MPs to hold City summit on loans

January 30, 1998

A WORKING party of MPs is to hold talks with City finance companies in a bid to break the impasse over attempts to privatise student loans.

The move, by the Education and Employment Committee, marks members' growing frustration with the Treasury which is seen to be behind the rejection of proposals exploring the possibility of privatising loans.

The committee hopes that, by sidestepping the Treasury, it can win private-sector support.

Committee chairwoman Margaret Hodge said that it was vital that the Treasury took a more constructive view of privatisation proposals which could release badly needed money for investment in higher education.

Mrs Hodge said: "Higher education is facing a funding crisis next year. The Treasury has to find a solution. They have to be nuts if they continue to shoot holes in everything."

Treasury scepticism stems from the rules it must follow regarding the definition of what ought to count as public spending and what can be removed from the spending equation because it is effectively privatised. It is assumed to be behind the Department for Education and Employment's negative response to a privatisation proposal in last December's report by the committee on the Dearing report.

The proposal, by committee member Nick St Aubyn (Cons. Guildford), was for universities to establish a "not-for-profit" trust acting as an intermediary borrowing money from the private sector and lending it to students. The DFEE reponse uses Treasury-style public accounting arguments to pour cold water on the scheme.

The committee has also heard extensive evidence from Nick Barr and Iain Crawford of the London School of Economics and Bill Robinson, of consultants London Economics, who favour private sector funding for student support. Despite the ingenuity and money raising potential of their schemes the committee is doubtful that they will pass the Treasury test.

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