This morning, Danny Alexander, Chief Secretary to the Treasury, addressed the House of Commons. He set out the government’s investment plans for 2015 to 2020 as a complement to the day before’s Spending Round (which set departmental expenditure budgets for 2015/16).
…we will take action to sell off £15 billion worth of public assets by 2020. £10billion of that money will come from corporate and financial assets like the student loan book. And the other £5 billion will come from land and property.
Mr Speaker, government is the custodian of the taxpayers’ assets. When we no longer need them, we should sell them back at a fair price – not act like a compulsive hoarder.
No doubt the ‘hoarding’ analogy wasn’t meant to extend to student loans. But as has been discussed elsewhere (the latest being my appearance on the Keiser Report), any such sale will make a long-run loss for the government as they will be forced to subsidise any purchase.
The justification is found in the more detailed report accompanying Alexander’s statement, Investing in Britain’s Future.
6.11 The Spending Round therefore sets out the Government’s plans to go even further, setting an ambitious target for central government to deliver at least £15 billion of asset sales between 2015 and 2020. This will comprise at least £5 billion of land and property to support growth and drive efficiency, and at least £10 billion of corporate and financial assets, which will contribute to the Government’s aim to reduce public sector net debt, including proceeds from the pre-Browne Income Contingent Repayment student loan book.
This plan is consistent with what we have previously revealed about the Rothschild recommendations on how to best ‘monetise’ student debt – although the planned start date has been moved back by two years.
Those who have been following recent debates on the wonkhe website will see that the main justification is that such a sale would ‘reduce public sector net debt’.
There is no further detail as yet. The question is: how will such a sale be structured?
For more information on the background to sale, see my recent book. For discussion of Rothschild’s recommendations – changing the interest rate terms for graduates or ‘synthetically’ reproducing such a change – see my piece for False Economy.
Update
David Willetts ruled out the option of changing the interest rate terms for graduates in a parliamentary response last night:
The Government received proposals in 2011 from its advisers that the cap on interest rates on student loans should be removed as part of a possible sale of the loan book. The Government rejected these proposals.
The ‘Synthetic Hedge’ has not been ruled out as yet.
The Guardian have published my take on why the government is considering a sale of student loans given that many think it likely to be a bad long-term deal.
For a more technical explanation of the accounting behind student loans and how that affects the key public sector finance statistic of public debt, you can look at this post for wonke.com
It’s been a busy few days in the world of student loans.
Here’s a story I helped False Economy and the Guardian break last night – 100 000 hits so far. The Government’s ‘state of the art’ advice on selling loans, codenamed ‘Project Hero’, recommended changing the interest rates for existing borrowers in order to boost price and volume of sales.
Alternatively, the government could replicate such a change through providing purchasers with guarantees against particular combinations of RPI and bank base rates. This is termed a ‘synthetic hedge’. This would see public money shoring up a sale instead of repayments made by individuals.
See what you think:
Longer comment from me here on the False Economy site
I will be talking about the relevance of Art Education today at a Symposium organised as part of the Fine Art degree show at The University of Leeds.
For What it’s Worth: the Relevance of Art Education Today
Date: Monday 17 June
Venue: School of Fine Art, Old Mining Building, Woodhouse Lane.
Time: 12-5pm
The Global Economy and Business Research Unit at the University of Hertfordshire will be hosting an event for The Great University Gamble on Tuesday 4th June.
Venue: Room N003, Hertfordshire Business School, de Havilland Campus
Time: 5pm
Tea will be available from 16.00 onwards and wine and nibbles to follow lecture.
For those who are not staff or students at Hertfordshire, tickets can be reserved here.
A new campaign to promote part-time study in Further and Higher Education has been launched this week (Adult Learners’ Week).
Part Time Matters is concerned by the 40 per cent decline in part-time enrolments since 2010. That’s a drop of 130 000 (105 000 at undergraduate level).
You can support the campaign by writing to your MP and alerting him or her to Early Day Motion 93.
On a personal note, I have benefited immensely from being a Birkbeck student over the last two years.
Goldsmiths, University of London is hosting a public meeting against austerity on Thursday 16 May.
Venue: Room 137 in the Main Building
Time: 6pm
I will be speaking alongside:
- Aaron Kiely, NUS Black students’ officer
- Rachael Maskell, Unite national officer
- a Save Lewisham Hospital Campaign speaker
- Romayne Phoenix, Coalition of Resistance
Further details and directions can be found on this facebook page for the event.
When we put the book to bed in January, the official government estimates put the loss on student loans at 32 per cent. That is, for every pound lent the government expected to receive 68p by 2046 in present value terms.
In February, the figures were revised upwards to 34 per cent and today David Willetts appears to have said that the loss on loans is now looking like 35 per cent ‘and could rise further‘.
By 2014/15, around £10billion of loans will be issued per annum these small percentage point changes represent big changes – roughly £100m per ‘click’ according to government and independent assessments.
We are awaiting one important bit of data for this first year of the new scheme – the amount of loan taken out to cover tuition fees.
Hefce reported in March that the number of such loans had fallen ‘from 916,600 in 2011-12 to 907,600 in 2012-13’. But with average tuition fees looking significantly higher (c. £8,250) than the assumptions used in the modelling (£7,000-7, 500) this drop in uptake may presage a bigger amount borrowed than anticipated.
This data may already be factored in to the new figure of 35 per cent. June’s Fiscal Sustainability Report and the Student Loan Company’s annual report will be revealing.
The Global Economy and Business Research Unit at the University of Hertfordshire will be hosting an event for The Great University Gamble on Tuesday 4th June.
Venue: Room N003, Hertfordshire Business School, de Havilland Campus
Time: 5pm
Tea will be available from 16.00 onwards and wine and nibbles to follow lecture.
For those who are not staff or students at Hertfordshire, tickets can be reserved here.
I am at the early phase of some new research on moocs. The first publications have just appeared:
An article in today’s Guardian on where the returns of investment may be given the problems around public disinvestment from higher education.
A video of my contribution to last month’s initial ‘Dynamics of Virtual Work’ workshop in Darmstadt.
The video is in 4 Parts which begin half-way down this page. There you can also view Prof Ursula Huws – the project lead – giving an overview of the project.
Critical Education 