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November 28, 2013 12:02 am
Ministerial miscalculations over student loan repayments have resulted in the potential loss of £5bn taxpayer-funded debt for which the government has no tracking records, according to research by the public spending watchdog.
The National Audit Office estimates that around 368,000 students who have borrowed money are unlikely to pay it back because the Department for Business, Innovation and Skills does not have their employment records.
These individuals could be unemployed students living in the UK, European Union students who have returned home or Britons who have moved overseas.
Amyas Morse, NAO chief, said that, given the expanding size of the student loan book, the business department needed to take a “more energetic and considered approach” to maximising taxpayer value and achieving a high level of collections.
Ministers had initially assumed that 35 per cent of new student loans would never be repaid but, according to the spending watchdog’s calculations, the correct figure is more than 40 per cent.
Liam Byrne, shadow minister for higher education, said the miscalculation would cost an extra £600m a year from 2015/16, blowing a “huge hole” in the department’s budget.
“We need to know fast how ministers got it so wrong, and how they’re going to fix it without putting Britain’s scientists, students and colleges under threat,” Mr Byrne said. “This is industrial scale incompetence in the department for industry.”
The business department said that the report demonstrated an “effective and efficient” process resulting in high collection rates at a low cost. “We are continually improving the collection process for borrowers and we will carefully consider the NAO’s recommendations,” a spokesman added.
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