Mr. Paul Johnson:

There are many ways in which various regulated prices are increased. It is a current issue where student loans are concerned because there are different parts. With one exception, the regulated price for university tuition has been frozen for a decade. That is essentially a saving for the Government because it means universities get less. It does not make much difference for most students how much they must pay off because most do not pay off the full amount in any case. What really matters to the student is the threshold above which he or she starts paying off the loan. In principle, that is supposed to rise each year in line with earnings but was effectively frozen for a time before seeing a large increase. It then rose in line with earnings and has now been frozen again. This is not a loan. It is not how people who make loans are allowed to behave.

I will try to remember how the system works for other regulated areas. Rail fares have historically been linked to the RPI plus a certain amount. The RPI already overstates what inflation is. In periods of high inflation like now, it is within the power of the Executive to cut that link. While there are defaults, those defaults are easily overridden. There are other examples. The BBC licence fee, which is a tax in national statistics terms at least, is set. There is no default for that and it has been frozen for the next several years, which means a big cut in its value over time.

We are increasingly in a world where the Government is understandably reacting to high levels of inflation by overriding the defaults in some cases, as with rail fares, and in others by making political decisions about the amount of money it wants to go to institutions like universities and the BBC.