The Accounting and Budgeting for Student Loans

Higher Education Policy Institute have just published my pamphlet on student loans and their place in government accounts and budgets.

This is a somewhat technical overview of how loans figure in national accounts, headline fiscal statistics (the deficit and the debt), departmental accounts and departmental budgets.

Much of what is in there has been covered on this blog in piecemeal fashion over the last 18 months. It benefits from off-the-record interviews and seeks to shed light on two technical issues: the discount rate and the new budgeting conventions that were introduced retrospectively in 2013/14.

The bottom line is that the accounting and budgeting determines what we mean by the sustainability of the loan scheme in its current form – has BIS been given enough resource to cover projected loan non-repayment? What incentives does it face to control loan outlay and improve graduate repayment levels?

I argue that the new conventions in place mean that BIS will aim to freeze the maximum tuition fee at £9000 for this parliament for the majority of courses at the majority of institutions. In addition, BIS will consider very seriously freezing the repayment threshold at £21 000 after 2016, rather than increasing it in line with average earnings (as has been promised to borrowers).

One further aspect: George Osborne told the CBI last night that we was setting up a new company, a subsidiary of government, to be called UK Government Investments. This would be formed from merging UK Financial Investments and the Shareholder Executive. The latter are/were responsible for attempts to sell the student loans issued to those starting undergraduate study before 2012 (‘pre-2012’ loans or ‘pre-Browne’ loans). Osborne repeated the line that those loans would be sold as they ‘should be in the private sector’. That line needs challenging – the government will likely lose money on any sale and has formalised that by basing its central ‘value for money’ test in a way that would accept a price lower than its value for loans in its accounts.