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    • Ed-1
    • By Ed-1 19th Apr 17, 6:37 PM
    • 2,204Posts
    • 1,178Thanks
    FYI - FOI releases on student loan repayment threshold policy (retrospective changes)
    • #1
    • 19th Apr 17, 6:37 PM
    FYI - FOI releases on student loan repayment threshold policy (retrospective changes) 19th Apr 17 at 6:37 PM
    There are now 2 extremely insightful freedom of information releases on how the policy on this developed with the pre-2012 threshold (notably hardly anyone seemed to acknowledge prior to me raising it that retrospective changes to thresholds and policy intentions occurred with the pre-2012 threshold). There was much misinformation and misunderstanding from the likes of Martin Lewis when the post-2012 threshold was frozen.

    In order to further people’s understanding of the retrospective changes which occurred with the pre-2012 threshold I am sharing these FOI releases.

    The first shows how the threshold policy developed under the Labour Government. Some people realise that it began life at £10,000 from April 2000. Most people recognise the £15,000 level which it was raised to in April 2005 (not 2006 as stated in the submission below – it seems some people even in Government confuse the year the threshold was raised with the year the new top-up tuition fees came in, which shows the threshold was meant to be reviewed separately to any changes in tuition fee policy). What very few people realise is that it was meant to be raised annually by RPI (at least in the short term, with raising by earnings growth a longer term aim) from April 2010. However the spanner in the works came when RPI was negative (March 2009) at the point it was first meant to increase in April 2010. The following submission shows the 3 options that were considered to the then Minister (David Lammy): (1) decrease the threshold by RPI (which happened to be -0.4% in March 2009); (2) freeze it at £15,000 for a further year and uprate by RPI from April 2011; and (3) uprate by earnings growth instead from April 2010. The recommended option was (2) but it was not what happened. The first part happened, as the threshold was frozen at £15,000, but it was not uprated by the March 2010 RPI (4.4%) from April 2011. .pdf

    This following freedom of information release neatly dovetails with the above and explains what happened next after the change of Government in 2010. Following much political wrangling in the Coalition Government, an announcement was made in December 2010 by the Secretary of State (Vince Cable) to uprate the threshold in 2012, 2013, 2014 and 2015. The submission to the new Minister (David Willetts) in February 2011 contained this recommendation to implement threshold uprating from April 2012 – presumably this was the earliest that the uprating could now start given that April 2011 was nearing and the above submission shows that practical time sensitive issues with HMRC and the devolved administrations need to be considered. Notably, in the below submission, paragraph 13 identifies that “the inflation increase in the repayment forecast has already been factored into the RAB forecast, so there is no financial impact.”

    However, as the first submission shows, the RAB forecast and budget calculations were based on the threshold increasing by RPI (forecast to be 2.8% in the first year) year-on-year from April 2010, so the fact it was maintained at £15,000 until April 2012 was actually a financial windfall to the Exchequer.
Page 1
    • Ed-1
    • By Ed-1 19th Apr 17, 8:06 PM
    • 2,204 Posts
    • 1,178 Thanks
    • #2
    • 19th Apr 17, 8:06 PM
    • #2
    • 19th Apr 17, 8:06 PM
    Also interesting to go with the above and the subsequent post-2012 retrospective changes:

    "The coalition says that the threshold for repayment will be set at £21,000, but that is in 2016 prices. In real terms, that is the same as the £15,000 threshold that started in 2006 (sic - it was 2005) and is due for review next year. That is not generous: it is sleight of hand. Lord Browne said the threshold should be uprated every five years in line with earnings. The ready reckoner published by the Department assumes that it will be uprated every five years in line with earnings, but the Minister for Universities and Science, Mr Willetts, says only that there will be periodic uprating. I asked the Secretary of State whether that uprating would be laid down in law, but his letter is silent on that point. Even the dubious claims made about fairness depend on regular uprating in line with earnings, but if it is not in law it means nothing. The House must see draft clauses, not vague promises, before it is asked to vote on the fee cap." (John Denham, 30 Nov 2010) 67#g746.7
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