COMMONS

Treasury Committee welcomes change in student loan accounting

17 December 2018

In its report published in February on student loans, the Treasury Committee criticised how the Government accounts for student loans.

The Government expects a high proportion of the student loans it issues to never be paid back. When student loans are written off in 30 years, National Accounts accounting rules stipulate that there is no impact on the deficit.

The Committee recommended that ‘loans that are intended to be written off are, in substance, a partially repayable grant rather than a loan’, and that the ‘ONS [Office for National Statistics] should re-examine its classification of student loans as financial assets […] and consider whether a portion of the loan should, in substance, be classed as a grant.

In response to the Committee’s report, the ONS has announced today that ‘the best way to reflect student loans within these statistics is to treat part as financial assets (loans), since some portion will be repaid, and part as government expenditure (capital transfers), since some will not.’

The Office for Budget Responsibility estimated that this new approach would have added £12.3 billion to Government borrowing in 2017-18.

Chair's comment

Commenting on the ONS’ announcement, Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, said:

“As the Treasury Committee concluded in its report on student loans, the current accounting rules allow the Government to spend billions of pounds of public money without any negative impact on its deficit target at all.

“Today’s announcement from the ONS, which will improve transparency of the public finances, is welcome.

“Ensuring that Government spending is properly recorded allows it to be properly scrutinised.” 

Further information

Image: iStockphoto

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