My honourable friend the Minister of State for Universities, Science, Research and Innovation (Jo Johnson MP) has made the following Written Ministerial Statement.
Today, the Government is starting the process required to sell part of the English student loan book under the Sale of Student Loans Act (2008). The sale covers loans issued under the previous (“pre-2012”) system, specifically those which entered repayment between 2002 and 2006.
The Government’s intention to launch this sale at this time, subject to market conditions, was set out in last year’s Autumn Statement. The decision to launch this process is consistent with the Government’s fiscal policy and approach to asset sales. The position of all graduates, including those whose loans are part of a sale, would also not change as a result of the sale.
This Government is committed to cutting the deficit, reducing debt, and living within our means as a country. The Government’s policy is to sell assets where it is value for money to do so and where there is no policy reason to continue to own them. Selling assets gives headroom for the government to invest in other policies with greater economic or social returns and reduces fiscal pressures.
The Government’s policies towards student finance and higher education are not being altered by this sale. Under the current system of student support (the framework for which has been in place since 2012) we will continue to offer financial support so people who have the qualifications and want to pursue higher education are able to do so, with no limit on their numbers. This is part of making sure our economy works for everyone.
Students are protected by statute and completely unaffected. A sale would not alter the mechanisms and terms of repayment and sold loans would 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. These protections mean that purchasers would have no right to change any of the current loan arrangements or to directly contact borrowers.
The Government has launched the first sale process on the basis there is a good prospect of achieving value for money, but will only proceed with the sale subject to market conditions and a final value for money assessment. The assessment of value for money is in accordance with the HMT Green Book framework and includes a comparison of the value of retaining the student loan book and receiving payments over time (the retention value) and receiving cash now (the proceeds of the sale).
This sale will comprise the future repayments on the outstanding balances on a selection of loans, with a total face value of around £4bn. The retention value to Government is lower and is calculated using standard Treasury Green Book methodology developed for asset sales, and also accounts for Government subsidy of the student loan system. The loans which are being sold have already been in repayment for over ten years, and therefore much of the original value of the loans has already been paid back to Government.
The sale process is expected to take several months. Selling the loan book involves securitising the remaining future repayments on the loans and selling securities representing the rights to these to a range of purchasers. The House will be informed if and when a sale is completed.
This statement has also been made in the House of Commons