The secret plan to raise the price of student finance hints the government wants to privatise loans

Deferred gratification is not this lot's strong point.

Since the Guardian's scoop about "Project Hero", the secret Government report which proposed retroactively raising the price of student loans, there've been a couple of extra points raised which deserve thinking about.

The first is about the language used. Ministers were given a script, by which they might sell the plans to recent graduates. They were supposed to tell them that:

We all live in difficult times. You have a deal which is so much better than your younger siblings (they will incur up to £9,000 tuition fees and up to RPI+3% interest rates); it won’t make any difference to how much you pay in the short or medium term, just how long you pay it for.

The timing of the report is important to bear in mind, here. It was finalised after the Government had already approved, but not yet implemented, the post-2012 fee regime. A fee regime which was described as "fairer - opening the doors of universities to everyone, regardless of where they're from" and "the fairest option on the table - fairer than the current system and fairer than the graduate tax too" by David Cameron, and "a system of graduate contributions that is fair for all" by David Willets.

Few students going in to university in 2012 will have thought that they were experiencing a "fairer" system than their older siblings did; so it's interesting to know that exactly at the same time that ministers were making these pronouncements, the experts they'd hired to work out how to squeeze the most out of the graduates were busy telling them that it was self-evident that the fee regime was being made much worse.

The second point is the motivation for the changes. Raising the interest rate payable on loan balances won't get any extra money to the government now, when the vast majority of loans taken out since 1998 remain outstanding. Instead, it will increase the time taken to fully pay off the loans, in some cases pushing it all the way back to the 25-year/retirement maximum. That means as time goes on, and people who would have paid back their loans carry on paying off the interest, more money comes into the state.

But this is a government supremely, myopically concerned with the deficit now. If they were able to defer pleasure, they'd have waited to cut the deficit until we were out of depression, after all. So why do it? To make the loan book more appealing to private investors.

The idea of selling off the student loan portfolio has been mooted for a while now. It's an easy way of turning a bunch of future income streams into one handy payment. And if that sounds a bit like a daytime TV advert for debt refinancing, that's because it is. The Government would inevitably sell the debt – which is estimated at between £35bn and £45bn – at far below what they would get if they held on to it. That's partially because you always lose cash if you divest yourself of risk, but it's also because this is not a sale which we can expect to be entered into with the Government negotiating at strength. It's such a political football that any potential buyer will know that once the decision's been made, they aren't going to back track – and so offers below par will be accepted to save face.

That's even more likely to be the case if the Government decides to privatise the loan book before the election in 2015. That will be a fire-sale to remember.

If the measures proposed in Project Hero are enacted, it won't be the end of the fight over student finance – just the start of the next battle.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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The future of policing is still at risk even after George Osborne's U-Turn

The police have avoided the worst, but crime is changing and they cannot stand still. 

We will have to wait for the unofficial briefings and the ministerial memoirs to understand what role the tragic events in Paris had on the Chancellor’s decision to sustain the police budget in cash terms and increase it overall by the end of the parliament.  Higher projected tax revenues gave the Chancellor a surprising degree of fiscal flexibility, but the atrocities in Paris certainly pushed questions of policing and security to the top of the political agenda. For a police service expecting anything from a 20 to a 30 per cent cut in funding, fears reinforced by the apparent hard line the Chancellor took over the weekend, this reprieve is an almighty relief.  

So, what was announced?  The overall police budget will be protected in real terms (£900 million more in cash terms) up to 2019/20 with the following important caveats.  First, central government grant to forces will be reduced in cash terms by 2019/20, but forces will be able to bid into a new transformation fund designed to finance moves such as greater collaboration between forces.  In other words there is a cash frozen budget (given important assumptions about council tax) eaten away by inflation and therefore requiring further efficiencies and service redesign. 

Second, the flat cash budget for forces assumes increases in the police element of the council tax. Here, there is an interesting new flexibility for Police and Crime Commissioners.  One interpretation is that instead of precept increases being capped at 2%, they will be capped at £12 million, although we need further detail to be certain.  This may mean that forces which currently raise relatively small cash amounts from their precept will be able to raise considerably more if Police and Crime Commissioners have the courage to put up taxes.  

With those caveats, however, this is clearly a much better deal for policing than most commentators (myself included) predicted.  There will be less pressure to reduce officer numbers. Neighbourhood policing, previously under real threat, is likely to remain an important component of the policing model in England and Wales.  This is good news.

However, the police service should not use this financial reprieve as an excuse to duck important reforms.  The reforms that the police have already planned should continue, with any savings reinvested in an improved and more effective service.

It would be a retrograde step for candidates in the 2016 PCC elections to start pledging (as I am certain many will) to ‘protect officer numbers’.  We still need to rebalance the police workforce.   We need more staff with the kind of digital skills required to tackle cybercrime.  We need more crime analysts to help deploy police resources more effectively.  Blanket commitments to maintain officer numbers will get in the way of important reforms.

The argument for inter-force collaboration and, indeed, force mergers does not go away. The new top sliced transformation fund is designed in part to facilitate collaboration, but the fact remains that a 43 force structure no longer makes sense in operational or financial terms.

The police still have to adapt to a changing world. Falling levels of traditional crime and the explosion in online crime, particularly fraud and hacking, means we need an entirely different kind of police service.  Many of the pressures the police experience from non-crime demand will not go away. Big cuts to local government funding and the wider criminal justice system mean we need to reorganise the public service frontline to deal with problems such as high reoffending rates, child safeguarding and rising levels of mental illness.

Before yesterday I thought policing faced an existential moment and I stand by that. While the service has now secured significant financial breathing space, it still needs to adapt to an increasingly complex world. 

Rick Muir is director of the Police Foundation