It’s coming any day now. The blueprint for the new vocational education and training system for Aotearoa, unpicking Te Pūkenga, demerging the polytechnics, doing something – no one outside the innermost circle of officials knows what – about work-based industry training. What we can be sure of is that we can’t revert to what we had in 2018, with unsustainable polytechnics and a fractured vocational training system.
I have written about this before.
We need to remember that the failing Te Pūkenga project has its origins in two distinct but related problems – problems with the architecture of New Zealand’s VET system and the pressing issue of the viability of our polytechnics. Something had to be done. So the government gave us the Review of Vocational Education (RoVE) and that led (against official advice) to the soon to be unpicked Te Pūkenga. If it’s an experiment that has failed, we need to be sure that what comes out of the change does address the original problems. And that the result is a strong VET system, one that can endure and deliver for our society.
As the great reveal gets near, and as we enter the process of consultation on a new architecture for VET, I have been thinking about how we got into this situation in the first place – in an effort to identify what needs to be preserved from the ruins and to clarify the principles that need to underpin the new system.
Let’s look for the source of the problems that the incoming government inherited in 2017 and that led to Te Pūkenga.
The beginnings
Let’s start at the very beginning …
Let’s start with Gary Hawke’s report to the government. Hawke laid the base for the government’s Learning for Life reforms that shaped the system from 1990 until the TEAC reforms of 2003 … and whose echoes are still audible in the tertiary education system now.
Hawke proposed a unified tertiary education system with all parts – higher education, vocational, work-based vocational education, adult foundation education, non-formal and continuing education – supervised and funded through a single agency. He wanted providers to have autonomy, within the scope of institutional charters negotiated with the government. He argued against any formal distinction between “education” and “training”. He was against barriers, privilege, rent-seeking of any kind – barriers to private providers, barriers to the movement of individuals through the system. He argued against the monopoly that universities held on degree teaching. He argued for cost sharing between students and government and for private providers to be able to qualify for government funding. He anticipated the loan scheme introduced by a subsequent government …
On industry training, he welcomed the move to competency-based certification, argued that apprenticeship shouldn’t be the sole route to certification (meaning that polytechnics should be free to offer an alternative pathway) and stated that “… the reform of apprenticeship currently proposed should be expedited and extended in line with the recommendations of this report…”[1]
Because there was a reform process already underway, Hawke was deliberately unspecific about what to do about industry training.
The government response …
Much of Hawke’s architecture was adopted in the Learning for Life policy decisions and eventually found its way into legislation and practice. Learning for Life paid lip service to the ideal of seamlessness. There was a level of cost sharing with the introduction of much higher tuition fees, eventually, some private providers could receive public funding…
But not everything. The government wasn’t prepared to assign oversight of the whole system to one agency. So we had the creation of the Education, Training and Skills Agency, ETSA, later to be rebranded as Skill NZ, which was established and given oversight of two parts of the post-secondary education system – the apprenticeship system (which was still awaiting the results of the review) and the adult foundation education system[2] (which had previously been administered by the Department of Labour).
What of polytechnics …
Polytechnics were freed from micromanagement by the Department of Education; instead, they were to be governed by councils, working to charters negotiated with the government, and within those constraints, they were autonomous, funded through the new EFTS-based funding system. They were expected to respond to the needs of their communities. With the end of the university monopoly on degree teaching, polytechnics were able to offer degrees alongside their traditional roles: foundation and bridging courses and continuing and community education – plus, courses leading to qualifications needed for trades, off-job components of apprenticeships – in short, vocational education.
The industry training system
The review of apprenticeships, underway as Hawke prepared his report, resulted in transformation of work-based vocational education, of the apprenticeship system. Industry training and certification were to be competency-based (rather than shaped by the duration of training). The architecture of the system, the array of boards, committees and councils[3], that oversaw the system were swept away in the legislation enacted in 1992. In their place were the Industry Training Organisations, set up and owned by the industry, responsible for standard setting and for arranging training. Each trainee entered an agreement with his/her employer and the ITO, specifying the standards to be achieved, the role of the off-job training component and how costs would be met…
Employers were expected (but not obliged[4]) to contribute to the cost of training. And the government contribution would be channelled through ETSA to the ITOs.
It granted more power to industry to determine the skills needed. It simplified much of the bureaucracy.
Under this new system, the employer remained the principal instructor and teacher of trainees and apprentices, supported by training advisors from the ITO and complemented by off-job training brokered and purchased by the ITO, mostly from polytechnics but also from private providers.
The new industry training system was a much better system than its predecessor. It was almost a good system. Almost.
And the problems?
The first issue is that the industry training system, as designed, will always be strongly pro-cyclical; demand for industry training depends on the number of trainees which in turn depends on employers being prepared to take on trainees (who are, of course) employees. They will be prepared to do that only if there is the prospect of a steady stream of work. The risk is that the reduction in training during the downturn will have led to a shortage of skills as the economy comes out of recession, as growth looms. And hence, a bidding up of the price of skilled labour[5].
Second there is a funding issue. ITOs were responsible for purchasing the off-job training. Yet their government funding was low, and employer funding was even lower and uncertain[6]. Fees didn’t contribute enough. As purchasers, they were incentivised to drive down the price for off-job training, looking for cheaper, more efficient providers[7].
As for polytechnics … vocational training is among the most expensive areas of delivery for polytechnics which must purchase (and then depreciate) tools and equipment, keep up with changes in technology and industry practice. The high capital cost means that polytechnics had to find economies of scale[8].
Driving down the price can produce perverse results. For one thing, polytechnics were, in effect incentivised to expand their work in the degree market and their offerings in community and foundation education – where the financial returns were greater. By the end of the 1990s, a quarter of polytechnic enrolments were at degree level and the polytechnics commanded one sixth of all degree enrolments nationally. And prudent managers in polytechnics found it easy to counter requests for the funds to renew aging VET equipment and to buy new generation tools. Some ITOs began to question the quality of off-job training run by polytechnics and the responsiveness of polytechnic VET departments to their needs[9].
And thirdly, the funding rates for vocational education through the EFTS system were higher than what the ITOs could pay, incentivising VET departments in polytechnics to offer programmes that were, in effect, rivals to ITO-arranged programmes. This led to the introduction by some polytechnics of ‘managed apprenticeships’ leading to trades qualifications, funded through the EFTS-based funding system (hence, generating higher funding for the polytechnic) and in direct competition with the ITO route to certification[10]. That was not a recipe for harmonious relationships between the two sides of the VET system.
And then there’s the problem of culture …
One of the most complex difficulties that arose in the VET system, a problem that rarely surfaced in reports and policy papers, was the difference in culture between the two VET systems. In her History of Apprenticeship In New Zealand, Nicky Murray quotes one ITO chief as saying, dismissively: “tradespeople working in the industry were better placed to judge the competency of a trainee than ‘a bunch of academics in polytechnics’”[11]. That reflects the view of many in ITOs that some polytechnic tutors were out of touch with the realities of the workplace. That view underpinned many of the ITO submissions during the RoVE consultation through 2019 – ITOs argued that their training advisors straddled the education/work divide in ways that polytechnic academics couldn’t.
The sense of rivalry between ITOs and polytechnics and the separation of the arms of the VET system exacerbated the gulf between the two.
The TEAC reforms and after …
Ten years after the Learning for Life reforms, we had another major strategic review of the sector – the Tertiary Education Advisory Commission (TEAC) review. The TEAC reforms addressed a number of gaps in the Learning for Life system. But they left untouched the split in the VET system, a sore that continued to fester under the surface.
And the changes made to strengthen the industry training in 2010-2013 – the creation of the NZ Apprenticeship Scheme and the consolidation of the ITOs into larger more capable organisations representing a range of industries – those modifications also retained the split VET system[12].
The Industry Training Act 1992 provided New Zealand with a well-functioning work-based training system. But it contributed to the fracture in the design of the VET system, a problem that lay dormant until the RoVE.
The trouble with the polytechnics …
What made the RoVE important was that it was an attempt to address the VET system as a whole, recognising that there are multiple players. Polytechnics and ITOs, obviously. But also private providers and wānanga who also contribute to off-job training. But everyone’s attention was focused on the polytechnics because of their financial vulnerability.
Polytechnics operate in multiple markets – foundation education, higher education, community education as well as VET. They receive their government revenue from multiple funding streams, each with different and high compliance requirements. They serve widely-dispersed populations that are less mobile than the typical higher education students, so they have to operate from multiple sites, usually incurring losses on their regional operations.
Polytechnics suffered financially from changes to the funding of non-formal education in the early 2000s. The financial constraints discussed above meant they struggled to maintain leadership in their traditional area of VET. Polytechnics have small scale. High compliance. Mergers and closures saw the number of polytechnics fall from 25 in 1990 to 16 in 2019 when the Te Pūkenga merger began[13].
While work-based training is pro-cyclical, polytechnic enrolments are counter-cyclical – they go up when the economy and the labour market are weak. So, as the labour market strengthened following the GFC, enrolments in polytechnics fell. Between 2012 and 2019, domestic enrolments dropped 25%. While that fall was offset to an extent by international enrolments, those too began to drop after 2018 when the government set out to restrict the entry of international students below degree level.
By 2017, the polytechnics as a whole were in deficit. By 2019, the collective operating deficit was 3% of income and 11 of the 16 institutions recorded a deficit[14].
Something had to be done.
Creating Te Pūkenga
Most everyone will agree that the Te Pūkenga experiment hasn’t worked. The government created the single national VET institution against official advice.
But it was a well-intentioned failure. It was an implicit recognition of the problems outlined here.
The design incorporated two features that I welcomed at the time and that I stand by still. And that I hope will be carried into the new system that will emerge from the ashes of Te P.
- Te P was an attempt to create a VET system, a single system rather than a set of polytechnics and a separate work-based training system. It was an attempt to end the rivalry, to build into the structure a close connection between those who deliver off-job VET and those who arrange on-job training and support employers in their role as trainer.
- There was an integrated, unified funding system that covered off-job and on-job, that created the potential to recognise both the differences and the commonalities between on-job and off-job training[15].
But there were design problems ….
First, the structure was just too complicated with too many parts. Much of the work of ITOs – and in particular, the arranging of training – was to be absorbed by Te P, resulting in a dismembering of the ITO network. That left the question of how to deal with the ITOs’ national roles, key roles like standard-setting, qualifications development. This meant that the government had to develop Workforce Development Councils.
And WDCs were (appropriately) national bodies. So, to ensure the regional perspective wasn’t lost, they had to be balanced by Regional Skills Leadership Groups.
And by Te Taumata Aronui, the group set up to ensure the protection of the Māori perspective in VET.
A raft of new Crown entities, governed by boards comprising ministerial appointments. A complex set of relationships to navigate, replacing work that was internalised and managed by the ITOs. Now this isn’t to criticise the work of the WDCs or their achievements during their short life. But it did create complexity. And, alongside the absorption by Te P of the function arranging work-based training, it amounted to a loss of industry control over industry training.
Second, there were split responsibilities, between WDCs and the NZQA and TEC. The decision documents appeared to give WDCs the power of veto over NZQA and TEC decisions and conversely – not a recipe for good government. Some of that didn’t make it all the way to the legislation, common sense having prevailed.
Plus, it hardly needs stating that the execution of the creation of Te Pūkenga was problematic …
What we need
Looking through the experience of the 32 years since the passage of the Industry Training Act, looking at the failure of the Te Pūkenga experiment, my conclusion is that among the necessary conditions for a solution, we need:
- a VET system, a single system, not a single institution – rather, we need a set of components that work together as parts of an interconnecting network, exploiting the synergies between off-job and on-job training, between work-based and institution-based VET
- the retention of an integrated, unified funding approach for VET, a funding mechanism that copes with work-based VET and institution-based VET, on-job and off-job teaching, fairly reflecting the costs of each approach, which provides the lubrication that keeps the system running and the glue that holds it together.
What we want to avoid is a set of polytechnics and a separate work-based training system. A single system with a unified funding approach should allow us to exploit the complementarity of pro-cyclical work-based training and a counter-cyclical institution-based training. It needs to be structured to allow learners, trainees, students to move seamlessly from one mode to the other. Training advisors who support employers need to act as the link between off-job tutors and the employers who do much of the instruction for work-based trainees.
We also need:
- financial viability – meaning as few institutions as are needed to build economies of scale, but as many as needed to enable a distributed, regional presence of VET and foundation provision – noting also that, in its draft funding determinations for 2025, the government has signalled an intention to apply a significant increase to polytechnics’ revenue[16]
- recognition of the role of the employer as educator and instructor, meaning stronger support and training in teaching for employers.
The new institutions need to recognise the invisible problem of the cultural distance between educators who work in an institutional setting, those who employ and teach apprentices and trainees and those who support work-based training. It’s important to recognise the cultural differences. And it’s important for leaders to face up to this problem and look for ways to mitigate it – that needs to e an important priority. It needs leadership …
In the medium term, it’s time for a serious discussion about how we might rethink our approach to VET, drawing on successful models from other countries. No, we can’t transplant models developed in different countries with different industries, different economies, different educational cultures. But we can learn from those models. It is interesting, for instance, that in some European countries, VET extends beyond the certification of craft/trade competence; in Germany, Austria and Sweden for instance, qualified tradies are encouraged to undertake further training that includes business and legal skills and, crucially, training in how to train. That leads to an additional “meister” qualification[17]. The meister qualification recognises that a fully qualified tradie is an educator, a trainer; education and training is a key part of a leading tradie’s role.
If we are serious about creating a successful VET system, that’s the sort of thing we need to look for when the big reveal occurs. And if we don’t see those elements, that’s what we need to ask for during consultation.
Bibliography
Green N, Hipkins C, Williams P, Murdoch C (2003) A brief history of government funding for industry training 1998-2002 Industry Training Federation
Hawke G (2008) Aligning education with our contemporary society and economy IPS Lecture Series, Victoria University of Wellington
Hawke G (1988) Report on postcompulsory education and training in New Zealand A report prepared for the Cabinet Social Equity Committee, Government of New Zealand
Laczik A, Emms K, Dabbous D and Quyoum A (2024) Master craftsperson qualifications across four European countries: Austria, Germany, Slovenia and Sweden Edge Foundation
Mahoney P (2015) What is a managed apprenticeship Ministry of Education
Maurice-Takerei L (2016) A whakapapa of technical, trade and vocational education in Aotearoa, New Zealand: Origins of a hybrid VET system E-Press Monograph Series, Unitec
Ministry of Education (2012a) History of industry training Ministry of Education
Ministry of Education (2012b) Industry training review: summary of submissions received on the discussion paper: key roles in industry training systems Ministry of Education
Murray N (2004) Who gets their hands ‘dirty’ in the knowledge society? Training for the skilled trades in New Zealand PhD Thesis, Lincoln University
Murray N (2001) A history of apprenticeship in New Zealand Masters Thesis, Lincoln University
Smyth R (2024) Unpicking Te Pūkenga Strategy, Policy, Analysis, Tertiary Education
Smyth R (2019a) Navigating the complex new vocational education system Education Central, Strategy, Policy, Analysis, Tertiary Education
Smyth R (2019b) The creation of the NZIST: the benefits, risks and challenges Education Central, Strategy, Policy, Analysis, Tertiary Education
Smyth R (2012) Two decades in the life of a small tertiary education system, OECD
TEC (2018) A brief history of institutes of technology and polytechnics (ITPs) in New Zealand TEC
End Notes
[1] Hawke Report, Recommendation 5k, page 13.
[2] At that time, the adult foundation education system comprised two programmes – Access and M-Access (short for Māori Access).
[3] The system had needed the Trades Certification Board, the Authority for Advanced Vocational Awards, 36 NZ Apprenticeship Committees and 350 local apprenticeship committees. See Ministry of Education (2012) and Murray (2001).
[4] The legislation obliging employers to pay training levies had been repealed as part of the reforms – see Murray (2001).
[5] See Murray (2004). Note that a partial mitigation of this risk is in group training schemes where trainees are employed by a firm that arranges short-term placements with employers in the industry, reducing the risk to employers of taking on training.
[6] Murray (2004) notes: “the removal of both legal regulation and the moral obligation to train embodied in the tripartite apprenticeship committees, allowed many employers to lapse into the short-term benefits to be gained from not training…” (page 244)
[7] This account doesn’t address all the complexity and problems of the funding of industry training – which was tweaked several times in the life of the Industry Training Act 1992. See Murray (2001), Green et al (2003) and Ministry of Education (2012) for fuller descriptions of the permutations of the funding system between 1992 and 2012.
[8] There are similar capital requirements in work-based training; but in that case, the investment is made (or the depreciation cost is incurred) by the employer as part of the finances of the business/the margins on the jobs.
[9] Nicky Murray’s 2001 History of Apprenticeships in New Zealand reports on the debate about finding levels – see pp223, 231-233.
[10] See Mahoney (2015)
[11] Murray (2001) page 233
[12] This is not to belittle the value of those changes. In addition to the creation of the NZ Apprenticeship scheme strengthened the system and the consolidation of the ITOs, an operational policy review lifted trainee completion rates very significantly and improved value for money. Participation rose while the ITO consolidation led to improvements in organisational capability.
[13] See TEC (2018)
[14] See this account. The full data is here.
[15] The fact that the work-based training division of Te P made a large surplus in 2022 while the polytechnic divisions made a large collective loss raises questions about whether the initial calibration of the unified funding system was “right”. But that’s not to argue against the intent of the unification of funding. It also reflected that the position of the economy; and the fact that one of the components of VET is pro-cyclical, the other counter-cyclical. The way that Te P, in its initial years, was structured, with the training advisors responsible for work-based VET all in the same division (as opposed to assigned to the departments responsible for delivery in the advisors’ fields)
[16] The unified funding system shifted VET funding away from polytechnics and towards work-based trainings. The draft determinations show that the rates for work-based training are being lifted by 2.5% (around half the rate of inflation and in line with the shift in higher education) while enrolments at Levels 3-7 (non-degree) – an area where most polytechnics earn most of their student-led revenue – are rising by around 12.4%. Note also that the TEC has required Te Pūkenga to engage consultants to investigate cost savings in the lead up to the separation of Te Pūkenga into regional polytechnics.
[17] See Laczik et al (2024) for an account of how the meister qualification is structured and the role it plays in Austria, Germany, Slovenia and Sweden.
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