22/11/2018 00:01 GMT | Updated 22/11/2018 09:26 GMT

Ministers Sold Student Loans Book Worth £3.5bn For £1.7bn To Cut Public Debt

A return of just 48p in the pound.

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The first tranche of the student loan book was sold while Prime Minister Theresa May was in power

Ministers who sold off student loans to cut government debt failed to get the best price for the taxpayer and stand accused of being “short-sighted”. 

The sale in 2017 of the first tranche of student loans with a face value of £3.5bn raised just £1.7bn - a return of just 48p in the pound, the Public Accounts Committee has found. 

The committee’s report says that, according to the Government’s own analysis, had it held on to the loans it would have recouped the £1.7bn sale price in just eight years.

As there was little chance all the loans would be repaid, ministers could not have expected face value but should have sought “the best possible deal”, MPs said.

“In this case, government received too little in return for what it gave up,” the report said.

“Treasury’s focus on reducing its ‘public sector net debt’ measure is a short-sighted approach which fails to convince us that the deal is the best one for public sector finances in the long term.

“The willingness to accept offers from investors if they exceed government’s theoretical ‘opportunity cost’ of holding the assets runs the risk of accepting too low a price.”

Committee chairwoman Meg Hillier said ministers must learn from “the weaknesses of this sale” to get a better deal when the next share of the book is sold. 

“When public assets are gone, they’re gone – in the case of this first student loans sale, for too little return,” the Labour MP said. 

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PAC committee chair Meg Hillier 

“It is troubling that the Government could have expected to recoup the £1.7bn sale price in just eight years.

“Decisions on asset sales must fully consider value for money but I am not convinced that this transaction, with its narrow and short-term objective of reducing public sector net debt, is fully compatible with that principle.” 

She said ministers must be more transparent about what the sale means. 

“It is not clear how this sale serves to decrease the long-term risk to the public finances, nor if Government’s decision to withhold the identity of investors best serves the public interest,” she said. 

“Government must review its approach to evaluating student loans and other assets it has earmarked for sale, and better demonstrate the role such sales play in Government’s overall strategy for managing public finances.

“As part of this it must ensure decisions affecting transparency around sales are backed by evidence.

“The public deserves to know who stands to gain from the sale of public assets.”

A Government spokesman insisted ministers got value for money.

He said: “Student loans are designed so that borrowers only repay when they can afford to - this gives more people the chance to go to university and get on in life, but, as the Public Accounts Committee recognises in its report, this also means many students will never fully pay back their loans.

“We welcome the report from the Committee and will issue a full response in due course.”