Private training industry will ‘go to war’ over new legislation that could ‘kill the sector’

CEO of Academy of Interactive Entertainment Ltd Vicki De Margheriti, and chairman and CEO of AIE John De Margheriti, at Watson’s Canberra Technology Park. Mr De Margheriti was appalled to learn that all non-government training providers must hold a quarter of their expenses in liquid assets. Photo: Jamila ToderasA leading Canberra entrepeneur says the private training industry will “go to war” with the federal government over new laws and guidelines that he believes could kill the sector.

“I’ve been speaking to other colleges around Australia and this is going to be huge. We will mobilise very, very quickly,” chief executive and chairman of Academy of Interactive Entertainment, John De Margheriti​ said.

“We will fight to prevent most private colleges closing its doors in the coming months.”

The federal government has brought in reforms to crack down on shonky private training providers who are exploiting vulnerable students.

But some in the sector feel the proposed changes, designed to target unscrupulous providers, may hurt those who are doing the right thing.

Recognised as a founder of Australia’s video games industry, Mr De Margheriti was shocked and appalled to learn that all non-government training providers must hold a quarter of their expenses in liquid assets.

The ’emergency laws’ passed last Thursday would freeze next year’s government funding to vocational educational providers at 2015 levels, greatly slowing the sector’s massive growth boom.

The cost of VET fee-help loans ballooned from $279 million in 2012 to $1.76 billion last year.

Mr De Margheriti had already written an open letter to the Prime Minister in The Canberra Times stressing these laws would hurt students, when he received an email from the Department of Education detailing the “guidelines” about the 25 per cent cash, that he said went far beyond the bill.

Mr De Margheriti said he knows of few businesses that would have the liquidity required under the government’s reforms. He said most would have already invested their cash back into growing their business.

“All of a sudden, businesses have to find 25 per cent of their expenses to put away. They will have to fire people, shrink down their business, save their money crazily, or they might have to put their house on the line and deal with various factors to try and get that money immediately.”

Businesses will also have to find 20 per cent of their revenue from VET fee-help.

Mr De Margheriti said it was unfair of the government to drop these bombshells during student graduations and recruitment finalisations.

“I truly hope the government acts before they see many good colleges go under or this will be the death of innovation in the VET private provider sector in Australia,” he said.

While innovating will become a challenge for AIE, Mr De Margheriti said the not-for-profit organisation had deliberately not relied on VET fee-help and would therefore survive. He still plans to invest $111m over the next 20 years into student accommodation and job creation at Watson.

A spokesperson for the The Department of Education and Training said providers are required to to retain liquid assets “to ensure they are able to operate in periods of economic downturn and cover unexpected costs without an interruption to course delivery”.

“This includes scenarios where the provider is required to return VET fee-help monies to the Commonwealth or students, where an overpayment to the provider has occurred,” they said.

Mr Jamie Pryor is the CEO of Unity College Australia in Belconnen, which provides vocational training in IT, management, music, Christian studies, and hairdressing.

“Education is not something you can just put a sale on and have a quick turn around… six months is not enough time for a business to cough up all of that extra money,” Mr Pryor said.

“We have some very serious soul-searching to do.”

Mr Pryor understood the need to target unscrupulous providers, but said to attack the whole industry would be like “stopping a car by taking off all of the wheels, instead of one or two”.

Co-founder of Canberra Academy of Dramatic Art in Fyshwick, Elizabeth Scott, is also greatly concerned about the funding cuts.

However, the changes are praised by CEO of NECA – a peak body in the electrotechnology contracting sector that represents companies in the ACT and Australia – Mr Suresh Manickam.

“The reputation of strongly performing providers should not be allowed to be dragged down by rogue operators – who only serve to feather their nest rather than add value and capacity to the students that they purport to serve,” he said.

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