Spot the difference: pensions vs student loans

It's only OK to retroactively change a deal when it affects young people.

The Guardian's Aditya Chakrabortty and the False Economy network have a massive scoop this morning. A secret government report from 2011 proposes retroactively changing student loan agreements to force pre-2012 graduates to pay more for their education:

At the moment, the cap on student debt taken out before 2012 keeps repayment rates at 1.5%. Lifting it would mean a rate of 3.6%, in line with RPI in March 2012. One indicative calculation suggests that an employee on £25,000 a year, with £25,000 of undergraduate loans taken out before 2012, could work until retirement without ever paying off their debt if the interest rate cap were removed.

Somewhat astonishingly, the report also contains a "script" for ministers to push the policy:

"We all live in difficult times," they suggest ministers argue. "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)".

Needless to say, the report does not address the fact that the ministers' generation had a deal which is considerably better that either younger or older siblings.

There's an element of sleight of hand at play here. Since the actual fees are not retroactively raised, the government would be able to argue that it's not really changing all that much, just the terms of repayment. But student loans are already basically taxes in how they're repaid. What this will do in that assessment is extend the length of time which those taxes are paid – in some cases, right up until the 25-year cut-off, at which point the outstanding debt is wiped away.

The reason why the change is so remarkably unfair is because of its retroactive nature. A cohort of students decided to go to university based on the deal that they would repay loans at the lower of 1 per cent above the Bank of England base rate or RPI. If that weren't the deal at the time, it's a fair bet a number of people might not have decided to get themselves into around £20,000 of debt.

There's a certain amount of fun to be had comparing the proposals to the reaction to Labour's markedly less radical suggestion that pensions count as welfare spending, and might need to be capped if welfare spending as a whole grows too large.

That is not a particularly bold statement. As Ian Mulheirn of the Social Market Foundation has showed, given the rate at which pension liabilities are growing, just to keep total expenditure flat would require massive cuts to every other spending program. Nonetheless, it's led to comments like this, from the National Pensioners Convention:

Ed Balls has made a fundamental error of judgement in suggesting that state pensions are just another benefit in the general scheme of welfare spending.

Everyone knows that you only receive a state pension if you have paid national insurance for at least 30 years. This contributory principle means that it’s not a benefit, but an entitlement.

Interestingly, no-one brings up the same point when contributory JSA is cut, a benefit which also relies on NI contributions. But the larger point is that the contributory principle says nothing about the level of benefits.

It may well be a terrible idea to cut pensions, for exactly the same reason that it's a terrible idea to retroactively increase student loan payments: people make spending plans spanning decades based on these figures, and a cut can wreck those plans at a time when there's no chance to rescue them.

(Of course, that objection doesn't quite hold water in the case of pensions, which have, thanks to the Government's "triple lock", increased in present value significantly. Removing the triple lock could not irreparably damage anyone's long term plans)

But young people are easier to screw over than old people. And divide and rule – pitting one cohort of young people against another – makes it even easier still.

Here's a better idea for funding universities: don't scrap a tax which brings in billions of pounds from people who can overwhelmingly afford it, and then complain that the one generation which actually paid for their university education should pay more.

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.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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