UK Government Investments ‘reviewing’ student loans selloff transparency

Written by Jim Dunton on 7 March 2019 in News
News

Probe set to report on potential for openness over who is buying tranches of multibillion pound loanbook

Department for Education Credit: PA

UK Government Investments is undertaking a review of how much detail can be revealed on the financial institutions buying up chunks of the nation’s multibillion-pound student loans book, MPs have been told.

The Department for Education began selling off tranches of the loanbook to private investors in 2017 so government could get the funds from the loans more quickly. The initial sale generated £1.7bn, which represented just 48 pence in the pound of the total loan values a return that drew criticism from the Public Accounts Committee.

MPs said the sale had been “short sighted” and questioned the value-for-money the department expected to get from future loans sales. They also expressed concerns about the transparency of the sales.


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PAC members had called for investors buying up student loans to be named – and for there to be a “presumption to release investor names” in future sales, unless there was an “evidenced and quantified risk to value for money in doing so”.

According to just-published Treasury minutes responding to the committee, UKGI is undertaking a “review exercise” with investors, market leaders and advisors that aims to test the “commercial impacts of disclosure on government and investors” in the programme of future sales. It is aiming to provide the update to MPs in May.

The government response also said it had “revised” its reporting methodology to parliament on the second tranche of loan sales, completed last December, when loans with a value of £3.9bn were sold for £1.9bn. The figure represents a fractionally higher return rate than the 2017 sale. An official report on that sale said allocations were made to 33 institutional investors, and that the names would be provided to the PAC and the National Audit Office in confidence.

The Treasury minutes said: “The government would like to take this opportunity to confirm that Sale 1 saw allocations made to 36 institutional investors across the four notes [the number of sale bundles] and involved the same investor types as set out in the Sale 2 report”.

According to official estimates given to the PAC, the government said it expected the nation’s student-loans book to be worth £473bn by the end of the 2048-49 financial year, but also envisages that only 55-60% of its value will ever be repaid. That is because loan recipents only have to make payments when their income reaches a particular level, and some former students may never earn enough to pay back anything, or may make some repayments but reach the cut-off age without paying everytning back.

The government has targeted the sale of £12bn of student debt by 2022 as part of a strategy to “de-risk” the public finances. However loans will continue to be administered by HM Revenue and Customs, via the Student Loans Company.

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