Saving from student loans at risk

Universities responded with alarm this week to news that student tuition fees was not extra money for them

A ROW is brewing between education ministers and the Office for National Statistics about student loans.

Baroness Blackstone has said that she believes including student loans in the Public Sector Borrowing Requirement is arcane and should be scrapped. If she gets her way, it would free up hundreds of millions of pounds more for education.

But a spokesman for the Office for National Statistics, an independent government agency, said this was still under review. He said: "The Office for National Statistics is still looking at various proposals; some of them will reduce the public sector borrowing requirement and some of them won't.

"The central issue is who bears the risks. If the Government still has a role to play and it is not farmed out to the private sector completely, one has to assess what the implications would be.

"It is by no means clear which proposal we are going to take up. If the Government still carries the risk and has control of debt collection we cannot take it out of the PSBR."

Under present rules, student loans are included in the PSBR in exactly the same way as grants. Baroness Blackstone wants to change this so that only subsidies and expected non-repayment of student loans are included in future.

The new system would make the education budget appear millions of pounds healthier, particularly when maintenance grants are changed to loans next year.

The ONS says it will take the ultimate decision because it is responsible for classification.

It is anxious not to jeopardise its good relationship with the International Monetary Fund by tinkering with accounting systems.

A spokesman for the Department for Education and Employment said the Government was planning to change its accounting rules soon and the decision about whether to take student loans out of the PSBR would be a joint decision between the ONS and the Treasury.

Iain Crawford, who works with Nick Barr at the London School of Economics' centre for educational research and will give evidence next month to the select committee on the Dearing report, said New Zealand, Australia and the Netherlands had already set precedents for this kind of accounting.

"Civil servants have been trying to get this done for ten years," he said. "It now has to become a political battle."