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
News
Young Winstone: His ‘tough-guy’ image is a misconception
people
Sport
Adnan Januzaj and Gareth Bale
footballManchester United set to loan out Januzaj to make room for Bale - if a move for the Welshman firms up
Arts and Entertainment
Ellie Levenson’s The Election book demystifies politics for children
bookNew children's book primes the next generation for politics
News
Outspoken: Alexander Fury, John Rentoul, Ellen E Jones and Katy Guest
newsFrom the Scottish referendum to the Ice Bucket Challenge, our writers voice their opinions
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
i100
Sport
Yaya Sanogo, Mats Hummels, Troy Deeney and Adnan Januzaj
footballMost Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
Arts and Entertainment
L to R: Hawkeye (Jeremy Renner), Captain America (Chris Evans) & Black Widow (Scarlett Johansson) in Avengers Assemble
film
News
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
Arts and Entertainment
Pharrell Williams' “Happy” was the most searched-for song lyric of 2014
musicThe power of song never greater, according to our internet searches
Sport
Tim Sherwood raises his hand after the 1-0 victory over Stoke
footballFormer Tottenham boss leads list of candidates to replace Neil Warnock
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
Voices
Strictly Come Dancing was watched by 6.9m viewers
voicesIt has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
Arts and Entertainment
Roffey says: 'All of us carry shame and taboo around about our sexuality. But I was determined not to let shame stop me writing my memoir.'
books
News
i100
News
Caplan says of Jacobs: 'She is a very collaborative director, and gives actors a lot of freedom. She makes things happen.'
people
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

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Ashdown Group: Senior Marketing Executive- City of London, Old Street

£40000 - £43000 per annum + benefits: Ashdown Group: Senior Marketing Executiv...

Ashdown Group: Marketing Manager

£40000 - £43000 per annum + benefits: Ashdown Group: An international organisa...

Ashdown Group: Internal Recruiter -Rugby, Warwickshire

£25000 - £30000 per annum: Ashdown Group: Internal Recruiter -Rugby, Warwicksh...

Day In a Page

War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?
Finally, a diet that works: Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced

Finally, a diet that works

Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced
Say it with... lyrics: The power of song was never greater, according to our internet searches

Say it with... lyrics

The power of song was never greater, according to our internet searches
Professor Danielle George: On a mission to bring back the art of 'thinkering'

The joys of 'thinkering'

Professor Danielle George on why we have to nurture tomorrow's scientists today
Monique Roffey: The author on father figures, the nation's narcissism and New Year reflections

Monique Roffey interview

The author on father figures, the nation's narcissism and New Year reflections
Introducing my anti-heroes of 2014

Introducing my anti-heroes of 2014

Their outrageousness and originality makes the world a bit more interesting, says Ellen E Jones
DJ Taylor: Good taste? It's all a matter of timing...

Good taste? It's all a matter of timing...

It has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
Olivia Jacobs & Ben Caplan: 'Ben thought the play was called 'Christian Love'. It was 'Christie in Love' - about a necrophiliac serial killer'

How we met

Olivia Jacobs and Ben Caplan
Bill Granger recipes: Our chef's breakfasts will revitalise you in time for the New Year

Bill Granger's healthy breakfasts

Our chef's healthy recipes are perfect if you've overindulged during the festive season
Transfer guide: From Arsenal to West Ham - what does your club need in the January transfer window?

Who does your club need in the transfer window?

Most Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
The Last Word: From aliens at FA to yak’s milk in the Tour, here’s to 2015

Michael Calvin's Last Word

From aliens at FA to yak’s milk in the Tour, here’s to 2015