Question to the Department for Education:

To ask the Secretary of State for Education, what assessment she has made of the potential impact of increasing the maximum level of maintenance loan that students can take out on public sector net (a) debt and (b) financial liabilities.

The department publishes forecasts annually for higher education and further education student loans in England. The published forecasts include assumptions that fee caps and maintenance loans will increase annually by RPI All Items Index Excl Mortgage Interest (RPIX). These assumptions are agreed with a range of stakeholders, including HM Treasury (HMT), the Office for Budget Responsibility (OBR) and the National Audit Office. These forecasts are available here: https://explore-education-statistics.service.gov.uk/find-statistics/student-loan-forecasts-for-england.

These assumptions in the baseline forecast mean the policy to apply inflationary increases to fee caps and maintenance loans in the 2025/26 academic year is equivalent to the baseline forecast, so there is no additional cost on either public sector net debt or financial liabilities when compared to the published figures, which are included in departmental accounts and provided to HMT.

Any increase to loan amounts, whether on maintenance or fee loans, compared to the baseline would increase public sector net debt (PSND) and public sector net financial liabilities (PSNFL). Student loans affect PSND by changing the government’s cash balance. The change in PSND is calculated as outlay (payments to students and providers) minus repayments. PSNFL includes the portion of student loans expected to be repaid and is calculated as PSND minus the modified loan balance. The annual increase in net debt would be equal to the increased cashflow, so the same as the increase in outlay in the near future.

In the context of student loans, public sector net financial liabilities are most affected in the short term by the proportion of the additional outlay the department forecasts will eventually be written off. As such, the impact of increased loan amounts would be smaller on net financial liabilities than on net debt.

The OBR was created in 2010 to provide independent and authoritative analysis of the UK’s public finances. The OBR’s approach to scrutinising each measure on HMT’s scorecard and incorporating these into its forecast is set out in its ‘Briefing paper No.6: Policy costings and our forecast’, which is available here: https://obr.uk/docs/dlm_uploads/27814-BriefingPaperNo_6.pdf.

Inflationary increases to fee caps and maintenance loans are already included in the baseline forecast provided to the OBR, so no policy costing was necessary in this case, and my right hon. Friend, the Secretary of State for Education, has had no discussions with the OBR on this matter.