A MOVE to a more realistic account of the government’s income from student debt repayment has shown up a huge hole in the public finances — £12 billion this year previously covered up.

Recognising that much of the debt will never be repaid, the Office for National Statistics (ONS) will now split the loans into two parts: financial assets and government expenditure.

It marks a break with the current system whereby student loans do not count as government spending, while interest payments are counted as income — despite the fact that many graduates will never pay all the interest back because they earn too little.