Debt sale was avoidable

August 1, 1997

SWIFT changes to Government accounting rules could have stopped the sale of the student debt, which can be "ill afforded", finance and education experts said this week.

The Government is soon to announce a change from cash to resource accounting in all departments by the year 2000. This means loans will no longer be treated in accounts in the same way as grants.

The move should improve the appearance of Department for Education and Employment figures by recording only the subsidies and expected non-repayment of student loans, and not their full amount.

But it will come too late to solve the immediate cash shortfall in higher education. This will have to be filled by the sale of the student loan book, which is expected to raise Pounds 1.6 billion in the first year.

In the forward to his summary report, Sir Ron Dearing urged the Government to meet the funding crisis by allowing credit for future payments from students.

Quentin Thompson, a Coopers and Lybrand adviser to Dearing, said: "Had they got their act together quicker, sale of the student debt wouldn't have been necessary."

Ministers announced before the Dearing report was published that they would still sell Pounds 3-billion worth of student debt as planned under the previous government. They argue that sale receipts were built into Conservative spending plans which they vowed to adhere to in their election campaign.

But John Arbuthnott, University of Strathclyde vice chancellor, who was on the Dearing committee, said: "We felt until the PSBR arrangements were adjusted, there continued to be a problem."

Changing to resource accounting will show almost exactly the same saving as selling the loan book because the same subsidies have to be built into calculations.

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