BY TIM DODD THE AUSTRALIAN FINANCIAL REVIEW OCTOBER 22, 2012

The controversial call by the Grattan Institute think tank for students to pay more for university degrees has been challenged by one of the authors of the federal government’s review of higher education funding.

Professor Louise Watson of the University of Canberra criticises the Grattan Institute’s approach, in its Graduate Winners paper, of trying to analyse the benefits to the public, and the private benefits to graduates, which arise from different university courses.

The Grattan Institute paper, authored by the institute’s higher education program director, Andrew Norton, says the returns which accrue to graduates from higher incomes would make many university courses an excellent investment even if students paid the full cost of the course.

Mr Norton tries, where possible, to put a value on these benefits and argues that the government should ideally only subsidise a course if it leads to an additional public benefit which justifies the cost. This could be, for example, the cultural value to society of training historians to help us understand our past, or the enrichment of our culture which comes from educating creative artists.

Or it could be that nursing courses should be subsidised if it turned out that the return to nurses from the investment in their course was not high enough to attract enough nurses to fill the public need.

In her report, which is Issue Paper 1 from the University of Canberra’s Education Institute, Professor Watson attacks the fundamental basis of Mr Norton’s argument, saying it is not reasonable to differentiate the benefits which arise from each course.

She points to the work done in preparing the Higher Education Base Funding Review, which concluded that working out the rate of return for the cost of education in each professional discipline was not a useful approach because of too much variation in the circumstances of individual graduates of a particular discipline.

Furthermore, Profession Watson criticises Mr Norton’s approach to calculating the public benefits which accrue from each university course. “It is not possible to assign a public benefit to each and every degree of a university,” she said.

In the Grattan Institute report Mr Norton analyses a number of public benefits which could arise from higher education including volunteering, civic engagement, tolerance and law-abiding behaviour and finds no evidence of a university education leading to better outcomes. As a result he restricts his analysis of public benefits of higher education to the financial benefits to the public which arise from graduates earning more money and paying more tax than they would otherwise.

Professor Watson says this is far too narrow a way to measure public benefits.

Professor Watson is one of the authors of the Base Funding Review, which was handed to the federal government a year ago but is still awaiting a response.

The review takes a very different approach to Mr Norton. Although it accepts that an assessment of private and public benefits is relevant in deciding who should pay for higher education, it concludes that it is not reasonable to distinguish between different professional disciplines in calculating private and public benefits.

It recommends that governments should pay 60 per cent and students 40 per cent of the cost of university education in all disciplines.

In response to Professor Watson, Mr Norton said his Graduate Winners paper was conceptually different to the approach taken in the Base Funding Review, which is being defended by Professor Watson.

He said his conclusion that higher education should be publicly funded if it produced public benefits or equity outcomes that would not otherwise occur contrasts with the Base Funding Review’s argument that the public benefits of higher education justify public funding, regardless of whether that funding causes those benefits.

The federal Tertiary Education Minister, Chris Evans, said in August that the government would respond to the review by around the end of this month.