Student Tuition Fees and Maintenance Loans

Lord Forsyth of Drumlean Excerpts

Tuesday 18th December 2018 Lords Chamber

[Lord Forsyth of Drumlean (Con)]

My Lords, is my noble friend aware that this was a recommendation of the Economic Affairs Committee of this House? One of the issues it focused on was the effect of counting the interest on student loans as income, which flattered the deficit and therefore provided some explanation as to why students were being charged as much as 6.3% on their loans. Given that we now have honest accounting on this matter, can we look forward to the Government implementing the committee’s recommendation that there be an immediate cut in the interest rate for student loans to 1.5%—the cost the Government bear in borrowing this money?

[Lord Bates]

We of course looked at the report, as I am sure the ONS did, and its recommendations were influential. I take the point my noble friend makes about the interest rate at one level, but at another, it is graduated so only those earning more than £45,000 a year will pay the full 3% above RPI. Those earning over £25,000 would pay only RPI. All of these things can be looked at in the post-18 education review, which is under way and due to report next year.

--- Later in debate ---

[Lord Bates]

Perhaps I misunderstood the question—I do apologise. I thought the noble Lord had asked what the effect was on the programme of sales of student loans—to which the answer is that there is no change. He is asking a different question: what about loans that have already been sold and will there be an effect? Of course, for those loans the value of the assets will be a matter for the institutions and organisations that have purchased the loans to account for in the correct way on their balance sheets. If that is still not the correct answer, I will be very happy to meet the noble Lord and write to him to clarify.

[Lord Forsyth of Drumlean]

My Lords, can my noble friend confirm that, had this change not been made, in 2050 the write-off in cash terms on the student finance book would be £1.2 trillion?

[Lord Bates]

I cannot confirm that number: I will have to look at it. The reality with these things is that we set them out, we follow the rules set down by the ONS and the OBR and we report accordingly in the Budget Statements.