Willetts in Hansard – ‘RAB is now 35-40%’
Mr Willetts: Estimates for the impact of RAB charge changes from 2016-17 are highly dependent on the future growth of earnings, and forecasts of spending for years beyond FY 2015-16 have not yet been made.
However, the impact of 1% pt increase in the RAB charge on loans issued in 2014-15 would be around £100 million. The impact of 2% pts increase in the RAB charge on loans issued in 2014-15 would be around £200 million. The impact of 5% pts increase in the RAB charge on loans issued in 2014-15 would be around £500 million.
Any change to the RAB charge will impact the net expenditure and balance sheet position in the Department for Business, Innovation and Skills annual accounts, but does not impact the current deficit or Public Sector Net Debt.
Mr Willetts: In March 2011 we estimated that around 30% of the value of post-2012 loans would not be repaid. We currently estimate that around 35%-40% of the value of these student loans will not be repaid, a change of 5%-10%. This is largely due to an increase in the value of the £21,000 repayment threshold relating to forecast earnings.
That means the expenditure needed to cover each year’s loan outlay has officially climbed by £500m to £1billion. But that’s on an estimated annual outlay of £10bn – that’s already out-of-date.
Will the promise to the Lib Dems be kept? That the repayment threshold will rise in line with earnings from 2017? The relevant regulations had still not been made at the end of 2012.