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make its way to training, rather than being siphoned off to non-productive activities before it is allocated to support actual delivery. This is a very welcome move which could be pursued in other jurisdictions to good effect.

public providers have a greater understanding of the benefits of competitive pressures and the need to demonstrate understanding of ‘value’ from an

employer’s perspective in their contribution to the apprenticeship and traineeship system.29

This view was shared by many public providers.

While [we] believe that the maintenance of adequate public provision through TAFE Institutes is essential to the health of every community, we also acknowledge that our Institutes are extremely competitive in the User Choice system. Contrary to suggestions that TAFE Institutes are unable or unwilling to compete with private providers, it is significant that not one of the TAFE representatives who appeared before the House of Representatives Standing Committee on Employment,

Education and Training attempted to argue that TAFE should not have to compete against other providers.30

Employers have clearly appreciated the choice now available to them.

My organisation supports the opening up of the training market to competition.

Prior to the introduction of competition employers had to send their apprentices to some TAFEs with poor teachers, facilities and very inflexible timetables for the delivery of training programs.

My organisation uses four different RTOs, three TAFEs and one Private Provider.

[My organisation] benchmarks these RTOs against each other and is very happy with their service. [My organisation] has also dispensed with the services of non- performing TAFEs. [My organisation] opposes any suggestion to the freezing out of quality Private Providers from the Training System.31

Despite its still relatively immature stage of development, the market for apprenticeship and traineeship training appears fairly healthy, as indicated by:

Ÿ a growing number of employers willing to employ trainees and also, though to a lesser extent, apprentices;

Ÿ a growing number of people, including young people, able to access employment- based training;

Ÿ a growing number of new industries engaging with the apprenticeship and traineeship system for the first time;

Ÿ greater access to formal training for those industries which have found it difficult to gain access to government training funds in the past because of historical allocations to older industries;

Ÿ a large and diverse pool of RTOs competing vigorously in the market; and Ÿ a broader range of more flexible training programs and services available in the

marketplace.

Some submissions pointed to skills shortages as an indicator of failure of the User Choice system. Skills shortages are, rightly, a matter of serious concern to industry and government alike, requiring public policy responses to minimise them and to overcome them when they arise. However, skills shortages have been a feature of the

apprenticeship system from time immemorial, long before the introduction of User Choice. They are a reflection of the cyclical nature of many industries and the career choices of individuals. While government incentives can and should be directed to avoiding or overcoming them, their existence cannot be attributed to the User Choice system of funding.

The current User Choice freeze

Upon its election in 1999, the Victorian government placed a freeze on both User Choice funding and other contestable funding for a minimum period of 12 months, to allow time to assess the impact of competition on the quality of training and consider the desirability of further competition in the training market. One of the concerns behind this decision was that apprentices and trainees should receive training which is not diminished by intense price competition.

It has been the policy position of governments to fund apprenticeship and traineeship growth on an open-ended basis. As a result of significant growth in demand,

government funding for apprenticeship and traineeship training in Victoria has risen from $62.5m in 1996 to $151.1 million in 1999. In 1996 all Victorian government funding for apprentice and trainee training ($62.5m) went to TAFE Institutes. With the introduction of User Choice, combined with the introduction of the National Training Framework, many private providers and ACE providers were able to access government funding for apprenticeship and traineeship training.

As the graph below indicates, most enrolment growth since the introduction of User Choice has been with non-TAFE Institute providers. TAFE Institute enrolments have declined marginally from 37,607 to 37,001 over the two-year period 1998–1999, while non-TAFE Institute enrolments have increased from 7,717 to 25, 752 over the same period.

The share of the government-funded apprenticeship and traineeship training held by private providers and ACE providers has increased from a little under 20% in 1998 to around 40% in 1999, as shown in the following graph.

Trainee and Apprentice Enrolments, Victoria, 1998 and 1999

0 10,000 20,000 30,000 40,000

TAFE Institutes Non-TAFE Institutes

Number

1998 1999

For Victorian TAFE Institutes as a whole, apprentice and trainee enrolments comprise a small proportion (around 14%) of all government-funded enrolments, although this pattern does vary from Institute to Institute depending on their profiles. By contrast, as the graph below shows, non- TAFE Institute providers (principally private providers) are increasingly reliant on government-funded training for apprentices and trainees.

From the perspective of this Review and the evidence available to it, the freeze on User Choice has had mixed effects. On the positive side, it has slowed uncontrolled growth so as to provide a clear space for re-assessment of the competition–quality nexus and other factors which affect quality training. It has sent a strong signal to the market that quality now matters.

The freeze appears to have also had some negative impacts on the market.

Ÿ It has frozen out new and potentially excellent providers seeking to enter the market.

Ÿ It has had significant negative impacts on the individual business plans of private RTOs, especially those who had entered the market shortly before the freeze.

Ÿ It has limited choice for those employers dissatisfied with TAFE Institute

% Market Share of Trainee and Apprentice Enrolments Victoria, 1998 and 1999

0%

20%

40%

60%

80%

100%

1998 1999

Market share

Non-TAFE TAFE Institutes

Apprentice and Trainee Enrolments as % of total Enrolments, Victoria, 1998 and 1999

0.0 5.0 10.0 15.0 20.0

TAFE Institutes Non-TAFE

% 1998

1999

One submission claimed that in a couple of instances, apprentices/trainees have had to travel considerable distances to a provider when local providers, who were previously able to deliver the training, reached their cap.

Submissions and consultations around this Review have revealed widely differing views on the impact of the freeze. At one end, the view is that the freeze should remain as a means of restricting the number of private providers operating in the training market. At the other end are arguments that the freeze should be lifted forthwith.

The views of private providers are well reflected in the Australian Council for Private Education and Training’s submission to the Review.

The Victorian Government has a choice — try to recreate the past or work with the political and market pressures to develop a system which meets the future needs of apprentices, trainees and employers. Ultimately the Victorian Government, by its actions rather than its words, will demonstrate in whose interests the

apprenticeship and traineeship system exists.32

The Hon. Lynne Kosky, Minister for Post Compulsory Education, Training and Employment has given a reference to the State Training Board of Victoria to consider and report on the extent of contestability in the VET market. The extent of User Choice in this wider context of contestability will be one of its considerations.