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Lord Morris of Castle Morris: The lack of interest being shown in the scheme by financial institutions comes as no very great surprise to those of us who oppose the Bill. Without wishing in any way to say, "We told you so", we told you so. One of the poet Wordsworth's later sonnets--perhaps not in the National Curriculum English Studies, but none the worse for it--begins with the immortal line:

The Government must have felt rather like that when on 4th March the NatWest Bank announced its decision. In the National Union of Students' press release there is, perhaps, a note of grim satisfaction when it says:

    "NatWest bank has today confirmed to NUS that it has told the government that it will not tender to provide private student loans even if the Education (Student Loans) Bill becomes law, despite the small concessions made in the government's revised tender document".
Perhaps I may remind Members of the Committee who may not have recently looked again at the tender document, which is available for all to inspect in the Library of the House, that the second version of the tender (which all banks, building societies or financial

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houses would have to peruse carefully and fill in and return before their bid would be accepted) weighs 471 grammes. I weighed it after I read it in the Library. For those Members of the Committee who have not yet caught up with the European Union, 471 grammes is just over one pound, one ounce. Either way, it was as I believe George III said to Gibbon:

    "Another damned, thick, square book"--

Lord Henley: Perhaps I may assist the noble Lord, it was his son!

Lord Morris of Castle Morris: I am grateful to the Minister for that correction. That quote was not in my script. I used it straight off the top of my head and got it wrong.

The president of the National Union of Students, Jim Murphy, said in the course of considering that rejection:

    "First, the Midland, the Co-op Bank and the Woolwich turned them down, then Lloyds expressed 'serious misgivings', then they were forced to delay the plan's implementation for a year, and now NatWest has put the exclamation mark on the writing on the wall".
Was it not the Royal doctor of his day--and I shall be careful with this one--who coined the historic phrase:

    "The King's life is moving peacefully towards its close"?
So, it seems, is the life of this sad Bill as one bank after another creeps silently out of the sick room.

However, the Bill presents a danger even though it does not get any success. There is a danger that the Government may be forced now into some sort of "sweetheart deal" with one loan provider. It seems perfectly possible that one bank or building society might be induced--I use the word "induced" carefully; I shall not say "bribed"--to come aboard the Government's scheme. That seems to me a dangerous situation in which we all, as a nation, might find ourselves.

Let us consider the next two or three moves in a situation like that, if there were only one lender. Such a deal would almost certainly involve a much higher level of subsidy than that originally envisaged by Ministers--whatever that might have been--for two reasons. First, the lender would, of course, have the whip hand over a Government who would be desperate to get the egg off their face. Secondly, the lender would face a student boycott of its student loan business and other business, organised by the National Union of Students. That, I have taken care to find out, is a real, practical possibility which the National Union of Students is willing to consider. Not only is it a real possibility; it is a real and a potent threat to this Bill and to the Government's plan for privatising student loans as far as they can.

Let us play the next couple of moves. If only one lender took part in the scheme it would be possible for that lender to offer preferential deals until the Student Loans Company attracted so few applicants that it would have to be wound up, at which point the Government would have replaced a public monopoly with a private monopoly and the private lender could revert to the standard Student Loans Company terms because there was no one else in the field--it had seen them all off.

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The requirement for a two-year contractual commitment would remove the possibility of one lender using the same loss-leading tactic to force out a weaker competitor in addition to the Student Loans Company.

I should have thought the Government would welcome this amendment because it will get them out of what could be three serious holes. We support the amendment. My noble friends--if I can call them that--on the Liberal Democrat Benches (they are for the moment anyway) propose it in a spirit almost of helpfulness, because we feel we are in a position to be reasonably helpful now that there does not seem to be much danger of this Bill ever coming to anything very much. Competition and choice--the Government's sacred watchwords in this as in every other activity--absolutely require that there shall be more than one private lender. It takes two to tango and it takes two to make competition, which is why we on these Benches wholly support this amendment.

3.45 p.m.

Lord Peyton of Yeovil: I was grateful to the noble Lord, Lord Morris of Castle Morris, for establishing as a fact what I had heard only as a suggestion; namely, that the NatWest Bank had turned down the invitation to tender. I wish to make the observation that the weight of the invitation to tender document is probably its chief virtue. Certainly I have examined it not all that closely; but such examination as I have made suggested to me that it was not a document which yielded up its meaning to the casual reader. Indeed, I was tempted to believe--I would feel better if this were the case because I find the document extremely difficult to understand--that the reason for NatWest's rejection of the invitation to tender was the difficulty of understanding the document. That would make me feel better because I would be happy to know that such intelligent people as bankers had found the document a little difficult to understand.

As to this amendment, for exactly the same reasons as those given by my noble friend Lord Renfrew when he refused to support the previous amendment, I do not support this amendment. I think it quite wrong to intervene at the negotiation stage. What I would much prefer to do--indeed what I propose in a later amendment--is that Parliament should be given a full opportunity to scrutinise the arrangements when they have been finalised. That would seem to me to be a proper course, and one which I hope that my noble friend will in due course accept. I do not think it right to press the course suggested in the amendment.

Lord Ponsonby of Shulbrede: Before the noble Lord, Lord Henley, replies to this amendment, will he indicate to the Committee whether the length of the contractual commitment is at least part of his negotiating arsenal? It seems to me that while the Government continually profess their belief in competition, banks will do almost anything to avoid competition. If they can be induced to accept reduced subsidies through the length of commitment which the Government will make, it seems to me that will be to the benefit of the Government, the students and the banks themselves.

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Lord Henley: I start by thanking the noble Lord, Lord Morris of Castle Morris, for his interesting little literary tour, and particularly for choosing a great Cumbrian poet. I am sure that that was of considerable use to the education of my noble friend the Chief Whip. I remind the noble Lord of the full quotation from Gibbon that he used. I quote this for the noble Lord's own interest,

    "Another damned, thick, square book! Always scribble, scribble, scribble! Eh! Mr. Gibbon?"
I believe that it is normally attributed to the late--now very late--Duke of Gloucester, son of the then King, King George III.

My noble friend Lord Peyton similarly complained that it was possibly unfair on the banks to have this "damned, thick, square book" and the noble Lord, Lord Morris, gave its weight both in metric form and in imperial units. I believe it weighed a little over one pound. I accept that for my noble friend Lord Peyton the document can have problems yielding its message--as I think my noble friend put it--to the casual reader. But I should say that it is obviously not designed for the casual reader. It is designed for the financial institutions and not--if I dare say so--for my noble friend. Nevertheless, we thought it would be of some use to noble Lords, in trying to indicate where we are going, to place copies of it in the Library. That is why we did so.

Although we obviously deeply regret the fact that the National Westminster Bank has withdrawn, I can give an assurance to the Committee that there are still a reasonable number of banks who are interested. We hope very much that they will consider the invitation to tender in detail and come forward with proposals that we can negotiate in due course. Our aim is that up to four private sector lenders would be chosen for each of England and Wales, Scotland and Northern Ireland. The invitation to tender documents make that quite clear. They also make quite clear our aim--this will deal with the points raised by the noble Lord, Lord Ponsonby--that the contracts should each last for five years.

For obvious reasons we cannot be more precise about the number of private lenders until the tenders have been received and we have been able to come to a view on them. But I can assure the noble Lord, Lord Addington, that if there is none, we shall obviously not go ahead. We do need a number of lenders. We shall consider the tenders carefully to ensure that the benefits of the private sector involvement are achieved cost-effectively for the taxpayer. We shall also look carefully at each tender to ensure that that institution is able to deliver the service standards that are an important element of private involvement. We shall also look carefully at the tendering process as a whole to judge whether our objectives of choice, competition and diversity will be met. I am not worried by those words, as the noble Lord, Lord Morris, is. He seems to reject choice, competition and diversity. I know his party rejects that in much of our educational programme. But obviously the number of high quality and potentially successful bids will be an important factor in that whole process.

Again, I give an assurance that we shall not sign contracts unless they provide effective choice and competition at the right price. But we have to take that

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decision on the merits of the tenders received. I think there is no case for putting quite such a general restriction on the face of the Bill. I therefore hope that the noble Lord, Lord Addington, will feel able to withdraw his amendment on this occasion.

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