Accounting on the never-never

Alan Thomson explains what the government's comprehensive spending review could offer further and higher education

STUDENT loans could be the key to CSR cash for universities and colleges if the government exploits the opportunities created by the switch to resource accounting.

By changing Treasury accounting procedures annual expenditure on student loans could be reclassified as a recoverable balance sheet asset rather than non-recoverable spending. It has been estimated that this might free up to Pounds 1 billion a year for investment.

Proponents of resource accounting and budgeting (RAB), including Iain Crawford and Nick Barr of the London School of Economics' centre for educational research, estimate that at least half of the total loans portfolio annually could be counted as an asset. They estimate the total portfolio at Pounds 2 billion by 2001-02.

Mr Crawford said: "Student loans are eminently appropriate for this kind of accounting treatment. It does have never-never tendencies but essentially the government is borrowing on behalf of consumers, the students, who will ultimately pay the money back.

"It is reasonable that students get the benefits of their contributions immediately. At the moment they are paying for people who will benefit further down the line."

Martin Harris, chairman of the Committee of Vice-Chancellors and Principals, said: "It would be very encouraging if there was an indication in the CSR that the government is moving in this direction. Not only would it release substantial resources for further and higher education but allow them (the government) to extend loans to part-timers."

Chris Giles, a senior researcher at the Institute of Fiscal Studies, was more sceptical. He believes that RAB will help the government make more accurate spending plans. But he warned that higher education had no particular claim on any resulting spending benefits.

A spokesman for the Treasury said that RAB would help departments and central government plan more accurately and on a longer term basis. He said that it was not the intention of the CSR to address RAB specifically.

But he said that the CSR is using the National Asset Register, a stock take of departments' worth completed in November last year, and that that register had fed into RAB.