J S Mill I think you are confusing the free rider problem with the right of organizations to levy fees as they see fit. All organizations are entitled to levy fees to people who want to participate in those organizations. Thus a number of Churches have 'tithing' as a condition of membership.
The difference here is that the govt. of the day claims the right to determine what fees universities can or cannot charge. I would personally argue that the govt does not have that right unless it can demonstrate that by charging fees some students are excluded from being able to attend on the basis of financial hardship.
The government for its part argues that as it is funding the universities it has a right to impose conditions on the sort of fees universities charge.
I find this argument peculiar in that governments (state and federal) also fund private schools but impose no restrictions on the fees that they charge.
By the same token it needs to be acknowledged that the original point is valid - this is a return of compulsory unionism and I only wish that the government had the courage to acknowledge it as such - the benefits of compulsory union fees outweigh any of the perceived shortcomings and it would have been nice to see the government unambiguously assert that.

Baygon - some interesting points.
Firstly let me say that AFAIK Universities are creations generally of State Acts but are principally funded by Fed money. In this way they are strange hybrid creatures but the golden rule seems to hold sway - he who holds the gold, makes the rules.
Secondly, allowing a Uni to mandate an amenities fee is different from the SU I suffered under where my enrollment was conditional upon payment of a membership fee to the Guild (or, for Conchies, an equivalent donation to a recognised charity). A Uni may well be free to require payment of their own broad-based fees - however, query the right to do this when they are already principally funded direct from the taxpayer - but formerly they also were permitted to force payment to a third-party entity. Government payments usually come with strings attached - just ask the Premiers about the increase in tied grants as opposed to untied. In this case, the Feds are making the rules. Just as they are trying to do with private schools but requiring they disclose other revenue sources.
To look at a likely scenario - is it still acceptable for a Uni to make membership conditional on payment of monies that are then simply handed over to another entity to provide the services... Taxation by the entity with the coercise power for the benefit of another entity. Would you be satisfied with your State government imposing a community welfare levy on households then handing the funds and service provision entirely over to, say, The Smith Family with precious little oversight and in circumstances where the Smith Family, for all of its benevolent aims, is a highly politicised entity with often non-mainstream agendas?

J S Mill: "The point is - to whom to due allow the power of coercive taxation."

Coercive taxation is a loaded term - just like "Union". A tax/fee/charge, call it what you will, they are all coercive, as in no one would not pay them if they had a choice. When I evaluate these things I try to put aside such words. They are an appeal to idealism, not a pragmatic look at how well something works.

In your response to BAYGON is in essence that because Uni is funded from taxes it should not be able to charge additional fees. That makes no sense - they charge all sorts of additional fees now (eg car parking fees, tuition fees, hex) you don't object to.

The Uni's see the need to provide a range of services for students, outside of teaching them. Things like child minding centres, accommodation, cheap on campus food, representation when dealing with the bureaucracy. Notice this list is not too different to what our taxes support now in the greater community - federal childminding assistance, the dole, legal aid. The Universities could provide them through their own bureaucracy, but in their own assessment it is more efficient to get the students to provide it themselves. Since you have dealt with that bureaucracy, I imagine you won't find this a surprising conclusion. Possible reasons have already been pointed out - the students know what they need, provide voluntary labour and employ other students.

Yet, you object to paying a fee to a "Student Union". To me it looks like you are objecting to the way the services are charged, as opposed to the actual provision of the services. If so you are effectively saying you want the services provided in a less efficient way for purely idealistic reasons. Its an argument I have no sympathy for. In my utilitarian world, arguing we should not help the less fortunate students at all would be marginally easier to sustain. But I bet that like me, you can't bring yourself to do it.

RStuart - six years since I was a Uni student...
1. I accept your emotive language point.
2. I didn't say Unis funded from taxes couldn't impose fees - I queried its acceptablity. Eg I consider Education essential, public hospitals don't impose fees on public patients. Police don't require fees to investigate crime. Firemen don't refuse water until you pay.
3. Yes, Unis impose additional fees - but user-pays. Car-parking is an example. Unis don't impose HECS. I don't recall tuition fees.
4. Query Govt funding childminding (cf the tax treatment of private expenses essential to work, eg travel to and from; business suits etc) but this also goes to the key issue - we accept (broadly) the power of Govt to impose tax and fund these things - do we allow other entities the same power and, if so, to whom, why, and how? Why Unis?
5. I have no problem paying a 'Student Union', provided I see the value in doing so. For example, I used the Ref and the Second-hand bookshop, vending machines, gym et al at Uni and was happy to pay for that. I didn't use other 'services' and was not happy to pay for them.
6. You suggest I wanted services provided in a 'less-efficent way'. Did you think I wanted them provided by the Uni rather than the Guild? If so, not true. The question is, should those services be provided at all and, if so, who should pay?
7. I'm not sure I agree that provision of services by the Uni is less efficient than provision by the Guild (or that provision on a user-pays basis is less efficient than by a broad fee). Can you tell me why you think it is less efficient?

J S Mills: "Unis don't impose HECS."

True, the government does. But that is a bit of a red hearing. HECS is a source of funding for the Uni's. It is irrelevant which particular government department gets the job of collecting it.

J S Mills: "The question is, should those services be provided at all"

So you are prepared to say that. Well done. I take it this means you are against the government funding the education related expenses of the less fortunate - not against the Student Union per se. Unlike the other silly arguments about banning "Student Unionism", that makes sense. It is a defensible if extreme viewpoint. I disagree, but I am not going to debate it here.

J S Mills: "I'm not sure I agree that provision of services by the Uni is less efficient than provision by the Guild (or that provision on a user-pays basis is less efficient than by a broad fee). Can you tell me why you think it is less efficient?"

Apart from the reasons already given repeatedly in this tread - like the students providing free labour? Well, the Universities said it themselves at the time. Of course it would be in their interest to say so, so perhaps you don't believe them. But given your apparent political viewpoint I am surprised you are suggesting a government funded bureaucracy would be more efficient than motivating people to help themselves. This is in essence the social "trick" the Student Union pulled off.

JS Mill If you have a look at the way taxpayer services are run you will find that there are so-called core-services and non core services. The core services are fully funded. However, in many instances for the particular service to be of any value to the consumer they also need to supply non-core services. Sometimes these can be funded on a use pays basis eg if you go to a sporting venue for a big event you will find a police presence. The cost of that police presence is absorbed in your ticket price for the police will charge the venue a fee for both crowd and traffic control. In other instances the nature of the services are so broad that you will be charged a flat fee to enable the institution to supply those services to whomsoever may need them. Thus public school fees are used to fund all manner of things for example in some schools they are used to subsidise school excursions.
What happens in universities is, in reality, no different. Your objection seems to stem from the fact that the union fees are student administered. I am afraid that people like me are partly to blame for that. When I started university the union fees were collected by the university and administered by the universities. They employed someone to manage the facilities and that person was accountable not to the students but to the Vice Chancellor. In the late sixties and early seventies there was a nationally co-ordinated campaign for students to manage that money themselves. By about 1974 it became the norm for the students to have control over the operation and management of the unions.
When I came back to do some study about 5 years ago I felt that the Student union was run in much the same way as it had been before the student “takeover” – the bean counters were very much in charge and there was very little, if any, serious student activism but perhaps I judge this student generation too harshly