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Lord Tope: My Lords, I support the amendment which was moved so well and ably by the noble Lord, Lord Morris. He said that the issue of subsidy is at the heart of the Bill, and that must be right. However, as he also pointed out, we had no idea until at least the Second Reading what level of subsidy we might we talking about.
No one expects the Government to reveal their negotiating hand while negotiations are taking place but we expect them to give us some idea of what we are considering. As the noble Lord pointed out, the Minister, inadvertently or otherwise, gave at least some indication on Second Reading when he said that the figure was not £1,500 per student. He did not say whether it was more or less, but we all make the assumption that it must be less.
Lord Henley: Perhaps I may assist the noble Lord. I did not say that the figure was not £1,500; I simply rejected that as a figure. Whether the figure is right or not is another matter, but I do not believe that at this stage it is right for the Government to make an assumption. Therefore, I reject the assumptions behind the noble Lord's figure but I am not saying whether it was right or wrong, higher or lower.
Negotiations have been taking place for some time and we gather that they have not been terribly successful. However, surely the Government must be in a position to give us at least a broad indication of the level of subsidy that they have in mind or what the upper limit will be. The lack of interest from the financial institutions is well known. Indeed, only recently the National Westminster Bank announced that should the Bill be passed it would have nothing to do with the scheme.
I hope that it is not unworthy to believe that the Government, in their determination to press ahead with the matter, might feel the need to give some greater encouragement to the financial institutions to take up the scheme. If we have no indication of the kind of figures that the Government have in mind, as we said on Second Reading, that is the clearest indication that the Government in presenting the Bill to the House are asking us to give them a blank cheque. That is not acceptable.
Lord Desai: I support the amendment. There are two issues which one ought to clarify. First, because the loans are relatively short-term there is the possibility that they will be bid for by the wrong kind of financial agencies. If the Government were properly proposing long-term loans, insurance companies and others which can make long-term actuarial calculations would be willing to participate in this business. But we have a short-term loan business which will take away from the banks a lucrative business in which they give overdrafts to students and receive a lot of interest.
The banks are fearful that the business will be taken away but at the same time they are waiting to see how much subsidy the Government will give. Obviously, they would like a high subsidy but I reiterate that there is no economic case for such a subsidy. That must be clearly established. As I said on Second Reading, this is piling market distortion upon market distortion. The rational way of providing the facility would be to provide a long-term loan which would be deductible from the national insurance surcharge. That is not been done and therefore we must have a subsidy.
I can see why the Government do not want to say how much the subsidy will be. Normally, when we on this side of the Chamber put forward suggestions the Government are quick to ask, "How much money is it going to cost and how are you going to find the money for it?". There is a general statement in the Bill that it will all depend on the arrangements that are made with the financial institutions. My noble friend's amendment makes the sensible suggestion that we should ascertain the rough size of the limit by putting a percentage on the value of the loan to which the subsidy attaches. If the Minister does not like 10 per cent. it could be up to the figure of the bank rate, say, and we could have a fluctuating subsidy. It is important that some principle is stated as regards the Government's view of the appropriate subsidy and how much that will cost.
I am not a banker but it seems to me that, given that the student will be undertaking studies for three or four years and that there will be a repayment period of several years, a 10 per cent. absolute figure--the amendment does not provide for 10 per cent. per annum, which would be a large sum--clearly represents about two years' interest on a loan at the current bank rate. That is a very small sum indeed. My reason for opposing the amendment is that to hamper the Government with a figure of 10 per cent. would probably make the system unviable.
Lord Henley: I am grateful for my noble friend's support, somewhat unexpected though it may have been on this occasion. I suspect that the noble Lord, Lord Morris, moved the amendment more by way of probing. He said that he wanted to get to the heart of the discussion on the Bill and I do not believe that he addressed the amendment itself. His noble friend Lord Desai came back to it, but I do not intend to follow the noble Lord in that. I believe that the amendment is to some extent economically illiterate--my noble friend Lord Renfrew put it somewhat more politely--and would not achieve the noble Lord's desired effect.
The noble Lord, Lord Morris, seeks to find out how much the subsidy is likely to be. He quoted me, and at least did so fairly, by saying that I rejected his figure of £1.5 billion. The noble Lord, Lord Tope, took the matter further and said that I did not use the word "rejected" but said that it was wrong. There is an important distinction. I rejected the figure because I am rejecting any suggestion as to precisely what the figure should be. The noble Lord, Lord Tope, will well understand that if I reject the figure of £1.5 billion and he comes forward with others which I continue to reject, finally he will get the answer that he desires. We have no figure in mind and it would be wrong to make any prediction as to what the figure will be.
As I explained on Second Reading, we are determined to bring private sector capital and expertise into the provision of student loans. That is what is behind the Bill. There are distinct advantages in that process to the borrowers and, as I have explained on a number of occasions--and I believe that the noble Lord, Lord Desai, will accept this--there are advantages also to the taxpayer in our doing so. But it is pointless to bring in the private sector and nullify those advantages with an inflexible approach as set out in this amendment.
As I have explained on a number of occasions, the amendment would tie our hands in negotiations. Those negotiations will be extremely difficult. The noble Lord, Lord Morris, gave the example of estate agents, but we
Having said that, I understand the desire of Members of the Committee to ensure that public money is not wasted. I give a guarantee that we are not merely looking for a blank cheque. No doubt that is something which we can explore later. However, I assure the noble Lord and all those who have spoken that the question of whether public money is being wasted is a separate issue. I give an assurance that we shall not enter into any agreements with private lenders which do not achieve our objectives cost effectively. This Chamber and another place and all the usual bodies--for example, the NAO--will have an opportunity to scrutinise our spending in the normal way in the future. Having explained the Government's position and why I cannot accede to the demands made by the noble Lord, Lord Morris, that I should provide a precise figure, I hope that the noble Lord will feel able to withdraw the amendment.
Baroness Farrington of Ribbleton: Are we given to understand that the Treasury has not considered the maximum cost in terms of public expenditure in order to subsidise the private sector to take part in the scheme? What other examples is the Minister able to give of subsidies being provided to the private sector to behave in a private sector capacity?
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