Fix can put pounds 1bn into education

The Government should relax strict accounting rules affecting student loans to free up pounds 1billion a year to ease the higher education funding crisis, a former senior Treasury official said yesterday.

Dr Bill Robinson, special adviser to the Chancellor from 1991-93, said ministers could safely change rules which mean student loans are treated by the Treasury as if they will never be paid back. The adjustment would remove loans from public spending, allowing the Government to put more money into higher education and stay within its spending limits.

Arguments over changes to public accounting rules were being heard yesterday by the Commons education and employment select committee as part of its inquiry into higher education funding. The inquiry follows the publication last July of the Dearing Report, and the decision to introduce means- tested tuition fees next September.

Senior economists have told the committee that continuing to classify student lending as spending means there will effectively be no benefit from raising student contributions to higher education until around 2007, when the first fee-payers are repaying their loans. However, ministers fear a relaxation in the rules could cause alarm in the City over public spending.

-Lucy Ward, Education Correspondent