there’s a push for a Higher Education Future Fund, but some unis ‘hate’ it

The federal government has released the final report on a Universities Accord. Taking more than a year to prepare, it is billed as a “blueprint” for reform for the next decade and beyond. It contains 47 recommendations across student fees, wellbeing, funding, teaching, research and university governance. You can find the rest of our accord coverage here.

One of the most contentious recommendations so far from the Universities Accord final report is for a “Higher Education Future Fund”.

The fund would be established with money from both the federal government and universities, ultimately reaching A$10 billion in assets. The idea is the government would match funding from universities, which would provide money from their own “untied” revenue.

This means universities could not use any of the non-government funding they have gained that they currently spend on research, buildings and other institutional priorities.

So would a fund work and is it a good idea?

Why have a future fund?

The report says the federal government should set a target to more than double the number of government-supported university students in Australia by 2050. The future fund would help support this growth, by providing “built and digital infrastructure, including student housing”. It could also include spaces such as libraries and things like cyber-security.

The fund would be managed by the Board of Guardians of Australia’s Future Fund, Australia’s sovereign wealth fund. This board also manages the Medical Research Future Fund, the Future Drought Fund and four other funds.

Any grants paid by the higher education fund would be approved by an independent board.

How would it work?

The accord final report suggests wealthier universities would pay more as the fund would “recognise universities’ capacity to pay”. The report contains little detail on how this would be achieved, but it seems likely the fund would redistribute resources from universities with more “untied non-government revenue” (from sources such as international student fees and business ventures) to those with less.

This appears to be a development of the proposed levy on international student fee income floated in the accord interim report last year.

This was criticised by higher education experts as being “unhelpful and unworkable”. Wealthier universities also opposed the idea.

So the review panel may not be surprised to see the future fund is being similarly criticised.

As the Group of Eight chair Mark Scott (who is also chair of The Conversation’s board) noted in a statement:

This is extremely poor public policy, and taxing the very system the report identified as underfunded is not a solution.

Scott added it could also undermine Australia’s “successes in international education and damage our global reputation”.

But not all universities think alike. According to The Australian, Western Sydney University Vice-Chancellor Barney Glover (who was also a member of the accord review panel) thinks the fund is “important future proofing” for the sector, but there is work to do on the details.

Read more: What would a levy on international student fees mean for Australian universities?

What about the impact on research funding?

Asking universities to surrender some of their own funds for a communal fund seems to be inconsistent with other areas of the report.

The report calls for increased targets for how much Australia spends on research and development as a proportion of GDP and for a “pathway” to fund the “full economic cost of research”. At the moment, Australia’s university research is significantly subsidised by international student fees.

If funds were taken away from individual universities for a future fund, this would likely take funds away from research. Universities would gain more direct funding for research, but would loose some of their international student fee income which they currently reallocate to research.

Monash University (which is also a member of the Group of Eight) said the fund would “blunt” the impact of its research. As Vice-Chancellor Sharon Pickering said:

[It will] diminish Monash’s ability to deliver on the Accord’s objectives and aspirations.

The fund’s proposed model stands in contrast to that of the Australian Government Future Fund, which was set up in 2006 to soak up big federal government surpluses generated from the mining boom. In other words, it was funded fully by the government.

Read more: Nobel laureate Brian Schmidt's big ideas for how Australia funds and uses research

But a fund has some merit

Yet there are reasons to support a future fund for higher education. It would be prudent to use some of the revenue from the current boom in international students to generate revenue long into the future.

Collective action from the sector to set itself up for the future could also be more powerful and better coordinated than separate actions of individual institutions. And it is progressive to redistribute resources from those with more to those with less.

We also know affordable housing is a crucial issue for many Australians, and students are among those with the fewest resources. The huge numbers of international students has also increased pressure on student housing.

While Australian universities have not been expected to provide student housing, we already have some structures set up via university colleges and student residences as well as housing services that seek to match good landlords with responsible students.

So it is not unreasonable to expect universities to be part of the solution of student accommodation pressures.

However, history suggests it will be politically difficult. In 1988, the federal government levied universities (or “clawed back” funds) to establish the Australian Research Council.

This was the subject of fraught and prolonged negotiations between universities and the then education minister John Dawkins. In the end, the clawback was largely implemented as planned. But the spread of research funding across universities remains highly disputed.

Read more: Universities Accord: 'Gonski-style' funding is on the table for higher education. This will see some unis gain more than others

What now?

A future fund is not going to be set up anytime soon. The review panel advises it should not be established until after the full implementation of a recommended new needs-based funding model for universities.

This itself has many moving parts and is likely to involve extensive and intensive discussions and negotiations.

So there is plenty of scope for universities to offset what they consider to be disadvantages with other parts of the proposed accord.

In the meantime, the government is considering the report. When asked about the future fund by The Conversation’s Michelle Grattan, Education Minister Jason noted some universities “hate” the idea and others “like it”, before adding, “I’ve got an open mind”.