Australia’s proposed performance funding system could see universities punished for traits that they have little control over, with some measures difficult to improve on and others cancelling each other out.

Vice-chancellors said that they were “cautiously optimistic” that the scheme would not unleash unintended consequences, citing inbuilt safety mechanisms and the government’s promise to tweak the system if necessary.

But critics said the approach may fail to influence institutional behaviour, with one measure rewarding universities for having a high proportion of non-metropolitan students – giving regional universities a natural advantage.

“If you’re about improving performance outcomes, they’ve got to be somewhat in the control of the university,” one source said.

̽����Ƶ

The scheme, which is awaiting government approval, has some similarities to the UK’s teaching excellence framework. It would make up to 7.5 per cent of universities’ teaching grants conditional on their performance on four measures: access, retention, student satisfaction with teaching quality and graduate employment.

Universities appear destined to receive only some of this money because most perform well on some of these measures but not on others. The best three universities for graduate employment, for example, are among the worst 10 on attrition.

̽����Ƶ

And while Group of Eight universities have among the lowest attrition rates in the country, they also have low enrolments from Indigenous, rural and socio-economically disadvantaged students – the nominated equity groups.

The scheme’s architect insisted that universities’ successes on some measures will not be negated by their shortcomings on others. University of Wollongong vice-chancellor Paul Wellings, who chaired a government-appointed panel tasked with devising the scheme, said institutions would be judged against local rather than national benchmarks.

“We’ve contextualised the data,” he said. “That’s the important statistical manipulation we’ve made. We haven’t looked at the absolute scale of the data and just said there are winners and losers. It’s about the relative performance on the rolling average of each university.”

But while retention, employment and student experience measures would be contextualised, performance on widening participation would be judged against national thresholds. A critic said this could encourage a “crazy” outcome whereby city universities overlooked local applicants and poached enrolments from country-based institutions.

He said universities should be rewarded for increasing regional student numbers, not rearranging their share of students from particular backgrounds, adding: “If you want to raise participation rates outside the city, it doesn’t need to be at the expense of city kids.”

Dawn Freshwater, vice-chancellor of the University of Western Australia and a member of the Wellings panel, said the proposed scheme was not set in stone. “It’s a starting point that lays out the potential metrics and ways in which we can contextualise those metrics,” she said.

̽����Ƶ

“The [education] minister [Dan Tehan] has made it clear that he’s open to a review as we go along. We’re going to take feedback from the sector in an ongoing way.”

Professor Freshwater said the proposed scheme would avoid the unpopularity that had plagued the TEF in her native UK. “The TEF is essentially a [set of] reputational indices,” she said.

̽����Ƶ

“What we’re looking at in Australia is a [set of] growth and improvement indices focused on key areas like productivity and employment. It’s not a way of driving a league table for reputational purposes.”

Charles Sturt University vice-chancellor Andy Vann said the panel had done a “pretty good job” of balancing rewards with incentives for improvement. Linda Kristjanson, vice-chancellor of Swinburne University of Technology, said the panel had produced a data-driven framework “that we can continue to massage and refine”.

While both leaders said universities would need to “unpack” the detail of the proposals, Professor Kristjanson said the panel had endeavoured to achieve fairness “and to create a balanced set of indicators that were trustworthy”.

Peter Dawkins, vice-chancellor of Victoria University, applauded the diversity of measures, saying performance funding risked making universities “focus on the things that happen to be measured” while overlooking other activities. “Provided you’ve got a good spread of [measures], that diminishes the risk,” he said.

However, Grattan Institute expert Andrew Norton criticised the recommendation to allow performance-contingent funding to accumulate to 7.5 per cent. This “worsens an already bad situation”, he said, because a bulge in Australia’s youth population was expected to increase university demand from 2022.

“If you’ve got contingent funding that may not occur every year, you’d be very reluctant to enrol students for three or four years on funding that’s not certain,” he said.

̽����Ƶ

Mr Norton said the system would not offer additional funding in real terms. “This is giving universities a bit more of the indexation they would have got under the old system. It’s not very generous and is not going to deal with the biggest problem we face.”

john.ross@timeshighereducation.com