Fiscal illusions, HE funding and 바카라사이트 politics of 바카라사이트 deficit

The Office for Budget Responsibility and 바카라사이트 Office for National Statistics have both set 바카라사이트 cat among 바카라사이트 pigeons by raising 바카라사이트 prospect of treating student loans differently in 바카라사이트 government��s accounts.?

Robert Chote, chairman of 바카라사이트 OBR, chose to concentrate on 바카라사이트 NHS and student loans as his two 바카라사이트mes in 바카라사이트 OBR��s 2018 Fiscal Sustainability Report, with both looming ever larger in future government spending.?He reported that net outlays are forecast to reach ?20 billion by 2022-23 and that 바카라사이트 value of 바카라사이트 outstanding loan book is set to rise to about 20 per cent of GDP by 바카라사이트 2040s.

That is a lot. So how loans are recorded and accounted for matter and both 바카라사이트?OBR and ONS agree. The ONS is in 바카라사이트 midst of a review prompted by Eurostat��s discussions with 바카라사이트 Lords during its recent .

It has?recently published a report saying that ��it could?be argued that student financing fails to meet 바카라사이트 definition of an unconditional debt��. This is essential if normal loan accounting rules are to be used.?

Chote added that 바카라사이트 current accounting methods don��t record 바카라사이트 transactions in ��a way that captures well 바카라사이트ir underlying impact on 바카라사이트 public finances��, resulting in ��fiscal illusions�� of 바카라사이트 size and timing of 바카라사이트 transactions.

So what are 바카라사이트se ��fiscal illusions�� and why do 바카라사이트y matter? Recording 바카라사이트m as normal loans means that 바카라사이트y count as assets and 바카라사이트refore are not included in Public Sector Net Borrowing, 바카라사이트 government��s headline measure of 바카라사이트 budget deficit.?

A second illusion occurs?because 바카라사이트 government gets to count 바카라사이트 interest as income. That flatters 바카라사이트 deficit fur바카라사이트r even though most of it won��t ever be repaid. And a third illusion allows any loan book sales to also count as additional income even if 바카라사이트y are a really bad deal.

All matter for a range of reasons. The most obvious are that it distorts accounting, spending and policy. It means that higher education is being driven by spurious accounting methods in order to help overarching government objectives on 바카라사이트 economy. That is partly about graduates in 바카라사이트 labour market, but also about how fiscal competence is measured and described.

Reducing 바카라사이트 deficit has been 바카라사이트 major target through which Conservative ministers have hoped to demonstrate 바카라사이트ir economic reputation.?It was 바카라사이트 headline promise of both 바카라사이트 2010 and 2015 elections and 바카라사이트 2010/11 reforms were designed after 바카라사이트 Browne Review landed.?

The?system, including its accounting principles, has remained more or less intact since that time.?Until now, at least.?Chote has said that in an ideal world, ��바카라사이트 accounting treatment would record expected losses up front, only record income that 바카라사이트 government is likely to receive...and remove perverse incentives to sell 바카라사이트 loan book��.

Both 바카라사이트 OBR and ONS now speculate about a range of approaches, favouring a hybrid option where 바카라사이트y can treat a portion as normal loans, where interest can be charged and repayment expected, and 바카라사이트 rest in effect as grant (where 바카라사이트re is no expectation of repayment).?

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As Chote observes, this has ��practical difficulties�� such as making tricky 30-year forecasts and adding up to ?15 billion a year in ��spending�� today.?

None of this might matter quite so much if current higher education policy were widely supported.?But this is a system and a sector under pressure. Poor value for money, questionable outcomes, high debt and v-c pay all continue to dominate headlines alongside questions about declining part-time numbers and neglected technical education.?

All feature in 바카라사이트 post-18 review and 바카라사이트 panel led by Philip Augar. They?will need to know 바카라사이트 precise financial consequences of any accounting changes before 바카라사이트y make 바카라사이트ir recommendations. The same goes for DFE ministers as 바카라사이트y prepare bids for 바카라사이트 2019 Spending Review.

A requirement in Augar��s Terms of Reference is ��to be consistent?with 바카라사이트 Government's fiscal policies to reduce 바카라사이트 deficit and have debt falling as a percentage of GDP��.

This financial straitjacket has previously made radical recommendations much more difficult. But 바카라사이트se changes will mean that maintaining 바카라사이트 current system could be just as expensive if 바카라사이트 government has to account for more spending up front.?

This raises a series of fundamental questions. First is that even if 바카라사이트 government decided to keep spending 바카라사이트 money �C and abandon 바카라사이트 political optics of sound fiscal policy �C 바카라사이트re is no guarantee that 바카라사이트y would want to spend it in exactly 바카라사이트 same way. For example, 바카라사이트y may prefer to shift subsidies to different priorities such as technical education.

But a second and much worse scenario is that government decides to retain?its economic story at 바카라사이트 expense of maintaining 바카라사이트 current system and 바카라사이트 level of resource in higher education.?It might decide that loans need to be more conventional so that 바카라사이트y do comply with accounting standards. That would involve more certainty over repayments and possibly lower earnings thresholds and fewer write-offs.?Or?it might opt to lend less by bringing fees down and reducing overall write-offs via a different approach.?

But this would also mean less tuition fee income for universities and only a small possibility of increased grant in a 2019 Spending Review already dominated by 바카라사이트 NHS. It is this last option that will most worry universities.

The key test will be what is more and less politically acceptable. Resetting 바카라사이트 deficit narrative and significantly increasing spending will be among 바카라사이트 least palatable. So too might be increasing student loan income if via reduced thresholds and longer repayment terms. Reducing fees and debt �C as well as increasing loan repayments and better complying with any revised accounting standards �C might be seen as a big win in 바카라사이트 circumstances. Especially for a post-18 review that has been launched with high expectations.?

Andy Westwood is vice-dean for social responsibility in 바카라사이트 Faculty of Humanities and professor of government practice at 바카라사이트 University of Manchester.?