Osborne before the Treasury Select Committee

George Osborne admitted to the Treasury Select Committee yesterday that the Autumn Statement failed to include the impact of lost repayments as a result of the loan sale.

Q: You are selling the student loan book. That just generates a one-off fee. Do your calculations take into account the long-term effects of losing this income?

No, they don’t says Osborne. The Treasury figures just look at the immediate costs. The OBR looks at the long-term consequences.

The implication that this is  a long-term matter is incorrect; even for his ‘scorecard period’ the graduate repayments sold to purchasers amount to £1.7billion. If he is still claiming that the change in cash outflow as a result of additional grants and loan outlay will be covered by net sale proceeds over 2013/14 to 2018/19, he may just be right. (‘Osborne says there are two costs: grants, and borrowing money to lend to students.This is a cash flow issue.’)

But once 2019/20 is included, he’s wrong.

Moreover, he cannot continue to maintain the Autumn Statement’s claim that this policy will also reduce Public Sector Net Debt over the period.

Here’s a quote I gave to the Guardian yesterday:

How will the planned expansion of undergraduate places will be funded after 2015/16? We don’t have the details yet: setting out policies using gross, rather than net, proceeds is incompetent. If you sell the loans, you no longer receive the associated income stream. That should be obvious.

Beyond 2019/20, there are no more sale proceeds, but income will continue to be £1billion lower than previously estimated. What happens then? This is hit-and-hope policy making.

Higher Education deserves better – a clear, sustainable financing solution without gimmickry.

I could have added: not only is income lower, but you’ve also got those additional places to fund.