The costs of revisions to estimated repayments for existing loans

Tucked away on page 201 of the Supplementary Estimates 2013-14 is the first indication of the impact of revisions to estimates on student loan repayments.

BIS applied to Treasury and Parliament for an additional £5.455billion allocation to its Departmental Expenditure Limit (in ‘non-cash’) to cover new lower values for the loans already issued (that sit on the department’s books). In the previous three years to 2012/13 inclusive, similar claims were made for a total of £7billion.

Corrected

That £5bn figure will be used to cover downwards revisions to the valuations of loans issued before this financial year (2013/14). If we leave aside the question of the value of repayments (c.£1.8bn according to the OBR) and interest on outstanding balances (1.5% for the majority of loans), what this means is that the loans thought to be worth £31bn (on a face value of £46bn) last year may now be revised down to £26bn.

We will get the audited accounts some time in the summer.

Further down the document we can see that £0.495billion was needed for a new student loan provision in ‘resource AME’. This is to cover the revaluation of loans issued in 2013/14 against their ‘target RAB’. (See previous post on the new accounting conventions).

The ‘cost’ of lower estimates for graduate repayments is therefore £6billion today.