The imposition of Muldoonist-style price controls on tertiary institutions - in other words, fee maxima - is wrong and will harm the quality of education. But to be fair, the system is an improvement over the existing fee freeze because it allows for increased private contributions - the only way the sector will ever get enough funding to meet the challenges and realities of tertiary education in the 21st century.

Student representatives' critiques of higher fees are misplaced. They focus on the price of tertiary education alone, rather than the value obtained from that education. Students won't get value from second-rate academics and under-resourced institutions.

The question for politicians and voters is who should pay - those benefiting directly from higher education or taxpayers at large? There are no other possibilities.

Ms Fitzsimons argues that the Government has broken its promise to keep course costs affordable. In saying this, she plays down the significant contribution that taxpayers already make to just that. For example:

* This financial year Government spending on tertiary education (excluding the $252 million spent on industry training and other tertiary expenses) is expected to be $2.5 billion - more than $6.8 million a day.

* The amount spent on tertiary education for each equivalent full-time student (a measure of enrolments) is expected to be more than $10,500 a year. Taxpayers' contribution is estimated to be over 70 per cent of the direct costs of tertiary education.

* Relative to the size of our economy (as measured by gross domestic product), New Zealand spends more on tertiary education than most other OECD countries.

* In the Budget alone, the Government announced new spending initiatives on the student component of tertiary funding of more than $420 million over four years. This dwarfs the $55 million in new spending going on early-childhood education initiatives - the big winner, according to Dr Cullen's pre-Budget hype.

And there are promises of more to come, with Associate Education Minister Steve Maharey saying the Government will, later this term, enhance student loans and allowances.

Such spending has a cost. More money going into tertiary education means there is less available for hip replacements, police, helping children to get a better start in life or, indeed, allowing taxpayers to keep more of the money they earn.

The Government's goal of increasing access is laudable but price controls, accompanied by general funding increases and more concessionary loans and allowances, are a second-best means of achieving this.

They will cost a bundle but do little to improve opportunity for traditionally disadvantaged groups, such as Maori or those on low incomes. Targeted initiatives at the tertiary and earlier levels of education would do more.

Requiring students to pay a reasonable proportion of the costs of tertiary education is justified, given the many benefits that accrue from tertiary training - including higher lifetime earnings.

Mr Maharey makes the point that "throughout the 1990s, fees and course costs rose relentlessly against the backdrop of Government funding cuts" but those increases should be kept in context. On average, tertiary fees rose by less than $300 a year during the period in which tertiary institutions had the freedom to set fees. Institutions proved themselves to be responsible in fee-setting.

Rather than restraining fees through regulation, the Government should ensure that tertiary education is competitive, that its institutions are well governed and that policy generally encourages the best use of resources in the sector.

Mr Maharey has taken some useful steps in this regard, with the introduction of the performance-based research funding scheme, various initiatives aimed at increasing the amount of information available to students, and addressing the weak performance of some tertiary institutions. The review of tertiary institution governance provides further scope for ensuring that it is as sharp as it should be.

Students, staff, institutions and the Government all have much to gain from a less regulated tertiary education sector. Constraints on fee-setting will, over time, affect tertiary institutions' ability to attract and retain high-performing teaching and research staff.

In particular, it will make us increasingly uncompetitive against countries such as Australia and Britain, which are wealthier and are introducing greater freedom for institutions.

For more information, contact:

Norman LaRocque
Policy Adviser
Ph: 04 499 0790
Email: nlarocque@nzbr.org.nz

Roger Kerr
Executive Director
Ph: 04 499 0790
Email: rkerr@nzbr.org.nz

David Young
Communications Manager
Ph: 04 499 0790
Email: dyoung@nzbr.org.nz

Web: www.nzbr.org.nz