Today’s announcement on the sale of income-contingent student loans has been a long time coming. In fact it has been a decade since the Labour government passed the Sale of Student Loans Act 2008 and there have been numerous delays in the years since.
We can expect acres of newsprint and lots of protests. Other countries, notably Australia, have looked at selling off their loans but have shied away from it afterwards. The student movement have opposed any sale, as have some vice chancellors (though others have looked keen to buy their own loan book). But, as on so much else, his detractors and his fans must admit that Jo Johnson has managed to make significant progress. Despite, the rocky road the Higher Education and Research Bill is experiencing in the House of Lords, the Minister is ploughing on with other big changes alongside.
What the Government is doing may make some sense. Why should it keep the loans forever on its books? Why shouldn’t the demand of pension funds for long-term income streams be satisfied if there are no clear losers? Why shouldn’t we look for imaginative ways to reduce the national debt?
Debates about the sale of student loans have been plagued by misinformation. One particular issue is the idea that someone could buy the loans and then change the terms and conditions so graduates end up paying more. In fact, the terms and conditions have to be nailed down at the point of sale because otherwise the buyer has no idea what it is they are buying and will not part with their money. The Government have told me that the terms of the sale mean ‘investors would have no right to change any of the current loan arrangements or to directly contact people who hold the loans’. Moreover, as we have seen in recent times, the terms can be changed when the loans are on the government’s books – the repayment threshold was going to go up in line with earnings, but is now fixed at £21,000. So the public debate on terms and conditions is in the realm of alternative facts.
What really matters for the long term are, first, whether taxpayers get value for money. We saw in Gordon Brown’s sale of the government’s gold and also in Vince Cable’s sale of Royal Mail how hard that is to achieve and how controversial it can be if the price paid comes to seem too low. Ministers will say the underlying legislation only allows sales which are good value for money but it takes time to know if that has happened in practice. A second important question is what might happen if the government should ever come to feel that it can afford to ease the debt burden on graduates. I have argued elsewhere that this could be a theme of the 2030 general election. If that were ever to happen, it probably became a whole lot messier today.
Finally, one interesting historical nugget from today’s announcement is that it is Barclays who are working with the Government to sell off the loans. Had Barclays been as bold in the 1980s as they are today, this loan sale would never have happened. The Student Loans Company was originally devised to be owned by the ten clearing banks in the UK, but they backed down in the late 1980s in the face of student protests and the Company came to be owned by Government instead. So, today’s announcement also signals another important change: the much reduced power of the student movement to change the priorities of Britain’s lawmakers.