Government will make savings by moving loan eligibility threshholds
By Paul Hutcheon Scottish Political Editor

THE Scottish government is planning to restrict access to student loans through an accounting trick associated with Gordon Brown.

Education Minister Fiona Hyslop is planning to cut £12 million from the student support budget by means of "fiscal drag", a method of restricting benefits and increasing taxation.

The raid is part of the Nationalist administration's drive to save £1.6 billion in efficiencies in three years.

The government wants to make cash-releasing savings of 2% every year in order to make the public sector leaner.

Officials put the 200-page document on the government website, a programme that reveals a list of planned cuts. Tucked away is Hyslop's plan for £12m of efficiencies over three years in the student support sector.

She will make the savings in student loans by playing with eligibility thresholds and levels of parental support, otherwise known as "fiscal drag".

The UK government is about to increase eligibility to student loans by working from a lower base of parental income. But Scottish ministers are not keen on the English reforms and believe that "keeping the eligibility threshold constant" will free up resources.

"We have considered this option and chosen to move away from the UK position to continue with the present arrangements in Scotland. This allows us to use the fiscal drag, saving freed-up resources which can then be targeted on the less well off," the document notes.

Using a higher parental income level to calculate loans will result in fewer students qualifying for support. The education department has been pencilled in for £157m of savings by 2011, which makes it one the biggest cost-cutters.

Top of the list is the health department, which has been earmarked for £628m of efficiencies. Cuts within specific budgets include a £30m saving by selling of part of the government's forestry estate, while around £62.5m may be saved by scaling back affordable housing grants.

The justice department, which is overseen by Kenny MacAskill, is planning cost reductions of £51m, while the economy and local government sectors have been put down for savings of £524m.

Claire Baker, the Labour spokeswoman for higher education and student support, said: "These efficiency savings amount to a £12m cut to student support. In each of the next three years fewer students will receive loans, grants and bursaries. At a time when financial hardship is a real worry for students, these cuts couldn't be worse timed."

A Scottish government spokesman said: "The full £12.6m stays in the system for student support. No money is taken from students whatsoever, rather it is recycled for students with lower incomes. We are driving efficiency savings throughout government to divert additional funds to front-line services.

"We have put in place many other measures to help students and tackle student hardship, including a £38m package of grants for part-time learners in higher education."