Part 3: Covid-19 response and recovery plans

3.1
On 2 February 2020, the Government announced it would implement a travel ban on passengers from China. On 11 March 2020, the World Health Organization declared Covid-19 a pandemic. On 20 March, the Government closed the border to everyone except for returning citizens and permanent residents.

3.2
The border restrictions meant that about a third of first-year international university students might not have been able to travel to New Zealand to take up their places. ITPs were affected, but less so, as more of their international students had already arrived.

3.3
On 21 March, the Government introduced a four-tiered alert level system in response to Covid-19. It immediately implemented alert level 2 arrangements. The Government increased the alert level to level 3 on 23 March and to level 4 on 25 March.¹⁶ The alert levels included restrictions on non-essential services and domestic travel, and introduced a range of social distancing measures.

3.4
Tertiary campuses closed under level 3 on 23 March 2020. They did not re-open until the country was at level 2 on 13 May. About 6000 students spent the lockdown, or noho rahui, in halls of residence.

Initial Covid-19 response

3.5
Senior leaders in the tertiary education sector told us that the sector’s initial response to Covid-19 was highly collaborative. Because TEIs are independent and more used to competing with each other, we consider this to be notable.

3.6
The TEIs’ initial response plans included continuing to provide courses through online platforms, implementing social distancing safeguards for students and staff, and providing consistent and clear communications.

3.7
Many TEIs were reasonably well prepared to provide courses online. Some TEIs already had some or all of their courses online. These included the Open Polytechnic of New Zealand, the six ITPs using the TANZ eCampus platform, Southern Institute of Technology, Massey University, and Te Wānanga o Aotearoa.

3.8
For others, moving to online courses was an emergency response. One example of how the sector collaborated to respond to Covid-19 was that TEIs with online platforms shared those platforms with TEIs that did not have them.

3.9
The tertiary education sector’s operational response to Covid-19 was variable. Some TEIs found responding in a timely way to the human, practical, and financial consequences of Covid-19 challenging. Many staff found making alternative teaching arrangements stressful. Media reports indicated that staff at TEIs that had limited experience of online delivery faced more difficulties.

3.10
Most TEIs provided online courses for a large number of students quickly. These covered a vast array of different teaching contexts. By October 2020, there was no overall decrease in the number of students still enrolled, including students offshore.

3.11
However, no centralised data on how many international students might have deferred rather than withdrawn or how many are studying remotely is currently available.

3.12
We are aware that the university sector estimates that about two-thirds of those students (more than 5000) who did not make it to New Zealand are still enrolled and have begun their studies remotely. About half of those students will need to enter New Zealand to complete their studies.

3.13
Data from August 2020 shows that, for courses starting in the first half of 2020, overall enrolments were down by about 1.3% at universities and 6.2% for ITPs. This was partly related to Covid-19, but it is also part of a continuing trend for ITPs.

3.14
There was a noticeable increase in course enrolments in the second half of 2020. This correlates to the significant increase in unemployment reported for the September 2020 quarter. Enrolments were up by 4.3% at universities and by 6.8% for ITPs.

3.15
Overall, TEIs appear to have provided good levels of support for the well-being of students. However, some students did not view TEIs’ responses as trouble free.

3.16
The New Zealand Qualifications Authority (NZQA) is responsible for looking into concerns and complaints about TEIs and the pastoral care of students.¹⁷ It told us that there had been a “steady stream of concerns and complaints, but not an avalanche”. Overall, it saw no notable increase in volume compared to the previous year.

3.17
However, the nature of the complaints and concerns changed. Since March 2020, more of the students concerns were about changes from face-to-face teaching to online teaching.

3.18
Students and family members also contacted NZQA to raise concerns about students’ mental well-being during the pandemic. The Government has announced an additional $25 million for extra mental health and well-being services for all domestic students studying at TEIs, although these services will not be available until later in 2021.

3.19
University Students’ Associations highlighted concerns about the timing of assessments and financial hardship. In response, the sector worked to adjust the nature, timing, and frequency of student assessment. Most TEIs moved reasonably promptly to publish policies about how they would adjust assessment grades to take account of Covid-19.

3.20
As at 30 June 2020, 120 tertiary organisations, including TEIs, had accessed funding from the Government’s hardship fund for learners. The Government also set up a hardship fund for international students to help with temporary and urgent needs, and a financial support package for domestic students.

3.21
In 2020, the Government will not be “clawing back” funding if TEIs do not meet their enrolment targets or performance measures because of Covid-19. Also, all TEIs will receive a 1.6% increase in government funding from January 2021.¹⁸

3.22
The Government also provided $1.6 billion for a trades and apprenticeships training package in Budget 2020.¹⁹ This funding will mostly fund extra training places at Te Pūkenga, its subsidiary companies, and some Transitional Industry Training Organisations and private training establishments.

Longer-term recovery strategies and priorities

3.23
The Covid response phase was, and continues to be, important. However, Covid-19 has fundamentally reset TEIs’ operating environment for the foreseeable future. Even before Covid-19, disruptive technology and the changing expectations of employers and students were putting pressure on traditional operating models.

3.24
We asked senior leaders in the sector about their longer-term strategies for recovery.²⁰ Although those conversations were wide-ranging, two topics dominated – international education and delivering courses online.

International education

3.25
Senior leaders mostly told us about how TEIs (except wānanga) are struggling from a decline in revenue from international students. We saw some financial forecasts that assume that international students will return from the second quarter of 2021.

3.26
Although those plans also project some additional domestic demand related to Covid-19, the net revenue (revenue less expenses) from those students is not projected to fill the financial gap. It is also not yet certain that the Tertiary Education Commission will be able to fund additional domestic demand for non-trades training in 2020. Its existing budget is committed by the funding guarantee (see paragraph 3.21).

3.27
In July 2020, Te Pūkenga’s subsidiary companies were forecasting a combined $53 million deficit in 2020. This might double in 2021 if international students cannot enter the country in the first quarter of 2021. Because Te Pūkenga is continually reforecasting based on the latest information on domestic student enrolments, these projections will change.

3.28
Universities New Zealand²¹ estimates that total university revenue will decline by $200 million in 2020 and by $400 million in 2021. These forecasts include not only a reduction in revenue from international students but also reductions in other activity, including research, commercial activities, and philanthropy. We estimate that, as at November 2020, revenue from international tuition fees was down by about $60-$70 million.²²

3.29
On 13 October 2020, the Government announced that it would allow 250 doctoral research (PhD) and masters-level postgraduate students to enter the country from about November 2020. Students who already held visas for 2020 and who needed to be in New Zealand to complete practical components of their research would be eligible for those places.

3.30
TEIs (most likely universities) will need to nominate students for these places. Successful students will need to complete the mandatory period in managed isolation when they arrive in the country.

3.31
There is no indication when other international students might be allowed into the country or how many. The Treasury’s pre-election economic and fiscal update for 2020 assumes that border restrictions will be lifted on 1 January 2022.

3.32
However, the update includes a possibility that safe travel arrangements might be agreed to allow some service exports, including international education, to start recovering from mid-2021. The update also notes that the speed at which those service exports will recover is uncertain.²³

Delivering courses online

3.33
Some TEIs are making the most of the opportunity to develop their online courses for domestic and international students. Some estimates we have seen forecast that, globally, 70%-75% of courses could be offered fully online or by a mixture of face-to-face and online teaching. Providing more education through online platforms is also part of the Government’s strategy for international education.

3.34
This approach could build resilience for future shocks and meet the learning needs of some students. However, in our view, delivering more courses online is not the only solution.

3.35
Although delivering courses online might be more efficient in some respects, costs could increase. For example, TEIs will need to consider:

• investing in retraining educators to be able to teach online to mitigate student concerns about variable quality;
• the need for communications support staff, such as those with skills in video editing and creating content;
• investing and re-investing in online delivery and assessment platforms;
• the possible duplication of courses running online and face-to-face – some students might choose a TEI based on the availability of face-to-face tuition;
• any impairment of physical assets that might no longer be needed or cannot be fully utilised (for example, halls of residence), or where fixed campus costs might be shared between fewer students;
• reduced revenue from student services fees for on-campus services such as sports facilities;
• additional complexity in managing student well-being;
• price sensitivity – surveys show that students likely want to pay less for tuition delivered wholly or mostly online; and
• for international students, studying a New Zealand qualification outside of New Zealand might not translate into work rights in New Zealand, which can be a factor when students decide where to study.

Other actions under way

3.36
Te Pūkenga has an opportunity to address sustainability issues when designing its future operating model and as the Tertiary Education Commission continues to work on the unified funding system. It has started work on its strategic approach to international education with its subsidiaries and Education New Zealand.²⁴

3.37
Te Pūkenga hopes that the unified funding system will make a significant difference to its financial viability. However, the system is currently at the design stage and might not be in place for another two years. In the meantime, Te Pūkenga’s subsidiaries are divesting some assets and reducing some variable costs, such as by appointing joint chief executives.

3.38
In September 2020, the Secretary for Education agreed that Te Pūkenga would not need her consent to dispose of assets, raise money (including by borrowing), or carry out other activities that would normally require her consent.²⁵

3.39
This enables Te Pūkenga to use the cash and cash equivalents within the group to support the liquidity needs of subsidiary companies that are at risk. However, in doing so, Te Pūkenga must not affect the overall balance sheet of the group. It must also keep to previously agreed restrictions on the use of local assets.

3.40
On 27 July 2020, the Government announced a concurrent three-part recovery plan for the international education sector. The plan aims to:

• stabilise the international education sector;
• strengthen the system by ensuring that regulatory settings, policies, and practices support the recovery; and
• accelerate the transformation of the international education sector described in the 2018 International Education Strategy.²⁶

3.41
To stabilise the international education sector, the Government has announced a $51 million support package. Most of this funding is targeted at schools and some types of private training establishments. Education New Zealand receives $10 million of the package for marketing and to support innovation in delivering education to international students.

3.42
We understand that transforming international education might include changes to the number of international students eligible to study in the country, the nature of their study, their financial independence, and their access to work rights. These measures are likely to lower overall demand. However, New Zealand’s generally successful response in avoiding the worst consequences of the pandemic presents opportunities. As a consequence, demand might increase.²⁷

3.43
Although the universities are participating in some of the recovery initiatives, our view is that there is a long way to go in to building a strong consensus about how to recover from the pandemic and build a sustainable operating environment for higher education.

3.44
We heard many differing and unreconciled views between TEIs, policy makers, and funders on the model of government funding (including price and volume controls), commercialisation, the “right” level of international students, operating models (including online learning), and the asset base of universities.

3.45
As it develops its policies of strengthening the sector and transforming to a more sustainable future state, the Government has signalled its intention to consult with the sector “as needed”. In our view, achieving long-term sustainability will need a shared vision, co-ordination, co-operation, and leadership. Because of their autonomy, this is particularly the case for universities.

3.46
Without a consensus, there is a risk that tactical response decisions being made now might be detrimental to successful outcomes in the long term.

3.47
In the short term, many universities are looking at voluntary redundancy schemes, and some are holding back on capital projects or repairs and maintenance. We have not yet heard whether universities are planning to dispose of assets (if possible) as part of their recovery strategy.

Conclusion

3.48
The sector’s initial response to Covid-19 was variable, but it was characterised as collaborative and flexible. However, in our view, many TEIs are still in a “getthrough” phase. During the recovery period, focusing on longer-term strategic goals and priorities will be critical in guiding short-term decisions.

3.49
The Government’s recovery strategy for international education provides a foundation for improving the financial sustainability of the sector, but more needs to be done to build consensus.

3.50
Building that consensus will be complicated. For example, the Government will need to balance immigration settings, international relations, broader economic policy, the autonomy of universities, the importance of university rankings, attracting academics and students, and research and development capabilities.

3.51
The Tertiary Education and International Education Strategies cover much of this, but they need to reflect the challenges of the Covid-19 environment. In our view, any new or revised strategic approach needs to be specific enough to enable longer-term planning for what tertiary education and the institutions that deliver it will look like in five to 10 years.

16: The Government also declared a state of emergency. After four weeks under alert level 4, the country gradually went down alert levels until it was at level 1 on 8 June. There have been other changes to alert levels since June. The country, or parts of it, might move up and down the alert levels in response to any future outbreaks.

17: The current code of practice for the pastoral care of students covers international students, and there is an interim code for domestic students.

18: Budget 2019 provided for a 1.8% increase from January 2020.

19: Of this funding, $334 million was for additional tertiary education enrolments (level 3 to non-degree level 7 courses). A further $320 million was targeted to free trades training in critical industries. Other funding was aimed at apprentice support and increased demand for trade academies.

20: We spoke to senior staff in some TEIs, Te Pūkenga, the Ministry of Education, the Tertiary Education Commission, Universities New Zealand, the New Zealand Qualifications Authority, and Education New Zealand.

21: Universities New Zealand carries out statutory functions under the Education and Training Act 2020 for universities. These functions include quality assurance, placing qualifications on the qualifications framework, approving and moderating courses, and granting scholarships. It also co-ordinates sector responses to government policy, including international education.

22: This depends on the equivalent full-time student value of the course the students intended to study.

23: The Treasury, Pre-election Economic and Fiscal Update 2020, at www.treasury.govt.nz.

24: https://xn--tepkenga-szb.ac.nz/news/category/News/mobilising-for-internationalisation-in-a-new-world.

25: Education and Training Act 2020, section 282(4).

26: New Zealand Government (2018), International Education Strategy 2018-2030, at enz.govt.nz.

27: Cabinet paper: A Strategic Recovery Plan for the International Education Sector, 22 June 2020, Ministry of Education.