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Lord Morris of Castle Morris: My Lords, I am grateful to the noble Lord for that reply. I was fortified and convinced by the wise words of the noble Lord, Lord Tope, especially when he prayed in aid the words of the noble Lord, Lord Beloff. I am sorry not to see the noble Lord in his place because I wish to say how, on this occasion as on many others, I find myself totally in agreement with what he said about universities and students and all that is therein.

Sadly, I am unimpressed by the reply that the Minister was able to give. It is simply a fact that the banks are not and have not been interested in the Bill and students are not in any ugly rush to demand the minimum piece of choice which this would force before them. On this occasion, the Minister was not able to offer us a single crumb of comfort or indeed to move any way towards the purpose of the amendment. So I have no alternative but to ask the House to express an opinion on it.

5.24 p.m.

On Question, Whether the said amendment (No. 3) shall be agreed to?

Their Lordships divided: Contents, 79; Not-Contents, 122.

Division No. 2

CONTENTS

Ashley of Stoke, L.
Beaumont of Whitley, L.
Berkeley, L.
Blackstone, B.
Blease, L.
Borrie, L.
Brooks of Tremorfa, L.
Castle of Blackburn, B.
Cledwyn of Penrhos, L.
Cocks of Hartcliffe, L.
David, B.
Dean of Thornton-le-Fylde, B.
Diamond, L.
Donaldson of Kingsbridge, L.
Donoughue, L.
Dormand of Easington, L.
Dubs, L.
Falkender, B.
Farrington of Ribbleton, B.
Fitt, L.
Gallacher, L.
Gladwin of Clee, L.
Gregson, L.
Grey, E.
Hanworth, V.
Harris of Greenwich, L.
Haskel, L.
Hayman, B.
Healey, L.
Hilton of Eggardon, B.
Hollis of Heigham, B.
Holme of Cheltenham, L.
Howie of Troon, L.
Hughes, L.
Irvine of Lairg, L.
Jay of Paddington, B.
Jenkins of Putney, L.
Kennet, L.
Kilbracken, L.
Kirkwood, L.
Lester of Herne Hill, L.
Lockwood, B.
Longford, E.
Lovell-Davis, L.
McCarthy, L.
McIntosh of Haringey, L.
Mackie of Benshie, L.
McNair, L.
Mallalieu, B.
Mason of Barnsley, L.
Merlyn-Rees, L.
Milner of Leeds, L.
Mishcon, L.
Molloy, L.
Monkswell, L.
Morris of Castle Morris, L. [Teller.]
Murray of Epping Forest, L.
Nicol, B.
Prys-Davies, L.
Rea, L.
Redesdale, L.
Richard, L.
Ripon, Bp.
Seear, B.
Sefton of Garston, L.
Serota, B.
Shepherd, L.
Smith of Gilmorehill, B.
Stoddart of Swindon, L.
Strabolgi, L.
Thomson of Monifieth, L.
Tope, L. [Teller.]
Tordoff, L.
Turner of Camden, B.
Wedderburn of Charlton, L.
White, B.
Williams of Elvel, L.
Williams of Mostyn, L.
Winchilsea and Nottingham, E.

NOT-CONTENTS

Abinger, L.
Addison, V.
Alexander of Tunis, E.
Ashbourne, L.
Astor of Hever, L.
Belhaven and Stenton, L.
Blaker, L.
Blatch, B.
Blyth, L.
Bowness, L.
Boyd-Carpenter, L.
Brabazon of Tara, L.
Brigstocke, B.
Brookes, L.
Brougham and Vaux, L.
Butterworth, L.
Cadman, L.
Caldecote, V.
Campbell of Croy, L.
Carnock, L.
Chelmsford, Bp.
Chesham, L. [Teller.]
Clanwilliam, E.
Clark of Kempston, L.
Colwyn, L.
Courtown, E.
Craig of Radley, L.
Cranborne, V. [Lord Privy Seal.]
Crickhowell, L.
Cumberlege, B.
Davidson, V.
Dean of Harptree, L.
Denham, L.
Dilhorne, V.
Dixon-Smith, L.
Dundonald, E.
Elibank, L.
Ellenborough, L.
Elles, B.
Elliott of Morpeth, L.
Elton, L.
Ferrers, E.
Goschen, V.
Granard, E.
Gray of Contin, L.
Greenway, L.
Haig, E.
Hailsham of Saint Marylebone, L.
Hamilton of Dalzell, L.
Harding of Petherton, L.
Harlech, L.
Harmsworth, L.
Harrowby, E.
Hayhoe, L.
Henley, L.
Hertford, M.
Holderness, L.
HolmPatrick, L.
Inglewood, L.
Jenkin of Roding, L.
Johnston of Rockport, L.
Kimball, L.
King of Wartnaby, L.
Laing of Dunphail, L.
Lane of Horsell, L.
Lauderdale, E.
Lawrence, L.
Leigh, L.
Lindsay, E.
Lucas, L.
Lyell, L.
Lytton, E.
McConnell, L.
Mackay of Ardbrecknish, L.
Mackay of Clashfern, L. [Lord Chancellor.]
Mackay of Drumadoon, L.
Marlesford, L.
Massereene and Ferrard, V.
Merrivale, L.
Mersey, V.
Miller of Hendon, B.
Milverton, L.
Monk Bretton, L.
Mountevans, L.
Moyne, L.
Munster, E.
Murton of Lindisfarne, L.
Northesk, E.
Oppenheim-Barnes, B.
Orr-Ewing, L.
Pearson of Rannoch, L.
Pender, L.
Peyton of Yeovil, L.
Pilkington of Oxenford, L.
Plummer of St. Marylebone, L.
Rankeillour, L.
Rawlings, B.
Rees, L.
Rennell, L.
Renton, L.
Renwick, L.
Romney, E.
St. Davids, V.
Saltoun of Abernethy, Ly.
Seccombe, B.
Sharples, B.
Shaw of Northstead, L.
Strange, B.
Strathclyde, L. [Teller.]
Sudeley, L.
Tebbit, L.
Teviot, L.
Thomas of Gwydir, L.
Trumpington, B.
Ullswater, V.
Vivian, L.
Wade of Chorlton, L.
Whitelaw, V.
Wilcox, B.
Willoughby de Broke, L.
Wise, L.
Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

25 Mar 1996 : Column 1509

5.33 p.m.

Lord Morris of Castle Morris moved Amendment No. 4:


After Clause 1, insert the following new clause--

Level of subsidy

(". The subsidy paid in respect of each private sector student loan to any person in pursuance of arrangements under this Act shall not exceed the amount required by that person to reimburse the cost of--
(a) any administration relating to the loan; and
(b) the difference between the interest rate agreed with the eligible student receiving the loan and the rate of interest which the bank would otherwise have charged.").

The noble Lord said: My Lords, if there is one thing in this Bill on which we are all agreed it is that the subsidy is at the heart and centre of the Bill--indeed, it is probably the only thing on which we agree. I need not apologise unduly therefore for returning to it with a fresh suggestion for improving the Bill's vagueness on the subject and making it a bit more comprehensible to the students who may be affected and the banks who still could, theoretically, be induced to compete for it--though as the days go by that seems to be an increasingly unlikely possibility.

The Minister was correct in saying in his reply at Committee stage that the 10 per cent. figure we then proposed was more of a "probe" than a "proposition". However, it failed to elicit much useful information from the Minister and the whole matter remains shrouded in what seems to us to be unnecessary secrecy. The Minister failed completely to answer several points made by my noble friend Lord Desai. I should like to give him the opportunity today to repair that omission and I shall speak for a little longer than may otherwise be tolerable in order to give him time to make a few notes and, if necessary, refresh his memory on what my noble friend said.

In an attempt to help him in that respect, I can tell him that my noble friend asked why the Government were not proposing long-term loans so that insurance companies and others who made actuarial calculations would be the more willing to participate. There was no reply. My noble friend pointed out that the banks,


    "would like a high subsidy but I reiterate that there is no economic case for such a subsidy".--[Official Report, 12/3/96; col. 742.]
Can the Minister explain to us now the economic case for whatever subsidy is agreed? Further, my noble friend suggested the merits of a long-term loan which could be deductible from the national insurance surcharge. Why is that not a preferable option to one which requires so substantial a subsidy to succeed, even though we have no idea what that subsidy will look like?

The Minister has been kind enough to write to me on the subject of a subsidy since the Committee stage. I am grateful for his attempt to clarify the concept and its

25 Mar 1996 : Column 1510

workings. Unfortunately, his letter--which I read most carefully--raises more new problems than it solves of the old ones. He begins by saying that,


    "The purpose of the subsidy is not to persuade private lenders to lend money".
When I read that, I felt like Macbeth as he entered after discovering the body of Duncan and said:


    "Confusion now hath made his masterpiece".


    "The purpose of the subsidy is not to persuade private lenders to lend money",
In the most obvious sense of those words it is. The subsidy is there to persuade them to lend money because, if they were not provided with a subsidy, they would be unlikely to lend any money. But, as I thought about it, revolved it, turned the sentence over in my mind and considered it in relation to the next sentence, I began to see a glimmer of light on what may be in the Minister's mind. He went on:


    "It is to enable them to lend their own money"--
"their own money"; I do not see how they can lend anybody else's money--


    "on the preferential terms which are central to the loans scheme, whether public or private, to student borrowers with little credit history".
There at least we surface and light shines. On these Benches we have been concerned to protect the creditworthiness of students, though so far with little success. The letter goes on to state,


    "the subsidy level which the financial institutions will set out in their tenders to reflect the benefits to them of getting privileged access to this market".
If we ask the question, "What is in it for the banks?", the answer is the benefits of,


    "privileged access to this market".

I should like the Minister even now to explain to us what exactly those "benefits" are which by this subsidy may be obtained and which would not be obtainable without the subsidy. Banks have been lending to students for a long time. Why should this subsidy, whatever its level may be, make such an enormous difference that banks or anybody else will want to take it up?

A few more difficult terms are introduced in that paragraph. The Minister says:


    "Obviously, the form and level of subsidy which we offer to the private lenders may differ from the resources which we currently provide for the Student Loans Company".
I do not understand what is meant by the distinction between "form" and "level". What does it mean? A subsidy is a subsidy. It can only, so far as I know, mean money. But the noble Lord talks here of the "form and level" of the subsidy. I should be grateful for an explanation of the difference between "form" and "level" in terms of subsidy and how those two terms relate to the resources which we currently provide for the Student Loans Company. What are those resources apart from financial resources--apart from money?

The noble Lord then says one thing which I found very helpful:


    "We are in the process of testing the market and if none of the bids are acceptable we shall not proceed".

25 Mar 1996 : Column 1511

The word "are" might be replaced in that sentence by "is" since the subject is singular and that might add a pleasing touch of literacy to it. But I get the point. It is a welcome reassurance. Not so the next sentence:


    "But we have no intention of setting out our reserve price".
We have never asked anyone to set out a reserve price. We would be perfectly satisfied with some indication of an order of magnitude. What kind of sum are we talking about? I find it difficult to believe that that is too much to ask.

I was grateful for the clear description in the letter of the flexibility permitted to the banks or other financial houses, though I do not approve of it, for the letter says:


    "The private lenders will have the flexibility, with the agreement of the borrower, to charge interest at a rate below that set out in the regulations governing public loans, with a corresponding reduction in the repayment period".
Good; I understand that. It is what we have all believed along the way in any case. But it is good to have it thus set down and spoken out. It does, of course, favour the rich against the poor and to that extent we find it less than totally acceptable. But I am at least grateful for the clarity.

Apart from that, the Minister's letter obfuscated as much as it clarified to my grammarian's mind and so I felt that we were obliged to come back with this amendment which seeks to establish a clear and fair basis for the subsidy and to remove the totally unacceptable element of latitancy and secrecy from it. I beg to move.


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