Accounting for Income-Contingent Loans as a Policy Hybrid: Politics of Discretion and Discipline in Financialising Welfare States

ABSTRACT

Income-contingent loans (ICLs) are becoming widely adopted across higher education sectors internationally, and increasingly proposed for other policy domains. This article explores why this policy form has gained such wide popularity in the context of fiscal austerity and greater financialisation of social policy. It argues ICLs act as a policy hybrid, combining elements of a tax and a loan. The article traces the development of ICLs in their original and most developed context, Australia’s university sector. We connect the development of ICLs to changes in modes of state accounting associated with the application of private sector accounting techniques. These changes reflect financialisation inside the state, producing contradictory political dynamics. Drawing on Streeck’s conception of a shift from the ‘tax state’ to the ‘debt state’, we argue the hybrid construction of ICLs creates political tendencies in both directions, facilitating greater state discretion while also implementing market discipline. Alongside these contradictory state imperatives we highlight continued partisanship, pointing to new and ongoing forms of distributive politics. To the extent that accounting technologies allow the state to act as a special kind of creditor, we ask whether financialisation may also involve the emergence of an ‘asset state’.

KEYWORDS:

• Financialisation
• welfare state
• education
• income-contingent loans
• taxation
• asset-based welfare
• public sector accounting

Disclosure statement

No potential conflict of interest was reported by the authors.

Acknowledgements

We would like to thank the two anonymous referees for their very useful feedback on the original draft, Jane Andrew and Melinda Cooper for their helpful comments and suggestions, and participants in a 2016 Australian Political Studies Association conference session in which we presented an early version of this article.

Notes on contributors

Ben Spies-Butcher is a Senior Lecturer in Economy and Society in the Sociology Department at Macquarie University. His research explores the political economy of social policy and has been published in the Journal of Social Policy, British Journal of Industrial Relations, Housing Studies, and Social Policy and Administration. His most recent co-authored book is Market Society published with Cambridge University Press.

Gareth Bryant is a Lecturer in Political Economy at the University of Sydney. His research explores the marketisation of different areas of socio-ecological life, with a current focus on climate change and higher education policy. His research has been published in Environment and Planning A, Antipode, Energy Policy and the Annals of the American Association of Geographers, and he has a forthcoming book with Cambridge University Press on the political economy of carbon markets.

Notes

1 HECS was officially renamed the Higher Education Loan Programme (HELP) in 2005, although its original name is most commonly used in policy and public debate. This article uses the term HECS to refer to the ICL scheme that has operated under both names.

2 Like most income tax systems, Australia’s system of Pay As You Earn is based on marginal income tax rates. That is, only the income above a threshold is taxed at the specified rate. HECS bands are effectively average tax rates. That is, once a tax payer’s income exceeds a threshold the HECS repayment is determined by applying the relevant rate to the tax payer’s entire taxable income. Crossing a threshold can thus result in a significant increase in liability.

3 All $ references in this article are Australian dollars

4 Since the 1940s the two major non-Labor parties, the urban-based Liberal Party and rural National Party, have governed federally in coalition.

5 The underlying cash balance makes some minor adjustments to the fiscal balance, which have limited impacts on ICLs

6 The Parliamentary Budget Office is the public body tasked with costing parties’ pre-election policy commitments.

7 Notably the Federal Government budget was in surplus through most of the 2000s as HECS debts were rising.

8 The UK government has commenced the process of securitising and selling its accumulated ICL assets to private actors, introducing a more direct link to financial markets (Coughlan 2017).