Treasury Committee

The Committee scrutinised ministers on whether the student finance system is fair, sustainable and understandable for graduates. The ministers defended the 6% cap on Plan 2 interest rates as a fiscally responsible response to inflation risk and geopolitical shocks, said the Government had already made the system fairer through threshold increases, capped interest and maintenance grants, and argued that fairness must be judged across taxpayers as a whole. They also committed to publish more detailed earnings/repayment information in July and to continue improving plain-English communications. The session exposed concerns about retrospective changes, psychological pressure from rising balances, and whether students were properly warned that future Governments could change loan terms. The minister also confirmed maintenance grants will begin in academic year 2028-29, funded by the international student levy, and said the Government will legislate to index tuition-fee increases to inflation over time.

The Committee scrutinised how the FCA and HM Treasury intend to deliver the financial inclusion strategy, with particular focus on access to banking, insurance affordability, targeted support and small-sum credit. The FCA stressed that financial inclusion is core to its strategy but that it cannot mandate firms to serve unprofitable customers; it favoured piloting, partnership and, where needed, future legislative change. HM Treasury said the strategy is ambitious, that the Consumer Credit Act reforms are in the Bill, that a review of access to banking is underway, and that it will provide further detail on ISA changes and strategy measurement soon.

The Defence spending and financing session probes the gap between UK defence objectives and available funding, the role and timing of the Defence Investment Plan (DIP) and Strategic Defence and Security Review (SDR), and how finance, procurement reform, and industrial-capability dynamics affect delivery. Witnesses from RAND Europe, Make UK Defence, and the Institute for Fiscal Studies highlight: a 2.6% GDP baseline vs. SDR targets of 3%–3.5% by 2035, the need for a credible, quickly-published DIP, and the risk that backloading undermines deterrence. They point to private-finance constraints for SMEs (debanking, overdraft access), and the importance of clear demand signals to unlock investment. They urge stronger defence-procurement reforms, greater use of SMEs to reduce cost inflation, and enhanced multilateral collaboration (DSRB, MDM, OCCAR) to accelerate capability while guarding strategic IP. The discussion also covers the fiscal trade-offs of scaling defence versus welfare and international-aid reallocation, costs of steel tariffs, and the need for sustained, predictable pipelines to prevent capacity gaps and brain drain. The overarching message is that without an accelerated DIP, tighter cross-department collaboration, and credible, long-term spending profiles, UK deterrence and industrial resilience will remain brittle.

The Treasury Committee’s inquiry into student finance scrutinised the balance of cost-sharing between the state and graduates, the design of Plan 2 vs Plan 5, and the sustainability of interest-rate regimes. Witnesses call for a public debate on the correct public-private funding balance (advocating near 50:50), tighter transparency around loan terms, and clearer communication to students and parents. The session emphasises thresholds as a priority (to reduce immediate burden), flags intergenerational fairness concerns, and highlights policy levers such as upfront teaching funding and reform of how the system is described (contribution vs debt). There is broad concern about retrospective changes to terms, and calls for stable, principle-based reforms rather than piecemeal tinkering. Panel members and students stress thresholds, transparency, and the need for investment in higher education funding to maintain parity with international peers while protecting vulnerable cohorts. A second panel of students and graduates foregrounds thresholds, the psychological burden of debt, and the case for potentially rethinking information to applicants and families at the point of decision-making.

On 2026-05-20 the Treasury Committee quizzed Bank of England policymakers about the Monetary Policy Committee’s last decision (to hold Bank Rate at 3.75%). Witnesses stressed that the hold reflected high uncertainty and three conditional factors: the duration of the Middle East energy shock, lasting damage to energy infrastructure, and potential second-round effects on inflation. They discussed how energy-price interventions and inflation expectations interact with macro finances, the mortgage transmission channel, and wages, while flagging data gaps in the labour market. They also debated QT, gilt-market volatility, and private credit, and indicated written updates on steel tariffs and a QT annual review. The session touched on AI’s productivity implications, productivity metrics, and the need for granular sector data to inform policy.

This Treasury Committee session compared the UK Office for Budget Responsibility with independent fiscal institutes abroad (the Dutch CPB and the US CBO), focusing on independence, forecasting horizons, transparency, and how policy implications are communicated. Key positions include caution against letting the OBR score manifesto promises, calls for longer-term perspectives and uncertainty mapping, and a push to harden the OBR’s independence via resources and stronger governance. The witnesses also contrasted Dutch practices (promising policies, expenditure ceilings, sustainability gaps) with the UK framework, and discussed the potential for greater parliamentary engagement on long-term sustainability.