Ten days ago, the Government’s response to the Business, Innovation and Skills Committee’s report on Student Loans was published. It received some press coverage at the time, for example from Times Higher Education, the BBC and the Guardian.
They all rightly focussed on the Government’s refusal to accept Recommendation 11, which called ‘for an urgent review of the sustainability’ of the undergraduate finance model. Given the mounting speculation that the Government might seek to extend something akin to the current undergraduate finance model to taught postgraduates, not to mention the proximity of the general election, Ministers’ rejection of a review is unsurprising but still newsworthy.
Yet there are some other interesting points in the Government’s response which are worth looking at too, not least because the original report and the new response cover a lot of ground.
Here’s three small observations (but there’s lots more than could be said).
1. The critiques of the Government’s original position on the RAB charge, by Hepi among others, are now pretty much accepted:
- BIS Committee – Recommendation 1: The evidence that we have received, both in this inquiry and previous inquiries, suggests that there has been a persistent miscalculation of the Department’s estimates of the RAB charge. The resulting holes in the budget are only just beginning to materialise. Forecasters, particularly HEPI, had and continue to have a more accurate picture of repayments. Despite this, the Department has ignored their concerns. We recommend that, as a matter of urgency, the Department conducts a full review of all the financial assumptions underpinning the Department’s RAB model. (Paragraph 17)
- Government – As a result of the recommendations of the Committee and the National Audit Office, we have updated the model for student loan repayments and the new model has been reviewed both internally and by the NAO as part of the process for producing the BIS accounts. We have taken the concerns of the sector into account when producing these new models. Forecasters such as the IFS have conducted independent analysis and produced results that are broadly in line with those of the Department. In order to make the process more transparent, we have published a simplified version of the new loan repayment model on the GOV.UK website.
2. Arguably, there is a certain complacency on the recovery of loans from EU students in the Government’s response. This issue was raised by the committee in their original report and their concerns built on some of Hepi’s recent work that discusses the issue. But in the Government’s response, the question of whether to make repayments for those who move abroad more like mortgage payments, where there is a fixed sum each month irrespective of income, is largely dodged. The Government simply claims the current system ‘already has a number of features in common with the Mortgage-style arrangement’, which overstates reality. Moreover, the Government try to lessen concerns by pointing out that ‘Over 80% of borrowers known to be overseas are either repaying, or their income is below the relevant repayment threshold. … The majority of borrowers who are overseas are UK nationals.’ This is a little complacent because EU students studying here only typically became eligible for tuition-fee loans in 2006, which means they only became liable to start repaying typically in April 2010. So the data is thin and may well change. As the Times Higher Education point out this week, the issue of EU students’ entitlement to loans will become bigger when the student numbers cap is removed – as it will if and when postgraduate loans are made available to home and EU students.
3. There is a nice example of the difference between how things sometimes look from the perspective of Whitehall and how they look from the outside world. The Government describes the student loan declaration form that students have to sign as ‘a clear statement’ before giving the following extract as part of their evidence:
- I acknowledge and agree that any loan(s) made to me by the Secretary of State for Business Innovation and Skills, “the lender” (which includes any persons exercising functions on behalf of the Secretary of State pursuant to section 23(4) of the Teaching and Higher Education Act 1998 as amended from time to time or successor legislation, “the Act”) will be on the terms set out in these declarations and in Regulations which are made under section 22 of the Act as amended from time to time.
I suspect Jim Royle might have had a good response had he been told that was ‘a clear statement’.