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There are major long-term issues in the Bill, for all that it is Treasury-driven and will be Treasury-directed, which relate to the real world of students and, indirectly, to the health of higher education institutions and the overall health of the sector. As my hon. Friend the Member for Havant (Mr. Willetts) has said in the past, once the Department has settled down after its initial separation from the other education Department, it needs to make an early start on appraising the impacts of the present fee regime ahead of the 2009 review. In fairness, the Minister has quoted figures for recruitment which will be relevant to that, and which I welcome.
As a whole, the present position is encouraging. The Conservatives, too, are interestedcertainly I am interestedin access for people who, although they are from disadvantaged backgrounds, have the same potential as, or even greater potential than, some of their counterparts. We need to discover whether there are differential impacts, not just according to social class or income but relating to the pattern of offers among part-timers and mature students.
The other day I went to talk to a group of sixth-formers. I was a little disappointed when someone who seemed bright enough to qualify for university said very definitely, I am not going. When I asked,, Would you mind telling me why?, the reply was, I am worried about debt. That was a one-offit may have been the word on the street, and it may not be typical of students collectivelybut it is depressing nevertheless.
The Minister may be awareit has featured in earlier debatesof my concern about the cumulative effect on marginal tax rates of income taxperhaps even paid by quite junior people at higher ratesnational insurance contributions and student loan repayments. I can never remember what the acronym is supposed to stand for, but some social scientists have referred to members of the so-called iPod generation, who incur, in effect, a marginal tax rate of over 50 per cent. at a very young age, which I think is worrying.
That also plays into wider issues to do with life profile and life chances. People who are repaying onerous student loans might at the same time be founding households or thinking for the first time about taking out a mortgageand, as we all know, they ought to be thinking about their pension, too, when there is a chance that compound interest will give them a worthwhile pension.
In saying that, I do not seek to subvert anything the Minister has done. A good job was done collectively in Committee on proposed higher education legislation in getting a better student package. I am happy in some respects about that. We cannot anticipate the review, but we should emphasise that it is important and that it is about sustaining access and at least controlling the burdens on graduates even if they have a better future income stream.
There are questions to do not only with the conventional model of higher education students, but also with part-time and mature students. I will not today open up the issue of payments through higher education institutions for qualifications of equivalent or lower quality, although that is a concern of mineabout which I have written to the Secretary of Statebecause of some of the impacts on some institutions and types of study.
There is also the whole area of comparison with further education. The Minister was not quite right when he said that nobody has ever helped in that area before, because career development loans have been available for many years. In a sense, they are a private sector riska managed and reduced risk. However, the scale of the commitment to CDLs pales in comparison with the size of the student loan book.
Part-timers at higher education institutions have, at last, been able to avail themselves of loans in certain circumstances, which is welcome, but some recent work has come to my attention through City and Guildsthe Minister might have seen it, tooconfirming my long-standing belief that FE is left standing in terms of student support, however great its economic contribution might be. I hope that that will be addressed, and that the Minister will take those disparities seriously.
As I move on in my parliamentary career, I can reflect as well asI hopelook forward. It is a strange fact that the Education Act 1962 marks the beginning of the concept of the student support package and the mandatory award. I was an undergraduate at that time. Since then, the whole body of measures has gathered barnacles, accretions, qualifications, embellishments, derogations and further advantages. Let me give a simple example: it was not until approximately 1990 that the first student loans were added to supplement the grants package, and Ministers have now brought back the grants package to supplement the loans. The concept of an entitlement, or mandatory award, attached to a first course of undergraduate study at a higher education institution has, however, persisted; but the time is fast approaching for us to take a fresh look not only at student finances, although that is important, but at the whole of the financing of post-compulsory education at higher and further education level and also embracing training and the important and growing area of continuing professional development. None of that is included in the Bill, as it is a technical, enabling Bill, which is all right as far as it goesat least we hope that there is none of that, and that such changes to the system might only have crept in inadvertently. The issues we are discussing are serious and deep, however, and we will have to address and tackle them before too long.
The Bill had an inauspicious start as far as Wales was concerned when it was trailed in the draft legislative programme and described as England only. It has now been properly described as extending to England and Wales. Indeed, we have received more support and information from the Wales Office than we have had previously when dealing with similar Bills. The hon. Member for South Holland and The Deepings (Mr. Hayes) mentioned the Further Education and Training Act 2007, which led to confusion when the intention was not to give Welsh further education colleges the power to award foundation degrees. We are all gaining experience in this type of legislation.
Bill Rammell: For the record, I remember distinctly that what my hon. Friends were concerned about was proper and effective scrutiny of the transfer of powers to the Welsh Assembly Government. The concern was not about whether that Government chose to take up foundation degree awarding powers.
The explanatory notes give the student loan book a value of £18.1 billion. Lord Triesmans office has informed my hon. Friend the Member for Ceredigion (Mark Williams) that that is an England-only figure and that the Wales figure is £1.1 billion. It would be helpful if the Minister confirmed those figures in Committee or at some other stage.
I would be interested to learn what representations the Minister and his Department have received from the Welsh Assembly. I understand that there is little appetite in Wales for using these powers. I might be wrong about that, but it would be interesting to hear about any representations that have been made to the Minister along those lines.
The powers are mirror powerswe are learning to use that technical term. They give Ministers in the Welsh Assembly Government the same powers, and no more, as the powers that could be exercised by Ministers here. My hon. Friend the Member for Harrogate and Knaresborough (Mr. Willis) asked where the money raised by the sale of the student loans book would go. When he was making that point, I wondered where any sum raised by the sale of the Wales student loan book would go if Ministers in the Welsh Assembly Government used the powers that are intended for them. Would the money stay with the Assembly or be taken back to Westminster? If the money stayed with the Assembly, what could the Assembly use it for? Ministers in the Welsh Assembly Government might be encouraged to use powers given to them if they felt that they could use the money in a constructive and positive manner.
In general, Liberal Democrats would prefer to have framework powers in this type of legislation rather than mirror powers. We shall be interested to see in Committee how the Minister will respond under scrutiny to such sentiments.
Mr. Rob Wilson (Reading, East) (Con): This is my first contribution from the Front Bench, and it is a great privilege to follow the many thoughtful speeches and interventions in the debate today. We have had a short but interesting debate, which has at times made me think that the major parties are conducting a love-in rather than a debate. It certainly lacked some of the usual rough and tumble of exchanges in this House, but why should the Opposition oppose the Government when they implement ideas that we originally proposed?
Much has been made recently of the Xerox Chancellor and the magpie Budget, but the sale of student loans goes back much further and could be described as Labours original sin. As my hon. Friend the Member for South Holland and The Deepings (Mr. Hayes) said, my party first proposed the sale of student loans back in 1996, and it was implemented in 1998 and 1999 by the right hon. Member for Sheffield, Brightside (Mr. Blunkett) in an attempt to stay within Government spending limits.
If those on both sides of the House could continue to work effectively in pursuit of sensible policies, especially Conservative ones, it would be good for the image of Parliament and for the country. I therefore applaud the Government for once again recognising a bright idea that has emanated from the Conservatives. I hope that that sets a precedent for a future in which our policies regularly slip unchallenged past the House. Even the hon. Member for Brent, East (Sarah Teather), in a thoughtful contribution, made it clear that her party would not oppose the Bill.
The Bill is a sensible and rational piece of legislation, although I agree with my hon. Friend the Member for Daventry (Mr. Boswell), who pointed out that this is a Treasury Bill, not a higher education Bill. The sale of the student loan book is consistent with our belief in further public-private collaboration, and it will enable the Government to capitalise on a growing public asset without affecting borrowers or taxpayers. It could even have the added and totally irrelevant but enjoyable side benefit of irritating the left wing of the Labour party.
Speaking of the Labour left, I notice that an early-day motion from the usual suspects has already called for the uncosted abolition of interest on student loan repayments. It would be useful if the Minister could let us have an estimate of the cost of that policy. Perhaps he could tell us how many nurses or teachers would have to be sacked if the Government implemented the policies of their Back Benchers.
Bill Rammell: I welcome the hon. Gentleman to the Front Bench. To enable me to respond properly to the point that he has just made, I would be grateful if he repeated it, as I was inadvertently detained elsewhere for a moment.
Mr. Wilson: The Minister may be aware of the early-day motion tabled by some Labour Back BenchersI described them as the usual suspectsthat calls for the abolition of interest on student loan repayments, which would raise costs for the Treasury significantly. I wondered whether he could advise us how much that would cost, perhaps in terms of how many nurses and teachers would need to be sacked. In any case, I advise him to keep an eye on the left wing of his party, so that it does not lurch too far to the left.
We are satisfied in general terms that the Bill includes sufficient safeguards for buyers and borrowers. The proposals will transfer a growing debt portfolio, and all the risks that go with it, out of public hands and into those of private institutions, which are vastly more experienced than Government in debt management. Those private institutions are also probably more
experienced in data protection, given this weeks calamitya point made powerfully by the hon. Member for Great Grimsby (Mr. Mitchell).
The National Union of Students has already stated its concern that the Bill may be a step towards students paying commercial rates of interest. I do not believe that it is, and it should be noted that students still enjoy a favourable interest rate that is pegged to inflation. There is little for students to worry about in the Bill, which probably explains why they have not been more vociferous in their representations to hon. Members. Students may be more concerned, however, that the average graduate debt is £15,000 and takes some 13 years to pay off, as the Minister recently informed me in a written answer.
Like the hon. Member for Brent, East, we recognise that financing a university education can be a challenge for many students and their families. We welcome the fact that the Bill enables the Government to preserve the low interest rate that students currently enjoy. In that context the point made by the hon. Member for Bury, North (Mr. Chaytor) is relevant in making sure that we are communicating directly with students on this matter.
The Minister, in his opening remarks, was right to say that it is prudent to consider the timing of any sale of the loan book. I understand that passing the legislation does not necessarily mean an immediate sale. As many hon. Members have said, in the light of the Northern Rock fiasco and the dark economic clouds over the banking sector and the economy, that is a particularly relevant and important concern.
There are questions on which I hope the Minister can shed some light. I understand that the proceeds from the sale are already accounted for in the comprehensive spending review. Perhaps he can tell the House whether there is a time limit on when the sale must be undertaken. If putting the revenue into the comprehensive spending review means that the money must be raised within three years, does that weaken our negotiating position in getting the best deal? My hon. Friend the Member for South Holland and The Deepings made a good point when he asked how much of the £6 billion is already accounted for in the comprehensive spending review and where it is allocated. If the Government do not raise the expected sum, what impact will that have on the Governments spending plans?
I remind the Government that the student loan book is a public asset and taxpayers will expect a reasonable price from any sell-off. The Government must avoid the temptation to cash in too quickly for the sake of the public sector borrowing requirement and pressure to raise funds. It was absolutely right for my hon. Friend the Member for Daventry (Mr. Boswell) to remind the Minister that the former Chancellor of the Exchequer sold a large portion of the gold reserves for a quarter of the price that we could have got shortly afterwards, even if in doing so my hon. Friend slightly changed the flow of my hon. Friend the Member for South Holland and The Deepings. As the hon. Member for Twickenham (Dr. Cable) pointed out yesterday, the Government undervalued QinetiQ to the tune of £300 million.
I will be helpful to the Government, because they have had such a stinker of a week, and demonstrate why there is no rush to sell. Despite the concern
expressed by the hon. Members for Great Grimsby and for Brent, East, this sale is a good deal for whichever commercial entity wins it. The House should note that these loans are not sub-prime mortgages. Graduates are likely to move directly into employment and begin repayment quickly. These loans are an attractive asset for banks, providing a continuous income over a long period from a low-risk group, collected securely through the tax system. They will also diversify the banks portfolios and give them direct contact with an important socio-economic group. The Government have a strong hand to play and we will watch to ensure that they play it well.
It is worth remembering that the first two sales of student loans failed to reach the estimated value. Valuations of £1.6 billion and £1.5 billion raised a combined total of just under £2.1 billion when sold. Does the Minister expect to lose as much as a third of the face value with this sale, as the Government have on previous occasions? Is that what he suggested in his opening remarks was good value for money?
According to the figure we have been given, the sale will involve £6 billion-worth of loans from the current £18 billion, but I am not clear whether that is the amount that the Government expect to receive into Treasury coffers or whether that figure is negotiable. I again remind the Government that these are public assets and Parliament expects full disclosure on how the sale will be handled and conducted. However, I am sure that we can deal with many of these questions in Committee rather than detain the House too long this afternoon.
We have also heard references to the expense of paying interest subsidies to the debt sale purchasers, particularly from the hon. Member for Great Grimsby. I accept that some form of subsidy will be inevitable to make the project commercially viable, but the expense of repayment should decline as the loans are repaid. Can the Minister inform the House what the impact of paying interest subsidies will be on the total revenue the Government will ultimately receive?
In a written answer to the hon. Member for Nottingham, South (Alan Simpson) of 3 May, the Minister informed us that between financial years 1998-99 and 2005-06 the interest subsidy came to a total of £561 million.
Mr. Boswell: My hon. Friend might like to reflect on the fact that the nature of the interest subsidy is contingent. It cannot necessarily be predicted in advance because the rate of inflation, which drives the student loan formula, and the commercial interest rates available may diverge over time and could have no direct relation to one another.
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