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.
This statement has also been made in the House of Lords