Government funding cuts: public statement from Dr Michael Spence

26 April 2013

A public statement from Dr Michael Spence, Vice-Chancellor and Principal, University of Sydney:

As you may be aware, the federal government recently announced plans to cut around $2.5 billion from universities and student support to help fund planned reforms to the school system. These latest cuts come on top of a $1 billion cut to research programs announced late last year.

If these new saving measures are passed by the Parliament, we believe they will have a serious impact on the sector and this University in particular. Our initial estimates are that our budget forecasts for the next two years, 2014 and 2015, could be cut by around $45 million. Taking into account other cuts forecast in the government's mid-year economic statement, the University may be as much as $79 million worse off.

The proposed cuts involve a 2 percent 'efficiency dividend' to be imposed on university funding in 2014 and 1.25 percent in 2015, the introduction for the first time of a cap on self-education expenses, the conversion of start-up scholarships for disadvantaged students into loans for new students and the abolition of the discount for paying HECS loans upfront.

Although the federal government has lifted its total levels of funding for the sector since 2007, the growth has mostly been linked to the thousands of extra students now in the system as a result of the lifting of the cap on undergraduate enrolments. Detailed analysis undertaken by the Group of Eight in 2012 found that real levels of core funding per student has actually declined in real terms.

Applying an efficiency dividend will further reduce the value of funding and is unlikely to address the government's long-term budget challenges. It could potentially see universities lowering entry standards to enrol even more Commonwealth-supported students to offset the impact of these cuts. This would have serious implications on the overall quality of teaching and research.

The impact of the efficiency dividend will be higher for research-intensive universities such as Sydney which offer many high-cost disciplines such as medicine, veterinary science, agriculture and dentistry. Although the Commonwealth does make a substantial contribution to the cost of these courses, these disciplines are chronically underfunded and may now face further hardships.

The introduction of a $2000 per annum cap on self-education expenses could seriously harm student demand for our domestic fee-paying courses. We had projected revenue of around $100 million from these programs in 2014. A 10 percent drop in enrolments would reduce our revenues by $23 million in 2014 and 2015.

The conversion of student start-up scholarships to loans represents perhaps the most significant shift in student income support policy since the introduction of the Youth Allowance in 1997. It will add to the level of indebtedness faced by students from low-SES backgrounds upon graduation, and may deter some from pursuing university studies altogether.

We are working hard to convince both the Australian Government and the Opposition of the seriousness of our concerns. At the same time, Universities Australia has launched a campaign for increased investment in universities, which I encourage you to read and support.

Media enquiries: Andrew Potter, 02 9351 4138, 0414 998 521