The conservative government of prime minister John Howard plans to reduce its grants to Australian higher education just as graduates repay increasing amounts under the national Higher Education Contribution Scheme.

Over the next three years, and despite rising enrolments, federal allocations to the nation's universities will be cut by Aus$1 billion (Pounds 404 million). In place of central government spending, the shortfall will be made up by income generated by HECS.

When the former Labor government introduced the deferred tuition repayment system in 1988, it said that money raised would be used to expand enrolments. But now the government is using HECS income to reduce its own contributions.

The government has boosted HECS revenue by raising the charge - and introducing a three-tier system under which certain courses cost more than others - as well as reducing the salary level at which graduates must begin repaying their HECS debt.

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Previously, graduates who earned Aus$28,000 a year or more were required to begin repaying what they owed as a tax surcharge. But the government dropped the level at which repayments begin to Aus$20,000 a year so that many more graduates are now having to pay the additional tax and all at a higher rate.

In the 1996-97 financial year, HECS debt repayments through taxation amounted to about Aus$300 million - equivalent to 5 per cent of higher education funding. In 1997-98, HECS income is projected to rise to more than Aus$600 million or nearly 11 per cent of operating revenue.

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By 2000, HECS returns are expected to exceed Aus$1 billion or 15 per cent of higher education spending that year. Yet central government payments to universities under the Higher Education Funding Act will have fallen to Aus$4 billion - down to the level they were a decade earlier.

On the government's figures, university expenditure in 2000 will be Aus$200 million more than in 1996 although this additional money is supposed to come from fee-paying students, both overseas and local. The government estimates that fee-paying students will contribute about Aus$1 billion to higher education by the end of the decade - yet this figure is looking increasingly dubious.

Revenue from overseas students is projected to rise by 69 per cent or almost Aus$400 million between 1996 and 2000 but the currency crisis in Asia is having a severe impact on enrolments from the main source countries where Australia recruits students.

Similarly, by 2000 universities are expected to enrol at least 3,500 undergraduates who will pay full fees. On current indications this seems highly unlikely given that seven universities offered 1,300 fee-paying places to local students this year and only about 400 undergraduates were willing or able to meet the full cost of tuition.

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