Resource Accounting and Budgeting charge calculation: FOI release
- Published
- 27 January 2025
- Topic
- Education, Money and tax, Public sector
- FOI reference
- FOI/202400444505
- Date received
- 9 December 2024
- Date responded
- 10 January 2025
Information request and response under the Freedom of Information (Scotland) Act 2002.
Information requested
How the Cost of Providing Student Loans (RAB Charge) budget line was calculated at £396.651 million in 2025-26. For context, level 4 budget data states this number was a ‘technical adjustment based on current Economist estimations.’
Please provide these calculations, why it is denoted as a deduction from spending in that portfolio area compared to 2024-25, when it was added to total spend in that portfolio area and why this adjustment has been necessary.
Response
The RAB (Resource Accounting and Budgeting) charge is the estimated cost to Scottish Government (SG) of providing a subsidy for the student finance system.
The RAB charge is the difference between the face value of the loans and the present value of the repayments model. It is based on future loan write-offs and interest subsidies in net present value terms. For convenience, we express these costs as a proportion of the initial loan outlay.
Twice a year, Economists revisit the RAB charge calculations, taking into account various economic metrics which includes inflation along with many more. This means that the future loan write-off and interest subsidy percentage is recalculated. If there have been any changes in the economic metrics used, this can mean either an increase or decrease in this percentage. As the percentage is then reassessed against the total SG student loan book valuation of £9.5bn, any movement can produce significant movement in the RAB. At the start of 2025/26 the opening provision is forecast at 30% and the closing 2025/26 forecast provision has reduced by 5% to 25%. It has to be remembered that this calculation looks at the lifecycle of the loan and not just at today’s value.
This percentage reduction means that the overall total value of anticipated write-offs and interest subsidy in 2024/25 compared to 2025/26 was too high, thereby in turn lowering the value of the loan book held on the Balance Sheet. The only way to adjust this is to do a recalculation of the values held in the Balance Sheet in 2025/26 using the revised RAB charge %.
To demonstrate the movements and readjustments the information below should help.
|
£m |
|
Estimated write-off and interest subsidy value 25/26 |
2,371 |
|
Opening write-off and interest subsidy value 25/26 |
2,867 |
minus |
|
|
|
Movement |
496 |
|
|
|
|
Impact on the loan book |
£496m increase |
|
|
|
|
|
|
|
Calculation |
£m |
|
|
|
|
Adjustment to prior lending |
496 |
|
Provision for in-year lending 25/26 |
100 |
minus |
|
|
|
TOTAL |
396 |
|
About FOI
The Scottish Government is committed to publishing all information released in response to Freedom of Information requests. View all FOI responses at https://www.gov.scot/foi-responses.
Contact
Please quote the FOI reference
Central Correspondence Unit
Email: contactus@gov.scot
Phone: 0300 244 4000
The Scottish Government
St Andrew's House
Regent Road
Edinburgh
EH1 3DG
There is a problem
Thanks for your feedback