Expansion of private providers – 2013/14 & 2014/15

On 29 January, in a written answer to a parliamentary question tabled by Liam Byrne, David Willetts made the following statement:

The estimated cash expenditure by financial year is (i) £400 million in 2013-14 and (ii) £600 million in 2014-15. We do not estimate a specific RAB charge for students at private colleges. Our current estimate of the RAB charge across all full-time undergraduates is around 40%.

Byrne asked about ‘the amount spent on student loans for students at private colleges’. Willetts has provided figures for ‘cash expenditure’. This is confusing in two ways: first, because expenditure would normally be taken to include spending on maintenance grants and estimated loss on loans from non-repayment (‘RAB’); second, because that estimated loss is not cash.

Still, let’s assume that’s what Willetts’s answer indicates – BIS’s budget will absorb £400m of expenditure in the current year relating to students at private providers, and £600m in 2014/15.

That represents a further massive expansion.

In 2011/12, the equivalent expenditure figure was £60m. £30m in grants & £30m RAB.

In 2012/13, it was £175m. £85m in grants & £90m RAB  (Please note that this last figure do not tally with those released by the Student Loans Company. The £175m is a revised figure in circulation from October and is higher than those in the official ‘first release’.)

You might have an inkling now as to why emergency cuts to the BIS budgets for 2014/15 and 2015/16 are subject to ongoing wrangling at the highest levels of government.  No official explanation has been provided for this ‘major fiscal challenge’. But here’s the best guess as to where to look – that overspend has to have consequences.

What’s going on in the private sector is spilling over into the budgets for the established universities.

Update – Sat 8 Feb

Even if the figures offered by Willetts relate solely to loan outlay in cash terms, they still represent a sizeable increase on the most recent years. In 2011/12, £90m of loans were issued to these students, in 2012/13 circa £250m.

Prior to the publication of the 2011 White Paper, I wrote an article on ‘new providers’ which outlined the threat of very rapid growth with this sector being ‘nurtured’ by government. It probably read quite speculatively three years ago. Less so now.

Update 10 Feb

I have since spoken to the BIS press office who have clarified the statement. See this new post.