Magazine article The Times Higher Education Supplement : THE

Inflation and Obfuscation

Magazine article The Times Higher Education Supplement : THE

Inflation and Obfuscation

Article excerpt

As author of the Intergenerational Foundation report False Accounting?, I take issue with David Willetts' response to Liam Burns in Times Higher Education ("Without fees reform, our children would really feel the pinch", 31 May).Willetts has failed to understand the report - or even to address Burns' main demand.

First, neither I nor the foundation believes "that it is wrong to borrow to fund today's students", as Willetts asserts. We believe it is wrong to increase borrowing to fund a poorly designed loan scheme. Moreover, we believe it is wrong to obscure that borrowing and its impact on public sector net debt by referring only to the impact on the "deficit". On Office for Budget Responsibility and government figures, for the next 20 years additional borrowing will be required to support the higher loans needed for higher tuition fees. OBR projections show net debt increasing by at least Pounds 50 billion before annual graduate repayments are meant to match annual loan outlay sometime after 2030.

Second, Willetts recognises that estimates for non-repayment over the next 30 years are "imprecise". Exactly - but those estimates are recorded as expenditure at the time the loans are issued. By using low estimates for non-repayment, the Department for Business, Innovation and Skills' contribution to the "deficit" is lowered. Future governments are left to deal with any shortfall between estimates and actual returns. The responsible approach to imprecision is to set aside a more generous "impairment" in the accounts. …

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