Mr (The Secretary of State for
Education): I am pleased to inform Parliament that the
Government has today completed its sale of part of the older,
pre-2012, English student loan book achieving a value of £1.9bn.
Government has been clear in its commitment that the position of
all borrowers, including those whose loans have been sold, will
not change as a result of the sale. This sale does not and cannot
in any way alter the mechanisms and terms of repayment: sold
loans will continue to be serviced by Her Majesty’s Revenue and
Customs (HMRC) and the Student Loans Company (SLC) on the same
basis as equivalent unsold loans. Purchasers have no right to
change any of the current loan arrangements or to contact
borrowers directly. The sale does not change the Government’s
current approach to higher education or student finance.
The Student Loans Company will be writing to borrowers whose
loans have been sold within 3 months to notify them of the sale.
No action will be required from borrowers. Government has no
plans to change, or to consider changing, the terms of pre-2012
loans. I also want to be clear that these older loans, whose
borrowers benefited from lower tuition fees as well as lower
interest rates, are not in scope of the current review of post-18
education and funding.
This sale is good for the taxpayer. It releases money that is
tied up and serving no policy purpose, to invest in other policy
priorities now, whilst keeping within the spending limits we need
to strengthen public finances. The sold loans have already been
in repayment for over nine years, and therefore a portion of the
original value has already been paid back to Government. The
Government does not expect all of the remaining loans to be paid
off in full and the sale guarantees money upfront today rather
than waiting for fluctuating and uncertain payments over a long
period of time. This sale also transfers risk to the private
sector. Repayment income from student loans fluctuates with
economic performance, as do tax receipts and managed expenditure
like benefits. Selling the loans reduces the Government’s
exposure to this fluctuation. The Government is committed to
reducing public sector net debt in order to enhance the UK’s
economic resilience, improve fiscal sustainability and lessen the
debt interest burden on future generations. This sale makes a
significant contribution to that objective.
Government does not sell at any price. Throughout the process,
Government’s decision on whether to proceed remained subject to
market conditions and a final value for money assessment. This
looked at whether we were selling to an efficient market, that
can price the asset efficiently, and at a price that was worth
more to Government than retaining the loans. The Government’s
retention value takes into account predicted repayments, the
effect of inflation, the riskiness of the asset and the
opportunity cost of having money tied up in the asset.
I can confirm that the price offered in aggregate across the book
was above the Government’s retention value range. I will shortly
be laying before Parliament a report on the sale in accordance
with Section 4 of the Sale of Student Loans Act 2008. This will
provide more detail on the sale arrangements, and the extent to
which they give good value as well as covering the sale’s
different fiscal impacts.
