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22 Nov 2007 : Column 1416

Obviously, the Bill involves a much bigger transaction than the £561 million to which I was referring, and the amount of interest subsidy paid will increase at least proportionately, which involves some risk, as my hon. Friend suggests. Taking into account the face value of the sale and the subsequent interest subsidy payments, what proportion of the £6 billion will the Government ultimately keep? What proportion of it has been accounted for in the comprehensive spending review?

Can the Minister tell the House which loans will be selected for sale? Will the selection be random or systematic, according to a formula such as whether the loans are high or low risk? What is the total number of loans to be included in the package to bring the value up to £6 billion?

Many Members referred to trust in their contributions. Recent events have further undermined the Government’s reputation for competence—throughout Government, not just in the education sector. Several Members asked about data protection, about which the public have some doubts, so what assurances can the Minister and the Government give graduates that their personal details, including bank account information, will not be lost, leaked or liquidated accidentally? The public will not have been completely reassured by the Minister’s opening remarks. Can the House be assured that such information will always be encrypted and not moved around on CD-ROMs?

Can the public trust the Government to spend the proceeds of the sale wisely? There have been countless examples across Government, including in education, of profligate and wasteful spending. Indeed, some people might even say that unnecessarily splitting a Department and renaming the remnants constitutes just such waste. If that were not enough, there are many other examples of waste, as recent reports have shown; Lancaster university has already warned us about the frivolous way in which the Government splash the cash. A commitment from the Government to reinvest the revenue raised from the sale would be extremely welcome. In a powerful intervention, the hon. Member for Harrogate and Knaresborough (Mr. Willis) said that he wanted some of the money spent on higher education—as did some other contributors.

I, too, hope that at least some of the money can be spent on our higher education sector, which is, as the Minister knows, vital to the UK economy and should be given every reasonable support. However, the money resolution makes it clear that all the revenue will disappear into the Consolidated Fund. Can the Minister tell the House how much of it will go to higher education? A small part could be used to reinvest in institutions that will be devastated by the impact of recent cuts. Over the summer, the Government sneaked out a £100 million cut in funding to institutions dedicated to part-time and mature students. Help to institutions such as the Open university and Birkbeck college, both of which provide a valuable service to the UK economy, would be extremely welcome.

I am sure that, as my hon. Friend the Member for South Holland and The Deepings suggested, the House would be interested to know whether the Minister has been in discussion with interested commercial bodies already. Will it be possible in due course for the Minister to name the interested parties? If he feels that
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doing so would undermine negotiations, could he perhaps disclose the number of interested parties with whom he has already had preliminary discussions? If he genuinely fears undermining the negotiations, I shall not push that matter, as it is vital that the Government are not hampered in their efforts to obtain maximum value for money when the assets are sold.

It is important to respond to the powerful contribution from my hon. Friend the Member for Daventry (Mr. Boswell), who has enormous experience of these matters. In particular, he raised the issue of selling on loans, as did my hon. Friend the Member for Windsor (Adam Afriyie), and the Minister needs to offer considerable reassurance on that issue. My hon. Friend the Member for Windsor is right: it is possible that the Government could end up guaranteeing the very loan that they have just sold off.

Having sounded several notes of caution and having asked the Minister a number of specific questions, I shall close my speech by saying that the Opposition are, in general, satisfied that the Bill will provide the necessary safeguards to attract commercial buyers. The sale is evidence that closer co-operation between the public and private sectors provides the most effective way to manage the growing student debt portfolio. The revenue that the Bill will raise, and should continue to raise, is welcome. Despite reservations about selling on loans, information security and how the Government will spend the money, we believe that the proposals in the Bill are sensible, and we will therefore not hinder its progress on Second Reading.

4.31 pm

Bill Rammell: We have had a good, constructive—

Mr. Deputy Speaker: Order. The Minister needs the leave of the House.

Bill Rammell: I apologise. With the leave of the House, I seek permission to respond to the debate. Thank you, Mr. Deputy Speaker.

We have had a good, constructive and, in many ways, consensual debate. The hon. Member for South Holland and The Deepings (Mr. Hayes) set out his dedication, which I accept, and that of the Conservative party, to widening access to education, particularly higher education. Genuine commitment to widening participation requires consistency in decision making. I charitably remind him of the Conservative party’s flip-flopping on student fees. When tuition fees were first introduced in 1998, the Conservatives advocated full top-up fees, with no protection. By the time we took the legislation through the House before the last general election, the Conservatives were opposed to variable fees. Now, they are in favour of the Government’s position. Indeed, they now tell us that they want the review on the cap to be brought forward, which would be irresponsible. Some Conservative Members, such as the right hon. Member for Wokingham (Mr. Redwood), advocate the lifting of the cap before we have the evidence. The Conservative party is somewhat lacking in credibility on this issue.

Mr. Boswell: I do not intend to challenge everything that the Minister is perhaps about to say, but it is important that Ministers start to collate the evidence
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on the review of the cap and to take a preliminary view—they should not leave that until the last moment, when they might take a snapshot, which would not be wholly representative of the profile of the situation. Further—I end on this point—they should also have regard to the long-term, whole-of-life implications for students whose other commitments grow as their careers mature.

Bill Rammell: I accept that last point, and given that the hon. Gentleman previously did my current ministerial job, I know that he is very knowledgeable on such matters. I certainly agree that it is critical that we have as much information as possible about how the new system is working before the independent commission in 2009. That is why the shadow Secretary of State for Innovation, Universities and Skills is neither right nor justified in calling for that commission to be introduced before we have the full, substantive body of evidence before us.

The hon. Member for South Holland and The Deepings chided me, saying that we were picking up Tory policies. We legislated on the sale of mortgage-style student loans in 1998—well before the commitment that the Opposition gave in their last general election manifesto. We believe that this is the right thing to do. It sensibly transfers risk from the public sector to the private sector and ensures that students and graduates are not affected in any way, shape or form.

The hon. Member for Harrogate and Knaresborough (Mr. Willis), who chairs the Innovation, Universities and Skills Committee, made an interesting contribution. He argued that the proceeds from the sale of student debt should be hypothecated to my Department. I will come back to that point later, but I have to say that the money will be paid into the Consolidated Fund and will support all Government expenditure. That is in line with the principle by which loans are repaid at the moment, and it would not be in anyone’s interest to breach the principle.

Mr. Hayes: The hon. Gentleman speaks with integrity on these matters and I hear what he says about the money being paid into the Consolidated Fund. Members on both sides of the Chamber have expressed doubt about the timing of the sale. This would not be a great time to sell, as I am sure he realises. Given the Government’s financial problems, I suspect that the matter may be decided well above his pay grade. We do not want a sale to go ahead that is not in the interests of the public, universities or students.

Bill Rammell: The hon. Gentleman referred to the extra-sensory powers of the hon. Member for Daventry, who anticipated the next point that he was going to make. The hon. Member for South Holland and The Deepings is similarly endowed with those powers, because he has just made the very point that I was coming to.

We will not rush the sales imprudently. Clearly, it is not possible accurately to predict market conditions at a given point in the future because they will, naturally, vary for different sales. The powers in the Bill are intended to establish a long-term ongoing programme of sales. We will monitor the market with a view to launching sales at times when market conditions are more stable and less volatile, to help ensure the best
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possible value for money for the taxpayer. The Bill gives us the ability to sell. All that we have set out so far in the comprehensive spending review is our intention, over the coming three years, to sell £6 billion of student loans. If market conditions are not adequate or appropriate, and do not ensure value for money, sales will not go ahead. I can give that categorical commitment.

We heard welcome comments about establishing a cross-party consensus, if we can, so that everything possible is done to ensure confidence in the safety of personal data. I refer back to what I said in my opening contribution. My right hon. Friend the Chancellor made his statement this week. Lord Triesman, the Minister with responsibility for intellectual property and quality, has asked the Student Loans Company to review its operations and data management processes. No breaches of data protection protocols have occurred in respect of student loan administration and we are certain that no data have gone missing in respect of student loan administration. However, Her Majesty’s Revenue and Customs has initiated a wide-ranging review of its security processes and procedures, and we are undertaking a review of student loans and all Departments are reviewing their data management processes. If the hon. Gentleman wants to make further suggestions in Committee, I will be happy to consider them.

Mr. Hayes: I am grateful for the tone of the Minister’s remarks. It seems that this is a dynamic situation. Fraudsters are becoming ever more sophisticated and it might be necessary to look at the matter more closely in Committee, given the events of the last few days. I am happy to accept his suggestion that we could do that on a bipartisan basis, but it might involve taking further advice and making amendments to the Bill to build in extra security—purely because it is important that we reassure the public, students and potential students.

Bill Rammell: It is important that I again make it clear that we have not identified a problem. No breaches of protocol have taken place and no student loans administration data have gone missing. Nevertheless, if the hon. Gentleman has proposals, I am happy to consider them.

The hon. Gentleman made a point about ensuring that a fair allocation of the Bill’s proceeds goes to my Department. That is a decision for the Treasury, and I will not reveal discussions that take place between my Secretary of State, colleagues in the Treasury, the Chancellor and me. I ask the hon. Gentleman to judge us by what we have done in the past. During the Conservatives’ last eight years in power, there was a 36 per cent. real-terms cut in per-student funding rate for higher education. Under this Government, there has been a 23 per cent. real-terms increase in the higher education budget. Across the country, virtually every vice-chancellor I speak to acknowledges that universities are undergoing a big expansion in their finances; that is in stark contrast to what they experienced before 1 May 1997.

The hon. Gentleman also asked me about growth projections for the student loan book. We expect that the income-contingent loan book will grow to about £21 billion by April 2008, and about £25 billion by April 2009. Clearly, the sales anticipated over the comprehensive spending review period are not for the whole loan book; we are talking about a long-term
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programme. I reiterate that if market conditions are not appropriate and we cannot guarantee value for money, sales will not go ahead.

Mr. Boswell: Is it not also self-evident that the value obtained for a particular tranche of loans is a function of the size of that tranche? It may be quite easy—and sensible—to get small amounts away, and to leave some of the bigger bulk for later. In other words, it is not just a matter of initiating the programme. The Minister and the Government should not be in too much of a hurry to try to sell the bulk.

Bill Rammell: Let me again make it clear that we will act prudently and responsibly in undertaking the sales. The hon. Member for South Holland and The Deepings asked who was likely to purchase the loans. We believe, based on the advice that we have received, that a wide range of investors will be interested in buying bonds based on the loans, because they are a new asset class that will diversify investors’ portfolios and meet specific investor needs, for which there is a market. Those investors are likely to include pension funds, banks, insurance companies and fund managers; they will buy different loans according to their risk appetite.

The hon. Members for South Holland and The Deepings, and for Brecon and Radnorshire (Mr. Williams), asked about the implications for Wales and the Welsh Assembly. As the hon. Member for Brecon and Radnorshire knows, student support policy and ownership of the Welsh student loan book was devolved in 2006. As responsibility for student loans in Wales has been devolved to Welsh Ministers, it is important that the provision applies equally to Wales. Any decision on the future sales of the Welsh loan book must be made in Wales by Welsh Ministers. Clause 8 gives Welsh Ministers the power to make those decisions. Welsh Ministers are keen to ensure that the powers are in place, so that they can ensure that maximum value for money is achieved for Welsh student loans. The Bill will enable Welsh Ministers to decide when it is appropriate to use the powers, bearing in mind the relevant economic and value-for-money considerations.

The hon. Member for South Holland and The Deepings also asked whether I could give an indication of protected proceeds—that is, of the price that we will achieve. It would not be right to talk about the level of proceeds ahead of a rate. There will be a competitive process to maximise value for money for the taxpayer.

My hon. Friend the Member for Great Grimsby (Mr. Mitchell), who is no longer in the Chamber, made a number of points. He talked about £18 billion-worth of sales; our only commitment at this stage is to seek £6.3 billion over the coming three-year period.

The hon. Member for Brent, East (Sarah Teather), who leads for the Liberal Democrats, asked me to write into the Bill our future intentions with respect to fees and student finance. That would not be the right thing to do. We should stick to our policy of having an independent commission in 2009 and not prejudging it. That is the position of the Government, not of the Opposition. The right hon. Member for Wokingham has said that we should lift the cap now, and a Liberal Democrat think-tank says the same. We need to be responsible and stick to our policy.

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The hon. Lady asked about the implications for the Student Loans Company. Let me be clear. Following a sale, the Government plan to include provision within the contract that the SLC will continue to carry out the administration and enforcement of the loans that have been sold, and will continue to have all direct day-to-day contact with borrowers. That should give significant reassurance.

The hon. Member for Daventry (Mr. Boswell) made an important contribution, based on his previous experience. We will not sell at any price. He made some important comments about students who travel overseas or students from elsewhere in the European Union. We need to be clear that loans to EU citizens for tuition fees started only in 2006-07. The first graduates will begin repayment from 2010. For that reason, those loans will not be part of the early sales of the loan portfolio.

We are putting in place with the Student Loan Company a comprehensive system for collecting loans. The principle of income-contingent loans means that we will collect repayments according to purchasing power in the country where the borrower is resident. That is important. No one will be able to avoid repaying because a good local salary does not meet our £15,000 threshold simply as a result of the currency rates. We will ensure that enforcement across the EU will be possible under EU law by taking action in the UK courts—from memory, I think EC directive 1441 deals with that.

The hon. Member for Reading, East (Mr. Wilson) wound up for the Opposition. I welcome him formally on his first appearance at the Dispatch Box. He asked me about paying interest subsidies to the purchaser. That is not how we expect the sale to work. There will not be an ongoing subsidy to purchasers; all that will be taken into account in the sale price.

The hon. Gentleman commented on second degrees. Let me state for the record that we are not cutting funding to universities. We are saying—rightly, in my view— that £100 million over three years ought to be transferred from institutions spending that money on people who already have an undergraduate qualification to those, especially in the workplace, who do not have a first degree. There will be protection and transition. No university will lose out in cash terms at the end of that period. That is the right priority. Some 70 per cent. of the adult work force do not have a first degree qualification. That is a higher priority than people who already have their first degree.

In conclusion, the Bill is important. We have had a sensible and measured debate and I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.


Motion made, and Question put forthwith, pursuant to Standing Order No. 83A(7) (Programme motions),

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