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Mrs. Angela Browning (Tiverton and Honiton): I begin by congratulating the Minister for School Standards--particularly on his delivery of information which falls not far short of having to read the telephone directory from the Dispatch Box. We welcome the Bill. Its measures carry on from where we left off, moving to a system whereby private sector lenders take responsibility for the provision of student loans.
It is our view, and has been for some time, that the Government should not be in the business of lending to individuals. The private sector has a proven record of being much better placed to manage the risks involved, and much more experienced in recovering loans.
In government, we took action to move in that direction. I promise the Minister that I shall not repeat what he has said page by page, but he made reference to the Education (Student Loans) Act 1996, which sought to enable the payment of Government subsidies to financial institutions in the private sector to facilitate the provision of loans to students in higher education. Under the Act, students would still be able to apply for loans from the Student Loans Company. However, the clear aim was to ensure that most subsidised loans would eventually come from the private sector, with the choice resting with the student.
Following extensive negotiations with financial institutions, that twin-track, public-private model did not proceed. As a result, the Conservative Government came up with an alternative proposal to sell some of the existing
student loan debt to the private sector, and to contract out the work of the Student Loans Company. That proposal is contained in the Bill.
There is estimated to be about £2 billion in outstanding loans. Selling some of that debt will bring benefits to the Government and to the taxpayer by transferring some of the risk to the private sector.
We welcome the fact that the Government have decided to press on with the sale of student loan stock. It is a step in the right direction, and we hope that the Government will continue to look for ways of involving the private sector still further in the provision of student loans.
In response to questions from Conservative Members, the Minister said that there will be a statement on Wednesday on the Dearing report. It would be helpful if he could confirm whether any additional loans or changes to the loans system will be accompanied by a decision on Wednesday on how loans are to be serviced and whether they are to be part of a package that will be passed on for the private sector to deal with.
Mr. Byers:
I have not briefed anyone on the Dearing report, and do not intend to do so now. Hon. Members must wait until the statement on Wednesday afternoon to find our how the Government intend to respond to the recommendations of the Dearing inquiry, and in particular our views on student support in future years.
Mr. Phil Willis (Harrogate and Knaresborough):
On Friday last, the same cast of hon. Members sat in the Chamber and, despite our differences, we congratulated the Government on producing a White Paper that was a good basis for discussion. I spoke to a number of head teachers in my constituency this morning, and there was also a great deal of support on the ground. The Minister and his team rightly went away on Friday with some satisfaction about a job at least well started.
Today, the same Minister is at the Dispatch Box attempting to put a brave face on legislation that was cobbled together by the previous Administration to meet cash-limited spending plans. The present Chancellor admits that this legislation
We now know why the Government did not include the Bill in the Gracious Speech. It was not an oversight, as was said in a leak to the newspapers this weekend. It was not included because the Government were embarrassed at having to introduce such unacceptable legislation.
The Minister and the Labour party when in opposition, together with the Liberal Democrats, condemned the proposals contained in the 1996 Education (Student Loans) Bill as much for their vagueness and lack of detail as for their intention. However, today the script is so similar to that used by his predecessor, the right hon. Member for Bromley and Chislehurst (Mr. Forth), that the
House could be forgiven for believing that the general election never happened. Like a long-running play, the director merely changed the cast to give the script new life.
To be fair, I know how committed the Minister is to his portfolio, and I am sure that he is embarrassed at having to introduce the Bill. I do not, therefore, want to cause him any more anxiety than he deserves.
The Liberal Democrats do not have any philosophical difficulty with the principle of student loans or with the involvement of the private sector. We understand the need to keep the public sector borrowing requirement under control, and we recognise the part that the private sector must play. We have always asked for negotiations to be open and capable of scrutiny, and for there to be a tight regulatory system that protects the students and the taxpayer. Above all, we seek a system that treats all students, both part time and full time, with equality.
We fully accept that the Government have real difficulties in funding higher education. I have no doubt that, despite the leaks, Wednesday and the following days will be traumatic for the Government as Back Benchers try to wrestle with their consciences. However, we have never supported the current student loans scheme. The Bill fails to meet the criteria for our support, so if there were a Division, we would not support the Government.
Had parts of the proceeds of this "fire sale" been allocated to our universities to make up for the 28 per cent. cut in funding for students in the past six years, or for the 30 per cent. cut in capital budgets last year, there may have been some justification. As the hon. Member for Angus (Mr. Welsh) rightly pointed out, the Bill does nothing for our universities, which are experiencing a funding crisis. Not a single penny of the £1.6 billion that the Government are hoping to raise this year will go into higher education.
I may be doing the Government a disservice and our interpretation may be wrong. Will the Minister explain what proportion from the sale of this debt will be reinvested in higher education this year, and what proportion will be used to alleviate student hardship? After all, it is the students who have created the debt.
Although the Treasury may benefit from receiving £1.6 billion this year and £1.5 billion next year, the taxpayers may not benefit in the long term. Under the Bill, the Secretary of State can make any arrangements "as he thinks fit" to subsidise private sector buyers and to guarantee any losses through default. The Bill contains no details of the extent or the limit of those subsidies, or the cost to the taxpayer of making the portfolio saleable. In short, the Bill enables the Secretary of State to write the private sector a blank cheque.
One can imagine the howls of dissent from Labour Members if this measure had been introduced by the previous Administration. During the Budget debate, the hon. Member for Bolsover (Mr. Skinner) and his hon. Friends, when they espied the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), in the Gallery, shouted to him, "Come on down, the price is right." This proposal is akin to a game show called "The price is always right, whatever it is."
To give them credit, the previous Government always hoped that the private sector would take some, if not all, responsibility for student loans, including administration.
We know that the private sector was not interested in 1990, and, as predicted, the burden for administration and cost fell on the taxpayer and the universities.
A further attempt in 1996 by the former Secretary of State for Education and Employment, the right hon. Member for South-West Norfolk (Mrs. Shephard), also failed. Her comments in a press release on 19 December 1996 were most revealing and, if I may say so, characteristically frank. She said:
When the Chancellor said that
The Liberal Democrats do not believe that the Bill will be in the best interests of taxpayers. Indeed, we believe that the Chancellor has seriously compromised the position. If the Bill is passed, we shall want the National Audit Office and the Public Accounts Committee to examine the arrangements for the sale of the student debt portfolios, and to report to the House before any sale is confirmed. We seek the Minister's assurance that no sale will proceed without that level of scrutiny, and the guarantees for which we ask.
The third issue that I wish to raise concerns the terms on which loans will continue to be offered. We have long argued--and, indeed, the Labour party argued when in opposition--that the repayment of student loans should be income-contingent. We would favour a system whereby more generous loans were repaid through a national insurance contribution scheme or, in the future, a joint tax and national insurance contribution scheme.
As the Minister will recall, during the Committee stage of the Education (Student Loans) Bill in 1996, an amendment tabled by my hon. Friend the Member for Bath (Mr. Foster) proposed that
On Second Reading of the Bill in 1995, the then hon. Member for Oldham, Central and Royton outlined a number of principles for the future of student loans. He said:
That leads me to the fourth and final reason why we believe that the Government should stop and think before proceeding with this "sad and miserable little Bill"--a phrase used by my hon. Friend the Member for Bath, which he insisted that I put in. I refer to the publication of the Dearing report on Wednesday this week. I remind the Minister of what his former colleague the then hon. Member for Oldham, Central and Royton said in the House on 27 November 1995 when discussing the last Education (Student Loans) Bill. He said:
Both the last Government and the present Government acted bilaterally to commission Sir Ron Dearing to examine, among other things, the future funding of higher education. The report will inevitably be controversial, particularly if it suggests that students pay for tuition as well as maintenance. If students are to be expected to make larger contributions to their higher education costs, they will
5.2 pm
"is a critical element in meeting the Government's manifesto pledge to work within spending plans already announced for the next two years."
Our schools will be starved of cash this winter and, at a time when our universities are crying out for resources, the Secretary of State for Education and Employment sees yet another valuable asset snatched from under his nose in the name of financial expediency, because that is exactly what the Bill is about.
"In the event we have not been able to agree a deal which could meet their"--
the private sector's--
"requirements at the right price for the taxpayer".
Now it seems that the right price is any price. The market knows that the Chancellor must meet his cash requirements this year because he has said so. It knows that the cash is required by an arbitrary date because he has said so. The market therefore knows that it can demand whatever subsidies it requires to cover its costs and guarantee its profit margins. It can even build in subsidies to cover default if students fail to pay.
"the size of the continuing subsidies cannot be predicted in advance",
what he was saying, loud and clear, was that this was yet another opportunity for the City fat cats to profit at the taxpayer's expense. It is rather as though someone wishing to sell a car put an advertisement in the paper stating, "Must be sold by Friday--owner emigrating and needs cash for air fare". That is the extent to which we are in hock to the private sector. Such an approach to the selling of public assets is not only bizarre; it is exactly the sort of approach of which the Labour party would have been extremely critical when in opposition.
"the Secretary of State shall be under a duty to ensure that the level of repayments to be made by borrowers is, so far as practicable, income contingent".
The Minister will also recall a similar amendment tabled by the then hon. Member for Oldham, Central and Royton, Mr. Bryan Davies. Although not pressed to a vote, the amendment received considerable support, and, I understand, formed part of the Labour party's proposals to the Dearing inquiry.
"any system of student funding should be fair to both students and the taxpayer. That means that it must be efficient and progressive".
Is that still the Government's position? If so, why have they not taken the opportunity to include changes in the regulations in the Bill? Such changes would have framed future loan repayments, thereby delivering what we believe is essential if we are to attract the next generation of students from poorer homes into higher education--even if it would not have been possible to do the same for existing borrowers.
"He should also recognise that the Government are involved in an extensive consultation exercise on higher education. Why are they rushing to implement one particular measure when a whole range of higher education issues are part of a national debate?"--[Official Report, 27 November 1995; Vol. 267, c.953-57.]
What has changed? Surely the logic of the position taken on 27 November 1995 is even more apparent now, just two days before the publication of the Dearing report.
"need to be underpinned by an efficient system of student loans that is both cheap for the student and the taxpayer",
as Tim King said in The Independent on 15 July.
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