中国A片

On the folly of turning to private finance

二月 27, 2014

Rama Thirunamachandran is correct when he observes that the current model for student finance is unsustainable (“Bring in the banks: vice-chancellor breaks cover on student finance”, 20 February). And it’s good to see that even Nick Hillman, David Willetts’ former special adviser, now accepts this – although I?didn’t notice the word “sorry” appearing in his interview in the same issue in relation to his advice on this topic (“Hillman holds his hands up over RAB charge ‘mistake’?”).

Unfortunately, Thirunamachandran’s proposed alternative seems to follow the last Labour government’s view that private sector finance could act like a fairy godmother and magic-away problems through private finance initiatives.

Banks are going to lend to students only if?they make a profit from doing so, and they will almost certainly require their risk to be minimised through government loan guarantees: in other words, a?win for them, at the taxpayer’s expense. The result is likely to be, as with the London Underground PFI, a complex set of contracts that ends up costing the taxpayer far more than straightforward public spending would have done.

Paul Temple
Centre for 中国A片 Studies
Institute of Education, University of London

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Tim Hall’s review of Danny Dorling’s All That is Solid: The Great Housing Disaster (Books, 20 February) highlights the tragic inequalities in the UK housing “market”. A common reaction to the problem of young academics and researchers having to live in poor-quality, insecure and/or distant accommodation is to demand higher salaries. However, as Dorling points out, it is the rich who push up prices for everyone. Pay rises for academics will only shift the problem on to others.

Commercial banks create new money whenever a?loan is made and deposited into another bank account. About 97 per cent of the money in circulation in the UK is created as debt. The majority of loans go into property and speculation in financial markets, which are more profitable in the short term. The results are higher house prices, booming stock markets and the temporary illusion of wealth. When these bubbles burst, the taxpayer steps in to rescue the banks while funding for “luxuries” such as research and free education is squeezed.

What if some of this money had been channelled towards research and technological advancement? Would we be mining on Mars or harnessing fusion energy? University leaders should be asking: Why doesn’t the monetary system work in favour of long-term investment in research and education? Are we happy to ride the boom-bust funding roller coaster, or should we be exploring and promoting alternatives to our broken financial system?

Bob MacCallum
London

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Reader's comments (1)

This whole debate about the RAB charge is weird. I'm no economist but as far as I can tell, the cost to the taxpayer was previously 100%; under the new loans system it may or may not be 40%. How should that be perceived from the taxpayer's perspective? The RAB charge is a current speculation and a future reality, it is likely to vary over time and align with such things as economic growth. And although cash availability will always be an issue, UK plc has transferred a current account cost (the teaching grant) to a balance sheet asset (debtors) which also seems to have been overlooked. The only meaningful debate is how we, as a society, should be funding our HE into the future. Previously it was from general taxation and generally unquestioned. As student numbers grew - significantly in the period 1995 - 2010 - this became untenable in the view of many and possibly unfair to those who did not benefit directly. And both major political parties were essentially aligned on the solution, differing perhaps only in degree, with the third being able to take a principled stand without fear of reality interfering (until 2010). And of course the economic realities post-2008 made the situation more pressing. How best to fund HE is a complex debate that I don't plan to get into here. All I will say is that when something does not have any 'cost' attached to it then its value can be under-appreciated and its provision can become inefficient and unfocused. But whether the future write-offs are 30%, 40% or 50% of total loans and whether or not an estimate made several years earlier based on imperfect data was correct, seems to me to be missing the point. .
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