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Willetts in Hansard – ‘RAB is now 35-40%’

December 10, 2013

Yesterday in Parliament:

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 But that’s on an estimated annual outlay of £10bn – that’s already out-of-date.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.

  1. If you were nice enough to buy David Willetts an HP 12-C calculator for Christmas, he could learn that his non-repayment estimate has already increased not by 5-10% but by 33%. Didn’t they all talk about this before Osborne announced the removal of the student enrollment cap? It feels like there’s no process at all behind this .

    • confusing percentages and percentage points is pretty common. Here he’s using percentage points because he has the idea that a 1 percentage point ‘uptick’ equates to 100m additional spending annually (based on loan outlay of 10billion pa).

  2. Cicero permalink

    Interesting that he says that the increase will affect the “net expenditure and balance sheet” of BIS, but not the current deficit or PSND. That means that BIS will be forced eat the loss by cutting its budgets elsewhere. What will they cut?

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