Driving Society Forward.
Privatisation of Student Debt
Glenn Rikowski, London, 16th March 2007
And Thy Debt Shall Lay upon Capital's Private Altar
On the front page of the Financial Times yesterday was a chilling article written by Chris Giles and Nicholas Timmins. It appears that a tranche of the debt owed by students and graduates in the UK in the form of loans for university study is to be privatised. This will be a direct form of privatisation, with financial companies effectively owning the debt and students becoming beholden to them. The thing is, apparently, that Chancellor Gordon Brown needs some quick cash to balance his Budget books. University students are to be the sacrificial lambs.
As noted in the report:
"Gordon Brown will raise billions of pounds to put education at the centre of next week's Budget with privatisation of the student loans system" (Giles and Timmins, 2007).
Brown wants to raise education spending in real terms within an otherwise tight Budget, and this privatisation of student debt scam enables him to do it, it seems. But this is nothing new: Giles and Timmins note that over the 1997-2000 period the New Labour administration made £4.1billion by selling off some of its 'future revenue streams for student loan repayments' (Ibid.) to the private sector. A lot of money is tied up in student loans; Giles and Timmins report that:
"The book value of student loans at the end of March last year was £16bn and the Treasury is planning to sell a large chunk of this to the private sector that has an almost insatiable appetite for assets bearing a steady stream of income" (Giles and Timmins, 2007).
Yes, of course the private sector would have a huge appetite for steady incomes in these uncertain times. Capital loves itself, and always wants more of its own company; the bigger the party the better. Those in particular wanting these steady income flows include pension funds, note Giles and Timmins. There is a certain irony in this. Not only will young graduates be faced with paying off their loans to capital in its pure form (as opposed to the capitalist state, or an arm of this state) but they may be paying into a pension fund which feeds of their own loan-paying experiences! They will be caught ever deeper into the web of capital, and the government fosters and bolsters such developments to balance its own books! Though I suspect that, ideologically, and maybe even (perversely) 'morally', New Labourites believe this development to be altogether wholesome and progressive. Indeed, it is 'progressive' in the sense that in is another small step in the capitalisation of social life. The virus of capital takes an ever stronger grip on our social existence.
Further data given by Giles and Timmins show just how much of this 'steady income' is available for mining in UK educational services as a whole:
"Education is set to receive a budget settlement in the comprehensive spending review of about 3 per cent above inflation, more than the projected 2.75 per cent real growth of the economy. With education spending set to hit £75.8bn in 2007-08, such a settlement would provide close to £4.5bn a year extra in cash for education, raising spending to nearly £90bn in 2010-11" (Giles and Timmins, 2007).
So, by 2010-11, companies will be eyeing up £90billion of state revenue in the UK education industry that they would surely want to turn into private profit to the max. It remains to be seen whether Gordon Brown, when he becomes next New Labour leader, and hence Prime Minister, will be generous in opening up this £90billion widely to private operators. Certainly, over the last 10 years, businesses, the Confederation of British Industry, and the Institute of Directors have been disappointed with the pace at which the Blair regime has unlocked state revenue in the sector education to the wolves of capital – the Private Finance Initiative and the Building Schools for the Future programmes notwithstanding. Given this initiative on the privatisation of student debt by Gordon Brown, no doubt they now view the merits of Blair going quickly more strongly than ever.
Some Possible Consequences
There could be various consequences of for those faced with repaying student loans in what is being proposed. The more the private sector is brought into the situation, the greater certain pressures will increase, it could be argued. For example, pension funds and others owning student debt may well wish that the threshold earnings (when repayment of loans kicks in), be lowered. This would speed up the flow of profits. They may also wish that they had more control over interest rates regarding the loans. In addition, tighter control over debt recovery and a tougher legal framework for those refusing to pay, or attempting to avoid repayment of loans might be something they ask for. The extent to which New Labour under Brown acquiesces to such demands will determine the extent to which the hammers of the law and capital fall on the heads of higher education students and graduates.
No doubt these developments will spark off further calls for young people to become 'financially literate', with such programmes being advocated for school pupils and college students on the journey to taking out loans. As I have argued previously:
"Of course, there is an argument that school children should know about how finance capital and its various appendages actually work. Trenchant critiques of the banking sector (and its stratospheric profits), why city slickers get mega bonuses, the withdrawal of state benefits from young people, the higher education fees regime and much else financial would be all to the good. Yet this is not what New Labour actually wants. The New Labour debt-mongers want compliance and fear. They want to increase not lessen the burden of debt, and make us feel guilty in the process" (Rikowski, 2007, p.2).
However, with the privatisation of student debt, not only will young people be treated in a patronising and manipulative way in the interests of capital but may well be further hounded by capital's legal and financial wolves. Indeed, yesterday was a great day for companies at the forefront of education law in the UK, such as Eversheds: rich pickings on the bulging carcass of student debt appear to be increasingly enticing for the vultures.
Giles, C. & Timmins, N. (2007) Chancellor to sell off students' £16bn debt, Financial Times, 15th March, p.1.
Rikowski, G. (2007) Education for Debt, London, 22nd January, online at: http://www.flowideas.co.uk/?page=articles&sub=Education%20for%20Debt
© Copyright, Flow of Ideas, Ruth Rikowski and Glenn Rikowski. Website by [whiteLayer]