Wrong again

November 24, 1995

The Government is getting the student loans scheme wrong again. Incredible though it may seem, the advice of the few people who were asked has been ignored. The advice of the many who will be affected has not been sought. Consequently a scheme has been cobbled together which no one likes and which the banks will probably reject.

This threatens to leave the Department for Education and Employment Pounds 1billion short on its higher education budget - the amount which it has been estimated could be saved by privatising the loans scheme and which in all probability the Secretary of State has had to barter in the spending round to get more money for schools, especially nursery schools.

Sadly, the National Union of Students, in sounding off against the proposals, has hit the wrong issue. It is not privatising the loans per se which is the mistake: securitising the loans can be perfectly satisfactory for students. The mistake lies in not arranging to collect loan repayments on an income contingent basis through the tax or national insurance system.

This is the key to getting the banks' support and to ensuring that the scheme runs smoothly and fairly, as Christopher Johnson explains (page 14). Yet somehow Mrs Shephard seems to have been manoeuvred into agreeing to privatisation without the Treasury agreeing to this vital component.

The Treasury blocked it last time with the result that the banks fled and the present botched scheme was erected. It appears they have been allowed to do so again. It is high time someone - step forward Prime Minister John Major - told them where they get off. It is simply ludicrous to argue that it cannot be done. The Australians do it. There is plenty of computer technology to help. These over-mighty servants should be told to get on with the job.

Meanwhile, as the proposed scheme crumbles, Mrs Shephard had better consider what she is going to do when the hoped-for savings do not materialise. She has until Budget day next Tuesday to come up with some ideas.

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