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“I need to make one precise point clear at this stage. The Government will retain control of regulations, terms and conditions for all loans, and there will be no adverse change for borrowers, whether their loan is sold or retained.”—[ Official Report, 22 November 2007; Vol. 467, c. 1391.]
I entirely accept his assurance about the Government’s intentions—I am sure that they are entirely honourable—but this is not necessarily about the current Minister or the current Secretary of State; it is about how Ministers may use or interpret those powers in future.
Angela Watkinson (Upminster) (Con): My hon. Friend will understand that when students who already have loans hear about the sale of the loan book they will start to worry about the possible changes in terms and conditions of repayment. It is important that during the course of the debate we are able to secure agreement so that we can reassure not only students with existing loans but those about to take out loans.
Mr. Wilson: My hon. Friend makes a valid point. I hope that in the course of the debate we will get the reassurances that she seeks.
Clause 1 is ambiguous in that respect and needs to be tightened. It empowers Ministers to prevent loan purchasers from changing the terms of repayment, but that is not the same as offering an explicit safeguard against differential terms of repayment. The Minister has repeatedly stated that the Bill will have no material impact on graduates, but that proposition currently rests on the good will of the Government—the “trust us” message that I mentioned. Some would say that that is a pretty precarious safeguard these days. The protections that the Minister has cited are insufficient. There is nothing in the Bill to prevent different arrangements for loan repayments as long as those are made with a Secretary of State’s consent. Although the measure enables the Secretary of State to protect student borrowers once loans are sold, a flaw remains—its reliance on optional rather than concrete safeguards. Our amendment would strengthen the Bill by ensuring that the Government’s stated intentions are followed without any ambiguity.
It would be inappropriate to try to bind the hands of the Minister’s successors in perpetuity, but we in this House have a duty to protect the interests of students and graduates. The amendment tries to strike the difficult balance between limiting risk for graduates and students and maintaining the commercial attractiveness of the loans to a purchaser.
In Committee, the hon. Member for Wolverhampton, South-West (Rob Marris) sought more information and asked significant questions about this matter. His
constituency has a large number of students, many of whom are disadvantaged and therefore take out large loans. As an assiduous Member, he seeks to protect those students. If the Minister has time before he comes to the Dispatch Box, he may wish to reread the hon. Gentleman’s remarks in column 47 of the record of the Committee proceedings.
The hon. Gentleman was rightly concerned that paragraph 16 of the explanatory notes says:
“For example, the Government does not intend to grant purchasers the right to alter the repayment terms of sold debts.”
The key words are “does not intend”. It reminds me of the saying, “The road to hell is paved with good intentions.” Merely intending to good without actually doing it has no value, so what is said in the explanatory notes is not a guarantee; it gives students and graduates no reassurance about what may or may not happen in future.
The Minister agrees with us that the purchaser should not be able to alter repayment terms of sold debts, so I am sure that he will accept this very mild and minor amendment. If he does not, perhaps he can explain to the House why he does not want to do so—unless my eloquence has already changed his mind. We can then decide whether we wish to press it further.
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Amendment No. 6 deals with a matter that has been discussed in Committee, but not in great depth, and Conservative Members have not been reassured by the Minister’s comments. It is still possible that a body buying part of the student loan book will in time sell it on and that, as a result of that process, the loan will end up in an organisation that is underwritten by Government. The amendment would therefore be an important safeguard.
The main justification that we have heard for the use of ministerial veto over onward sale is to safeguard the interests of students. We can therefore deduce that Ministers would use their powers of veto to protect interest rates or repayment terms. However, alongside students’ interests we must consider the public interest more broadly. The Minister has said that one of the aims of the Bill is to transfer risk to the private sector from the public sector. At present, however, there is nothing in the Bill to prevent loans from ending up, through a process of resale, being underwritten by the public purse. In Committee, the Minister said that the Bill provides tools for the Secretary of State to prevent that, but that is not good enough.
The Bill offers wide-ranging powers to Ministers but has very few checks or balances. As it stands, these assets could be resold to a Northern Rock-style company or an equivalent organisation—the Minister did not deny that in Committee. We must remember that we are talking about public assets worth about £18 billion, and growing. The Government want a portion of the loan book to be transferred to private hands, and our amendment would assist that process. Let me be absolutely clear: transfer arrangements should not be made with an organisation underwritten by the Government. Can the Minister tell the House how he plans to make a cast-iron case that that should not and cannot happen?
Amendments Nos. 7 and 8 relate to the collection of debt. We are anxious to ensure that only the Student Loans Company is authorised to collect debt. The Bill says that “another agent” or
“a person acting on behalf of a loan purchaser”
should be allowed to collect debt, but the amendments would replace those with the Student Loans Company. That is because, as debt is sold and resold, there is a risk that the propriety and suitability of the debt collector may become a matter of concern. The current provision will certainly cause a great deal of anxiety on the part of debtors who are accustomed to debt being collected by the Student Loans Company or by commissioners for Her Majesty’s Revenue and Customs. Our amendments would eliminate those concerns.
Amendment No. 11 is the most controversial in this set of amendments. It is fair to say that Conservative Members have not been sufficiently reassured, either on Second Reading or in Committee, that the taxpayer will get the best possible outcome from the sale of the student loan book. The Bill empowers Ministers to sell off a very valuable public asset—currently worth around £18 billion and due to grow significantly in value over the next few years to as much as £25 billion—but it contains no provisions to ensure that the Government have a duty to get value for money.
Concerns about value for money are widespread and have been voiced by Members in all parts of the House, with the hon. Members for Stoke-on-Trent, South (Mr. Flello) and for Wolverhampton, South-West making telling contributions in Committee. However, we do not wish to tie Ministers’ hands too tightly, as we are well aware that we may inherit the legislation and we understand its importance to future public finances. When we are in government, we may well need to deal with such issues.
Our amendment sets boundaries within which the Minister should operate. They are designed to ensure, first, that a competitive market is generated, thus achieving the best value; secondly, that the market has full and up-to-date information about the loan book for efficient evaluation; thirdly, that there is a genuine transfer of risk away from the public sector to the private sector; fourthly, that the Secretary of State will assess the market value likely to be achieved against keeping the loans on Government books; and finally, that the Secretary of State will keep the House informed of the costs incurred in selling each tranche of the loans to the private sector.
It would be difficult for the public to understand why the Minister would oppose any of those boundaries. Indeed, throughout the various stages of the Bill he has, at one time or another, accepted those points as valid. They are the same value-for-money criteria that were described to the Committee by the director of student finance and strategy, Michael Hipkins. However, such provisions were not included in the Bill. The legislation empowers Ministers to sell off a student loan book currently worth £18 billion, but it provides no clear mechanisms for holding Ministers to account for their actions. We would not be doing our job as legislators if we allowed it to pass with such a huge omission.
How do we ensure that the Government stay focused on getting the best value for the taxpayer, now and in the future? The economic storm clouds have been
gathering. The markets are likely to be volatile for at least the next two years and financial institutions are therefore likely to take a very cautious approach. But we also know, as the Minister admitted in Committee, that the Government have £6.3 billion already written into the comprehensive spending review. That money is already allocated to be spent before anyone has signed on the dotted line—nobody has signed a contract. We have a duty to ensure that negotiations, as and when they take place, meet the Minister’s high expectations.
In future, how will a Minister or Secretary of State withstand the Treasury juggernaut as it seeks to force a future sale of student loans to raise a fast buck? Is anyone in this House convinced that any Minister will be able to resist? How can we ensure that true value for money is achieved? In light of difficulties over Northern Rock, general volatility in the credit markets and pressure on public spending, we feel it necessary to set out some safeguard that will protect a Minister from Treasury pressure. It is a sensible precaution and one that the Treasury will not like, of course, but it is certainly in the best interest of this country.
Our amendment would add to the Bill a clear, value-for-money framework to which Ministers must adhere. Do not take my word for it—the basis for the wording is the Minister’s own, taken from Second Reading. I do not intend to read all of his comments out. If our amendment were accepted, the Secretary of State would have to examine the prevailing market conditions and present full information about the loan book to ensure a correct valuation.
The Secretary of State would also have to ensure that there was a genuine transfer of risk to the private sector. That is an extremely important point, the significance of which has grown in recent weeks as the Northern Rock saga has unfolded. The hon. Member for Twickenham (Dr. Cable) encapsulated the point when he described the Government’s dithering as the “nationalisation of risks and losses, combined with the privatisation of gains.”
Stephen Williams (Bristol, West) (LD): Excellent.
Mr. Wilson: Indeed, it was excellent.
However, based on what the Minister said in the evidence session, such a transfer will not take place. He may remember that I asked him how student loans would be selected for sale, and he replied,
“we want to engage initially with loans where we can demonstrate a good track record of graduates repaying”. ——[Official Report, Sale of Student Loans Public Bill Committee, 4 December 2007; c. 31, Q87.]
In other words, the purchaser will not be taking on a great deal of risk because the best loans will be cherry-picked for them. There will be no random selection, just the crème de la crème of the loans. As the Minister said, only those loans with a demonstrable track record will be sold.
The Minister for Lifelong Learning, Further and Higher Education (Bill Rammell):
Will the hon. Gentleman be very careful in quoting from Hansard and then inserting his own view? The way he read his description of my comments did not make the distinction clear at all. I made it perfectly clear in the evidence session that
individual student loan accounts would not be cherry-picked. There would be a tranche of student loans, with a good track record, evidenceable and demonstrable, of repayment across the board. It is not a matter of individual case by individual case.
Mr. Wilson: I will come to that, because I have reread the exchanges involving the Minister and Mr. Hipkins in Committee on several occasions, and I have two points that I think will answer his questions. First, the position of the Government seemed to alter through the exchange, and secondly, any loan that is high risk will not be put up for sale. That came across clearly during that exchange.
If the most reliable debts are sold off while the more precarious ones remain in public hands, is there really a transfer of risk at all? As with Northern Rock, the Government seem prepared for risk to be nationalised while gain is privatised. That is why it is important to include an assessment of the risks against the income flows in the Bill. It is vital that provisions that hold Ministers now and in the future to account are included in the Bill.
Finally, we are asking that the Secretary of State should also make a written statement to the House on the expenditure incurred in connection with each transfer arrangement. I understand that subsidies will not be paid to loan purchasers this time, so the overall cost of the sale may be comparatively small next to the £6.3 billion income. However, the Bill empowers the Secretary of State to incur expenditure in connection with any sale. It is only fair and reasonable for Ministers to report back to the House regularly on the expenditure incurred by the Government.
The amendments are not wrecking amendments. They are clear safeguards for graduates and taxpayers. There is enormous concern throughout the House about how we achieve value for money through the Bill. I hope that the Minister will agree that the only way to ensure that there is no ambiguity is to include provisions in the Bill. All we are doing is urging the Minister to accept what he has already approved in practice. Our amendments clarify weaknesses in what is otherwise a worthy Bill.
Stephen Williams: Several changes have occurred in my party in the past few weeks, for reasons that are obvious to everybody. I therefore took no part in the Second Reading debate or in what I am sure were exciting and incisive contributions from the Minister for Lifelong Learning, Further and Higher Education and the Conservative spokesman in Committee. I have only had sight of the amendments today, so if I make any points that have been answered in previous discussions, I apologise.
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Amendment No. 5 would provide that purchasers have no right to alter the repayment terms of any debts that are sold. That is a worthwhile condition to include in the Bill. Protection should obviously be in place for graduates for all their repayment terms—the threshold at which they begin, the rate at which they pay and the period over which they make the repayments. Only
hon. Members, through the democratic process, should alter those conditions in future. We are therefore happy to support the amendment.
Amendment No. 6 refers to transfer arrangements, and would provide that they are not made to an organisation underwritten by the Government. When I read the bald phrasing of the amendment, I wondered to what the hon. Member for Reading, East (Mr. Wilson) was alluding—the Export Credits Guarantee Department or another organisation that the Government might underwrite. It was in fact an attempt to inject a further discussion about Northern Rock into parliamentary proceedings. Of course, the leader of the Conservative party has for several weeks been trying to steal my deputy leader’s thunder on that during Prime Minister’s Question Time. Leaving that aside, the amendment is logical. If we are considering a genuine sale of the loan book, there should also be genuine transfer of risk. There should be no danger of the risk becoming circular and travelling back to the Government and the taxpayer if the loan book were purchased by an organisation that had, now or in future, a direct connection to the Treasury or another part of Government.
Amendment No. 11, which, like two others in the group, would amend clause 1, would provide that the Secretary of State must ensure that he has examined the prevailing market conditions and that competitive conditions have been generated for the sale of the debt. That seems common sense. I am prepared to accuse the Government of many things, but I am sure that they would not wilfully sell off £6 billion of debt—if that is the true figure—at a substantial discount that would cause them to be examined by the National Audit Office and the new Comptroller and Auditor General, whom we discussed earlier.
The amendment would also provide that full information would be placed in the market. Again, I doubt that anyone would buy a chunk of Government debt if full information were not put in the marketplace. I should like an assurance from the Minister that normal due diligence procedures will apply and that full information will be provided to anyone who contemplates buying up to £6 billion of a current Government asset. Of course, there should be genuine transfer of risk. Finally, we obviously support the test of whether selling off the loan book, compared with keeping it in the state-controlled Student Loans Company, constitutes genuine value for money for the taxpayer.
Like me, the hon. Member for Reading, East got interested in politics in the 1980s—I believe that we were in the same party at that point.
Stephen Williams: We have been in the same party at one point.
Stephen Williams: We were both members of the Social Democratic party once.
Stephen Williams: I stand corrected.
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