Are the coalition being a little unfair in the way they uprate student loans?
After all, George Osborne made a big play of how it was right to adjust all benefits by the Consumer Price Index rather than the Retail Price Index.
He argued it was a better measure of inflation that was targeted by the Bank of England. (Nothing to do with it saving around 1 per cent on the benefits bill, of course.)
Yet in the case of student loans — surprise, surprise — ministers will be sticking to RPI.
The loans will be uprated by at least RPI each year, even if you don’t reach the £21,000 threshold for repayment.
That will mean students will be paying back more in total than if the government had used CPI, its preferred measure of inflation for everything else. Cheeky I’d say.
Apart from the obvious double standards, it will also mean that graduates who fall out of work will be facing a rising debt burden in relation to their income — something the coalition promised to avoid.
That is because a person on sickness benefits, say, will only see their income rise according to CPI, while their debts increase at the higher rate of RPI.
Given the big upheaval in higher education funding this is a minor quibble. But it is one worth raising. When Nick Raynsford put the point to David Willetts in the Commons, the reply was that RPI was “inherited from Labour”. Hmm.
Jim Pickard
Kiran Stacey