In a probe of the sale of the first batch of student loans to private investors, agreed in December 2017, the National Audit Office said it could not be reliably determined whether the process provided value for money.
This was because the Department of Education and Treasury measure the value of the student loans book differently, which risks selling loans too cheaply.
These loans had a face value of £3.5bn and UK Government Investments, which managed the transactions, sold them for £1.7bn. This meant the government received 48p for every £1 of loans sold.
Using a different methodology, the DfE calculated that the value of the loans was £2.6bn, meaning the government took a £900m loss.
The main incentive for the Treasury to sell the loans was to reduce Public Sector Net Debt and avoid future write offs for those that weren’t repaid.
But PSND provides “too narrow a view of debt” the NAO report said as it does not take account of potential income government would receive from student loan repayments.
Today’s report said: “The government has, in effect, sold an uncertain stream of future repayments in exchange for a lump sum upfront.”
Amyas Morse, head of the NAO, said: “The inherent limitations in the way the government assesses the value of student loans when selling them increases the risk that they could be sold at too low a price.
“The rapidly growing student loan book is a significant government asset, so I would expect to see greater consideration of the financial impact of selling and awareness of whether this provides value for money to taxpayers.”
The government aims to raise £12bn by selling a portion of its student loan book between 2017 and 2022.
Face value of all outstanding student loans rose from £89bn in March 2017 to £102bn in March 2018. This number is expected to reach £473bn by March 2049.
The Treasury has been contacted for comment.
