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Mr. Worthington: This is very interesting, but the central reason for the Bill is completely separate. What contact has there been between the Chancellor of the Exchequer and the Department for Education and Employment about the necessity to get student loans out of the public sector to lower the public sector borrowing requirement?
Mr. Forth: The contact between my right hon. and learned Friend the Chancellor of the Exchequer and my right hon. Friend the Secretary of State is close, harmonious and fruitful, as ever. The Government as a whole are happy and content with the thrust, direction and purpose of the Bill. They could scarcely be otherwise.
I was giving some background figures. Overall, the number of loan accounts has risen dramatically. In the first year, there were 180,000, and there were just under a million by the end of 1994-95. We believe that there will be nearly 2 million in two years' time. That represents a public sector success, but also a burden. I shall return to that point shortly.
Higher education is, of necessity, costly. The taxpayer, through the Government, has made substantial sums available--£4.7 billion in 1995-96, with a further
£1.5 billion for student support. There must be a limit to what taxpayers can reasonably be expected to invest in higher education.
Given our generous student support arrangements, it is not surprising that the number of loans has increased so substantially. Outstanding loans--that is principal and interest--will total some £5 billion by the end of the decade. That is an enormous investment and why I believe it is right to seek to transfer the task of raising that capital to the private sector.
I should like to take this opportunity to pay tribute to the Student Loans Company. The Bill is not directly about the company, which has achieved a lot in a short time, remarkably efficiently. Less than 8 per cent. of borrowers were in default--two payments behind--at the end of the last financial year. A significant proportion of them will eventually correct the position. That is well below the 20 per cent. fantasy figure mentioned by the hon. Member for Bath (Mr. Foster) in the debate on the Address.
Mr. Don Foster (Bath):
Given the high regard that the Minister clearly has for the Student loan Company, can he tell the House what its view is of the proposals?
Mr. Forth:
I would characterise the view expressed by elements of the student Loans Company as being understandably typical of any one in a monopoly position.
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There are some in the company who feel uncomfortable at the thought of having another player or players on the field. I do not blame them for that. I can assure the hon. Member for Bath, from the discussions that I have had with key figures in the company, that they accept the policy direction of the Bill. They will be more than equal to the task of making any adjustments necessary if financial institutions take up the opportunities offered in the Bill. In the student Loans Company, there is a mixture of apprehension and a willingness to get on with the job. I am encouraged by that.
There have been a number of comments about the National Audit Office findings on the sums that will not be repaid to the company. Many have rushed to criticise us on the back of that report and we should be clear what it means. Much of the money will not be repaid because it is our policy that those who cannot afford to pay should not. There are borrowers who will never raach the repayment threshold. The critics must say what they would do. They should say whether we have to hound those borrowers or change the repayment terms. The figures have caused criticism because our repayment terms are sensitive and generous, and take full account of the needs and abilities of individuals.
The Student Loans Company has reduced its administrative costs from £48 to £14 per account over the five years of the scheme. The company has also put recent operational and staffing problems behind it. It will continue to play an important part in student loans, but it cannot provide choice and competition.
The fundamentals of our loans policy are sound and will remain unchanged. Whether public or private, we have no plans for subsidised loans for fees. I wish to make that clear. We have no plans to abolish grants. We plan to achieve broad parity between grants and loans in 1996-97 and then to maintain that parity.
Loans reduce the share of the burden falling to parents and the taxpayer. That must be fair. The main beneficiary should pay some of the costs. After all, many taxpayers earn much less than most students eventually will. Loans increase students' sense of financial responsibility and their stake in successfully completing their courses.
Loans will continue to be made on generous terms, whether public or private. Repayment could be deferred if income was less than 85 per cent. of average earnings. Interest rates are fixed to the retail prices index, and repayments do not begin until the April after graduation.
A lot of nonsense is talked about student debt, The implication of some who make those allegations is that we should be more generous. Those who say that should answer some questions. Who will pay? Should it inevitably be the taxpayer? Should it be the families of the students or the students themselves? Can they afford to pay? All those questions should be answered clearly and systematically by those who seek to criticise the present arrangements and the Bill.
Mr. Bernard Jenkin (Colchester, North):
Will my hon. Friend give way?
Mr. Forth:
I shall give way first to the hon. Member for Cambridge (Mrs. Campbell) and then to my hon. Friend.
Mrs. Campbell:
As more people, particularly mature students, are coming back into higher education, it is important that there are some facilities for part-time students. Can the Minister tell us whether the new student loans scheme will cover arrangements for part-time as well as full-time students?
Mr. Forth:
I should like to take advice on that and give the hon. Lady a replay during the debate or when I seek the permission of the House to reply. I do not want to give an off-the-cuff answer that might mislead. It is a very important area.
Mr. Jenkin:
My hon. Friend discussed the access funds and the important role that they play. Is not it important that we make more money available to the access funds, to help the very people whom the Opposition parties say that they are worried about? However, so that we may be able to afford to do so, is not it entirely right and proper that people should become more dependent on loans and less dependent on grants at the expense of the taxpayer?
Mr. Forth:
My hon. Friend makes a very important argument, which I know has worried him and many other hon. Members for some time. We must constantly make very difficult judgments about the way in which necessarily scarce moneys in higher education are used. I shall take my hon. Friend's argument under advisement, if I may, and consider it to discover what can be done to help, but I warn him, as ever I must on such occasions, that, with necessarily limited total moneys, what is allocated in one direction must come from another. That is what makes it so difficult.
Dame Elaine Kellett-Bowman (Lancaster):
Is there any possibility of giving help to the small number of students who must take a year out and then return to their studies, who at the moment find it extremely difficult, especially with the council tax and so on?
Mr. Forth:
My hon. Friend has put a finger on an aspect that causes difficulty to some people. I undertake to consider that issue, to discover what help might be given, but I must repeat the health warning that I gave to my hon. Friend the Member for Colchester, North (Mr. Jenkin) a moment ago--it is always a matter of balancing what is available with the severely competing needs.
Mrs. Fyfe:
I thank the hon. Gentleman for his courage in giving way once again. Has he heard of a study published by the Scottish citizens advice bureau in August, entitled "Poverty by Degrees"? It referred to the fact that students have visited citizens advice bureaux because of the poverty that they experience; the CABs have had to refer them to charities providing free food. Does the Minister believe that taxpayers are so anxious to have their tax reduced by every penny possible that they want students to be in that condition?
Mr. Forth:
Taxpayers might want to know considerably more about the circumstances of students who find themselves in the position that the hon. Lady describes. When I visit campuses, I am always impressed by the number of students occupying the beer bars and enjoying many of the other benefits of higher education. The truth is that, as is the case in so many other aspects of society, the vast majority of students manage their money responsibly and manage to get by very well indeed. Although it is absolutely right that we should give sympathy, understanding and support to those who cannot
Mrs. Helen Jackson (Sheffield, Hillsborough):
Given what the Minister said about the importance of mature students, under the new scheme that he is suggesting, will loans be available at the rates suggested for both women and men over the age of 50? It is often at about that age that women start to recognise that they have potential that they want to use, and that men, in cities such as Sheffield, who are skilled and well trained in industries such as steel and engineering, want to take up different careers.
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