Sale of Student Loans Bill
10:44 am
Michael Hipkins: There are three elements to understanding how the value-for-money equation will work. The first is that the market understands the nature of these loans because they are different from consumer credit. We have to ensure that the market understands their particular characteristics. The second element is to ensure that the market is functioning properly, with proper competition.
The third element is to do some form of value-for-money comparator, which I think is the element to which you are referring. That is to do with estimating the difference between the value for money of retaining the loans on the Government’s balance sheet and selling them into the market. That is a complex calculation and is about trying to discount the future cash flows that will come from loan repayments, as against a lump-sum payment coming to the Government soon. Those are estimates rather than complete answers.
We must also factor it in that there will be some transfer of risk from the Government to the private debt owners. That element of risk will have to be given a financial value and factored into the equation. To do that, we are getting advice from our colleagues in the Treasury, speaking to the NAO and taking advice from commercial companies that can help us in the overall sale process.