The Conservative Party will force a vote on Wednesday on axing the government’s planned fuel duty increase amid spiralling oil prices and reforming student loans after Rachel Reeves admitted the system was “broken”.
It comes amid widespread concerns about costs for graduates and fears over soaring oil prices caused by the Middle East crisis.
Kemi Badenoch’s party will use an opposition day debate to call for “real interest” on student loans to be stopped, as well as calling for the salary repayment threshold to be lifted. It comes after the chancellor suggested the issue was not a priority for the government.
“Real interest” is the interest charged above the rate of inflation, commonly measured as Retail Prices Index (RPI) + 3 per cent, a form of interest which makes the loan more expensive over time.
The party will also table a motion to try to block the proposed September fuel duty rise, but it is unlikely to pass because of Labour’s large Commons majority.
Tory leader Kemi Badenoch has sought to pile pressure on the government over the issue as Iran’s threats have throttled a key shipping route for oil and gas, driving up prices.
Prime minister Sir Keir Starmer and Chancellor Rachel Reeves have stressed that tax policies are always kept under review, but that it is too early to predict what petrol prices will be when the change is due to come into effect in the autumn.
Fuel duty has been frozen since 2011, and was temporarily cut by 5p in 2022 in response to Russia’s full-scale invasion of Ukraine.
The Tories - who introduced the student loan system under the coalition government - claim to be the only party with a funded plan to fix the crisis, with a spokesperson saying it would “end the burden of student loan debt far too many are now facing”.
While opposition day debates in the UK House of Commons are generally not legally binding on the government, they can pile pressure on ministers to change course.
It comes after the chancellor, who earlier this year defended the system as “fair,” said Labour wanted to “fix it” as she faced questions following her Mais lecture to the City of London on Tuesday.
“Yes, the student loan system is broken,” she said, but added that it was “more broken” that one in six young people are not in education, employment or training.
“So, yes, we want to fix it. Yes, we want to make improvements. But is it front of the queue? No, it’s not,” she said.
Pressure has mounted on ministers to make changes to the Plan 2 student loan system, particularly after Ms Reeves announced in her autumn budget that the salary threshold for repayments would be frozen at £29,385 for three years starting from April.
Interest on these loans is charged at the rate of Retail Prices Index (RPI) inflation plus up to 3 per cent, depending on how much a graduate earns.
Ms Reeves insisted in January that government measures were proportionate amid mounting criticism from campaigners, but on Thursday said she was not “blind” to problems in the system.
However, she suggested cutting hospital waiting lists and lifting children out of poverty by axing the two-child benefit cap were more important.
“Politics is about priorities,” she said.
“I’m not denying there is a problem. I’m not blind to that, but what I do say is there has to be some patience. We can’t fix everything straight away.
“If you say to me, ‘you shouldn’t have done child poverty and you should have reformed the student loan system’, I just strongly disagree with that.”
A spokesperson for the Tory party said: “Too many young people have been sold a raw deal when going to university, ending up with high debt and poor prospects. The system urgently needs reform. Even those who manage to get well-paying jobs are often unable to pay off their loans.
“Graduates have to earn £66,000, nearly twice the average salary, to be able to pay their loans off. Hard-working young professionals despair at seeing their debt increase every year, even as deductions take cash from their strained payslips.
“We are the only party to have set out a fully funded plan to fix this – ending the rip-off of Plan 2 and doubling apprenticeships by scrapping low value university degree courses that end up costing the taxpayer and leave young people saddled with debt and minimal job prospects.”
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