UK government sold student loans ‘for too little return’

The UK government’s sale of student loans “is an example of selling off assets for short-term capital gain” without showing how the deal is in the “long-term interests of taxpayers”, according to MPs on the Public Accounts Committee.

The PAC report, on the sale of pre-2012 student loans to private investors for a £1.7 billion lump sum in December 2017, says that the government’s own analysis showed that the same amount would have been recouped via repayments in only eight years – and that a further £1.6 billion would have come in over the next 25 years.

The report – for which MPs gathered evidence from government officials in September and October – criticises the government for taking a “narrow focus” on reducing public sector net debt, a focus that “often makes a sale look positive, at any price, regardless of the true impact on the public’s finances”.

Meg Hillier, the Labour MP who chairs the PAC, said: “Government will need to learn quickly from the weaknesses of this sale if it is to secure the best deal for taxpayers in future.

“When public assets are gone, they’re gone – in the case of this first student loans sale, for too little return.”

The government said in October this year that another tranche of pre-2012 loans would be sold off.

“This is only the first in a series of sales, and as the government has now announced a second sale it must think carefully about whether its modelling is sufficiently developed to do justice to the real long-term value of these public assets,” says the PAC report.

The government’s December 2017 sale involved selling the rights “to an estimated £3.3 billion of future repayments for a £1.7 billion lump sum now”, says the report. “But it is an example of selling off assets for short-term capital gain, without demonstrating how the deal is in the best long-term interests of the taxpayer given the scale of future repayments that have been sacrificed.”

HM Revenue & Customs and the Student Loans Company, alongside UK Government Investments, will continue to administer the loans and collect repayments.

Recommendations from MPs on the PAC include that before any further sales, “the Treasury and the Department [for Education] need to articulate how the transaction fits into the strategy for the whole loan book, and how it improves public sector finances over the long term”.

Another recommendation is that “government must develop public sector finance objectives for future sales that go beyond the simple focus on reducing public sector net debt before any more asset sales are concluded to give a true picture of the value of the sale to the public purse”.

The report also raises concerns about a “lack of transparency” as the government has not disclosed the identity of the investors who bought the loans. For future sales, “there must be a presumption to release investor names” unless there is evidence of risk to value for money in doing so, the MPs say.

A government spokeswoman said that ministers were “confident that we achieved value for money for taxpayers from the first sale of student loans. As the National Audit Office has found, we received more for the loans than the value to government of retaining them, further strengthening the public finances.”

john.morgan@timeshighereducation.com