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The dog that hasn’t barked …

Why haven’t we yet had a ‘ministerial decision’ regarding the planned sale of student loans?

It’s October 1st and the first tranche of sale proceeds, roughly £2.5 billion, is scheduled to arrive by the end of this financial year: in March 2016.

That tranche is in the official and OBR projections along with four other equal amounts over the next five years; generating cash receipts of £11.5billion and helping George Osborne hit part of his fiscal mandate: to have public debt falling as a share of GDP by March.

A formal announcement was expected around the Summer Budget as the civil servant responsible has nine months to achieve the first sale once the green light comes from Sajid Javid.

I wrote to BIS in July asking about a potential delay and was told by a spokesperson:

“Subject to value for money, the Government expects to sell the first tranche of the pre-Browne income contingent repayment student loan book by the end of 2015-16.  Further public announcements will be made in due course.”

I went back again today – two months later – and it was confirmed to me that there was still no update.

OK. So not much of a story.

Except that these issues of cashflow and debt may shed light on why Javid is said to prefer a 40% cut to BIS’s budget in November’s Spending Review as opposed to a 25% one, with all that entails for research and the shape of the sector.

Especially as the changes to student finance for 2016/17 starters are likely to increase the cash outlay in the short to medium term (net cash requirement drives the change in public debt). This is because the new maintenance loans issued each year will be large than the level of grants.

By considering these potential changes to projected loan cashflows, we may better understand the pressures on other parts of BIS’s spending budgets.

New Picture

Table courtesy of the Office for Budgetary Responsibility

Queen’s University Belfast documentary

A film crew was at Queen’s University Belfast over the course of academic year 2014/15.

The first episode of the resulting three-part documentary was broadcast last night and is available on BBC iplayer.

It gives an interesting insight into the budgetary issues facing Northern Ireland’s universities and the new management initiatives at the university.

(Disclosure: I may make an appearance in future episodes outlining why England’s fee-loan regime is not the solution it might appear to be.)

Talks in September – Coventry & Nottingham

On the evening of Wed 16 September, I will be speaking at Nottingham Contemporary. My talk is ‘Researching Otherwise: reporting on Higher Education and universities’ and will review what it means to be a journalist writing about academia (and the investigative and research methods involved).

The talk is part of the three-day  series ‘End of Summer School’. The third evening is devoted to education.

I will speaking at Coventry University on Friday 18 September. My talk will be at the beginning of a day devoted to Critical Pedagogy & Activism entitled ‘Beyond the Neoliberal University.’ I will address the latest round of HE policy initiatives from the new government.

Time: 10-4pm

Venue: George Elliot Building

Details here

NCH – new company structure


some detail on the company structure at NCH and Tertiary Education Services

Originally posted on Critical Education:

Something bugs me about Anthony Grayling and the way he presents New College of the Humanities. Nothing is ever quite as it seems.

When the original company, Grayling Hall, was founded as a company limited by share back in July 2010 (note the date, before the Browne review was published) Grayling was one of two shareholders: the other was Peter Hall a strong opponent of public services who had previously sponsored David Willetts when he was in opposition.

Grayling Hall changed its name to New College of the Humanities Limited before the college was launched last summer. By far the largest shareholders, over 30 per cent of the company, are the Swiss family Ebstein who run the venture capital firm Meru AG based in Lucerne. They go unmentioned on the NCH website.

Private equity and venture capital is well served on the board Many of the illustrious…

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Guardian article on NCH


Relevant to today’s news that Southampton Solent will be validating degrees offered at NCH from next year. There’s no mention of this arrangement on NCH’s website, surprisingly only reference to ‘our degrees’.

Originally posted on Critical Education:

This Saturday’s Guardian featured a long article on New College of the Humanities.

It provided some information to supplement the recent analysis of the relevant accounts on here.

It suggests investment amounts to £9million ‘or so’ – I’d assessed it at £10m.

Recruitment for 2013/14 entry came to 65 students, raising the number of students to 121. I suspect this means that the confidence expressed in the accounts was misplaced:

“The directors are confident that the envisaged student intake in the financial year 2013 will more than cover the operating costs of the college and result in a profit being realised in the 2013 financial year.”

The Guardian expressed the same reservation: ‘there is no prospect of imminent profit’. Technically, as a non-profit distributing entity, the teaching college can only make surpluses which it must reinvest. Money moves out the college through the various fees it pays to…

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Government confirms preference for retrospective price hike on undergraduate study

A new day, a new development for student loans.

Or rather confirmation of something that’s been in the pipeline for a while. I first warned in 2012 that clauses in student loan agreements would allow governments to change the terms for existing borrowers.

Up until the election, ministers were denying that any such change would be needed as the fee-loan regime inaugurated in 2012 was ‘robustly sustainable‘.

Now the government has published a consultation which in order to put English undergraduate financing on ‘a sustainable footing’ proposes as its ‘preferred option’ to go back to all those who have started since 2012 (and taken out loans) and demand that they repay more.

The proposed mechanism is that the repayment threshold of £21000 be frozen at that rate for 5 years after 2016. Borrowers were promised from 2010/11 onwards that the threshold would rise in line with average earnings after 2016.

That change – ‘Option 1’ – will affect around 2million borrowers. A freeze for five years may not sound dramatic but if you expect a graduate starting salary of £30 000 or less the government provides examples to show that you will be £6 000 worse off in net present value terms (using a discount rate of RPI plus 2.2%).

loan impact

The very highest earners may actually benefit from this change as they will repay their loans more quickly.

The government estimates that this retrospective price hike will raise £3.2billion from the four cohorts who have experienced the £9000 fee (those who started between 2012/13 and 2015/16 inclusive). And their examples show it will be middle and lower earners who take the hit. This is consistent with the recent analysis published by Institute for Fiscal Studies.

The consultation closes on 14 October 2015. I urge you to respond as an individual if you are affected.

It’s fundamentally unfair to impose such changes after individuals have signed up for loans. The silence of the universities on this matter is worse than their craven behaviour in 2010. They don’t have any excuse now that the government’s own figures show the likely impact of what is proposed.

One other option is presented for consultation. This would see a five-year repayment threshold freeze introduced in 2020 for those starting after 2016/17. It would not involve a retrospective change in repayment terms.

A note on discount rate changes

I promised a short note on IFS’s analysis of discount rate changes. I have previously offered a brief explainer here on how discount rates work to convert a projected stream of cash payments – that come in over several years  – into a net present value today (or 2016).

The basic idea is that £1 000 received or paid in ten years’ time is not worth £1 000 today. Think about swapping some cash in your pocket for a promise from me to pay you £100 in 2025. How much might it be worth? A number of factors obviously come into play here, but when we are talking about the government and student loans a rate of RPI plus 2.2 per cent is used to discount all future repayments.

If RPI  is projected to be 1.8%, then the government discounts a payment made a year in the future by roughly 4% (1.018 * 1.022 – that ‘plus’ is a 2.2% increase on top of one of 1.8%). So a repayment of £1.04 made in 2017 is worth £1 in 2016 NPV terms. And so on – the rate is applied to a repayment received for each year away from 2016 that transaction is projected to occur (e.g. for five years away the rate would be 1.04 to the power of 5 – so £1.22 then would be worth £1 today).

It is this idea that underlies all discussion about how much the government ‘loses’ on student loans: it sends money out into the world today and repayments come back over the next few decades; how do you compare what is issues compared to what it gets back? What sum today (or in 2016) would be the equivalent of all the associated repayments generated over the lifetime of the loans?

Similarly, if we are discussing the impact of government changes to borrowers then the sums expressed, say £13 000 worse off, are also discounted in this way in reach an NPV figure using the government’s preferred measure.

In its analysis from Tuesday, the IFS considered a fourth measure proposed by government (subject to Treasury review). The discount rate would be brought into line with the government’s cost of borrowing. IFS suggest this might be around RPI plus 1.1%.

No change to projected repayments occurs here, only how those repayments are to be valued. Lowering the rate by which future payments are discounted would improve the overall value of the cohort’s aggregated repayments such that the government ‘contribution’ to HE drops dramatically from £7bn (after the other three changes) to £4.6bn. You can see how this presentational effect might alter the rather ill-informed debate we currently have around the sustainability of English HE (a drop in the resource accounting and budgeting charge or 15 percentage points according to IFS!).

Using a discount rate of RPI+1.1% (instead of RPI+2.2%) would increase the value of repayments from an average of £30,700 per student to an average of £37,900 per student in 2016 money when looking at the three policies combined.

That is, an additional £7 000 in value is recognised by altering the discount rate.

Read more…


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