Labour party analysis of Treasury figures suggets that write-offs of student loans will rise to £20bn per year by 2048-49.

The party says that figures from the Office for Budget Responsibility show the amount written off will jump from £2bn in 2044-45 for those whose loans were capped at £3,000, to £20bn in 2048-49 for those on the new system, capped at £9,000. It is expected that the first cohort of graduates under the new system will have any outstanding loans written off in 2046-47.

Loans are repaid at a rate that is determined by earnings and are written off after 30 years. When the government first announced a trebling of the cap, ministers expected that less than a third of loans would not be paid in full, but that figure has now risen to at least 45%.

When the government first announced a trebling of the cap on university tuition fees in 2010, ministers expected that less than a third of loans would not be paid back in full, but that figure has now risen to at least 45%.

Treasury figures – also highlighted by Labour – show that the Department for Business, Innovation and Skills has been given an extra £4.1bn this financial year to cover losses as a result of lower-than-expected repayments from student loans.



Commenting on his party’s findings, Liam Byrne, the shadow universities minister, said: “It’s now clear the government’s student loan chaos has now loaded an incredible £20bn to the nation’s credit card.

“That’s the figure the government’s own independent budget watchdog now says will never be repaid by students forced to borrow £9,000 a year for tuition fees tripled by this Tory and Lib Dem government.”

Byrne said it was “final, definitive evidence the student finance system is simply going bust”.

Byrne’s comments come as pressure builds on Labour to announce its tuition fee policy. Ed Miliband appears determined to press ahead with a cut in the fees cap from £9,000 to £6,000 in line with a pledge he has made previously, but has been facing internal questions about how the policy could be funded. The party is expected to lay out its plans before the end of February.



Last week, Peter Mandelson, the former Labour business secretary, warned that the Labour party risks damaging its credibility if it announces a policy to cut tuition fees without setting out clearly how it would be funded. Vince Cable, the Liberal Democrat business secretary, also wrote to Miliband urging him to reject moves to cut tuition fees to £6,000, describing the move as populist and pointless.

On Sunday, the Sunday Times reported that Miliband had been urged by frontbenchers to demote Ed Balls after the general election, amid tensions in the Labour leadership over how to pay for the cut in university tuition fees.

The paper reports that the shadow chancellor is examining plans to tax pensions and businesses to raise money for the policy or to introduce a “business education tax” to make big firms that hire graduates make up the cost.

Chuka Umunna, the shadow business secretary, has defended his party’s failure to set out its tuition fee plans, saying it was “a tortuous and difficult process” because of the mess “that we will inherit from this government if we’re elected in May”.

Speaking on BBC Radio 5’s Pienaar’s Politics, he said: “I have to say the comments I’ve seen from my opposite number Vince Cable – really, he has no credibility on this issue, having made huge promises before the general election which he has failed to keep – and part of the reason this is tortuous is because we’re determined not to repeat the mistake of Nick Clegg. What we don’t want to do is to be making promises in our manifesto that we can’t deliver.”