Britain’s annual deficit to increase by £12billion next year after a shake-up of how student loans are recorded which will see un-repaid debt count as public spending
- Estimated 45 per cent of student loans not paid back count as public spending
- Billions of pounds Government hands out in student loans is recorded as lending
- Critics claim method doesn’t reflect true state of Government’s fiscal position
Britian’s annual deficit – how much more the public sector spends than comes in from taxes – will be loaded with an extra £12billion bill from next year after a shake-up of how student loans are recorded.
The move by the Office For National Statistics will put pressure on the Government’s budget, as the estimated 45 per cent of student loans that are not expected to be paid back will, from next autumn, count as public spending each year.
Currently the billions of pounds the Government hands out in student loans each year is recorded as lending, so while it is added to the national debt – which stands at almost £2trillion – the nation’s annual balance sheet is unaffected.
The move by the Office For National Statistics will put pressure on the Government’s budget
But critics claim this accounting method does not reflect the true state of the Government’s fiscal position. If the changes had been in place for the last financial year, 2017/18, the annual deficit would have risen from £39.8billion to £52.1billion.
There are also fears ministers may now be tempted to cut university funding, as the true scale of the rapid expansion of higher education hits the Government’s books.
The move was yesterday welcomed by the Commons Treasury committee, which had criticised how the Government accounts for student loans in February. Chairman Nicky Morgan MP said: ‘Ensuring Government spending is properly recorded allows it to be properly scrutinised.’