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Lord Borrie: I am grateful to the Minister for his reply. I shall read it closely. At this stage I can safely withdraw my amendment while reserving my position for the future.

Amendment, by leave, withdrawn.

6.45 p.m.

Lord Morris of Castle Morris moved Amendment No. 7:


Page 1, line 13, at end insert--
("( ) A refusal to an eligible student of a private sector student loan shall not be regarded as a refusal of credit for any purpose and may not be required to be declared in any other application for credit."").

The noble Lord said: This amendment returns to the question of creditworthiness and specifically the refusal of credit to someone whose loan was refused by a private sector bank. I am perfectly content to leave the elaboration in the capable hands of my noble friend Lord Williams of Mostyn. I beg to move.

Lord Williams of Mostyn: This amendment is of some importance to students who may suffer if they have to declare that they have been refused a student loan in any subsequent application in their financial lifetime. It is intended to underline the fact that a student is obliged, in the overwhelming majority of cases, to look to this form of loan. It is not a matter of choice but of necessity. If relatively few safeguards are to be imposed within the scheme, we respectfully commend this one on the basis that it is a necessary protection for students.

As has been said, the Bill is skeletal. We do not know the arrangements. We have no likely opportunity of reviewing them, bearing in mind what happened on Amendment No. 4. This is an important matter. One would have thought that it was not an issue that the Government would feel comfortable resisting. However, we shall see.

Lord Addington: The amendment refers to disclosure of a refusal to grant a loan to a student. Students would probably say that their financial situation could change radically when they stop being students. That fact is behind the amendment. However, it has been pointed out already that students have no choice but to apply for the loans. They are a necessity.

12 Mar 1996 : Column 795

Students are calling for a subsistence level of income. Surely, a refusal should not be raised when their record of creditworthiness is being considered in later life.

Lord Henley: The noble Lord, Lord Williams, says that I should not feel comfortable in resisting the amendment. I have to say to him that it is a matter for me to decide as to the degree of comfort I feel rather than for him to impute it. I have to resist the amendment for two reasons. First, it goes considerably beyond the scope of the Bill. It seeks to regulate not only the private lender of student loans but private lenders of every kind. It is also unnecessary and impractical.

The amendment seeks to give a student refused a loan from the private sector the right to withhold that information whenever he applies for credit again. I sympathise with the feelings behind the amendment and the concern about students refused loans from the private sector possibly having a hard time getting credit in the future to buy a house, a car, or whatever. However, financial institutions, whether they be lenders of subsidised student loans or lenders of mortgages to graduates, must have the freedom to make commercial decisions. It would be wrong to expect a credit institution, when considering a mortgage application, to make a special exception for an applicant because he was refused a student loan by another institution.

In any case it is wrong to assume that future prospective lenders will have a great deal to gain from knowing why an applicant was refused a student loan some time before. They will all have their own selection policies and procedures, as I said earlier. The applicant's circumstances will also have changed. One should not make assumptions about the weight that past information will carry. I therefore consider the amendment unnecessary. I urge the noble Lord to withdraw it.

Lord Williams of Mostyn: Will the noble Lord say why he thinks the proposal is impractical?

Lord Henley: First, I consider that it goes beyond the scope of the Bill. I also think it wrong to impose such an obligation on the financial institutions, which must have the appropriate freedom to make their own commercial decisions.

Baroness Carnegy of Lour: It is very important to be clear about what my noble friend is saying and about the implications of the Bill. If a student is refused a subsidised private sector loan, can he or she then apply for an agency loan? If so, is that information confidential--so that we know what a student might do if he or she wanted a loan but was refused it by the public sector?

Lord Henley: If a private institution refuses the student a loan, as I have made clear more than once there will always be the availability of the Student Loans Company. It would always be possible for an individual to go to the Student Loans Company.

Baroness Carnegy of Lour: That is confidential under the Bill, is it not?

12 Mar 1996 : Column 796

Lord Henley: Obviously it would be known that the individual had a student loan--it would come from the Student Loans Company. The point I am making is that the private sector institution should be free, should it so wish, to take account of a refusal of a loan. That is a commercial decision that it can make. The individual student will always have the availability of a loan. If he fails in the private sector, there is the Student Loans Company.

Lord Williams of Mostyn: Does the Minister appreciate that I am not speaking about feelings of discomfort, because discomfort is entirely subjective like questions of taste? The question I understood to have been put was: if a student is refused a private sector loan and then makes an application for a publicly supported loan, is there an obligation to report the refusal of the private sector loan on the occasion of the public sector application?

Lord Henley: I do not see that there would be any obligation to report to the Student Loans Company the fact that the student had been refused a loan elsewhere.

Baroness Farrington of Ribbleton: Will the Minister agree that if an individual applies for a mortgage on a house there are two reasons why that application may be turned down: one is the deemed creditworthiness and the ability of the individual to repay; the other is the quality, siting and value of the property? In the case of an application for further credit, often now in these days of computerisation there is merely a box to tick: "Have you, or have you not, ever been turned down for credit before?". Is it not possible that a bank or other financial institution may decide fairly arbitrarily in the case of a particular career option such as dance or fine art that the career possibilities are limited; and may it not rather arbitrarily reject certain careers as being less likely to lead to people being in a position to repay? Surely this is a very different set of circumstances. In the case of a car it is a question of whether the income is adequate. Here we are dealing with a subsidised private sector loan scheme in relation to which judgments will be made about particular careers leading to the ability to repay.

Lord Henley: We shall come to that point when we discuss the noble Baroness's Amendment No. 13, when we can address the matter in somewhat greater detail. The simple point I make is that these matters must be left to the institutions themselves to make their own commercial decisions.

Baroness Farrington of Ribbleton: It is not the same point.

Lord Morris of Castle Morris: This is an important amendment, as my noble friend said. We take it extremely seriously. The Minister laid out his position, with most of which we firmly disagree. Obviously we shall return to the matter at a later stage when we have had a good look tomorrow morning in Hansard at what he had to say. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

12 Mar 1996 : Column 797

Lord Walton of Detchant moved Amendment No. 8:


Page 1, line 13, at end insert--
("( ) No subsidy may be paid by the Secretary of State under subsection (1A) except where provision is made under the arrangements between the Secretary of State and persons making private sector student loans as to the maximum amount of loan that may be made to a student in any year, having regard to the length of the period of study for students with additional weeks of study in their final year."").

The noble Lord said: This amendment is tabled in the interests of students of medicine, dentistry and veterinary surgery. Medical, dental and veterinary students face particular problems because of the length of their final year of study. Most study for five years, some indeed for six, as undergraduates compared with three, or perhaps occasionally four, for most students. The longer period of study means that medical and dental student needs are greater and more debt is accumulated.

The most severe hardship is in the final year, when students are at present entitled only to a reduced final year rate of loan. For most medical and dental students the final year begins much earlier than for other students, finishing in mid to late June. Medical students then have to wait until 1st August before starting their pre-registration posts. That short interim period is now increasingly taken up with induction courses, so that students are unable to take up paid employment. The beginning of the final year to the start of employment is over 11 months. A CVCP survey found that nearly all medical and dental students study for between 40 and 45 weeks in their final year. Veterinary students usually have to undertake a number of weeks of extra-mural training in addition to the weeks of term. This is unpaid and eats into vocation time.

The Committee of Vice-Chancellors and Principals would like to see medical, dental and veterinary students receive the full rate of loan entitlement in the final year of study rather than the reduced final year rate as at present. There is a situation at the moment whereby students studying for the postgraduate certificate of education do receive the full loan in their final year. The same is true of those taking accelerated courses.

It is true that medical and dental students receive extra weekly amounts in mandatory grant as a recognition of the difficulties they face in studying for much longer periods than many other students. But those studying for the postgraduate certificate of education and for accelerated courses already receive these additional amounts in mandatory grant as well as being eligible for a full year loan in their final year. It seems inconsistent and illogical that the same benefits are not allowed to medical, dental and veterinary students. I beg to move.


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