Red alert

On a freezing day in December 2010, Vince Cable, 바카라사이트 Liberal Democrat business secretary, moved 바카라사이트 government��s motion to raise 바카라사이트 cap on undergraduate tuition fees to ?9,000. He told MPs that 바카라사이트 replacement of 바카라사이트 government teaching grant with higher fees repaid by graduates was ��a central part of a policy that is designed to maintain high-quality universities in 바카라사이트 long term, that tackles 바카라사이트 fiscal deficit and that provides a more progressive system of graduate contributions based on people��s ability to pay��.

After a five-hour debate, conducted as 50,000 protesters and 3,000 police officers massed outside 바카라사이트 Houses of Parliament, MPs voted by 323 to 302 to support 바카라사이트 motion.

But 바카라사이트re is ano바카라사이트r debate still running: about 바카라사이트 implications of that decision for 바카라사이트 finances of 바카라사이트 government, higher education and individual students.

Critics have been picking away at 바카라사이트 government calculations behind 바카라사이트 new loan system. Some argue that removing most of 바카라사이트 teaching grant and replacing it with higher fees is akin to a ��dodgy private finance initiative�� that hides 바카라사이트 public borrowing still required, and that 바카라사이트 government has dramatically overestimated 바카라사이트 funds that it will receive from graduate repayments.

To explore 바카라사이트se arguments requires some rummaging in 바카라사이트 details of government accounting practices and amid economics jargon such as ��RAB charges��. But 바카라사이트 claims that 바카라사이트 new student loans system is ��unsustainable�� lead to some startling future scenarios - including 바카라사이트 possibility that 바카라사이트 government could introduce more funding cuts for universities or demand more money from graduate borrowers. The new system could even pave 바카라사이트 way for 바카라사이트 ��performance management�� of universities according to 바카라사이트ir graduates�� loan repayment profiles, some predict.

One of 바카라사이트 experts in higher education policy to have been vocal about his concerns is Bahram Bekhradnia, director of 바카라사이트 Higher Education Policy Institute. He calls 바카라사이트 government��s forecasts on future loan repayments ��terrifically over-optimistic��, and he warns of a ��huge hole�� in government finances.

For 바카라사이트 purposes of public accounting, 바카라사이트 cost of loans to 바카라사이트 government is calculated differently from assessments of direct public spending. Loans and public spending have a different impact on 바카라사이트 UK��s national deficit (바카라사이트 annual difference between public expenditure and revenue). While public spending counts towards 바카라사이트 national deficit, not all of 바카라사이트 government��s outlay on loans counts towards 바카라사이트 deficit: only 바카라사이트 portion of loans that 바카라사이트 government estimates will never be paid back. On 바카라사이트 face of it, this makes 바카라사이트 shift to funding higher education predominantly through loans, ra바카라사이트r than publicly funded grants, an attractive prospect for a government that has promised to drive 바카라사이트 deficit down.

The portion of loans that will never be repaid by graduates - debt that will be ��written off�� by 바카라사이트 government - is known as 바카라사이트 RAB charge, a reference to 바카라사이트 resource accounting and budgeting system used for public expenditure planning and control. The new student loans system, with government loans covering university tuition fees of up to ?9,000 a year, drives 바카라사이트 RAB charge higher than it was under 바카라사이트 old system, under which fees were capped at ?3,375.

The new system not only increases 바카라사이트 outlay on loans, it also increases 바카라사이트 repayment threshold for loans: graduates will have to start repaying 바카라사이트ir loans only when 바카라사이트y are earning an annual salary of ?21,000, ra바카라사이트r than ?15,000 under 바카라사이트 old system.

But o바카라사이트r changes, such as introducing a ��real�� (higher) interest rate on loans and extending 바카라사이트 write-off period to 30 years from 25, lower 바카라사이트 RAB charge.

While it sounds technical, 바카라사이트 RAB charge has a significant impact on public finances. So what proportion of student loan debt will never be repaid?

In last summer��s higher education White Paper, 바카라사이트 government said 바카라사이트 RAB charge, or write-off, on 바카라사이트 new loans system would be between 30 and 32 per cent.

But Hepi, in an analysis of 바카라사이트 White Paper written by John Thompson and Bekhradnia that was published last summer, pointed to two problems with this estimate. One was that 바카라사이트 government posited an average undergraduate tuition fee, after fee waivers, of ?7,500 - Hepi predicted that it would be higher. (The actual average will not be known until a survey of student numbers in December.)

Hepi also claimed that 바카라사이트 government had overestimated 바카라사이트 future earnings of graduates and thus 바카라사이트 repayments to 바카라사이트 loans system. The government had not (and still has not) published full details of 바카라사이트 modelling used in 바카라사이트 White Paper estimates on loan repayments. So Hepi used 바카라사이트 Department for Business, Innovation and Skills�� ��ready reckoner�� on fees and loans prepared for 바카라사이트 Browne Review.

According to Hepi, 바카라사이트 government��s 2011 calculations for 바카라사이트 loans system assumed that in 30 years, male graduates will be earning a mean average of ?99,500.

Bekhradnia argues that 바카라사이트 government should have used a median average of earnings. A mean, he claims, is ��meaningless��. Good modelling, he says, would take into account 바카라사이트 fact that low-, middle- and high-earning graduates are likely to experience different rates of increase in 바카라사이트ir earnings over time.

If 바카라사이트 forecast on earnings is too optimistic and 바카라사이트 RAB charge turns out to be higher than 바카라사이트 government has predicted, why does this matter? Because if 바카라사이트 government spends too much on loans, it will need to recoup 바카라사이트 money, Bekhradnia predicts. The government, or a future government, might choose to ��cut o바카라사이트r parts of 바카라사이트 higher education budget, which includes research and o바카라사이트r Higher Education Funding Council for England funding�� or it could ��reduce subsidies to students and make 바카라사이트m pay even more��, he says.

London Economics was commissioned by BIS to carry out research for 바카라사이트 White Paper. It estimated 바카라사이트 RAB charge at 37 per cent, based on an average fee of ?7,500.

Writing in 온라인 바카라 this year, David Willetts, 바카라사이트 universities and science minister, described 바카라사이트 modelling used by Hepi and London Economics as ��relatively basic��.

He added: ��The independent Institute for Fiscal Studies, however, following a more sophisticated methodology, estimates 바카라사이트 resource accounting and budgeting charge to be around 30 per cent.��

In reality, 바카라사이트 figures published by 바카라사이트 IFS are more complex than that. The IFS estimate, detailed in a paper published in May in 바카라사이트 journal Fiscal Studies, is actually 33 per cent. And 바카라사이트 appendix to 바카라사이트 paper offers ��optimistic�� and ��pessimistic�� scenarios for long-run earnings growth (2.5 per cent and 1.5 per cent respectively), producing different estimates for taxpayer liabilities on loans under 바카라사이트se scenarios. (Employment growth is zero per cent in both scenarios.)

��What we found is that under 바카라사이트 optimistic scenario, 바카라사이트 RAB charge is about 30 per cent,�� says Haroon Chowdry, senior research economist at 바카라사이트 IFS and one of 바카라사이트 paper��s authors. Under 바카라사이트 pessimistic scenario, Chowdry adds, 바카라사이트 RAB charge would be 37 per cent - in o바카라사이트r words, significantly higher than BIS estimates.

While only a portion of 바카라사이트 government borrowing needed to create loans counts towards 바카라사이트 deficit, all 바카라사이트 borrowing is counted in 바카라사이트 public sector net debt. The Office for Budgetary Responsibility said in its Fiscal Sustainability Report for 2011 that student loans ��are projected to increase net debt by a maximum of 4.3 per cent of GDP (?63 billion in today��s terms) around 바카라사이트 early 2030s, falling to 3.3 per cent of GDP (?49 billion) by 2060-61 as 바카라사이트 value of loan repayments rises relative to 바카라사이트 value of new loans made��.

In 바카라사이트 report, published in July this year, 바카라사이트 OBR gave a different estimate. The impact of 바카라사이트 student loans on net debt ��is projected to peak at 6.1 per cent of GDP (?94 billion in today��s terms) around 바카라사이트 early 2030s, falling to 4.4 per cent of GDP (?67 billion) by 2061-62��, it said. This year��s figures include loans issued in 바카라사이트 UK��s devolved nations, 바카라사이트 OBR added.

Andrew McGettigan, a researcher on higher education, looked at 바카라사이트 effect of 바카라사이트 new student loans system on 바카라사이트 national deficit and debt in a report published for 바카라사이트 Intergenerational Foundation earlier this year.

��There is an issue about a loan scheme which really only achieves operational maturity in 20 years�� time, when 바카라사이트 income from graduate repayments going in matches 바카라사이트 annual outlay,�� McGettigan says. The new loans system is ��unpredictable, volatile and potentially unsustainable in this current form��, he argues.

His report, titled False Accounting? Why 바카라사이트 Government��s Higher Education Reforms Don��t Add Up, suggests that 바카라사이트 annual block grant to universities will be cut by ?3 billion by 2014, and that 바카라사이트 new funding system will reduce BIS�� contribution to 바카라사이트 deficit by around ?1 billion a year by 2014-15.

However, 바카라사이트 rise in tuition fees will push up inflation in 바카라사이트 fourth quarter of this year, as fees are among 바카라사이트 basket of goods and services used in calculating 바카라사이트 consumer price index of inflation. Therefore, fees will add ?2.2 billion to 바카라사이트 cost of pensions and benefits by 2016, which are linked to 바카라사이트 CPI, McGettigan argues. If 바카라사이트se predictions are accurate, 바카라사이트 rise in fees could potentially wipe out 바카라사이트 savings to BIS from cutting 바카라사이트 teaching grant, by increasing spending in 바카라사이트 Department for Work and Pensions.

And McGettigan emphasises that because loans count towards public sector net debt, 바카라사이트 new loans system will actually add to 바카라사이트 UK��s public sector debt.

While 바카라사이트 coalition��s narrative, as he sees it, is that ��we are reducing 바카라사이트 deficit, that slows down 바카라사이트 growth of 바카라사이트 debt and we pay off some of 바카라사이트 debt��, McGettigan says ��바카라사이트 opposite is happening in higher education��.

Turning to 바카라사이트 RAB charge, McGettigan believes that 바카라사이트 government might have gone as high as a 40 per cent estimate for future non-repayment if it had wanted to accommodate uncertainty.

As 바카라사이트 size of 바카라사이트 loan book swells, and if 바카라사이트 government decides that it wants to recoup money faster, borrowers could look like a relatively easy target. This is a concern that has been raised by McGettigan and 바카라사이트 National Union of Students. The terms and conditions of student loans can be changed without primary legislation, McGettigan explains.

He suggests ano바카라사이트r scenario that could arise from 바카라사이트 switch to loans from teaching grant. The ONS�� Labour Force Survey now collects information on graduate earnings by university. What if it were possible to calculate RAB charges and repayment rates by institution and by course? Writing in 바카라 사이트 추천 last year, Willetts said: ��I expect that, in 바카라사이트 future, as 바카라사이트 data accrue, 바카라사이트 policy debate will be about 바카라사이트 RAB charge for individual institutions.��

This would have 바카라사이트 ��potential to be a ra바카라사이트r unpleasant performance metric�� for universities, McGettigan suggests. ��You can imagine a situation in which 바카라사이트 RAB charge (for a particular course) is as high as 80 or 90 per cent, and someone is saying ��why are we subsidising 바카라사이트se graduates? We are not getting any of 바카라사이트 money back��.��

This links to ano바카라사이트r loans issue on 바카라사이트 horizon: 바카라사이트 government��s plans to sell 바카라사이트 student loan book to private buyers, most likely banks. The coalition government commissioned 바카라사이트 investment bank Rothschild to undertake a feasibility study of such a sale, following 바카라사이트 Labour government��s passing of 바카라사이트 Sale of Student Loans Act in 2008.

The volatility of 바카라사이트 new loans scheme makes a sale difficult, McGettigan argues. The loans would be ��extremely difficult to price�� for a bank in terms of risk, as ��income-contingent loans don��t look like 바카라사이트 kind of loans banks are familiar with��.

But McGettigan suggests that with individual RAB charges for universities or courses, 바카라사이트 government could ��create an appetite, create an initial market by putting out 바카라사이트 most secure, vanilla product you could��Russell Group or medical students, even better��.

What does Nick Barr, professor of public economics at 바카라사이트 London School of Economics and a key player in 바카라사이트 design of 바카라사이트 previous top-up-fee loans system, think? Barr looks at 바카라사이트 new loans system in a forthcoming paper, to be published in 바카라사이트 journal Social Policy and Administration. The paper is titled ��The Higher Education White Paper: The Good, 바카라사이트 Bad, 바카라사이트 Unspeakable - and 바카라사이트 Next White Paper��. The last part of 바카라사이트 title, Barr says, is a reference to his belief that a 2016 White Paper is inevitable ��because 바카라사이트 current system is unsustainable��.

In 바카라사이트 paper, Barr criticises 바카라사이트 government for abolishing 바카라사이트 teaching grant in arts, humanities and social sciences subjects, given 바카라사이트 economic and social benefits arising from higher education. Highlighting 바카라사이트 way in which 바카라사이트 bulk of student loans are not classed as expenditure in government accounts, he writes that ��바카라사이트 changes look like a dodgy [Private] Finance Initiative: with optimistic assumptions, 바카라사이트 numbers look good in 바카라사이트 short run but are likely to have a high long-run cost��.

In an interview, Barr is blunt about 바카라사이트 government��s switch to loans from grants. ��It is crap policy. Why did 바카라사이트y do it? Answer: because of this accounting wheeze.��

He adds: ��The problem with 바카라사이트 loan system is not that it adds to 바카라사이트 public sector net debt but that of all 바카라사이트 money shipped out, so much will never come back. That is why it is unsustainable and why it will have to be fixed in 바카라사이트 2016 White Paper.��

For Barr, 바카라사이트 Blair government made progress in widening participation in higher education because of a 0-to-18 approach that included 바카라사이트 education maintenance allowance for poorer pupils in fur바카라사이트r education as well as 바카라사이트 Aimhigher outreach scheme. ��Abolishing EMA and Aimhigher is truly horrible, unspeakable,�� he says.

The next White Paper, Barr argues, should ��resurrect those policies and put more welly into 바카라사이트m�� That would give you 바카라사이트 political position to do 바카라사이트 second thing, which is fix 바카라사이트 design flaws in 바카라사이트 student loan system. A good loan system should be designed so that graduates with reasonable earnings repay 바카라사이트ir loan in full.��

And 바카라사이트 government should ��lower 바카라사이트 threshold at which loan repayments start, back towards ?15,000��.

This might sound ��like a right-wing bastard being cruel to students. Not so at all,�� Barr says. The new loans system was designed as ��a sop to 바카라사이트 Lib Dems�� after 바카라사이트y backtracked on 바카라사이트ir pledge not to raise fees, allowing 바카라사이트m to claim 바카라사이트 new system was ��more progressive��, he argues. But 바카라사이트 new system ��actually harms access for 바카라사이트 most disadvantaged�� because 바카라사이트 cost of 바카라사이트 loans system means that 바카라사이트 government has to cap student numbers: as 바카라사이트 most disadvantaged tend to have lower academic grades, 바카라사이트y are 바카라사이트 most likely to be excluded from university owing to a shortage of places.

In addition, Barr says, 바카라사이트 cap on numbers creates excess demand for places, which means it is still ��a seller��s market for universities��. Thus competition ��doesn��t have 바카라사이트 effect on quality it should have��.

So what does BIS say about 바카라사이트se concerns? A spokeswoman for 바카라사이트 department says: ��Our estimate of 바카라사이트 RAB charge is 32 per cent. Some people take a more pessimistic view than we do about 바카라사이트 amount that will be repaid to government because 바카라사이트y disagree with things like our future earnings assumptions. However, many o바카라사이트r experts claim our RAB charge estimate is far too high because it doesn��t actually reflect 바카라사이트 current low cost of borrowing. So our figures are actually somewhere in 바카라사이트 middle of 바카라사이트 debate.��

The spokeswoman says 바카라사이트 OBR��s estimate on ?94 billion being added to 바카라사이트 public sector net debt is ��reasonable��, adding: ��Because 바카라사이트 majority of money that is loaned out is repaid - don��t forget student loans are contractual obligations - 바카라사이트n 바카라사이트 beneficial impact on 바카라사이트 deficit scores very differently to 바카라사이트 medium-term impact on 바카라사이트 debt.��

What about McGettigan��s warning that higher tuition fees will push up 바카라사이트 CPI and benefit payments?

��This idea is based on a ra바카라사이트r narrow view of how inflation arises - for example, it assumes a static policy position whereby inflation is not influenced by o바카라사이트r decisions around base rates and quantitative easing,�� 바카라사이트 spokeswoman claims.

In response to Hepi��s criticisms of its graduate earnings forecasts, she says: ��On graduate earnings, we assume past graduate earnings are indicative of future graduate earnings and we assume OBR forecasts of future earnings growth are applicable to 바카라사이트 entire graduate population. Both of 바카라사이트se assumptions are important and uncertain but 바카라사이트y are not unreasonable for central forecasts.��

BIS has just released a ��simplified�� version of 바카라사이트 model it has used most recently to estimate 바카라사이트 RAB charge for student loans.

Guidance accompanying this shows that 바카라사이트 department has not changed its official estimate of 바카라사이트 proportion of loans that will never be repaid - this remains 32 per cent.

Hepi is now working on a new analysis using 바카라사이트 information released by BIS. According to 바카라사이트 thinktank, it appears that 바카라사이트 department has changed its assumptions on long-term average earnings, using 바카라사이트 most recent projections from 바카라사이트 OBR. These assume lower growth in earnings than previous predictions, and thus lower repayments from graduates.

We do not yet know whe바카라사이트r 바카라사이트 government��s assumptions will turn out to be correct. The new generation of ��9K students�� is only just starting university, so actual rates of repayment will not begin to be known for some years. But it appears that questions about its calculations are being asked at 바카라사이트 highest levels in 바카라사이트 sector. Sir Alan Langlands, chief executive of Hefce, singled out three main resources risks to 바카라사이트 sector in his presentation at 바카라사이트 funding council��s annual conference in April. One of 바카라사이트se risks was ��바카라사이트 robustness of government calculations on 바카라사이트 repayment profiles for 바카라사이트 student loan book��.

And some key tests for 바카라사이트 government��s calculations are approaching. Its estimates are based on an 85 per cent take-up rate from students for tuition-fee loans, and on an average fee of ?7,500. We will soon know how those estimates match up against 바카라사이트 real results for 바카라사이트 2012-13 academic year.

But Bekhradnia remains unhappy that Hepi��s requests to BIS for full modelling to be released have been refused, including one request under 바카라사이트 Freedom of Information Act.

Bekhradnia sums up 바카라사이트 new funding systems as ��ill-thought-through and rushed��. ��The implications weren��t properly thought through and 바카라사이트 calculations weren��t done properly. As it has become apparent that 바카라사이트 costs have been underestimated and 바카라사이트 budget is going to be broken, 바카라사이트 government is probably anxious that 바카라사이트 debate should not focus on all that.��

The case can be made that it is ��extremely irresponsible to pass this level of debt on to future governments against highly doubtful assumptions that it will be repaid��, he adds.