Wales refuses to implement Westminster’s stealth graduate tax raid

She was talking about Rachel Reeves’ slowly unravelling plans to freeze the graduate repayment threshold for Plan 2 student loan borrowers at its 2026 to 27 cash level for three years from April 2027.

She was doing so because Wales not only also has a bunch of graduates on Plan 2, it still uses it for new students. And education is devolved:

Only the Welsh Labour government ministers can set the repayment threshold for Welsh borrowers. The UK government can’t determine the threshold for Welsh students, and any change requires a decision by the Welsh government. And I want to make it clear today that we have no intention of freezing the thresholds and following England in this regard. We’ll work with the UK government to understand the full implications of the change, we need a proper impact assessment, and that’s clearly where we stand.

So what’s going on here? Changes to the repayment threshold and the interest thresholds are not made by primary legislation each year – they are effected by amendments to the secondary legislation that governs student loans, namely the various sets of Education (Student Loans) (Repayment) Regulations.

When changes are made, the statutory instrument substitutes one set of new figures for the old ones – and it’s usually signed by both the relevant minister in Wales, and the relevant minister in Westminster.

So since Reeves’ announcement, given a telltale note on the issue that appeared in “The Future of Tertiary Education in Wales: Sustainability and Participation” and the growing political furore over Plan 2 loans in general, whether Welsh Labour would risk the double whammy of a) looking like Westminster’s powerless lapdog, and b) attracting similar ire from graduates over fiscal drag.

And now we have our answer.

The whole thing is fascinating partly because we now have something close to confirmation of what we’d expected – that this wasn’t run past Wales ahead of its announcement.

Time was that government would run actual consultations on stuff like freezing the repayment threshold. Now it seems that Labour ministers can’t even seem to be bothered to talk to counterparts in Wales who share the system.

Given the loans system is run by the Treasury on behalf of the devolved administrations, it means that in theory, the OBR’s scoring of the budget will be out – because this (albeit small) part of it hadn’t been pre-agreed.

Could Plan 2 split off into two separate regimes, one for England and one for Wales? There’s no particular reason why not legally. Presumably the amending regs will just need to specify a new set of repayment and interest rate thresholds for Wales, and another for England.

Administratively though, that will be a huge pain for the Student Loans Company (SLC), who you’d have to assume are already at full pelt trying to implement the Lifelong Learning Entitlement (LLE) on time. See also the admin headache for HMRC.

Politically it won’t be great either. “Plan 1, Plan 2” etc are really just shorthand names – but on the assumption that it would be unwise to rename them all completely, a whole clutch of webpages showing Plan 2a: England alongside Plan 2b: Wales when the bifurcation kicks in hard towards the end of the Parliament won’t be ideal for a Westminster party that is haemorrhaging votes to the Greens already.

Of course, it’s not like there won’t be costs. Wales already looks like it’s maxed out its student loans credit card on loan system equivalence – if it refuses to play ball here it very much goes into an equivalence overdraft. So it may well need to fall into line in due course regardless – and potentially will need to go further.

What’s really happening here is a classic bit of dumping a problem on the next government. Even though Eluned Morgan is hoping that that will be her government, she won’t be wanting this issue to cloud an already fraught Senedd election campaign.

If the neutralising works, she can sort that out once back in power. If not, the problem lands in Plaid’s lap. Sorted!