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The ONS has announced to treat the subsidy on student loans as contributing to the budget deficit today.

Responding, Ryan Shorthouse, Director of Bright Blue, said:

    “It is entirely right to ensure that the growing government subsidy of student loans counts towards the budget deficit today, so there are immediate fiscal consequences to the policy decisions made by politicians. But this accounting change is forecast to add up to £12 billion a year to the budget deficit, posing major implications for the current Government’s fiscal plans.
    “There will now be pressure, quite rightly, for the Government to introduce policy changes to make the student loans system more affordable for taxpayers. There will be calls to cut tuition fees, reduce the interest rate on student loans and restore maintenance grants. All of these proposed reforms sound helpful, but in reality they are not. They would be deeply regressive, since they would simply mean that wealthier graduates enjoy an effective tax cut later in life.
    “Instead of assuming that either graduates or taxpayers should always pick up their bill, it is time to ask other major beneficiaries of higher education to contribute more to the sustainability of the student loans system. This means businesses and universities. Large graduate employers should be charged a new graduate levy. Universities that charge high tuition fees but produce graduates that will have their student loans heavily subsidised should also pay a levy.”