Funding increases in New Zealand’s “bittersweet” budget will not match universities’ rising costs, sector representatives said.

Universities New Zealand (UNZ) said a 1.2 per cent increase in funding per student would not keep pace with inflation, with the government forecasting a 1.7 per cent rise in the consumer price index (CPI) next year.

“University costs typically rise faster than CPI,” said executive director Chris Whelan. “We’re going to be under increased pressure.”

He said that while overall teaching subsidies would rise by about NZ$90 million (£46 million), that figure would be dwarfed by an extra NZ$165 million allocated to the Fees Free initiative, which covers tuition costs on the first year of tertiary studies. Mr Whelan said the scheme would cost taxpayers more while offering “no net gain” to universities. “It’s essentially the single largest increase in the university sector, but with no benefit to universities at all.”

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The increase in tuition subsidies will not apply to research funding, which will decline in real terms – a “disappointing” outcome given academics’ role in helping the country through the Covid-19 health crisis, said UNZ chair Jan Thomas.

“We recognise the many calls on limited government funding, [but] it is vital that investment levels in New Zealand universities are maintained,” said Professor Thomas, vice-chancellor of Massey University.

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As with the Australian budget a week earlier, the vocational education and training (VET) sector attracted the lion’s share of new tertiary education expenditure. The Tertiary Education Union (TEU) said the budget represented a “big win” for VET, with spending set to grow by NZ$280 million over the next three years.

“The sector is being rebuilt,” said national president Tina Smith. “They’re investing real money [to address] the desperate state of vocational education.” But universities had “missed out”, as funding failed to “bridge the gap” with mounting costs. “We have told successive governments that the system is stretched beyond breaking point for decades, yet still they stretch us further.”

She said that with resources increasingly squeezed, it was harder than ever to justify “market-driven” funding models. “Institutions continue to waste resources competing for students,” she said, adding that the “compliance and competition” focus of the Performance-Based Research Fund was particularly unsuited to Maori staff.

The budget contains some good news for students, who can look forward to a NZ$25 weekly rise in their allowances or living expense loans from April. Student and unemployment benefits will be matched, removing a perverse incentive for students to drop out.

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The budget also resurrects the training incentive allowance, a payment scheme to help welfare recipients meet the costs of education and training, which was pared back in 2009.

The government will also spend an extra NZ$6 million to extend the student hardship scheme introduced during the pandemic. “It will supplement other funding that universities already have and will be hugely valuable in terms of keeping a few more students in the system,” Mr Whelan said.

But he said the increase in student allowances was unlikely to keep pace with soaring rents.

Tertiary education analyst Dave Guerin said few in the sector would gain much from the budget. But Antarctic scientists were a possible exception, with NZ$306 million allocated to a redevelopment of Scott Base in the frozen continent. “That’s probably bright news if you’re studying climate change or penguins,” he said.

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john.ross@timeshighereducation.com