Student loans must be added to the deficit, the Office for National Statistics has said, as almost eight in ten graduates never pay it back in full.
The new accounting system, which comes into force next autumn, will be a blow for the Treasury as it will leave a £12 billion hole in public finances, according to official forecasts.
The ONS will now split the loans into two parts – financial assets and government expenditure. It marks a break with the current system where student loans do not count as government spending, despite the fact that many graduates do not earn enough to re-pay the loan.
“The design of the system means much of this student loan debt will never be repaid, and is therefore written off by the government,” said David Bailey, head of public sector division at the ONS.
My only confusion is why wasn’t it treated like this before?