Only a third of students are predicted to pay their loans off fully

Changes in the accounting treatment of student loans could cost the chancellor his £15 billion Brexit war chest and leave his fiscal rules in tatters.

The Office for National Statistics and the European statistical authorities are reviewing the way that the government accounts for the student loan book, which is on track to hit £20 billion by 2023, amid concerns that the present convention is a “fiscal illusion” that is creating “perverse incentives”.

A decision by Eurostat is expected shortly on whether a different treatment should be applied. According to the Office for Budget Responsibility, a preferred option would to increase the deficit by £15 billion, “roughly equal to the margin by which the chancellor was meeting his fiscal target in our most recent forecast”.