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5.18 pm
Bill Rammell: I beg to move, That the Bill be now read the Third time.
We have had a thoughtful debate today, as we did in Committee. I thank the members of that Committee for the constructive way in which they contributed at that stage. The Bill has enjoyed a good measure of consensus about its basic principles, with wide agreement that it is right for the Government to consider how the growing student loan book is managed so as to ensure good value for money and sound management of public finances.
It is accepted across the House that a sales programme for student loans is appropriate, provided that it yields good value for money and that the position of borrowers is not affected. Those two issues are the Government’s policy objectives in proposing that we embark on a sales programme. During the course of the debate, hon. Members rightly sought to satisfy themselves that the Bill allows us to ensure that the proposed sales will meet those specific objectives. We have taken the view that the small number of amendments proposed should not be accepted, but we acknowledge that the intention behind them has been to ensure that the aims that we have set out for the programme of sales come to fruition.
I shall now reiterate the key commitments that I emphasised when we embarked on our consideration of the Bill in November. The terms and conditions for all loans will, as now, be governed by regulations scrutinised by this House. I confirm that there will be no adverse change for borrowers, whether their loans are sold or retained, and I hope that that gives some further reassurance to my hon. Friends the Members for Hayes and Harlington (John McDonnell) and for Nottingham, South (Alan Simpson).
The borrowers’ experience will not change and the collection and administration systems will be the same, whether or not a loan has been sold. The Bill contains the provisions that we need to ensure that the enduring protection for borrowers is secured. All transactions will be subject to a rigorous assessment that good value for money is being achieved—a matter that has been the subject of much discussion, both in Committee and in today’s debate.
Some hon. Members have asked whether material for testing value for money should be included in, or appended to, the Bill. As I have said, I do not believe that that can be done: it would be irresponsible to put in the public domain in advance of a transaction any details of the Government’s assessment of what price would constitute good value for money, as that would undermine the competitive process. In any event, such an assessment would be different for each sale in what is a long-term programme, as the characteristics of each portfolio to be sold are unlikely to be identical.
What principles govern the value-for-money assessment, and what issues will be considered? I explained the Government’s approach on Second Reading, and I am happy to do so again today.
Part of the value-for-money assessment will involve the gathering of full and clear market information, and weighing the value of keeping the loans in the public sector on the balance sheet of the Department for Innovation, Universities and Skills. That process will
help us to compare bids for selling the loans against the value of holding them. Assessing those values will require various estimates of the level of repayments to be made by borrowers, stretching far into the future.
In addition, we will estimate the rate at which graduates will repay their loans, and the number of loans that will have to be written off because, for example, the people who have taken them out have become permanently disabled. Those projections will have to be based on assumptions and estimates, so it is clear that they have a built-in degree of risk. In assessing value for money, we will also have to take into account the value of transferring that risk from the public sector to the person who buys the loan. That is not something that lends itself to precise quantification, so the assessment will have to consider a range of values based on differing assumptions and estimates of risk.
That is only one part of the value-for-money assessment. The other elements include ensuring that a sale is competitive, that it takes place under normal market conditions, that potential bidders have enough information to make informed bids, and that there is a genuine transfer of risk from Government to purchasers.
We are making a clear commitment that sales will take place only where good value for money can be assured. It will be for the Government of the day to make a judgment about value for money for each proposed transaction. Some elements involved in that judgment may alter over time, for example as market conditions change and as the experience from earlier sales is built on. As I have said repeatedly, the judgments will be open to parliamentary scrutiny in the usual way. The Government will report to the House after each sale transaction, and no doubt the National Audit Office will report to the Public Accounts Committee on the programme of sales as a whole.
The debate on the Bill has been a constructive but rather technical discussion of how we can ensure that the programme of sales can proceed. It has also dealt with how we can fulfil our commitment that borrowers will notice no effect. I hope that I have been able to explain more fully how the Bill will achieve the Government’s widely accepted policy objectives. No one should doubt our commitment to working in a thorough way to ensure that the sales programme is a success for borrowers, the Government and the taxpayer alike.
5.24 pm
Mr. Hayes: The Minister described this as a technical Bill and it is certainly complicated. That is not to say, however, that its provisions are not significant to a very large number of people and that they do not have political ramifications. The Bill is in line with Conservative intentions to move the student loan book to the private sector, but those intentions are not without qualification. Throughout—both during the Bill’s consideration and earlier—we have made it clear that the transfer from the public sector to the private sector cannot be made unless proper safeguards are in place to protect both the public interest and borrowers.
I have no doubt—this point has been made previously, but it warrants reamplification—about the Minister’s intention or integrity. However, when we pass legislation in the House, it is vital that we detach
that legislation from the characteristics or strengths of any particular Minister, because we do not know who the Minister might be in a year or two. Of course, in the happy eventuality of our winning the next election and my becoming the Minister, these matters will be in even more secure hands than they are now. However, we cannot rely on that happy eventuality, which is precisely why thus far and, I hope, in the other place, there has been and will be a determination to ensure that those safeguards are in place.
That brings me to the three or four central points that I want to make on Third Reading. The first is to reprise the argument about value for money. When giving oral evidence in Committee, the Minister said:
“Clearly, the Bill gives us enabling powers to undertake value-for-money assessments over a long period of time...we have said within the forthcoming three-year comprehensive spending review that we are looking to make sales to the tune of £6.3 billion. Having said that, if we do not judge that the market conditions are appropriate for those sales and we do not think that we will get value for money, those sales will not go ahead.” ——[Official Report, Sale of Student Loans Public Bill Committee, 4 December 2007; c. 3, Q1.]
This seems to contain a paradox, possibly even a dilemma. The circumstance could arise in which the Treasury says, “Where is our £6.3 billion?”, but the market conditions and prevailing circumstances are not ideal for a sale. When the provision is set out for a three-year period, it is a bit rich to argue that if the circumstances are not right, one will ignore that and delay the implementation of the Bill to an indefinite future date. I cannot really believe that the Minister thinks that is likely. Just to be sure, Opposition Members have tabled amendments to make it clear for his benefit—he should see this not as a harpoon but as a lifeline—what the value-for-money criteria are and to place them securely in the Bill.
The Minister will argue, and no doubt has argued, that such a provision would be too inflexible and that it is dangerous to write into a Bill things that are, by their very nature, dynamic—in which case, why did he not come before the House and offer an alternative? He could have appended the value-for-money criteria to the Bill or guaranteed to provide it in guidance. He could have suggested that it would at least be made public. We hear that there is a value-for-money framework, which must include criteria, because the Minister has said so repeatedly on Second Reading, in Committee and again today. However, no one is allowed to see it. If there is such a framework, the debtors, the public and certainly the House have a right to know what it is, and it should be securely attached to the Bill in some form or another.
That brings me to my second point. We need to know something about the value of the loan book. My hon. Friend the Member for Reading, East (Mr. Wilson), in a remarkably eloquent speech, spoke about an assessment of the value—it is a changing value—of the loan book measured against the Government’s determination to make £6.3 billion. Without, I hope, being impertinent, I suggest that the target of £6.3 billion might be achieved regardless of the true value of the loan book unless we are absolutely secure about the systematic criteria for the sale.
At the end of the financial year 2006-07, the student loan book was valued at about £8.1 billion. Perhaps the Minister will at some stage tell us of any subsequent
valuations that are made, and say what the projected valuation of the loan book is for the next two or three years. Those figures should be readily available to the Department, because it can project based on information that is in the Government’s hands. From that, we could draw conclusions about what portion of the book would need to be sold to achieve the £6.3 billion target.
We should consider the question of what parts of the book would be sold first. The Minister said that some parts of the loan book were more attractive than others. That is a perfectly plausible argument. He says that where there is an established record of repayment there is more security, in the eyes of a prospective purchaser. He further argues that the situation changes over time, because as people become established repayers, they become a better risk—a surer bet. My question to the Minister is: does that mean that the less attractive parts of the loan book are the bits that will stay with the Government? If we unload the most attractive, valuable bits first, are we not left, at the end, with the least attractive, least valuable bits? That does not seem to shift risk from the public to the private sector; it seems to shift benefit to the private sector, and retain risk in the public sector. We need to be absolutely sure how the book will be split up, how judgments will be made on what is sold and when, and what proportion of the book the Minister anticipates is likely to be sold over the next three years.
There was considerable discussion of the issue of resale, both today and previously. Members on both sides of the House expressed concerns about the possibility of debt being collateralised, broken into parts and sold to the highest bidder. The Minister assures me, and the House, that he thinks that that is unlikely, but the provisions of the Bill explicitly make it possible. Once again, he is on the horns of a dilemma: he dare not build in protection against resale, because that would make the product less attractive but, as a matter of public interest, he has to assure Members of the House that if debt were resold to an agency or body outside the Secretary of State’s jurisdiction, or about whom we had the most severe reservations, there would not be a risk to borrowers or the wider public. That is a difficult circle to square, and I am not sure that the Minister did it convincingly today. There must be adequate protection, both for borrowers and from the point of view of the public interest. That is why we tabled amendments to attempt to ensure that resale was dealt with sufficiently, and in the most appropriate way.
In a similar vein, the collection of debt has been considered, although we did not debate the issue at length on Report. I think it is unacceptable to lose control over who collects the debt. The Bill suggests that an agent appointed by a purchaser could have control of debt collection. We need to be stricter in how we deal with the issue of debt collection. I think that the other place might take that view, too, but it is not for me to anticipate its standpoint. If there is one thing that will cause alarm and anxiety among current debtors and potential future borrowers, it is the idea that their debt might be collected by an inappropriate agency, so I am a little disappointed that the Government did not make further concessions on the issue of debt collection. I suspect that that is because, once again, it might make the sale unattractive to a potential purchaser, but when it comes to debt collection—a sensitive matter—we
need to be sure who will be involved in the process. The Student Loans Company seems the most appropriate body to deal with these matters. Surely it could be written into the Bill.
When challenged on those matters during the witness session of the Public Bill Committee, Michael Hipkins, the Minister’s adviser, who was a witness to the Committee, said:
“The point in terms of legislating for the long term is that the Student Loans Company might not exist in the long term, so there needs to be flexibility in the Bill to specify collection by whomever the Secretary of State would like”.
But the Bill does not say that. It refers to an agent appointed by a purchaser, not to someone whom the Secretary of State would like or not like. In addition, the Minister, clarifying his position, said that the Government
“have no plans to do away with the Student Loans Company” —— [Official Report, Sale of Student Loans Public Bill Committee, 4 December 2007; c. 36, Q107.]
On the one hand we are told that we cannot name the Student Loans Company because it might go, and on the other we are told that it will not go, at least for the foreseeable future. Next we are told that the Secretary of State will be able to choose the agency that collects debt; then we are told in the Bill that he will not be able to choose who collects debt. That aspect of the Bill needs to be clarified by Ministers in the course of its progress.
We have had serious consideration with a diligent Minister, who seems to have listened to arguments and, as I said earlier, acted with professionalism and generosity. The Bill is technical, but its real significance should not be masked by its technicalities and complexities. It is about moving a substantial amount of money from the public to the private sector. It affects the lives of many millions of our countrymen—many of the people whom we represent. It is important that the House insist on appropriate safeguards, both in the public interest and in their interest.
Although the Opposition will not seek to divide the House on Third Reading, I hope that when the matter is considered in the other place, some of the arguments rehearsed in Committee and again on Report not just from the Opposition Front Bench, but from other parts of the House, are made once again, listened to and taken on board by the Government.
5.37 pm
John McDonnell: In response to the Minister’s assertion that there is consensus about the Bill and the student loans system, I do not wish to disillusion him or to undermine our admiration for his powers of persuasion, but some of us do not support student loans, or the Government’s legislative proposal, because it further embeds the student loans system.
That system has brought about an average debt of £15,000 for most students, which on average they take 13 years to pay off. The Minister’s response was that the system had enabled a larger number of people to pursue a university education. My view, and that of many of my colleagues, is that in the fifth richest country in the world we should be able to afford to pay
people proper maintenance grants to enable them to access university education on the scale that the Government envisage—50 per cent. of young people. To drive people into debt in this way not only burdens them with that debt, but undermines their enjoyment of the education that they receive while they are at university.
Apart from consolidating the student loans system even further, the Bill causes other anxieties. We know from the Red Book that it is envisaged that the Bill will raise £6.3 billion, but nowhere in the Bill does that sum become hypothecated to funding education; it could go elsewhere. If we are to sell off an educational asset that has been brought in as a result of the educational provision that we make for our students, that money should be used for higher education.
As is shown by some of the information that we have heard today, which I accept the Minister contests, the bursary system is not working as effectively as it should. We could use the money from the sale to increase maintenance grants at the same time—to improve provision overall.
The Bill allows the Secretary of State to retain control over the interest charges levelled against students who take out student loans, but it does not address the key issue—the bizarre situation of the Government’s using so many different measures of inflation and interest rates to charge against loans. We use the consumer prices index, currently at 2 per cent., to award wages but the retail prices index to determine how much we levy on the burden of loans. I regret that the legislation did not address that matter.
I am not convinced that we have enhanced the Secretary of State’s role within the system to give us in the long term the security that we have sought today. I am thinking particularly about onward sales, which are one of our key anxieties. If it is important to secure the detailed involvement and approval of the Secretary of State on the initial sale, it is even more important that we secure his involvement on onward sales. That might offend against Treasury rules, but as was mentioned earlier, when it comes to Northern Rock and other matters, Treasury rules seem to fly out of the window.
I hope that further safeguards will be applied in the other place and that we then debate them here to provide the maximum long-term security—not only for those who take out and rely on student loans, but for the taxpayer as well.
Mr. Hayes: The hon. Gentleman was not entirely satisfied with the Minister’s assurance about what he might do in respect of accepting amendments in the other place. However, will the hon. Gentleman invite the Minister to reaffirm that willingness to consider the issue of onward sales and the Secretary of State’s involvement in them?
John McDonnell: The hon. Gentleman need have no fear that I shall not pursue the matter in my comradely dialogue with the Minister. Others will as well, because the issue is significant.
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