The government’s proposed changes to higher education funding will cut $2 billion a year from university research budgets, according to sector analysis.

An unpublished issues brief, cited by the University of Sydney in its submission to the parliamentary inquiry into higher education changes, estimates the reforms will see “as much as ~$2 billion annually cut from core university research funding”. The cuts come as the university sector has already lost some $5 billion from international students this year alone, due to the Covid-19 pandemic.

The University of New South Wales similarly notes in its submission to the inquiry: “Overall, this package removes more than $2 billion from core university funding at the same time as other countries are increasing public funding of research in response to the Covid-19 crisis.”

This week, a federal government plan to bring forward $700 million in university research funding was leaked to the media and has been independently confirmed by The Saturday Paper. According to one university vice-chancellor, however, the move is only a “short-term tactical fix”. This is not new funding – it has simply been taken from money announced for future years.

While the $700 million may help to win support for the contentious higher education reforms, it will cover less than half the annual research funding shortfall that will emerge from major changes created by the Job-Ready Graduates Bill.

What the bill does, in effect, is break a historical link between teaching and research at Australian universities. It will see Commonwealth subsidies fund only the cost of universities delivering instruction in a course, a so-called realignment. The bill will also increase student fees for some courses, such as the arts and humanities, while lowering them in others. It will create 100,000 new student places, mostly at regional universities.

Under the new scheme, the accepted practice of universities taking 40 per cent of teaching time and dedicating it to research activity will no longer be viable, according to these institutions. This is because the government calculation of the cost of course delivery does not account for the allocation of research time in staff costs.

But after years of skirmishes and thwarted attempts to overhaul higher education, the Coalition has the academy right where it wants it: ready to bargain for its very existence.

Nobel prize-winning scientist Professor Peter Doherty told The Saturday Paper that the government’s proposed changes will only serve to “diminish” academic institutions.

“If we want people from outside of Australia to look at us as an advanced nation, then we need to fund universities,” Doherty says. “And if we don’t, we’ll look more like a bunch of hicks who dig stuff out of the ground and do nothing else.”

He says that while medical research is a strong sector outside the academy, almost no other field is. And even medical research, he qualifies, relies on university graduates to perform the work of innovation and advancement.

Doherty points to the example of CSL Limited, the former Commonwealth Serum Laboratories, established in 1916 by the Australian government and privatised in the early 1990s.

“CSL can make two variants of the Covid-19 vaccine,” Doherty says. “It could easily have been bought out and moved offshore and we would have no capacity as a nation to manufacture these drugs. Why is it still here? Because they draw off the university talent.”

Crucial research is happening not only in the sciences, however. Following the Black Saturday bushfires in 2009, and the devastation of last summer’s fires, scores of academics and postdoctoral researchers were dispatched to study the behaviour of communities faced with total disaster. Such insight is critical to the success or failure of policy responses, and will only become more vital as climate change makes these events more frequent and intense.

Similarly, during the Covid-19 lockdowns, research teams have embarked on work that examines the social response to extreme lockdown measures – offering an understanding of the impact of loneliness and isolation, and how different groups react to restrictions such as these. This work would be much harder to fund under the government’s bill.

In its submission to the Department of Education, Skills and Employment about the Job-Ready Graduates Bill, the University of Melbourne – consistently ranked one of the country’s best research institutions – warned that “Australia’s research funding is under severe financial pressure”.

“This represents a significant risk to Australia’s economic recovery following the pandemic,” the university said. “A world-class research system is critical to the nation’s future prosperity.”

At this stage, it looks likely the Coalition has the numbers in the senate to push through the Job-Ready Graduates Bill before the end of the year. There will be no certainty on research funding before the bill is passed.

University vice-chancellors have told The Saturday Paper that a working group has been established and “given a mandate to look at longer-term solutions” for the funding gap.

But any future commitment to boost research dollars in the system at this stage would rely on the goodwill and good faith of the government, which has been in an ongoing tussle with universities over funding since it came to power in 2013.

Already, some vice-chancellors have accepted that the terms of the current bill – despite its flaws – stand as the least bad option heading into 2021.

The University of Tasmania’s vice-chancellor, Professor Rufus Black, emailed staff last Monday telling them it was time to fall in behind the government’s model. “Under the current funding scheme, we have reached the cap on the number of Commonwealth-supported places we can access next year,” Black said in the email.

“While this remains the case, we can neither increase the number of Tasmanian students nor the number of domestic students overall ... While the funding we receive per student will decline if the legislation is passed, this is because funding will be more closely aligned with the actual cost of delivery.”

Black conceded the reform “looks problematic on the face of it” but told staff that it “in fact starts the process of addressing an issue that seriously disadvantages smaller, high-quality, research-intensive universities” such as the one he runs.

Privately, the larger institutions believe Black’s reasoning is naive, self-interested or both, but none has said as much on the record and many see little value in a public fracas.

In order to pass the Job-Ready Graduates Bill, the Coalition will need three of the five crossbench senators to back the legislation.

Based on their voting history, One Nation senators Pauline Hanson and Malcolm Roberts will likely side with the government. New independent Rex Patrick won’t vote for the bill and Centre Alliance’s Stirling Griff is expected to vote no as well.

Tasmanian senator Jacqui Lambie stands as the remaining unknown, but The Saturday Paper can confirm the only university in the state she represents has made its support for the bill clear to her.

As the fallout from the Covid-19 pandemic has become clearer, universities across the country have begun to shed staff in huge numbers. At least 11,000 staff have already been axed, largely in response to a collapse in international student numbers.

But this is a conservative estimate. Jobs in higher education are increasingly casual or sessional contracts, and the universities have only been reporting cuts to full-time staff jobs.

The National Tertiary Education Union estimates job losses could be as high as 20,000.

Some have made the argument that the more exposed universities – those that rely heavily on international students – should have prepared for a crisis. For years before the pandemic, these institutions grew rich and were able to do so largely because of fees from international education.

In 2018, the university sector collectively took $34 billion in revenue – more than half of which came from the Commonwealth – and had $4.6 billion in reserves after cash expenses.

Equally, though, the universities were not prepared for a government that moved several times to deliberately exclude them from economic support during Covid-19.

No Australian public university has received JobKeeper during the pandemic. However, the ABC reported earlier this month that the Sydney outpost of New York University had qualified for the program.

A senior staff member at the University of Melbourne told The Saturday Paper that the sandstone giant, and the sector more broadly, is standing at a precipice.

“Of course, the risk of having 40 per cent of your students as international and a good chunk of them from China was not unknown,” he said. “But it didn’t stop the spending on buildings, on more managers, more systems …

“It all had to come to an end, and it did. Trouble is that the pain will be disproportionately borne by our younger researchers, students, women – and the well-paid management layer will be largely preserved.

“My biggest fear is that we will lose a whole generation of researchers and the damage of that is incalculable. The expertise within our ageing professoriate is not replaced overnight and takes decades to nurture and develop. The impact on our country will be devastating – who will train the next generation of thinkers, teachers, researchers?”

A presentation made to staff by the dean of law at the University of Technology Sydney on August 14 this year, obtained by The Saturday Paper, reveals that senior leaders at the institution have all but given up fighting for support from the government.

The presentation slides show the university’s management expects a budget hit of about $200 million annually for the next two years, as well as a “potential impact on jobs [of] 200-250 full-time equivalent, possibly double”.

UTS management openly canvasses moving to a “lower tier” model in the presentation.

“We offer a Rolls-Royce product in education, student experience, and administrative support more generally across all areas,” the presentation notes. “Perhaps we can still do well but with a slightly ‘lower tier’ model?”

One staff member at the UTS law faculty, who did not wish to be named, said “a huge number of casuals have been cut but we don’t know how many”.

At the same time, teaching hours are set to rise next year and more pressure is put on the remaining staff. “But again we don’t know by how many hours,” the academic says. “It’s been suggested that we start recording lectures for students.”

The higher education sector has warned the government that the bill will not succeed in its goal of pushing more students into “job ready” degrees, even if their fees are lower. Nor will it deter students from enrolling in law or the humanities, which will become more expensive under the new model.

“Even when course fees rose 300 per cent in the United Kingdom, there was a very limited impact in the year immediately following for applications to study at university,” the Australian National University said in its submission on the higher education reforms.

Melbourne University says that “many of the ‘national priority areas’ in which the Government wants enrolment growth will actually receive a lower rate of funding per student under the proposed changes”.

“Rather than helping the sector to meet growing demand for skills in these fields, universities will receive less funding for courses in which the Government is hoping for enrolment growth,” its submission says.

Extraordinarily, the government’s own explanatory memorandum for the bill concedes this point. It says students won’t be discouraged from studying degrees with higher fees because they can simply push the fees onto HECS or student loans.

“While this measure may be perceived as restricting access to higher education, this is not the case as the students affected by these changes are able to defer their [student contributions],” the memorandum says.

This will, of course, saddle some students with more debt later in life – especially those who study social work or similar courses where the “private benefit” of income in their chosen field is not as high as, say, in medicine or engineering.

An obvious question is why aren’t the universities fighting back more viciously? The answer is that the government has them in a bind.

In 2017, the Coalition froze indexation for subsidies and capped student places. These cuts, worth more than $2.5 billion, remain in place.

If the Job-Ready Graduates Bill does not become law, some vice-chancellors fear their universities will head into 2021 under the same system – and their immediate funding will continue to diminish. The new bill at least offers them more student places, and as such more revenue, and ends the indexation freeze.

While the universities have recommended changes to student fees, the time needed to rework this part of the bill makes amendment unpalatable to the government. “They are not going to change the total amount of funding,” one vice-chancellor says. “There is no more money and I can’t see any appetite for change.”

At the moment, the universities are losing money hand over fist – partly because of student caps, and also because of Covid-19. This bill doesn’t give them more money, but it gives them certainty and guarantees that the funding won’t fall further, and for a sector in crisis that might look like the best deal they’ve got.

Still, as one senior figure put it, after these changes it’s not clear what will be left of Australia’s best universities or the research they do.

Clarification: this article was updated to more clearly cite the source of University of Sydney's figure in relation to the research funding cuts.

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