Back in December the Westminster government published a piece of secondary legislation rejoicing in the title of The Education (Student Loans) (Repayment) (Amendment) (No. 4) Regulations 2022.
It is a statutory instrument (SI) subject to the negative procedure, which means it would only be brought to a vote in either house if a motion (a “prayer” is the jargon) to reject it is agreed by either the Commons or the Lords within 40 sitting days – otherwise it automatically becomes (or remains, for some parts) law.
Making the law
Because of the sheer number of regulations and changes to existing processes made via a negative SI, the House of Lords has a Secondary Legislation Scrutiny Committee (SLSC) which reads and “draws to the special attention of the house” pieces of secondary legislation subject to the negative provisions that have caught its collective eye. And – unlike the Commons Select Committee on Statutory Instruments (and, for that matter the Joint Committee on Statutory Instruments) it can do so for policy and political reasons, rather than just technical and drafting issues.
And with 1110 pieces of secondary legislation published in 2022 alone, that is potentially a lot of work. Most SIs pass without comment – the ones that get a mention in the committee’s regular reports are, for the want of a better word, special.
The SLSC is unimpressed with these particular regulations, which operationalise the changes proposed to the student loans system for new borrowers beyond August 2023 – announced back in February 2022. With the possible exception of the Treasury, nobody much likes these plans – which, in a nutshell:
- Reduce the repayment threshold for new borrowers to £25,000, uprated by RPI.
- Freeze the repayment rate for current borrowers at £27,295 for the next two years and then uprate by RPI in future.
- Reduce the loan interest rate to RPI only for new borrowers.
- Write of the balance after 40 years for new borrows, rather than 30 as it is currently
- Raise the overseas fixed instalment rate to £352 a month for new borrowers, up from £201 as currently – and increase the rate to £335 for current UGs and £255 for current PGs.
These new loan terms and conditions will become “Plan 5”, replacing the existing “Plan 2” for most English undergraduate students from the 2023 cycle onwards. As we’ve gone over on the site before, these are particularly regressive changes to the student loan system that means low-earning graduates pay more and high earners pay less.
What’s the beef?
You may dimly remember the February 2022 announcement was alongside a consultation on “HE Reform” (and another on the Lifelong Loan Entitlement). However, these proposals were not part of that consultation, and indeed (in the eyes of the committee) have never been consulted on. When asked, DFE tried to make out that the proposals were a part of the Augar review process – which started with an opportunity to feed in views – despite them being diametrically opposed to what Augar concluded. There’s no formal requirement to consult, but the committee not unreasonably suggests that this should have happened given the sheer number of people the plans will affect – and also suggests that DfE needs to write to existing borrowers when the terms of their loans change.
The Retail Price Index (RPI) is one of a number of measures of inflation in common use – although the UK Statistics Authority have specifically said RPI should not be used, and the government itself admits the measure is flawed. Changing loan terms feels like time to address this issue – but DfE has chosen to retain RPI for reasons that remain opaque.
There’s also an attempt to argue that adding a new plan makes the system more complex – but it is difficult to accept the committee’s reasoning that the various plans should be harmonised, as this would require detrimentally changing the loan terms of a large number of people for very little benefit (incidentally, if you are interested, plan 1 is pre-2012, plan 2 is post-2012 undergraduate, plan 3 is post-2012 postgraduate, and plan 4 is Scotland post -1998)
Not levelling up
But the force of the committee’s ire is reserved for the sheer unfairness of the proposals. The DfE response (which can be read at Annex A) goes heavy on the rebalancing of subsidy for higher education between “students” (it means graduates, of course) and general taxpayers “who did not have the benefits of that higher education themselves”
We recognise that there are many dimensions to fairness and acknowledge the Government’s argument that they are seeking to rebalance the contributions made by students and taxpayers. However, we are concerned that the changes make the system less progressive and may not be consistent with Government policy elsewhere, for example in the Levelling Up agenda.
Leaving aside the fact that about a third of taxpayers did personally benefit from higher education, the government argument is that the disparities in impact experienced by disadvantaged groups are because of the average salaries of such groups rather than directly because of personal characteristics or life experiences. This doesn’t wash.
The upshot here is that members of the Lords (or indeed, the Commons) need to move a “prayer” by 28 February (2 March in the Commons) to have any chance of stopping these changes becoming law on 8 April.
Such a “prayer” (there is no set way of doing this, the usual method is an Early Day Motion in the Commons including the wording “That a humble Address be presented to His Majesty, praying that [the instrument] be annulled”) could result in either a reference to the Commons Delegated Legislation Committee or a debate and vote in the house – although even if there is a “prayer” ministers can simply ignore it.
Despite the Secondary Legislation Scrutiny Committee being a Lords’ committee – the upper house tends to “regret” rather than annul SIs – though it has happened.
I don’t want to get any hopes up here – the last time a negative SI was successfully annulled in the Commons was the 1979 Paraffin (Maximum Retail Prices) (Revocation) Order. The last time the Lords managed it was the Tax Credits (Income Thresholds and Determination of Rates (Amendment) Regulations 2015 – and that was such a constitutional novelty it kicked off a whole inquiry.
Using RPI is better for most students though as it means the repayment threshold would increase more than otherwise: the difference between uprating the £27,295 threshold at current RPI and current CPIH is repayments that are £100 lower (some students may lose out due to the interest on student debt being set at RPI rather than at CPIH though)
From 2030, RPI reform will take effect and CPIH will be renamed as RPI solving this “problem” (CPIH has flaws too – odd that ONS didn’t just fix the formula issues with RPI by moving to RPIJ rather than completely changing what the headline inflation metric is measuring)
It’s also interesting in the context of Lords reform. If the Lords somehow do manage to revoke the SI, then there is both ammunition to argue for further reform as a (possible) new Labour government plans to and an argument against in that the Lords would have potentially been seen to have done something that the opposition could not do, which is reverse patently unfair legislation. That could be potentially embarrassing for a Labour government.
“…but it is difficult to accept the committee’s reasoning that the various plans should be harmonised, as this would require detrimentally changing the loan terms of a large number of people for very little benefit”
But isn’t having the same rules for everyone more equitable? The Government detrimentally changed my income tax payments by freezing the personal allowance, but since it applies equally to everyone I can’t really complain.