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Angela Watkinson: Are we to understand from what the Minister is saying about the collection of defaulted loans that there will never be any involvement by unregulated bailiff companies? There is a lot of anecdotal evidence at the moment about unprofessional and bad behaviour. If the collection of unpaid loans is not regulated, there could be unpleasant consequences for young people who are simply struggling to pay their bills.
Bill Rammell: There are clear procedures and guidelines in respect of the powers available to the Student Loans Company to follow up and search out debt that has not been repaid. Those restrictions will apply to the SLC, whether it is administering that debt on behalf of the public sector or the private sector.
The current drafting will also enable us to cater for any future overall change in the administration of the student loans system. Although no such change is envisaged, we must bear it in mind that the Bill will enable a long-term programme. I am happy to emphasise again for the record that it is the Governments firm intention for the SLC to continue in its current role for all loans. I hope that, with those reassurances, the hon. Member for Reading, East will feel able to withdraw his amendment.
Mr. Rob Wilson:
We have had a fairly brief, but good, debate. Some of the contributions, including that of the hon. Member for Nottingham, South (Alan Simpson), were extremely good. I listened carefully to what the Minister said in response to my amendments,
and I appreciate the patient way in which he has dealt with the many questions on the Bill from both sides of the House throughout this whole process. I am happy to accept his assurances on amendment No. 5. It appears that there will be sufficient parliamentary scrutiny, which was a key factor in my tabling that amendment. I am also happy to accept his assurances on amendments Nos. 6 and 8I hope that I have got those numbers right.
I do not feel, however, that the Minister has made a compelling case against our attempt to improve the Bill in other respects. On amendment No. 7, I am not reassured that, 10 or 20 years down the track, another agent or person acting on behalf of a loan purchaser will give sufficient reassurance to those who have taken out loans. His response on amendment No. 11 was also insufficiently robust. I listened carefully to what the Minister said about it and although his intentions may be nobleI do not doubt his integrity for a secondit is not only a matter of his viewpoint, as other Ministers will succeed him. As the hon. Member for Nottingham, South said, the ministerial merry-go-round does indeed go round and round, so where the Minister sits today may not be where he sits in a months or a years time. It is therefore important to have some guarantee built into the Bill.
The Minister also failed to reassure me about the Treasurys power in this respect. If £6.3 billion is bound up in the comprehensive spending review at a time when black clouds are gathering and the income from taxation may not be as high as the Chancellor hopes for, and given the increase in the power and influence of the Treasury in recent years, it may well push very hard to raise money through the sale of the loans. That may not offer the best value for money outcome for the country. I am not therefore going to press amendments Nos. 5, 6 or 8, but with your permission, Madam Deputy Speaker, I intend to divide the House on amendments Nos. 7 and 11.
Madam Deputy Speaker: Order. The only amendment before the House at the moment is amendment No. 5.
Mr. Wilson: I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: No. 11, page 2, line 13, at end insert
(8) In advance of entering into transfer arrangements the Secretary of State shall
(a) examine the prevailing market conditions and ensure that a competitive market for the loans has been generated;
(b) provide the market with full information about the loan book in order that the assets can be efficiently valued;
(c) ensure that there has been a genuine transfer of risk from the public accounts to the private sector; and
(d) assess the proceeds that look likely to be achieved in the transaction, using full and clear market information and a comparison with keeping the loans on the Government books, in terms of both likely income flows and levels of risk.
(9) The Secretary of State shall make a written statement on expenditure incurred in connection with each transfer arrangement.. [Mr. Rob Wilson.]
Question put, That the amendment be made:
John McDonnell: I beg to move amendment No. 4, page 3, line 22, leave out may and insert shall.
Madam Deputy Speaker: With this it will be convenient to discuss the following amendments:
No. 9, page 3, line 24, at end insert
(6A) Transfer arrangements shall.
No. 10, page 3, line 29, at end insert
(d) include provision to prohibit transfers to another person outside the jurisdiction of the Secretary of State;
(e) prohibit the making of further transfer arrangements under which rights in respect of student loans are transferred to multiple purchasers..
John McDonnell: Amendment No. 4 stands in my name, and I see that amendment No. 9 is virtually the same as itit would certainly have the same effect. I was not privileged to be a member of the Public Bill Committee, so [Interruption.]
Madam Deputy Speaker: Order. Would Members who are leaving the Chamber please do so as quickly and as quietly as they can?
John McDonnell: When I get to my feet I usually speed the rush out of the Chamber, so it was surprising that those hon. Members delayed.
I was not a member of the Public Bill Committee, so I come to this debate as a humble seeker of the truth. I want to focus on the issue of onward sales. During the debate we have received helpful assurances that provide some security, in particular for people who have taken out a student loan but also for the Government in respect of the long-term future of student loans. However, the issue of onward sales remains a matter of concern and does not yet offer us the security that is required.
I welcome any correction if I have got this wrong, but I understand that the process from here on in is that a financial adviser will be appointedI am not sure whether that has happened yet, but the last indication was that it would be Rothschilda special purpose vehicle will be established, the sale will take place and the Government will pocket a sum. The loans will be protected, as my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) has mentioned, by the contract on the loan itself and by the assurances given today by the Minister that the regime will be protected by, at least, a report to the House and the use of the negative procedure of the House. That still means that the Government will be able to vary things at a future dateI hope that such a variance will be beneficial when the rate applied at the moment is examinedand they still have the opportunity to go in a different direction. The argument is that this system will offer value for money via the terms of the sale and the contract that will then be issued by the purchaser.
Our anxieties are about onward sales. We live in a complex financial market and financial system, where we experience a range of what can only be described as exotic financial instruments. They are complex, and in being so, they are increasingly precarious. So, a difficulty over regulation has emerged, as a result of which market conditions have become exceptionally difficult. In some instances, it would be difficult to envisage a purchaser of the loans, given the current market instability.
I do not want to dwell too much on Northern Rock, but the Bank of England, the Financial Services Authority and the Government charter have all been unable to control Northern Rock and to ensure predictable certainty. That has thrown up a number of regulation issues that the Government have responded to by undertaking reviews that may lead to reform. In that uncertain climate, the Minister rightly made it clear on Second Reading and in Committee that there
was a perceived need for protection for all parties in the future. That protection certainly needs to be given to those who have taken out loans. For most people, a student loan will probably be one of the biggest loans that they will take out in their lives alongside their mortgage, their car loanand, if membership rates keep increasing, their loan for membership of the Labour party.
It is vital that we secure the future financial arrangements beyond the initial sale. The positive decision on the initial sale will be made by the Secretary of State. Amendment No. 4 would ensure that an onward sale would require the same level of ministerial consent. The amendment would mean that the Secretary of States consent shall rather than may be required. If it were accepted, the Bill would require that transfer arrangements shall, rather than may,
prohibit the making of further transfer arrangements without the Secretary of States consent.
In Committee, the Minister said in response to that suggestion that it was doubtful whether there would be a sell-on given the experience in the past decade of the first tranche of sales. I believe that the world has changed, and it is changing rapidly. New financial mechanisms are evolving almost daily to enable swifter sell-ons in a variety of forms.
The Minister also said that there was no need to require the Secretary of States consent because clause 3(6)(b) and (c) would provide satisfactory protection. However, it is uncertain whether those paragraphs would require the involvement of the Secretary of State. The Bill states:
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