The Government’s fees-free policy reset is at risk of following its predecessor in failing to incentivise tertiary study and only benefiting the more advantaged.
The warning is included in a Ministry of Education-led analysis, which found the “deadweight” policy to be so poor that it recommended axing it and spending the money elsewhere.
But keeping it in amended form – for the final year of study instead of the first year – was part of both the National-Act and National-NZ First coalition agreements.
This could lead to increased inequity with Māori and Pacific students missing out, the analysis said, as they are less likely to complete their studies at bachelor’s degree level or higher.
The policy was introduced in 2018 after being a key part of Labour’s 2017 election campaign, applying to the first year of tertiary study and progressively rolling it out to cover three years (which never eventuated).
It provided up to $12,000 in tuition fee payments for the first year of provider-based study, or the first two years of work-based learning.
It was billed as improving equity and opening the doors to higher learning for disadvantaged people for whom they would otherwise be closed.
But the opposite happened, as various Herald analyses have shown, in the sense that the scheme’s beneficiaries were increasingly students from wealthier households.
The Labour-led Government also expected – and budgeted for – more people to enter tertiary education, which failed to materialise.
“There was no noticeable effect on general participation in tertiary study,” the ministry-led analysis, which looked at the fees-free data from 2018 to 2023, said.
“Overall participation in tertiary education steadily declined between 2009 and 2020 in line with improving economic conditions in New Zealand. The introduction of first-year Fees Free in 2018 did not noticeably change this.”
Nor did the policy lead to an expected increase in “first-in-family” enrolments.
“Overall, learner demographics did not significantly change as a result of first-year Fees Free. Over the years 2017 to 2022, European, Māori, Pacific and Asian participation rates stayed relatively steady.”
The failure to shift the dial as intended was so evident that, in 2020, Labour shifted the policy’s purpose to reducing student debt levels.
This was self-fulfilling – a blanket policy, paid following enrolment – and, the analysis said, was the only one out of four objectives that was achieved.
The failed objectives were: to increase participation in tertiary study, expand access by reducing financial barriers and support lifelong learning.
“First-year Fees Free was limited to learners with little to no prior study, limiting life-long learning support,” the analysis said.
It described the scheme as a lot of money for little behavioural change, or a “high deadweight cost, as these policies cover the fees cost for learners who would otherwise be able to finance the fees themselves”.
From this year, the Government has changed the scheme so it applies to the final year of study, with payment following the completion of studies.
The policy has three objectives, the analysis said:
Like its predecessor, as the reformed policy is not expected to result in behaviour change, officials said the first objective was likely to fail.
“Particularly for degree-level study, once a learner reaches their ‘final year’, they are already more likely to complete than those first entering study,” the analysis said.
“The knowledge that they will receive a refund of fees for their final year is unlikely to change that outcome.”
The second goal was essentially meaningless. “The policy by definition rewards completion of qualifications. This makes the second objective a self-fulfilling outcome.”
The third would likely succeed, thereby at least helping the Government’s books, the trade-off being an estimated $230 million a year in student debt (and more debt repayments than would otherwise occur).
“Overall, we do not expect a net benefit with final-year over first-year Fees Free, beyond moderate cost savings,” the analysis said.
Those would amount to an expected $268m in 2025/26, a higher-than-normal return due to students being unable to double-dip with free tuition for their first and final years.
Expected annual savings drop to $139m for subsequent years.
The scheme could be seen as “inherently inequitable” when it comes to bachelor’s degree level or higher, given that all taxpayers pay for it but a certain demographic is more likely to benefit from it.
“Investigating learners in programmes at bachelor’s degree level and above, the completion rates demonstrate a noticeable gap [62% average, 50% for Māori, 48% for Pasifika],” the analysis said.
The completion rates across all levels of eligible study are more even.
“Other factors may also have an effect on completion rates, such as mental health and lower income.”
Officials told ministers it would be better to axe Fees Free altogether.
“Given the pressures facing the Crown’s finances (including Vote Tertiary Education) and the relatively low effectiveness of fees-free policies in general, we also provided ministers with the option of removing Fees Free altogether.
“This was our preferred option, from both a cost-savings and an effectiveness perspective. The funding could then have been reallocated elsewhere.”
Asked for comment, Minister for Universities Dr Shane Reti gave no indication it might be scrapped if the policy made no impression on completion rates.
Reti repeated its objectives, including better value for both students and taxpayers, and lauded the benefits of a higher education.
“The Government also continues to provide a strong system of student loans, allowances and targeted support for those who need help with living or study costs.”
While Fees Free might appear to have a sound rationale as a first-year policy (to improve access and equity) or final-year policy (to incentivise completing studies), officials said there was little evidence to support this.
“Evidence suggests that fees are not a significant barrier to learner participation in tertiary education. Indeed, evidence suggests that fees and fees-free policies have no real effect on learner behaviour.”
This was not exclusive to richer students, the analysis said.
“New Zealand has a well-developed learner support system, which provides upfront support for learners who may not be able to afford tertiary education. Thus, incentivising participation in tertiary education or completion of qualifications using fees as a lever is unlikely to produce significant results.”
There was therefore “no clear reason” for the policy, in this form or the previous one.
“A fees-free policy does not specifically address the main barriers to participation, or effectively steer the system towards meeting learner and labour market needs.”
There were just over 48,000 new fees-free learners in 2023, comparable to the numbers in the scheme’s first three years, but higher than in 2021 and 2022.
The increase was mostly driven by workplace-based learners coming back to fees-free study, following the end of the Targeted Training and Apprenticeship Fund.
First-time fees-free enrolments at bachelors degree level dropped.
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Derek Cheng is a senior journalist who started at the Herald in 2004. He has worked several stints in the press gallery team and is a former deputy political editor.