It was the great test of "grown-up" politics. The moment, a blushing Nick Clegg said, to ditch the "dreams" of protest politics and "deal with the way that the world is". How remarkable, then, that four years on from the hike in college fees, a select committee can report that we are "approaching a tipping point for the financial viability of the student loans system". The prospects for higher education funding remain entirely uncertain, clouded by conjuring tricks that no longer convince.
The first problem – evident to clear-headed outsiders even in 2010, and more widely acknowledged recently – is that so many graduates earn too little to pay off the full increased debts. Indeed, under the relatively generous lending terms agreed to get the fees package through, write-offs could well reach the point where taxpayers lose more than they gain. But entranced by a marketopian vision for universities, and puffed with pride about its own courage in raising fees, the coalition has been in denial about the dismal arithmetic. In his autumn statement, the chancellor declared that the reforms had "put our universities on a secure footing", and vowed to scrap the cap on university places, so that "providers" could expand and compete as they pleased. The reason the cap was there in the first place, of course, is the considerable cost of the subsidised loans, a cost that remains. Not to worry, George Osborne said, the sums could be made to add up by selling off the loan book.
This proposal was at one and the same time a delusion, because swapping a future stream of repayments for a cash sum does no more for solvency than selling your house and renting it back, and a snare, because the loans are worth less to any prospective buyer than to the government itself. Able to borrow more cheaply than anyone else, the state should be able to adopt a longer view of repayments received decades down the line. Instead, for the sake of flattering some (though not all) of his fiscal targets, Mr Osborne was ready to flog the debt at the inevitable discount. This discount, the committee points out today, would have to be all the greater since when – as now – official interest rates are lower than inflation, the terms of the loan do not even provide the guarantee of a return to cover the cost of living, which the likes of pension funds require.
Quite rightly, Vince Cable, burned by his underpriced Royal Mail sale, is now signalling that he will not license any such deal. Seeing as the transaction was not going to raise real money, its cancellation should not have any consequences for policy on the cap or anything else, but who knows whether that is how it will look through the distorting lens of the Treasury view. It isn't daydreaming students but cynical ministers who are failing to deal with the world as it is.