I watched government minister Victoria Atkins MP talking in a Channel 4 election debate last night, during which she claimed we must not borrow now because that would only leave a debt burden for future generations to repay.
Leaving aside the fact that there is no such thing as government borrowing, because all the government actually does is provide savings schemes for people who want to place money on deposit with it which very large numbers seemingly want to do, this argument also makes no sense, as there own policy makes clear. As I said on Twitter this morning:
If the government was really worried about the ability of future generations to repay debt they wouldn't be piling so many young people high with unrepayable and impossibly expensive student loans that the government's now planning to turn into a lifetime debt burden.
— Richard Murphy (@RichardJMurphy) May 4, 2022
The government cannot both create a deliberate and rapidly rising debt mountain for current and future generations of students and simultaneously say it is worried about doing so. In any case, only one of those statements can be true, and student debt policy makes quite clear that the government is entirely happy to put young people into debt.
In that case I suggest we entirely ignore the claim that we cannot take on debt now because it might impose a cost on future generations. Not only is that technical nonsense, because government deposit taking activity has never been repaid and very likely never will be, it is just not also a correct reflection of this government's policy.
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I am amazed that the interest now being paid student loans has not caused more anger.
Why do students pay 10% when the base rate is less than 1%? Well, when the loan scheme was hatched it seemed a good idea to link repayments to inflation rather than interest rates…. but nobody ever envisioned such a long sustained period where interest rates would be below inflation rates. The obvious answer is to just change the way the repayment rates are calculated but that is not so easy as the student loans have been repackaged and sold to investors who would cry foul if the T&C of the deal were changed.
It seems that
(1) the government does not care because students and recent graduates will never vote Tory and
(2) students are past caring because most will never repay the debt and are resigned to paying for the next 30 years.
The Government needs to
(1) change the way interest is calculated on all new loans being made today. (Easy)
(2) retrospectively change interest rates paid over the last 5 years (Not too hard)
(3) deal with the repackaged loans held by the private sector (Difficult but not impossible)
The detailed answer to (3) would require a close look at the prospectus of each deal and may end up with the government having to pay a windfall to these debt holders (although there may be other provisions in the deal that could be used). That would not sit well with me but if that is the price to get us out of the current situation then so be it.
I think nationalisation of this debt has to happen
I blame Gordon Brown for first selling it
Yes. History may still look back kindly on Gordon Brown for his global leadership during the Great Financial Crash in 2008 (along with Alistair Darling) but his obsession with Government debt levels and trying to shift them “off balance sheet” was bizarre and damaging. Student loans and PFI still burden us.
And that is why along with ABC I will also do ‘ABL’ – Anyone But Labour – because of student debt, PFI and ending public sector final salary pensions for no good reason at all in my view in 2003.
BTW where I live is a Tory safe seat where the biggest threat is from the Lib Dems. I don’t like them either which is why I vote Green but voting means absolutely nothing to me at all these days.
Student debt is proof if ever it were needed that the role of debt in society is nothing more than an income stream for the rich and powerful (including Government) and that is why it is preferred to real wages – we are here to serve the rich – our dreams, our lives , our ill-health, our joys and disasters and our deaths are all investment opportunities for the rich.
Education like health services should be free. Charging for it was a way of “Americanising” the system. Charging for higher education is a means whereby the wealthy can prevent the less well off from gaining access to power and maintain control themselves. Rich people do not have loans so can use this as a means of coercive power by controlling the interest rate of those who have the temerity to use it or by making the rate so onerous that poorer people do not obtain higher education but can serve the wealthy as workers.
Most/many/almost all? students don’t vote Tory-s. Thus the loading up of debt on students is akin to the “punshiment beatings” that Mendacious Fatberg used to waffle on about vis-a-vis the EU & Brexit. The Tory-s attitude is: well if they don’t vote for us lets load ’em up with debt & for those that students that do vote tory-s – their familes are probably in the 1% & thus student debt is irrelevant.
In another article on this site, Mr Warren commeted on the “energy loan” that Soonak has imposed on all UK households. Student debt falls into the same class – something that is imposed and which affects the less well off in society. As for young people, my advice is: become a plumber or electrician or expert at thermal renovation of houses. The first two are very very well paid and generally tend not to carry large-debt burdens once qualified.
We regularly see the impact of “only degrees have value” with candidates unsuited to the work in front of them. The result is that we have extensive induction, apprenticeship and development programmes to offset the failure of the higher education system. I think that the Swiss model is best of breed; subsidiaries there are most satisfied with labour input quality. The model there works on lower university numbers, excellent technical/ vocational education alternatives.
Student loans for maintenance were introduced as one of the last acts of Thatcher’s government in 1990, when maintenance grants were abolished, as normal loans with more or less standard repayment.
The extension of student loans to cover fees, and the link of repayment to income, was a Labour project introduced in 1998. Describing them as “loans” clouds the issue, given that repayments are linked to income and the payments are administered by HMRC. There is a payment that everyone is required to make to HMRC linked to their income, and that is income tax. Student loans are in reality a graduate tax.
The whole thing is reprehensible to me and echoes the point I’ve been trying to make elsewhere – we now live in the era of the Rentier State – a State that is going to make money out of us instead of helping us and that includes helping the rich to invest their money.
To pay my road tax recently , I thought I’d take out the monthly payment option only to find that the Government charges me interest to do so.
So what appears to be a mechanism to help and encourage people to pay their RT has an extra charge to it. It smacks of pre-privatisation to me – an income stream to be added to a prospective buyer (unless it already is some agency or other already).
When you consider the COLC as well it’s just not on.
Why?
Because as we know the Government can print the money to fully pay for this service, that’s why.