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Osborne before the Treasury Select Committee

December 13, 2013

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.

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