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Mr. Forth: I suspected that the hon. Gentleman would pick up Sir Eric's slightly unfortunate remarks, and I arranged for the position to be checked very carefully. My officials had discussions with the Student Loans Company on the subject as long ago as early August. I have personally discussed it with Sir Eric on two occasions, and my officials have had discussions with board members on at least four other occasions between August and October. I am sorry if the hon. Gentleman has been misled, but I checked the record very carefully, and those are the facts.
Mr. Davies: I accept what the Minister has said: such a meeting undoubtedly took place. "Consultation", however, suggests that someone is listening when the contrary point of view is presented. It is clear from what Sir Eric has said that the Government's proposals do not enjoy his whole-hearted support--and we should not be at all surprised at that.
It is clear that the financial institutions also have their doubts. The Woolwich and the Abbey National building societies are already reported to have turned the Government down; the Co-operative bank cannot envisage becoming involved, and neither can the Royal Bank of Scotland. A spokesman for the Midland bank has said:
Sir Christopher Johnson, the then chief economic adviser to Lloyds bank, advised his bank to have nothing to do with the last scheme. Last Friday he wrote in The Times Higher Education Supplement that the Government's new proposals made him "despair"--and who would disagree? He said:
The proposals are unlikely to interest the banks. Student loans are an uncertain business and the repayment mechanism is not secure or efficient. If the banks are to be involved, they will clearly need huge subsidies from the public purse. Sweeteners will be needed to cover interest rate subsidies, default levels and administration costs.
Mr. Tracey:
Will the hon. Gentleman give the House straight answers to some straight questions? Would the Labour party in government return to a complete grants system? In other words, does the Labour party envisage providing more than £3,000 per year to students? How would the Labour party pay for that? Perhaps the hon. Gentleman would like to comment on the idea of a graduate tax, which the hon. Member for Sheffield, Brightside (Mr. Blunkett) has talked about.
Mr. Davies:
The Labour party is engaged in a true consultation exercise: we are listening to what the wider community is saying. Whereas the Government's proposals are being roundly condemned by all relevant interest groups, our policy will be based upon a close appreciation of what will best serve the needs of education.
The legislation represents the Government's attempted solution and they are legislating in haste before they have concluded negotiations with the private sector. Can the Minister advance the name of any financial institution that is prepared to sign on the dotted line? If that is asking too much, can he name anyone who favours the proposals? I believe that he cannot, but perhaps the Minister will address those issues, and fill some of the gaps in his original contribution, if he seeks leave to wind up the debate.
The Minister wants Parliament to issue a blank cheque. The Government need something to interest the private sector as they have placed themselves at a disadvantage at the negotiating table. The Bill is already before the Parliament and, therefore, the Government have made a commitment to a policy that the private sector must underwrite.
The Minister claimed that his proposals will provide students with a choice. That should warm the hearts of Tory Back Benchers: a privatisation measure involving additional choice. Can one doubt that they will rush uniformly into the Division Lobby? However, if they ponder the facts, they will find that the measure will not give students a choice. The terms of the loan will remain basically the same. Students will have no effective choice--in fact, they will be placed at a disadvantage. The draft tender document suggests that the banks will be able to pick and choose to whom they will lend. They may even choose to negotiate a shorter repayment period. The banks can tie a bigger millstone around students' necks and the Government will call it choice.
Mr. Brandreth:
I am delighted to hear the hon. Gentleman praise the notion of choice. In political terms, the electorate is faced with a choice. It is clear what the Government are setting out: £4.7 billion per year to be
Mr. Davies:
I am not surprised that the hon. Gentleman has intervened in my speech for a second time, as it is his last chance before tomorrow's Budget Speech to give the Chancellor some idea of where the nation's priorities should lie. He makes yet another attempt to cull from Labour answers to questions that the Government are manifestly failing to answer effectively.
As to the issue of choice for students, do the Government suggest that students will have real negotiating power when applying for loans from banks?
How can a student, who is facing real hardship and who has no parental support to call upon, dictate terms to a major clearing bank? The idea is laughable. If the Government have their way, it is the banks that will choose. They will pick and choose between students. They will ask students questions such as, "What do your parents do and what do they earn? What degree are you doing? What career are you hoping to pursue?"
The Bill will create a two-tier system whereby well-off students and those with particularly good prospects will go to the banks and the rest will go to the Student Loans Company, which will be left to carry worsening default levels on its loans.
Mr. Barry Porter (Wirral, South):
I am still rather puzzled. I do not blame the Opposition for not saying what they are in favour of, but I cannot work out what they oppose. Do they oppose student loans in principle, or the proposed mechanics of delivering those loans?
Mr. Davies:
We oppose the proposals in the Bill, and that is why I shall ask hon. Members to vote against the Bill at the conclusion of the Second Reading debate. I am outlining why the Bill will not offer choice to students, will not create increased opportunities and will certainly damage those students who are less well off. Under a guise of choice, the Student Loans Company will become the lender of last resort. The Bill will do nothing to alleviate student hardship.
The Minister does not seem to recognise the hardship that many students face today. He said that he meets with students in bars--and presumably he drinks at their expense because he suggested that students are rather lavish with their resources. It may simply be that they are excessively generous--even to Ministers who are not concerned about their real needs.
When the Minister visits universities, does he not talk to those who distribute hardship funds? Does he not talk to ordinary students who are trying, for example, to cope with the fact that residential costs at many of our universities exceed the grant that the Government advance to students? I suggest that the Minister be a little less selective about the places where he meets students. When students are in a less generous mood and not so involved in socialising--which he seems to encourage from time to time--they will tell him a few home truths.
We must recognise the worrying signs, such as the increasing drop-out rates at British universities. In some cases, full-time students have become part-time students. Lecturers and students will confirm the extent to which students are working part time while studying.
Mr. Jenkin:
Is the hon. Gentleman reluctant to explain his own party's policy on student maintenance simply because it has no policies? Is the hon. Member for Sheffield, Brightside (Mr. Blunkett) once again in the unhappy position of being sat upon by the hon. Member for Dunfermline, East (Mr. Brown)?
"This is a high risk venture and we see considerable problems in managing this book. It is not the most attractive proposition in the world."
You can bet your bottom dollar that it is not, given our experience of the Student Loans Company thus far. Barclays bank has said much the same thing. The House will recall that the banks pulled out of the last attempt to get them to participate in a student loans scheme. Perhaps that was a testimony to the negotiating skills of the then Chief Secretary of the Treasury, the present Prime Minister. A more charitable interpretation is that the banks predicted nothing but problems, and why should their views have changed?
"There is every sign that a half-baked idea has been launched prematurely to get it into the Queen's Speech in time. Haste born of financial desperation is not a good recipe for fundamental reform."
However, the most telling testimony is that of the governing party. The Conservative national policy group on higher education has described the current loans
system as "inadequate" and "highly inefficient". Why should the banks become involved when the Tory party can muster no better recommendation of Government policy than that?
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