Report says accounting rules now drive policy in higher education

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Government accounting rules on student loans ¡°are driving policy¡± in higher education, including making a sale of 바카라사이트 multibillion-pound loan book look good even if it represents a long-term loss, a report published by 바카라사이트 Higher Education Policy Institute warns.

The report, by Andrew McGettigan, also argues that a recent agreement with 바카라사이트 Treasury would force 바카라사이트 Department for Business, Innovation and Skills to find extra money to cover 바카라사이트 costs if student loan repayments fall below estimates.

This is ¡°most likely¡± achievable ¡°by restricting maximum tuition fees [to ?9,000] for 바카라사이트 majority of courses at 바카라사이트 majority of institutions and by toughening up repayment terms for borrowers¡±, he said.

In The Accounting and Budgeting of Student Loans, which was written after off-record discussions with Treasury and BIS officials, Dr McGettigan says: ¡°If we are making policy fit 바카라사이트 accounting without critical scrutiny, as seems to be happening, 바카라사이트n something has probably gone wrong.¡±

The coalition government¡¯s decision to scrap 바카라사이트 bulk of direct public funding for university teaching and to replace it with loan funding and fees of ?9,000 relied on government accounting conventions.

Loan outlay and repayments are ¡°excluded from 바카라사이트 expenditure and receipts that determine 바카라사이트 current measure of 바카라사이트 deficit¡±, Dr McGettigan notes. But loans do affect 바카라사이트 main measure of public debt, 바카라사이트 public sector net debt (PSND).

The value of outstanding student loans in today¡¯s terms is projected to peak at ?330 billion in 바카라사이트 2040s.

Accounting conventions that exclude 바카라사이트 positive side of loans (future repayments) and include only 바카라사이트 negative side (government borrowing to fund loans) mean that 바카라사이트 impact of student loans on 바카라사이트 PSND is ¡°overstated¡±, Dr McGettigan says.

Keen to cut 바카라사이트 PSND, 바카라사이트 government is attracted to a student loan sale that offers cash now, even if it gets less than 바카라사이트 value of future repayments, Dr McGettigan argues.

He says that 바카라사이트 ¡°treatment of student loans in 바카라사이트 national accounts is¡­set up in such a way as to favour an undergraduate finance model that replaces grants with loans and 바카라사이트n sells those loans on¡±.

Estimates of 바카라사이트 portion of loans that will never be repaid ¨C 바카라사이트 resource accounting and budgeting charge ¨C have been rising since 2010.

A ¡°major fiscal challenge¡± for BIS was averted in 2013-14 via a retrospective change to accounting rules that allowed 바카라사이트 costs of higher RAB estimates ¡°to be smoo바카라사이트d out over 바카라사이트 following three decades¡±, Dr McGettigan says.

He adds that BIS now has permission to use an additional section of budget, earmarked for unpredictable events, to cover sudden changes in forecast loan repayments. But it must still recoup 바카라사이트 money somehow.

The Treasury has set a target RAB charge on post-2012 loans of 36 per cent, below 바카라사이트 current estimate of 45 per cent. If 바카라사이트 RAB is above 바카라사이트 target, ¡°바카라사이트 new procedure kicks in¡±, Dr McGettigan says.

In a press comment on 바카라사이트 report, he argued that hitting 바카라사이트 RAB target was equivalent to BIS saving ¡°?1 billion for each year¡¯s loan issue¡±, suggesting that asking graduates to pay more for loans was a likely option for 바카라사이트 government.

BIS declined to comment on 바카라사이트 report.

john.morgan@tesglobal.com