Towards the end of 1987, two major reports with a bearing on education in New Zealand were printed. They were the Report of the Universities Review Committee prepared for the New Zealand Vice-Chancellors’ Committee (the Watts Report, New Zealand’s Universities: Partners in National Development_), and the Treasury’s two volume _Government Management. This occasional paper is a review of the major findings of these two reports and addresses some of the central policy issues facing the tertiary sector, most notably those relating to the appropriate role of the state as a third-party funder of education and training.

• Is education a merit good or a positive right?
• Should the provision of educational services be left to the dictates of consumer sovereignty in a minimally regulated market?
• What are the purpose and role of universities?
• Is the current participation rate in universities appropriate and is there an ooptimal participation rate?
• What are the private and social rates of return to university education?
• What is a just policy for tertiary education?
• How should tertiary education and training be funded?