We look at Minister Hipkins ITP sector restructuring proposal and air our doubts on how successful it will be in delivering better outcomes and lowering costs.

On 13 February the Education Minister, Chris Hipkins, released a Cabinet Paper discussing his plans on how to restructure the Vocational Education and Training (VET) sector in New Zealand.

The main issues cited are that the Institutes of Technology and Polytechnics (ITPs) are not financially stable with current student numbers, and employers are not getting the skills they need.

Minister Hipkins’ three part proposal, in a nutshell, is to:

  1. Build a linking body between each industry and the Tertiary Education Commission (TEC) to set standards, define programmes and plan for skills needs. These industry bodies would   be made by existing industry bodies applying to the Ministry of Education for recognition.
  2. Amalgamate the 16 ITPs into a single ITP called New Zealand Institute of Skills & Technology (NZIST). The proposed benefit of this is to minimise duplicated effort in administration to help solve funding issues. Local campuses would be responsible for delivering nationally designed programmes, but delivering them in an appropriate way for their local area.
  3. A new funding system to support more work-integrated learning, resembling apprenticeships.

The benefits of these proposals could be: lower overall administration costs, if the central bureaucracy is designed well; national standardisation of ITP education (which may also be a dis-benefit as explained below); finally, the Minister cites removing silos and enhancing collaboration as an intended benefit.

It is not clear that these proposals address the stated concerns, nor whether they will deliver the benefits claimed. New Zealand has a long history of amalgamation plans as a means to reduce administrative costs, with varying degrees of success.  We also have a long history of proposals to increase collaboration in various sectors and across ministries that have, bluntly, failed to deliver.

The critical element, from our perspective, is the funding model.

At different times in the business cycle students will have different demand for training at VETs. We might expect that when the economy is depressed students might seek training to try to make themselves more attractive to employers. Whereas at the last stages of a boom before the labour market starts to adjust (as presently) students might put off training and seek employment with their current skills. The current funding model exacerbates the financial effects of this cyclical demand. Amalgamating the ITPs into a single national entity does not fundamentally change the funding model. Nor does having the functions of the Industry Training Organisations subsumed into the TEC and the new national polytechnic.

Additionally the proposal sets out a plan to centralise the decision making of the ITP sector. Even though it contains a mechanism for ITPs making some decisions at a regional level, the concern is that this is not enough. Skills shortages are a localised phenomenon and require local solutions driven by people with local knowledge.

For example, how will TEC (or the NZIST) be better than the ITOs at purchasing vocational education?  And how will the NZIST and its branches be better than the ITOs in supporting work-based training?

The Minister also cites the concern that employers haven’t been getting the skills they need. The proposed solution to this is to have industry groups work directly with the TEC to influence programme content and standards.

In the ideal world, employers would directly purchase training for staff as and when they need.  However, such an option assumes foresight and strategic awareness from employers.  Whether TEC and/or industry groups embody such characteristics remains moot. 

The proposed structure for industry training also seems at odds with the stated need to respond to the “future of work”. If incumbent industry groups and leaders are the ones influencing programme content and standards, there may be higher barriers to entry for new entrants to these industries. This is because the incumbents can design the standards to benefit their business model over that of a potential entrant’s. This is a force against innovation in the industry.

Finally, is removing all competition between ITPs really a benefit? Where is the incentive to innovate, improve quality and/or respond to consumer, industry, business, and community demands?  This facet should not (hopefully) be overlooked in the final design of the proposed structure.

As the Cabinet paper mentions, the issue is not the teachers or lack of effort, it is the structure.  To which we would add: the funding model and the behaviour it supports.