Asked by: Gregory Campbell (Democratic Unionist Party - East Londonderry)
Question to the Department for Education:
To ask the Secretary of State for Education, whether she has made an estimate of the value of tuition fee repayments that were written off due to lower graduate salary levels between 2020 and 2023.
Answered by Luke Hall - Minister of State (Education)
As education is a devolved issue, the following answer concerns the student finance system in England only. The student finance systems of the devolved administrations differ from that of England.
The department makes regular assessments of the expected write-off amount of student loans issued in each financial year. These forecasts are published on GOV.UK.
The headline statistic Resource Accounting and Budgeting (RAB) charge is the percentage of the loans (both tuition and maintenance) outlaid to students in a given financial year, that the government expects to subsidise, i.e. write-off.
Repayments are calculated based on income, not on the amount borrowed. Borrowers earning less than the repayment threshold repay nothing at all, and loans are cancelled at the end of the loan term with no detriment to the borrower. The Student Loans Company will also cancel a borrower’s liability to repay a loan if the borrower dies or receives an eligible disability-related benefit and because of the disability is permanently unfit for work. It is not possible to disaggregate the pure impact of salary levels of borrowers (graduates and non-graduates) on loan write-offs.
The latest publication of the student loan forecasts for England was published in June 2023, and will be updated at the end of June 2024. The RAB charge for full-time undergraduate higher education (plan 2) loans issued in the 2022/23 financial year was forecast to be 28%.
Student loan repayments volumes are sensitive to the wider economic environment. Earnings of borrowers (both graduates and non-graduates), interest rates, inflation rates, repayment threshold freezes, policy changes and modelling improvements, all influence the RAB charge forecasts. For these reasons RAB forecasts from the past are not directly comparable year-on-year.
Asked by: Baroness Taylor of Bolton (Labour - Life peer)
Question to the Department for Education:
To ask His Majesty's Government when they expect to publish an update to the calculation of the resource accounting and budgeting charge for student finance; and whether they propose to make any changes to the basis for calculation used at the time it was last updated.
Answered by Baroness Barran - Parliamentary Under-Secretary (Department for Education)
In the 2022/23 financial year, the Resource Accounting and Budgeting (RAB) charge was £5.5 billion, or 27% of the £20.0 billion of loans issued that financial year. The RAB charge for 2023/24 will be published in the department’s 2023/24 Annual Report and Accounts this summer.
Of student loans issued in the 2023/24 financial year, the government is expected to subsidise:
These forecasts are subject to change. The final RAB forecasts for 2023/24 will be available as part of the annual student finance statistical publication, released in June 2024.
The RAB charge, the government subsidy anticipated on student loans issued in any particular financial year, is calculated as the present value of student loan outlay less expected future repayments, in accordance with relevant International Financial Reporting Standards and guidance from HMT’s Government Financial Reporting Manual (FReM).
The FReM requires future repayments of student loans to be discounted at the higher of the intrinsic rate and HMT’s discount rate, based on analysis of real yields on UK index linked Gilts and are specifically appropriate to central government.
The FReM is kept under constant review. It is updated to reflect developments in relevant standards and best practice.
Asked by: Baroness Taylor of Bolton (Labour - Life peer)
Question to the Department for Education:
To ask His Majesty's Government what is the current value of the resource accounting and budgeting charge for student finance.
Answered by Baroness Barran - Parliamentary Under-Secretary (Department for Education)
In the 2022/23 financial year, the Resource Accounting and Budgeting (RAB) charge was £5.5 billion, or 27% of the £20.0 billion of loans issued that financial year. The RAB charge for 2023/24 will be published in the department’s 2023/24 Annual Report and Accounts this summer.
Of student loans issued in the 2023/24 financial year, the government is expected to subsidise:
These forecasts are subject to change. The final RAB forecasts for 2023/24 will be available as part of the annual student finance statistical publication, released in June 2024.
The RAB charge, the government subsidy anticipated on student loans issued in any particular financial year, is calculated as the present value of student loan outlay less expected future repayments, in accordance with relevant International Financial Reporting Standards and guidance from HMT’s Government Financial Reporting Manual (FReM).
The FReM requires future repayments of student loans to be discounted at the higher of the intrinsic rate and HMT’s discount rate, based on analysis of real yields on UK index linked Gilts and are specifically appropriate to central government.
The FReM is kept under constant review. It is updated to reflect developments in relevant standards and best practice.
Asked by: Lord Johnson of Marylebone (Conservative - Life peer)
Question to the Department for Education:
To ask His Majesty's Government what is their most recent estimate of (1) the Resource Accounting and Budgeting charge, and (2) the estimated cost to Government of their support for the student finance system, based on future loan write-offs and interest subsidies, (a) in net present-value terms, and (b) as a proportion of the initial loan outlay.
Answered by Baroness Barran - Parliamentary Under-Secretary (Department for Education)
In the 2022/23 financial year, the Resource Accounting and Budgeting (RAB) charge, which is the government subsidy on student loans, was £5.5 billion, or 27% of the £20.0 billion of loans issued that financial year.
Of student loans issued in 2023/24, the government is expected to subsidise about £5.6 billion, or:
These forecasts are subject to change. The next statistical publication on student finance forecasts, which will contain the final RAB figures for the 2023/24 financial year, will be available at the end of June 2024.
Asked by: Lord Mendelsohn (Labour - Life peer)
Question to the Department for Education:
To ask His Majesty's Government what assessment they have made of the impact of interest rate charges on Government student loan financing, following research by the Institute for Fiscal Studies which showed that higher interest rates will add more than £10 billion per year to the cost of England’s student loan system.
Answered by Baroness Barran - Parliamentary Under-Secretary (Department for Education)
Student loans are valued in the department’s annual accounts in line with the International Financial Reporting Standard 9 and set out in The Government Financial Reporting Manual which is attached.
Under which where future cash flows are discounted to measure the fair value of a financial asset, this should be done using the higher of the rate intrinsic to the financial instrument or the HMT discount rate. HMT set the discount rate annually based on a 10 year rolling average of gilt yields. For student loans the intrinsic rate would be the discount rate that gave a Resource Accounting Budget (RAB) or stock charge of 0%, so the HMT discount rate is used provided the RAB charge is greater than 0%. Should the HMT discount rate result in a RAB charge calculation giving a negative value then the intrinsic rate is used instead, meaning that that RAB charge will take a value of 0%.
The most recent forecasts for the student finance system can be found here: https://explore-education-statistics.service.gov.uk/find-statistics/student-loan-forecasts-for-england/2022-23.
The net present value of future repayments was calculated by discounting all future repayments at a rate of RPI -1.3% per year until the end of financial year 2029/30, and -0.2% per year from financial year 2030/31, to the same point in time as the loan outlay or loan balance. This is the discount rate for financial instruments set by HMT in 2022 and is intended to reflect of the cost of government borrowing. The most recent student loan forecasts using the 2023 discount rate set by HMT will be published at the end of June 2024.
The department has carefully assessed the impact of changes and published a full and comprehensive analysis in the Higher Education Reform and Consultation Document Equality Impact Assessment, which is attached.
The student loan repayment system under Plan 5 is progressive, with repayments being positively correlated with lifetime earnings. The highest earners make the largest individual contributions to the system overall, and the lowest earners are required to contribute the least.
Lower earners, whether male or female, are protected. If a borrower’s income is below the repayment threshold, they will not be required to make any repayments at all. At the end of the loan term, any outstanding loan debt, including interest accrued, will be written off at no detriment to the borrower. No commercial loans offer this level of protection.
The department will continue to keep the student finance system, including repayment terms, under review to ensure that it remains sustainable and delivers value for money for students and the taxpayer.
Asked by: Lord Mendelsohn (Labour - Life peer)
Question to the Department for Education:
To ask His Majesty's Government what assessment they have made of the impact of changes to the student loan repayment system, introduced in August 2023, on female students.
Answered by Baroness Barran - Parliamentary Under-Secretary (Department for Education)
Student loans are valued in the department’s annual accounts in line with the International Financial Reporting Standard 9 and set out in The Government Financial Reporting Manual which is attached.
Under which where future cash flows are discounted to measure the fair value of a financial asset, this should be done using the higher of the rate intrinsic to the financial instrument or the HMT discount rate. HMT set the discount rate annually based on a 10 year rolling average of gilt yields. For student loans the intrinsic rate would be the discount rate that gave a Resource Accounting Budget (RAB) or stock charge of 0%, so the HMT discount rate is used provided the RAB charge is greater than 0%. Should the HMT discount rate result in a RAB charge calculation giving a negative value then the intrinsic rate is used instead, meaning that that RAB charge will take a value of 0%.
The most recent forecasts for the student finance system can be found here: https://explore-education-statistics.service.gov.uk/find-statistics/student-loan-forecasts-for-england/2022-23.
The net present value of future repayments was calculated by discounting all future repayments at a rate of RPI -1.3% per year until the end of financial year 2029/30, and -0.2% per year from financial year 2030/31, to the same point in time as the loan outlay or loan balance. This is the discount rate for financial instruments set by HMT in 2022 and is intended to reflect of the cost of government borrowing. The most recent student loan forecasts using the 2023 discount rate set by HMT will be published at the end of June 2024.
The department has carefully assessed the impact of changes and published a full and comprehensive analysis in the Higher Education Reform and Consultation Document Equality Impact Assessment, which is attached.
The student loan repayment system under Plan 5 is progressive, with repayments being positively correlated with lifetime earnings. The highest earners make the largest individual contributions to the system overall, and the lowest earners are required to contribute the least.
Lower earners, whether male or female, are protected. If a borrower’s income is below the repayment threshold, they will not be required to make any repayments at all. At the end of the loan term, any outstanding loan debt, including interest accrued, will be written off at no detriment to the borrower. No commercial loans offer this level of protection.
The department will continue to keep the student finance system, including repayment terms, under review to ensure that it remains sustainable and delivers value for money for students and the taxpayer.
Asked by: Andrew Rosindell (Conservative - Romford)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what recent estimate his Department has made of the number of people who will become bankrupt as a result of the (a) loan charge and (b) associated activity.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
HM Revenue and Customs (HMRC) only ever considers insolvency as a last resort. Anyone who is worried about being able to pay what they owe should contact HMRC, who may be able to agree an instalment arrangement based on the individual’s financial circumstances. There is no maximum length for these arrangements.
Where people are facing insolvency, HMRC is not always the only creditor. Some individuals are declared bankrupt as a result of a non-HMRC debt and some individuals may choose to enter insolvency themselves based on their overall financial position. To date, HMRC has not initiated insolvency proceedings against any taxpayer solely for a Loan Charge debt.
As set out in the answer to PQ 17136, since 2022, HMRC has issued around 2,700 decisions under s.684(7A)(b) of the Income Tax (Earnings and Pensions) Act 2003 to disguised remuneration scheme users.
Asked by: Andrew Rosindell (Conservative - Romford)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many people have been issued section 684 notices by HMRC in relation to disguised remuneration schemes in the last 12 months.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
HM Revenue and Customs (HMRC) only ever considers insolvency as a last resort. Anyone who is worried about being able to pay what they owe should contact HMRC, who may be able to agree an instalment arrangement based on the individual’s financial circumstances. There is no maximum length for these arrangements.
Where people are facing insolvency, HMRC is not always the only creditor. Some individuals are declared bankrupt as a result of a non-HMRC debt and some individuals may choose to enter insolvency themselves based on their overall financial position. To date, HMRC has not initiated insolvency proceedings against any taxpayer solely for a Loan Charge debt.
As set out in the answer to PQ 17136, since 2022, HMRC has issued around 2,700 decisions under s.684(7A)(b) of the Income Tax (Earnings and Pensions) Act 2003 to disguised remuneration scheme users.
Asked by: Daisy Cooper (Liberal Democrat - St Albans)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, pursuant to the Answer of 21 March 2024 to Question 19192 on Tax Avoidance, whether it is his Department's policy to cease recovery of any liabilities incurred before December 2010 in cases where a taxpayer has not received an update for a period of 12 months or more from the initial date of an open enquiry or assessment.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
In the 2019 Independent Loan Charge Review, Lord Morse recommended that the Loan Charge should only apply to loans made on or after 9 December 2010. The Government accepted this recommendation.
Lord Morse was also clear that, for years before this date, where there is an open enquiry or assessment under appeal, HM Revenue and Customs (HMRC) should still have the ability to pursue the tax due under the existing rules. HMRC has proceeded on this basis and it is its policy to collect tax where it has the ability to do so.
As part of its overall compliance processes and its commitment to update taxpayers at least annually, all of these taxpayers should have received correspondence from HMRC in the last 12 months.
When HMRC opens an enquiry, the information sheet provided includes information about a taxpayer’s right to apply to the First Tier Tribunal for the enquiry to be closed. One of the grounds for making such an application is where there has been an excessive delay during which a taxpayer has not received any communication from HMRC.
Asked by: Daisy Cooper (Liberal Democrat - St Albans)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, pursuant to the Answer of 12 March 2024 to Question 17136 on Tax Avoidance, whether it is HMRC’s policy to seek to recover tax due for liabilities incurred before December 2010, where a taxpayer has not received correspondence relating to an open compliance check for longer than 12 months.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
In the 2019 Independent Loan Charge Review, Lord Morse recommended that the Loan Charge should only apply to loans made on or after 9 December 2010. The Government accepted this recommendation.
However, Lord Morse was also clear that, for years before this date, where there is an open enquiry or assessment under appeal HM Revenue and Customs (HMRC) should still have the ability to pursue the tax due under the existing rules. HMRC has proceeded on this basis.
HMRC continues to work with and support taxpayers to resolve all outstanding enquiries and assessments relating to their use of disguised remuneration (DR) loans, in accordance with their published DR settlement terms and HMRC’s Litigation and Settlement Strategy
As part of its overall compliance processes and its commitment to update taxpayers at least annually, all of these taxpayers should have received correspondence from HMRC in the last 12 months.