acknowledge their contribution to this reform and congratulate them on their work. I thank members of the house for their contribution in this debate. As I said earlier, the productivity gains through education and training are so critical to this state in particular, and the interest in it shown by members of the parliament is important and gratifying. With those words, I commend the bill to the house.

Bill read a third time and passed.

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