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Baroness Farrington of Ribbleton: This is important. Will the Minister guarantee that in the interest of choice, to which we on these Benches are wedded, a student taking a Student Loans Company loan will be entitled to the same range of choices, whether or not as an individual the student chooses to make an application in that scheme or whether the student is forced into that scheme because the private sector turns down the student?

Lord Henley: First, I am fascinated by the declaration made by the noble Baroness that her party is wedded to choice. That is something I had not noticed in some of its more recent confused statements on the subject of education. No doubt we will discuss more of that later.

No, it is obviously for the financial institutions to develop their own packages and personalise them in the appropriate way. I imagine that we will see a number of them in due course. The Student Loans Company will continue to operate as it does at the moment, but, as I said, if we wanted to extend the repayment period that is a matter that can be addressed in regulations. It is obviously a matter that would have serious financial implications.

Lord Ponsonby of Shulbrede: Will the Minister confirm that he said that the administration subsidy will remain the same for whatever type of loan is made? However, if the loan is for a shorter period, surely that will reduce the administration costs for the bank concerned. So does it not follow that it will be in the interests of banks to minimise the period of the loan to maximise their profits?

Lord Henley: I can confirm that I said that the level of public subsidy will be the same in both cases, but it might be in the interests of individual institutions to charge a lower interest rate in return for a shorter repayment period. That is a matter for them and the individuals concerned.

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Lord Ponsonby of Shulbrede: Will the Minister confirm that the private institutions will receive the same administration subsidy for a short-term loan as they would for a long-term loan?

Lord Henley: Obviously I am not going to speculate on how the negotiations will take place between us and the institutions concerned. We have set out roughly the design of that in the invitation to tender and in the draft contracts. Obviously there will be differences between one and another. That matter must be left to those negotiations.

Lord Morris of Castle Morris: I hope that the Minister will not think it in any way patronising if I say that I am grateful for that. I have not been terribly grateful for his previous answers, but he has given us some factual answers to this amendment, which are helpful and which have illuminated at least me. The playing field looks a little more level, but a bit of a mist has descended over the game.

We learn that private loans will be offered on-- I wrote it down--very similar terms to those of the Student Loans Company; that interest rates and the repayment period will be the same unless the private lender decides that they will not be and offers a shorter repayment period and a lower interest rate. That may be and/or, but there is the possibility of offering a quicker service, benefits of a larger network, and other things of which the Minister has not yet thought. I can well see that there may be other fringe benefits which could be an inducement: greater protection, possibly; greater long-term benefits for being signed up with the particular bank over a particular period.

I do not want to pursue this matter any further tonight, because I want to take away what the Minister has said, read it tomorrow morning and think about it at much greater length. I think that he has offered us what we have asked for on this amendment. Because of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 [Subsidy in respect of private sector student loans]:

Lord Peyton of Yeovil moved Amendment No. 4:


Page 1, line 13, at end insert--
("(1B) No subsidy may be paid by the Secretary of State under subsection (1A) unless the arrangements referred to in subsection (1A) have been laid before, and approved by resolution of, each House of Parliament."").

The noble Lord said: My noble friend has, on a number of occasions, reminded us that this is an enabling Bill. It enables the Government to do rather a lot. I am not all that fond of enabling Bills. When they exist in an almost total vacuum of information, I like them even less.

The Bill as it now is seeks authority on behalf of the Government to write cheques payable to unnamed persons, on dates unspecified, and for amounts unknown. On top of that, it makes absolutely no provision for scrutiny. It may be for the convenience of the Committee if I were to deal with Amendments

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Nos. 4, 9 and 21 which are in my name. It would save me, and relieve the Committee from enduring an unnecessary amount of tedious repetition by me.

By Amendment No. 4, my noble friend Lady Park of Monmouth and I seek to ensure not that we interfere in the course of negotiations with the private sector institutions, but that when those negotiations are completed the conclusion is submitted to an adequate form of parliamentary scrutiny. That does not seem much to ask.

It is the Government's wish to enlist the private sector institutions to take the risk--to use my noble friend's words on Second Reading--to be responsible for raising and lending much of the money (a total of £5 billion) and bearing most of the risk. The Committee should consider that on the previous occasion the private sector institutions showed no interest in participating, and so far as I am aware there has been no ugly rush on this occasion. Indeed, we are informed that the National Westminster Bank has declined the invitation to tender which was contained in that extraordinary document.

In passing, I venture to comment that we in this country appear to have developed a real taste for complexity. It is generally accepted that once one gets into matters of finance there is something indecent and naive in even attempting to express a point simply. I almost conclude that obfuscation is now considered to be the height of respectability instead of being denounced as it should be.

I suggest that since the necessary information is not available the Government have no alternative but to take the amendment away, if they cannot accept it tonight as drafted, and give it very serious consideration.

I turn to Amendment No. 9. In doing so I wish to lament at the outset the form in which the Bill now stands. A casual reader would soon reject any possibility of understanding the schedule as it stands. I seriously wonder why the legislature cannot have in front of it, in the form of, say, a schedule, a clear statement of the law as it would be if the Government's proposals in the Bill were accepted. Instead we have a terrible mixture of the 1990 Act and the present Bill pancaked together in a schedule which is totally comprehensible without a great deal of unnecessary labour. I have made that point on other occasions and I make no apology for repeating it today. I am happy to see my noble friend in an amenable mood nodding his head.

The Government's purpose is clear enough. They seek the power to subsidise private sector institutions and to amend the 1990 Act. Amendment No. 9 is a polite way--I should hate my noble friend to think that I am minded to be anything but polite where he is concerned--of asking the simple question: would it not be better to wait at least until sufficient of the private sector institutions have shown themselves willing to come to the party? It seems to me that in the meantime the Government would be well advised to apply their attention not to what may happen a long time ahead but to present needs. Perhaps I may use the words of the noble Lord, Lord Dainton, on Second Reading. He said that the Government's aim should be to ensure that,

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    "the loan scheme should be inexpensive to administer and should encourage, not deter, good but poor students from entering universities".--[Official Report, 19/2/96; col. 924.]
That is a simple purpose.

I wish to call in aid the words of my noble friend Lord Renfrew on the same day. He referred to a,


    "crisis which may soon become a catastrophe".
He later said:


    "Damage is being done now to the higher education system and the Bill does nothing to rectify it".--[Official Report, 19/2/96; col. 928.]
Those are serious words and they deal with the present situation. However, the Bill concerns itself only with an uncertain date in the future, and that while everything progresses as the Government would wish. I believe that the Government have every reason for putting the measure on one side and returning to the immediate perils with which higher education in this country is confronted.

I turn to Amendment No. 21. It is important that arrangements for repayment should, as far as possible, be simple, fair and realistic. There will be problems of default--indeed, there are already--and there will be increasing arrears. Perhaps I may remind my noble friend of the wise comment on the subject made by my noble friend Lady Park of Monmouth on Second Reading. She said that under the present arrangements it is virtually certain that arrears, which have already grown to an unacceptable level, will increase further.

Much the simplest way of achieving a fair and orderly repayment system would be to have it handled by the Inland Revenue. The Inland Revenue has the advantage of knowing the names, addresses, earnings and debts of all concerned. No other body has those advantages. It would be unnecessary to create a new organisation. Therefore, even if my noble friend does not leap to accept this sensible amendment tonight, I hope that he will indicate that he will take it away and look at it carefully. If he cannot accept the amendment I hope he will come forward with a form of repayment which takes account of current earnings. It is stupid and cruel for this House of Parliament to lay down that in the future students who have been given loans but who are not earning sufficient to have even the hope of repayment shall be required to do so. My noble friend and the Government must come to terms with that need.

I wish to make clear to my noble friend my discontents. I wish to make it clear to him that they are in no way related to him. He has been good enough to give me the opportunity of speaking to him and he listened patiently to what I said prior to the Committee stage. I am grateful to him for that. My complaint is that only too often the Government, that great big amorphous machine, find it easier to turn a deaf ear to representations to which a great deal of thought has been given and which we think are important. Coupled with that unwillingness to listen, there is a certain refusal to learn from experience. I find that intensely irritating. I can just, by a stretch of the imagination, entertain the idea that I am capable of being irritating to Ministers and their advisers. Indeed, I know that that is so. But I

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hope that Ministers, and in particular their advisers and superiors, will understand just how profoundly irritating they can be when they do not appear to listen and learn.

I make my position clear. My hope is that this evening the Minister has a discretion to move a little and that he will undertake to think again on behalf of the Government. Now that they have appointed Sir Ron Dearing, I hope that the Government will see that there is rather less point in focusing entirely on the long-term issues at the expense of the short-term immediate crisis. As my noble friend said in the words that I have quoted already, that crisis may turn into a catastrophe.

I shall listen with the greatest possible interest to every word and every nuance of my noble friend's reply. If he cannot as a minimum at least allow the possibility of some scrutiny following upon the conclusion of the arrangements which the Government hope to make, then I shall be obliged to take that very painful course and seek to divide the Committee. But I am sure that that will not be necessary on this occasion. I beg to move.

5.45 p.m.

Baroness Park of Monmouth: That is an extraordinarily difficult act to follow, but I must try. I strongly support all that my noble friend said. There has to be an opportunity for Parliament to scrutinise the arrangements referred to once the nature and cost of those arrangements is known. The market-testing to which the Minister referred on Second Reading has already required a new invitation to tender after the decision taken by the Government in this Bill not to implement the scheme for private lending until 1997 rather than 1996. Of course, the outcome of the negotiations cannot be known; that is, the Government will not know who has tendered and on what terms until at least after Easter. Nor, we understand, will the private institutions know until then what will be the cost of rejigging their computer technology and training their staff. Nor will the Government be able, until then, to cost the relationship between the universities, which must still do the paperwork, and two funding mechanisms rather than one.

Given all those unknowns, quite apart from the impenetrable language of the tender document, there is no clear set of proposals for us to legislate upon other than the simple propositions that commercial negotiations, of their nature, must be secret, with which I agree; and the Minister wants a blank cheque. Not only that, but, as my noble friend said, we are being asked to sign three blank cheques because we do not know the date, the amount or the payee. The Minister is asking for authority to sign all those three blank cheques. We know only his signature.

We argue that once those arrangements have been completed and only then can the proper powers of this House and another place be exercised. Therefore, we very much hope that the Minister can find a way to meet us on this point.

My second argument, which I believe is vital, is that, as my noble friend Lord Renfrew of Kaimsthorn said on Second Reading, and as we all argued then with varying degrees of urgency and anxiety, there is a crisis in

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student funding which cannot wait, as we were told that it must wait, until the whole question of student support is reviewed by the Dearing Committee.

The crisis is a double crisis. First, the shift from maintenance to loan has moved so quickly and is still moving so quickly that graduates going down from 1996-97, if they succeed in obtaining employment at £15,200 per annum and above, depending on whether they followed a three-year or four-year course, will be expected to repay in the region of not less than £90 to £100; and that figure will increase. That is a very sizeable slice of income. For those reading medicine, veterinary science and so on, it will be correspondingly much more. The longer the deferment, the more the interest will mount up.

That is not only a frightening prospect for graduates. I submit that it should also frighten the Treasury. I remind the Minister that in November of last year the National Audit Office reported that:


    "As at 31st March 1995, 269,000 accounts were in repayment status. Of those deferment of repayment...had been approved on 122,600 (45 per cent.)".
Payments were deferred because their earnings were less than the required £15,200. By July, according to the CVCP, 187,000 were granted deferment, and there were 9,000 in arrears and 35,000 in default.

The Minister may well see, quoting from a National Audit Office Report, that from 1991-92, to 1994-95, the Student Loans Company successfully collected 94.7 per cent. of the moneys due to be repaid. Only £1.9 million of £35.5 million was uncollected. But that was in the early days of a very small loan. The size of the loan has increased many times over since then.

It seems only too certain that the Treasury is looking at some very large losses. Our argument is that to replace the present inequitable and ineffective method of repayment by an income-contingent pay system would benefit not only students but also the taxpayer. But that must be done now. It cannot wait until 1998-99 which is the earliest date at which it seems to me any of the Dearing proposals would be likely to reach the stage of legislation.

In the context of proposals to extend eligibility, as we would certainly hope the Dearing Committee would propose, and proposals to extend repayment periods in the present system, the Minister said on Second Reading:


    "There are powers already available under the 1990 Act ... should we wish so to do".--[Official Report, 19/2/96; col. 963.]
That is good. Therefore, let us first defer any further consideration of private sector loans until we have some facts; and secondly, I urge the Government to proceed at once to use the powers already afforded by the 1990 Act to change the method of repayment. If they can change the length of time over which the loan is repaid and a number of other matters, they can change that. Better still, as we have proposed, they should use the present Bill to do that. Such government action would receive widespread approval and the money would come in.


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