§ Mr. Boswell
To ask the Secretary of State for Education and Skills what information he has collated on the contingent liabilities to public funds arising from an increase in student loans to cover the tuition fees of students and reflecting the interest subsidy offered on these loans. 
§ Alan Johnson
[holding answer 24 June 2003]: The Department does not classify the interest subsidy as a contingent liability as the liability occurs as part of normal departmental business. We do however recognise the liability by providing for the future costs in a provision.
The interest subsidy provision was set up to meet the costs resulting from the difference between the interest paid by students and the cost of capital on loans. The provision provides for the discounted cost of the interest over the life of the loans issued in the financial year. Each year the annual interest subsidy charge is released to the Operating Cost Statement. Listed in the table are the amounts provided in year for 2001–02, a provisional outturn figure for 2002–03 and the forecast figures for remainder of the current spending review period.
£ million Provided in Year Actual outturn 2001–02 773 Provisional outturn 2002–03 919 Forecast outturn 2003–04 1,067 Forecast 2004–05 1,009 Forecast 2005–06 1,083
The figures in the table do not take account of the change in the HM Treasury cost of capital rate from 6 per cent, to 3.5 per cent, which took effect on 1 April 2003. This will significantly reduce the size of the provision and the amount provided in year.
Loans for fees will not be introduced until the 2006/07 academic year which is beyond the current spending review period. The amount of those loans, and hence the cost of the interest subsidies on them, will depend on the actual fees to be charged by institutions and students' decisions of the extent to which they wish to take up the option of deferring their fees.
The source of the actual data is the Resource Accounts 2001–02. The final outturn figure for 2002–03 will be reported in the 2002–03 Resource Account, which will be published in the autumn. The forecast data for 2003–04 to 2005–06 is taken from the 2003 Departmental Annual Report published in May 2003.