Universities shocked as government freezes funding

A new Labour-led government has shocked universities in New Zealand by freezing their funding in its first Budget.

The decision appears to be a direct trade-off for the hundreds-of-millions of dollars committed to waiving students' fees for their first year of tertiary study, a policy the government rushed into place soon after taking power late last year.

The subsidy freeze has come as a surprise for universities and other tertiary institutions, which were hoping for some relief after nine years in which the previous National Party-led government drip-fed funding to the sector, increasing subsidies for certain subjects and levels of study, but freezing others altogether.

The chairperson of Universities New Zealand and vice-chancellor of the University of Auckland, Stuart McCutcheon, said the new government had failed to live up to its rhetoric about creating a future-focused economy and its decision would harm universities financially.

“It’s going to have a major impact on the universities. A rough estimate would be it will cost us somewhere in the order of NZ$18-36 million [US$12-25 million] in spending power next year alone," McCutcheon said.

"What it reflects is a continuation of a trend that we’ve seen for the past 20 or so years in which governments on both sides of the house have put most of their effort into lowering the cost of university education rather than raising quality and that’s really very disappointing."

McCutcheon said the government set limits on universities' annual fee rises, so they were not able to make up for the lack of government funding by increasing student fees.

Instead they would have to make cuts to their courses and staffing.

"We’ll continue to see the universities having to reshape themselves to cut costs wherever they can and I think we will also continue to see the trend of recent years in which New Zealand universities are tending to go down in the international rankings because other governments see the importance of quality universities and choose to invest in them," McCutcheon said.

The president of the Tertiary Education Union, Dr Sandra Grey, said the failure to increase tertiary institutions' subsidies next year undermined the government's plans to build the foundations for the future.

“Labour is at risk of going into the next election having fulfilled its commitment to provide one year of free tertiary education, which we welcome, but little else that will ensure these students actually have places to study in their local communities," Grey said.

Budget documents show the government's zero-fee policy will cost about NZ$355 million (US$245 million) in the 2018-19 financial year and its cost will grow further as it is eventually rolled out to cover more years of study.

Most New Zealand students finance their studies by borrowing for fees and living costs from the government's Student Loan Scheme, and some also have access to student allowances that are means-tested against their parents' incomes.

Education Minister Chris Hipkins said the zero-fee policy had already reduced student borrowing from the loan scheme by about NZ$151 million since it was introduced in January this year – just ahead of the start of the academic year for New Zealand tertiary institutions.

The president of the New Zealand Union of Students' Associations, Jonathan Gee, said the decreased borrowing was good news, but the union also wanted to see the government restore access to student allowances for postgraduate students, and access to student loans for people who had been studying for more than seven years.

Gee said the government also needed to address under-funding of tertiary institutions.