Are better days ahead for New Zealand’s storm-lashed universities?

When a science programme called the National Science Challenges (NSCs) expired at the end of June, it was just the latest setback for New Zealand’s beleaguered university and research sectors.

Shaped by respected biomedical scientist Sir Peter Gluckman, during his tenure as inaugural chief science adviser to the New Zealand prime minister between 2009 and 2018, the NSCs had acted as a conduit for the funding of research in priority areas such as ageing, nutrition, housing and natural hazards. Over 10 years, the scheme funnelled some NZ$680 million (£328 million) – a considerable sum in a small country – into collaborative research conducted mainly with universities and crown research institutes (CRIs).

As the programme’s 2024 end date lumbered into view, policymakers began thinking about how to maintain momentum. A review process, “Future Pathways”, was established in 2021 to update research priorities and consider other reforms to the science and innovation system. However, the NSCs attracted only fleeting mentions in the Future Pathways Green Paper. The then Labour government vowed to establish a “national priority-setting framework” in the following year’s White Paper, but the research priorities would not be agreed until 2024 and funding structures until 2025. These plans then dissolved when a newly elected centre-right government quietly cancelled Future Pathways in February. By then, lack of funding continuity had already forced the teams coordinating the NSCs to wind down their activities.

Jonathan Boston, emeritus professor of public policy at the Victoria University of Wellington (VUW), says a replacement vehicle should have been developed much earlier. “Research activity is really long term,” he says. “We’re talking five to 10 years. You can’t just turn things on and off with a switch.”

Documents from the National Party-led government’s first budget, handed down on 30 May, show that the NSCs’ demise will contribute perhaps 3 per cent of the NZ$1.5 billion in annual “baseline savings” prime minister Christopher Luxon is extracting from his departments and agencies.

Meanwhile, the seven government-owned CRIs are haemorrhaging staff, with up to 90 jobs disappearing at the National Institute of Water and Atmospheric Research (Niwa) and 30 at the Scion forestry research institute. Another 30 will go at Callaghan Innovation, a government agency that fosters entrepreneurial science. These jobs are succumbing to a combination of rising costs and reduced income streams. Contract revenue has dried up, particularly from government agencies stung by baseline funding cuts of between 6.5 and 7.5 per cent.

In all, the cuts have reportedly caused almost 1,000 job losses across the agencies responsible for primary industries, business, innovation, employment, environment, conservation and geographical information, with scientists often in the firing line. Last year’s Cyclone Gabrielle, which devastated much of the North Island’s agriculture, also reduced CRIs’ earnings from contracts and patents.

They are facing other storms, too. The previous Labour government’s 2023 budget had allocated NZ$451 million to the Wellington Science City project, a huge scheme to move the CRIs out of facilities widely considered to be on their last legs and into upgraded premises in the greater Wellington area, at the southern tip of the country’s North Island. This year’s budget, however, contained no such largesse. Instead, the Wellington Science City project was scrapped, and NZ$36 million was cut from the forward allocations of four research grant programmes.

Not all of the blame for New Zealand’s struggling science sector can be laid at the door of the National Party, which was re-elected in November after six years in opposition. Policy expert Dave Guerin, editor of the Tertiary Insight newsletter, said at the time that the governing coalition’s first budget was “neutral” for universities, with increased teaching revenue likely to offset inflation. But student debt will escalate, thanks to higher fees and a reorienting of the former government’s “fees free” scheme, which removed fees for all first-year study but did not succeed in its aim of making higher education more inclusive.

Indifference about science funding is bipartisan, Boston says. “New Zealand’s political culture…has never placed a high value on research. The people that are celebrated are the sports heroes, not the scientists.”

And while Lucy Stewart, co-president of the New Zealand Association of Scientists (NZAS), expects 2024 to be the “most disruptive year” for New Zealand research in the past four decades, the disruption has been long in the making, with years of below-inflation funding settlements exacerbated by the high inflation of the Covid era.

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“This is the effects of the last five years coming home to roost,” she says. “Scientists…have been making do with less for years and years. That’s always their attitude – we’ll just have to find a way to keep going. [But] they can’t keep going any more, and the same with universities. People just can’t keep going under these conditions.”

Nor is it only research budgets that have suffered. Recent years have seen support for university teaching programmes cut in real terms, too. Universities New Zealand (UNZ) chief executive Chris Whelan says government funding increases have typically run at about half the rate of the consumer price index. The government provides or controls about 80 per cent of university revenue through direct funding and tuition fee regulation, he notes.

The pattern of sub-inflation funding was broken in June 2023, when the Labour government dished up a post-budget bailout of NZ$128 million. The hastily organised emergency lifeline, sparked by the prospect of major redundancies at several universities, increased degree-level teaching subsidies by 4 per cent from last June, on top of a 5 per cent rise in the previous month’s budget. However, the lifeline was funded for just two years instead of the customary four, creating what government agency the Tertiary Education Commission (TEC) refers to as a “fiscal cliff”.

This year’s budget offered a break-even prospect for university teaching, with inflation roughly matched by increases of 2.5 per cent to tuition subsidies and 6 per cent to student fees. But the missing two years of subsidy hikes were left unaddressed.

Moreover, the fiscal cliff means that “our funding [could] go down for 2026, which has never happened at a time when inflation is running at 5, 6, 7 per cent”, says VUW vice-chancellor Nic Smith. “That idea of a real drop – not in real terms, in actual dollar terms – it’s something that we have never had to budget for before.”

UNZ’s Whelan says that if the shortfall is not covered in next year’s budget, the results will be “very, very difficult and probably catastrophic for parts of the sector”. He says universities were contemplating cuts to core programmes before the lifeline materialised.

“If that funding uplift was to disappear, we would have to go back to asking some pretty hard questions around what we could continue to afford to offer. What it’ll look like a year from now – all we can do is hope.”

TEC chief executive Tim Fowler says universities will be eyeing the fiscal cliff “with a degree of trepidation: clearly, the universities will be hoping that future budgets are able to rectify that issue. Hope is not a strategy, of course.”

Five of New Zealand’s eight universities reported operating deficits last year, and that might not change any time soon, Fowler warns. “It’s very much a game of moving market share,” he says. “You’re either gaining it or you’re defending it. Some institutions have lost significant market share in the last two or three years. Put that alongside high inflation, the slow return of international students post-Covid and generally low unemployment until this year. We’re forecasting this year and next year to be quite challenging for those institutions.”

Nor are subsequent years looking noticeably brighter given that the current minor upswing in domestic enrolments is unlikely to last beyond 2025-26 because of a “softening” in school-leaver numbers.

But recently released Education New Zealand (ENZ) figures show that overseas student numbers rose 21 per cent last year to more than 29,000, only 14 per cent below their pre-Covid peak in 2019. And Fowler is generally upbeat about the capacity of university managers to negotiate through difficult situations even without the help of the commission, which is available to them if necessary.

“There’s a lot we should be very thankful for in the way our university system runs,” he says. “The TEC’s job, as both monitor and funder, is not just to invest money but also to watch where the risk is and help institutions manage it.”

While the commission has occasionally found it necessary to intervene in the administration of polytechnics, Fowler points out that it has never had to do so in the case of a university.

UNZ chair Cheryl de la Rey says the 2025 budget will be a “pivotal moment” for the sector, which will need more certainty about 2026 funding. De la Rey, vice-chancellor of the University of Canterbury, says the 2023 lifeline was intended as a “breather” while the then government reviewed higher education funding.

While Labour’s review never proceeded beyond the initial scoping stage, the new government has unveiled not one but two advisory groups – one looking at the science sector, the other at universities. Both are chaired by Gluckman and have comprehensive terms of reference, with instructions to report in two stages.

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The science review was due to hand its preliminary report to the Ministry of Business, Innovation and Employment at the end of June, with its final report required before November. The universities review has been given slightly more latitude. Its initial report is due with the government in August and the final report next February.

Gluckman says the universities review still faces a “tight timetable”, but he regards that as desirable because it forces immediate consideration of the “high-level” questions. “Yes, of course, the system needs more money. But that has to be [justified] against…what the system should deliver [in] making a real difference to New Zealand’s future. I don’t think that case has been well made,” he says.

“We’ve focused on the institutions, rather than the national need. What’s the purpose? What’s the logic? If you get that answer right…you define the functions that the system must provide. Then the questions on architecture, the operational details and the funding details follow. I’m not saying it’s easy, but there’s a logic train you can build up. We’re focusing at this stage on trying to think about purpose, function, architecture.”

Gluckman says the current funding structure was “effectively designed in 1991” and no longer meets the needs of today, let alone of the future. “The population mix is going to change dramatically. Technology will…change what universities do and how skills are developed and learned. We’re in for a lot of change and the system needs to be adaptable,” he says.

But even the science review’s constrained timetable is not rapid enough for NZAS’ Stewart because the budget cycle means that there will be a lag in any additional funding it might recommend. “We’re facing at least a year of complete uncertainty about what is going to be available for the sector,” she says. “We are already facing…significant job losses and I expect to see more.”

Additional university funding could take even longer, VUW’s Boston warns: “Lots of things…are on hold until these two reviews are completed. With the best will in the world, that would probably mean only a marginal kind of impact on the 2025 budget.” In “the worst possible world”, moreover, any additional money won’t be assigned until the 2026 budget and won’t come through until 2027 or 2028.

“It’s what they call kicking the can down the road, and that’s probably deliberate,” Boston says. “We didn’t have to have these reviews. There are some genuine issues around the structure of the whole system, but the basic funding problems are blindingly obvious. And the options are blindingly obvious as well.”

He says things have changed little since he proposed some policy solutions in current affairs magazine North & South almost a year ago. His suggestions include applying inflation-level indexation to government grants and student debt, allowing “significant medium-term increases” to tuition fees and shifting the balance of research funding towards long-term grants. Fees in New Zealand vary by university and discipline but, roughly, range between NZ$7,000 and NZ$9,000 a year for most undergraduate programmes: less than half the universal English fee of £9,250.

Others see potential in shifting universities’ staffing balance back towards academics, after a 2023 analysis found that administrative workers comprised 59 per cent of the university workforce. “Have we developed excess managerialism…that has driven unnecessary costs?” Gluckman muses. “I don’t know, but that’s a question that the review needs to ask.”

The Tertiary Education Commission’s Fowler highlights the opportunities offered by better use of data. Universities need to convert “insights” about their performance and students into “actionable intelligence” that can be applied to their financial management, student recruitment and staffing, he says, noting that “the premium on good decision-making at the moment is high”.

For instance, “We’ve got a 62 per cent qualification completion rate at degree level in New Zealand, which we don’t think is good enough. In the case of Māori, it’s low 50s. In the case of Pacifika, it’s below 50. Lower socioeconomic groups are just as bad, as are disabled groups.”

The commission itself has “tried to incentivise the system to do better than that, and make qualification completion a priority”, Fowler says. “From a taxpayer accountability point of view, we want a better return from the money we’re putting in. The TEC has a continual job of rationing and trading off. [As a student] I’d be crazy not to go to the institution that’s getting a better return [on investment in terms of completions] than one that isn’t. I would like the problem of having to try and find the money to pay for a situation where all education providers were retaining and graduating more students.”

Fowler stresses the “immense” returns when institutions attract the full three or four years of tuition subsidies and fees from students who might otherwise have left within a year. Better completion rates would also enhance universities’ social licence: a “marvellous outcome for New Zealand”, he says. But maximising this revenue requires “organisation-wide systems” and the “comprehensive rethinking” of programme delivery, he acknowledges. “That is a multi-year activity and it’s quite expensive for the universities to do. We’re cognisant of that. We’re not leaning all over them saying, ‘You must solve this within a year’. That would be unrealistic.”

Others suggest that the system’s efficiency could be improved if institutions did not have to spend so much of their resources competing with each other.

“If you were designing the New Zealand university system from scratch, you wouldn’t design the system we currently have,” says University of Canterbury mathematics professor Alex James.

“We’re a small country. There’s only so many of us here. People spend so much time competing to get money, and they’re competing against a very small bunch of people that they know. Some level of competition is a good thing, but the level we’ve got at the moment hasn’t helped.”

Observers expect the science review to recommend mergers among the CRIs, but Stewart warns that it won’t be easy to “take organisations that view each other as competitors and rivals and say, ‘Well, now you’re all going to be one happy family.’”

Nevertheless, there are arguments for “getting rid of the hyper competition”, Stewart agrees: “We don’t need multiple organisations competing for the same funding.” She cites meteorology, in which both Niwa and the state-owned MetService are active. “They…compete to be the provider of weather forecasting information in New Zealand. We’re really not big enough” to have two providers, she says.

James disagrees, arguing that a country prone to storms and cyclones needs lots of weather forecasting: “You want as many people doing as many slightly different models as humanly possible.” Nevertheless, she says, it makes little sense to channel research funds into a “cottage industry of everybody applying, applying, applying”.

At university level, moreover, she thinks some rationalisation of the system is in order. Administrators need to make some “hard decisions” about their offerings in areas such as music and the arts, for instance: “Do we need international-standard research in classical Greek [or] Roman history at every single one of our universities?” she asks. “Or do we just need to accept that, actually, there are some areas that we just teach?”

Nor does she exclude her own subject from scrutiny. “Maths is a fairly universal subject…but, again, do we need to have an international research-led group at every university?” she asks. However, the likely consequences of such questioning are “tough”, she acknowledges – and she “would not want to be the person having to make those decisions”.

Gluckman concedes that “assisted differentiation” may come under consideration. “In some disciplines it’s hard to sustain critical mass,” he says. “A government and a society need to look at the university sector as a system rather than as individual institutions.”

One approach could be for New Zealand’s universities to maintain their breadth of offerings by cooperating to deliver some subjects. VUW, for instance, has struck an arrangement with the University of Otago that will see the Wellington institution leading the teaching of German for students at both universities while Otago – situated in Dunedin, 500 miles to the south – leads the teaching of Latin and Greek.

But Canterbury’s de la Rey doubts that activities of this scale can make much difference to universities’ financial pressures. “You could cut a language, for example, but it…doesn’t solve your problem because it is not [a] big enough lever to shift things around,” she says. “Our languages [at Canterbury] are small, but they’ve got fairly good enrolments, and many of the academics who teach those courses are also teaching something else in social sciences.”

“One does have to think about the cost” of running courses though, she acknowledges: “If I was running a whole university of low-enrolment courses, then I’d have an issue.” But she is sceptical of warnings that some university courses are “endangered” in New Zealand. This is in part because she believes that “relevance” is also an important consideration regarding which programmes universities offer, and “part of the responsibility on leadership is thinking about how you internally cross-subsidise”.

However, relevance is not fixed for all time. “Even what we currently understand to be science wasn’t always seen as core to universities,” she says. “Asking the relevance-responsiveness questions – that’s our academic mission. I see my role as vice-chancellor as being to repeatedly ask those questions. How is this relevant to a changing demographic? It’s my job to know what the next generation is focused on.”

But while course evolution is perfectly possible, Gluckman sees opportunities for fundamental reform of the university system as limited. “I’ve been quite open that on the research system we’re looking at the whole architecture. In the university system, we can’t do that because the architecture is effectively defined,” he says.

Some commentators think the recommendations of both reviews have already been foreshadowed in Gluckman’s 22-page submission to the Future Pathways review in early 2022. He proposed putting both science and research under Ministry of Education oversight, with increased research and development funding and a single New Zealand Research Council to allocate grants. He also advocated for the amalgamation of the CRIs and the creation of special support mechanisms for transdisciplinary and mission-led research, among many other ideas.

Gluckman cautions against any assumptions about the reviews’ outcomes, however. “Obviously, I have a view,” he concedes. “Obviously, the minister and the cabinet who appointed me would have been aware of those views. I have some influence by being chair, but there’s two outstanding panels.” Hundreds of submissions must also be taken into account, he adds: “I’m chairing a proper process.”

He intends to produce “pragmatic” recommendations that can “last across political cycles”. That entails “reality-testing” those policies with politicians, he says. “The government of the day has to accept it. The government of the next day – because there’ll always, inevitably, be a change – also has to be able to accommodate it,” he says.

But however broad and deep the process of reflection is, the reviews’ recommendations won’t be “perfect”, he warns, not least because they will inevitably involve compromises.

“There’s no perfect solution to this set of issues,” he says. “It will require some give and take. It’s got to be a solution that works for New Zealand.”

john.ross@timeshighereducation.com