George Osborne university plan is ‘nonsense’, says respected think-tank

Selling off loan book to fund more student places is not viable option, warns think-tank

George Osborne was speaking “economic nonsense” in his Autumn Statement when he claimed his decision to lift the cap on university places would be financed by the sale of the student loan book, the respected Institute for Fiscal Studies (IFS) think-tank said today.

On Thursday the Chancellor announced that from 2014 the Government would create 30,000 more student places and that the cap would be abolished altogether the following year. He added that the new money that would be required to finance this expansion in the university intake would be financed by selling the student loan book to private investors.

But Paul Johnson, the head of the IFS, said today that “economically it makes little sense” because the sale of the loan book was a one-off boost to revenues whereas lifting the cap on students would create a permanent liability.

“Selling the loan book will be broadly fiscally neutral in the long run, bringing in more money now at the expense of less money later on. Lifting the cap on numbers will cost money every year,” he said.

His colleague Carl Emmerson went further and described the Chancellor’s claim as “nonsense” because “selling an asset for what it is worth does not strengthen the public finances”.

In further bad news for the Government the IFS predicted that average household incomes at the time of the next election in 2015 were likely to be lower than they were in 2010, when the Coalition took office.

Mr Johnson took issue with George Osborne’s claim that household incomes were still rising despite the economic stagnation of recent years pointing out that the statistical index the Chancellor used to back up this claim was “not something with which to measure living standards”.

Labour, by contrast, has claimed, using a different statistical gauge, that the average household is £1,600 a year worse off since 2010.

The IFS did not endorse this figure but Mr Johnson said it was “pretty consistent” with what the think-tank regards as the true picture of what has happened to household incomes between 2009-10 and 2011-12.

Mr Johnson said that while the average household income should start to grow as the economy recovers it “will surely still be below its 2010 level by the time we get to the election in 2015”.

The IFS also said that the fiscal projections in this week’s Autumn Statement implied the pace of cuts to Whitehall spending would rise still further in the next Parliament. The think-tank said departmental spending is projected to fall by 2.3 per cent a year until 2016, and that this would accelerate to 3.7 per cent thereafter until 2019.

The Chancellor presented his Autumn Statement as “fiscally neutral”, meaning that the cost of new spending commitments   which include free school meals for all infants – were offset by countervailing measures which would raise new money for the Treasury.

But the IFS cast doubt on this, pointing out that the revenues from Mr Osborne’s tax avoidance clampdown were “inevitably uncertain” and that there are now additional unfunded spending pressures of around £7bn a year from 2015-16.

Labour said the IFS was right to question whether Mr Osborne’s sums added up.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA celebration of British elections
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Marketing Manager (B2B) - Romford - £40,000 + car

£35000 - £40000 per annum + car and benefits: Ashdown Group: Marketing Manager...

Ashdown Group: Helpdesk Analyst - Devon - £20,000

£18000 - £20000 per annum: Ashdown Group: Helpdesk Analyst - Devon - £20,000 ...

Ashdown Group: Data Scientist - London - £50,000 + bonus

£35000 - £50000 per annum + generous bonus: Ashdown Group: Business Analytics ...

Ashdown Group: IT Project Coordinator (Software Development) - Kingston

£45000 - £50000 per annum: Ashdown Group: IT Project Coordinator (Software Dev...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions