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The VET FEE-HELP debacle: Helping its victims and lessons for administration

The VET FEE-HELP debacle: Helping its victims and lessons for administration

7 December 2016, by Mark Warburton

The 2012 expansion of VET FEE-HELP is not the first large Government policy initiative which has gone wrong during implementation. It is one where it is possible to correct some of the adverse consequences which have resulted. There will be an inappropriate loss of Government revenue and unjust outcomes for individuals if adequate efforts are not made to correct what has occurred. To date, the response by DET appears inadequate, based on the evidence it has given to Senators who have inquired into the matter. This paper attempts to clarify the issues which are involved and to point a way forward which might result in a more acceptable outcome.

In 2012, the Australian Government accepted greater responsibility for funding VET diplomas and advanced diplomas through the VET FEE-HELP scheme in return for the States and Territories extending its subsidies to private VET providers and providing an entitlement to a first post school qualification to a minimum of the VET Certificate III level. By 2015, there were nearly 260 providers whose students could receive VET FEE-HELP. A small proportion of these providers developed aggressive expansion plans. From 2014 to 2015, 15 private providers doubled in size and increased their number of full time equivalent students by over 600 in each institution.

From mid-2014 signs of the abuse of VET FEE-HELP were emerging. Complaints started in 2014 and continued to escalate. By the end of the third quarter of 2016, the Department of Education and Training (DET) had received 3,659 complaints. Despite it being apparent by the beginning of 2015 that some providers were engaging in unacceptable practices to sign-up students, DET appears not to have fully used its powers to protect Government revenue, or the people being misled and signed up for debts to be repaid to the Commonwealth.

It is not possible to know precisely how many people were affected by the ‘unacceptable conduct’ of VET providers. A significant level of Government expenditure appears to be involved. DET has taken action in relation to around 1,500 debts, but evidence presented to the Senate indicates that a larger number of people have been involved. If about 20,000 students were affected in 2015, then around $380 million in fees may have been involved for enrolments which were not bona fide. If it is 50,000 students, then the amount could approach $1 billion in 2015. Most of these fees would have been paid through VET FEE-HELP.

DET should be held accountable for resolving the legacy issues from the abuse of VET FEE-HELP and steps should be taken to ensure this happens expeditiously. It is now two years since the problems associated with VET FEE-HELP became widely known. Knowledge of how they are being managed is only slowly emerging.

Senators have been questioning DET about what can be done to help people who have been adversely affected. DET has not clearly outlined the options which are available to it, instead providing piecemeal information on one of three different lines of activity:

  • The potential for ‘re-crediting’ of debts by providers: Re-crediting of debt is precisely defined in VET FEE-HELP legislation and cannot occur in relation to events whose impact occurs prior to a student’s debt being incurred. It is unhelpful to imply that this mechanism can assist adversely affected people.
  • The actions being taken by the ACCC: These actions are against providers who have allegedly beached the Australian Consumer Law. The ACCC directs its resources to matters that provide the greatest overall benefit for competition and consumers. It cannot pursue all complaints. Its actions will not assist many people who have been adversely affected by the unacceptable practices of VET providers.
  • DET’s own investigations into specific providers: DET has indicated that it is investigating 28 providers but has provided little information about the purpose of these investigations. DET has indicated that it does not comment on its investigations.

The ACCC’s actions are not a substitute for the actions that need to be taken by DET. The ACCC is seeking to prove that some providers engaged in misleading representations or unconscionable conduct. This is not the same test as whether students were bona fide and entitled to VET FEE-HELP.

DET does not appear to have an active and coherent strategy to recover the large amount of taxpayer funds it has outlaid to VET providers for enrolments that were not bona fide or to assist people who have been misused or misled by VET providers seeking to obtain documentation supporting those alleged enrolments. This should be of major concern to Senators and the broader public.

In my view, DET should be doing the following on a case by case basis.

  • It should be thoroughly investigating those VET providers which have been growing at high rates, particularly where this has been off a very low base, as well as those that have been the subject of multiple complaints. It should be actively investigating whether those providers were systematically putting in place ‘sham’ enrolments. There is an accepted legal definition of a sham arrangement and there are established precedents for disregarding sham arrangements in determining entitlement to Commonwealth benefits.
  • It should be disregarding enrolment documentation where there is good evidence that enrolments were not bona fide. In those cases, it should decide that people were not entitled to VET FEE-HELP, remove the debts of affected people and raise debts against the relevant VET providers to recover Government revenue.
  • It should be pursuing cases of apparent fraud, where there is sufficient evidence.

DET should not sit back and wait for ACCC action to be successful. The ‘entitlement’ nature of VET FEE-HELP puts Government officials in a strong position to make proper and principled decisions about student entitlements, based on evidence about the substance of relationships. It does not have to give primacy to a signed enrolment form in the light of substantive evidence that the enrolment was not bona fide.

Inadequate action by Government officials has been more responsible for the VET FEE-HELP debacle than inadequate legislative provisions for the regulation of VET providers. That should not continue in dealing with the VET FEE-HELP legacy issues. DET can and should be actively seeking the recovery of Government revenue associated with ‘sham’ enrolments and the debts of many adversely affected people may be removed in the process.

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Mark Warburton is Honorary Senior Fellow at the LH Martin Institute.

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