Why the student loan sell-off is a terrible deal for taxpayers

For the sake of short-term deficit reduction, the government is giving up a long-term asset.

The great student loan sell-off has begun. After announcing its intention to privatise the £40bn loan book earlier this year, the government has sold a £890m tranche to a private debt collection agency (Erudio Student Loans) for £160m. 

The coalition has presented the move as a pragmatic step that will, in the words of Universities minister David Willetts, "allow us to reduce public debt and maximise the value of one of the government’s assets." But in reality, the reverse is the case. In order to attract a private buyer, ministers have sold the loans at a discount of £730m. While analysts will debate the precise price, it would have been impossible for the government to sell them at a profit. As Martin Wolf explained earlier this year, "no private party has a lower borrowing cost than the government, since the government is the most creditworthy entity in the country. So the value of the student loan book to the government, given its low discount rate, is higher than to any potential private buyer."

Why, then, has the government opted for privatisation? Were the UK, like Greece, compelled to sell its assets to stave off bankruptcy, the move would make sense. But with its independent monetary policy (allowing the Bank of England to create new money), its above-average debt maturity and its growing economy, Britain is in no danger of insolvency. 

The decision, like so much coalition policy, reflects the Conservatives' determination to prioritise short-term deficit reduction over long-term investment (which is what student loans are). While the sale will save the government money today (allowing it to cut debt or taxes), it will cost its successors money tomorrow. But never mind the long-term economic interests of the country, George Osborne and David Cameron have got an election to win. 

Demonstrators chant slogans during a student rally in London on November 21, 2012. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Why Barack Obama was right to release Chelsea Manning

A Presidential act of mercy is good for Manning, but also for the US.

In early 2010, a young US military intelligence analyst on an army base near Baghdad slipped a Lady Gaga CD into a computer and sang along to the music. In fact, the soldier's apparently upbeat mood hid two facts. 

First, the soldier later known as Chelsea Manning was completely alienated from army culture, and the callous way she believed it treated civilians in Iraq. And second, she was quietly erasing the music on her CDs and replacing it with files holding explosive military data, which she would release to the world via Wikileaks. 

To some, Manning is a free speech hero. To others, she is a traitor. President Barack Obama’s decision to commute her 35-year sentence before leaving office has been blasted as “outrageous” by leading Republican Paul Ryan. Other Republican critics argue Obama is rewarding an act that endangered the lives of soldiers and intelligence operatives while giving ammunition to Russia. 

They have a point. Liberals banging the drum against Russia’s leak offensive during the US election cannot simultaneously argue leaks are inherently good. 

But even if you think Manning was deeply misguided in her use of Lady Gaga CDs, there are strong reasons why we should celebrate her release. 

1. She was not judged on the public interest

Manning was motivated by what she believed to be human rights abuses in Iraq, but her public interest defence has never been tested. 

The leaks were undoubtedly of public interest. As Manning said in the podcast she recorded with Amnesty International: “When we made mistakes, planning operations, innocent people died.” 

Thanks to Manning’s leak, we also know about the Vatican hiding sex abuse scandals in Ireland, plus the UK promising to protect US interests during the Chilcot Inquiry. 

In countries such as Germany, Canada and Denmark, whistle blowers in sensitive areas can use a public interest defence. In the US, however, such a defence does not exist – meaning it is impossible for Manning to legally argue her actions were in the public good. 

2. She was deemed worse than rapists and murderers

Her sentence was out of proportion to her crime. Compare her 35-year sentence to that received by William Millay, a young police officer, also in 2013. Caught in the act of trying to sell classified documents to someone he believed was a Russian intelligence officer, he was given 16 years

According to Amnesty International: “Manning’s sentence was much longer than other members of the military convicted of charges such as murder, rape and war crimes, as well as any others who were convicted of leaking classified materials to the public.”

3. Her time in jail was particularly miserable 

Manning’s conditions in jail do nothing to dispel the idea she has been treated extraordinarily harshly. When initially placed in solitary confinement, she needed permission to do anything in her cell, even walking around to exercise. 

When she requested treatment for her gender dysphoria, the military prison’s initial response was a blanket refusal – despite the fact many civilian prisons accept the idea that trans inmates are entitled to hormones. Manning has attempted suicide several times. She finally received permission to receive gender transition surgery in 2016 after a hunger strike

4. Julian Assange can stop acting like a martyr

Internationally, Manning’s continued incarceration was likely to do more harm than good. She has said she is sorry “for hurting the US”. Her worldwide following has turned her into an icon of US hypocrisy on free speech.

Then there's the fact Wikileaks said its founder Julian Assange would agree to be extradited to the US if Manning was released. Now that Manning is months away from freedom, his excuses for staying in the Equadorian London Embassy to avoid Swedish rape allegations are somewhat feebler.  

As for the President - under whose watch Manning was prosecuted - he may be leaving his office with his legacy in peril, but with one stroke of his pen, he has changed a life. Manning, now 29, could have expected to leave prison in her late 50s. Instead, she'll be free before her 30th birthday. And perhaps the Equadorian ambassador will finally get his room back. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.