Chancellor Rachel Reeves has hit back at demands to overhaul the students loans system, suggesting the government had other priorities and was not in a rush to fix it
Rachel Reeves has admitted the student loan system is “broken” – but warned the government is in no rush to fix it.
The Chancellor, who earlier this year defended the system as “fair,” said Labour wanted to tackle the issue as she faced questions following her Mais lecture to the City of London.
Pressure has mounted on ministers to make changes to the Plan 2 student loan system, particularly after Ms Reeves announced in her autumn budget that the salary threshold for repayments would be frozen at £29,385 for three years starting from April. Interest on these loans is charged at the rate of Retail Prices Index (RPI) inflation plus up to 3%, depending on how much a graduate earns.
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“Yes, the student loan system is broken,” Ms Reeves said, but added that it was “more broken” that one in six young people are not in education, employment or training. She went on: “So, yes, we want to fix it. Yes, we want to make improvements. But is it front of the queue? No, it’s not.”
Ms Reeves insisted in January that Government measures were proportionate amid mounting criticism from campaigners. In response to a question on Tuesday, she suggested cutting hospital waiting lists and lifting children out of poverty by axing the two-child benefit cap were more important.
“Politics is about priorities,” she said. “I’m not denying there is a problem. I’m not blind to that, but what I do say is there has to be some patience. We can’t fix everything straight away. If you say to me, ‘you shouldn’t have done child poverty and you should have reformed the student loan system’, I just strongly disagree with that.”
She was speaking after Lord Chris Smith, a former Labour cabinet minister and now the new chancellor of the University of Cambridge, called for the system of tuition fees to be overhauled.
He told the FT: “The (system) is badly broken at the moment. We’re in an absurd position where quite often a graduate in an average-paying job is paying a huge whack of their income in repaying their loan each month, and making any real dent. This can’t be right.”
The influential House of Commons Treasury Committee has opened an inquiry into the fairness of the student loans system.