Taxpayers ripped off in Treasury sale of student loans

THE taxpayer was ripped off by the sale of the student loan book, a public accounts committee (PAC) report found.

The Treasury’s rush to reduce debt was “short sighted” and risked public assets being sold off “at any price”, it added.

When the Government sold the student loan book in 2017, it had a face value of £3.5billion but was sold for £1.7billion, a return of only 48p in the pound. The PAC said the deal did not represent value for money for public sector finances in the long-term.

According to the Government’s own analysis, it said, had it held on to the loans it would have recouped the £1.7billion sale price in just eight years.

“We did not expect the Government to recover the face value of the loans as repayments rely on people’s earnings, which means there is no realistic prospect of them all being repaid in full,” the report said. “But we do expect the Treasury and the Department for Education (DFE) to get the best possible deal on behalf of the taxpayer. In this case, the Government received too little in return for what it gave up.”

The committee said that the Treasury risks accepting too low a price for public assets due to its willingness to accept offers from investors if they exceed the Government’s theoretical “opportunity cost” of holding on to them.

“The Government’s objective to reduce ‘public sector net debt’, as with previous asset sales, runs the risk of being prepared to sell at any price,” it said.

It also criticised the transparency of the deal, in particular, the refusal to disclose the identity of investors on the basis that it may weaken the Government’s hand in future negotiations.

“It is too easy to fall back on that as an excuse...,” the report said. “The Government should be transparent about who is investing in the loans and potentially profiting from public assets”.

It said in future sales, there must be a presumption to release investor names, unless there is an “evidenced and quantified risk” to value for money.

“When public assets are gone, they’re gone – in the case of this first student loans sale, for too little return,” said Meg Hillier, the PAC chairman. “Decisions on asset sales must fully consider value for money but I am not convinced that this transaction ... is fully compatible with that principle.”

Undergraduates are offered a taxpayer-backed loan that they pay back as a percentage of their income after graduation. After a period of time, the loan is written off.

The sale of the loan book – the collective loans value – last February was the first of a series of loan sales.

A Government spokesman said: “We are confident that we achieved value for money for taxpayers from the first sale of student loans. We received more for the loans than the value to Government of retaining them, further strengthening the public finances.”