Treasury View of Higher Education – Part 2

The second of two papers on the Treasury and English higher education has been published as a chapter in a new free e-book from the Political Economy Research Centre at Goldsmiths. It is titled Forging Economic Discovery in 21st Century Britain and includes contributions from Johnna Montgomerie (editor), James Meadway, Will Davies, Andrew Gamble and others.

‘The Treasury View of Higher Education: Student Loans, Illiquid Assets & Fiscal Control’ is the companion to ‘The Treasury View of Higher Education: Human Capital Investment’ which was also published by PERC as a working paper.

The new paper offers a short, more speculative overview of the significance of my recent long studies of student loan accounting and budgeting (last month’s HEPI pamphlet) and attempts to sell student loans to pension funds and insurance companies (March’s London Review of Books article).

It explores that material through two quotes:

• Roy Harrod’s comment that the ‘discount rate’ (used to give a value today to projected future income) is the ‘polite expression for the rapacity’ which the present shows towards the generations yet to come.
• And Rothschild’s advice to government in late 2011 that ‘capitalism is suspended’.

Errata

Unfortunately a couple of errors crept into the article during the editing process. On page 51, two references to ‘PSND’ should be to Public Sector Net Borrowing. The final two paragraphs should read:

Student loans do not impact directly on Public Sector Net Borrowing PSND or the current measure of the deficit, except for associated interest payments to creditors. However, student loans do figure in the Public Sector Net Cash Requirement, which is the measure of the additional cash government needs annually to finance itscommitments. This requirement is raised by selling gilts and so drives the level ofpublic debt: each year’s cash requirement adds to that stock.

Table 1 illustrates those flows for this year and the next five for the UK overall. My point is not to stress the expense of higher education funding, but to note that the ‘asset-structure’ of loans is formally isolated. These flows are separate, and additional, to PSNB PSND or the Current Balance currently used as the basis for the preferred ‘deficit’ measure.