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“The report must include information about the extent to which the arrangements give good value”
We have been so insistent about this matter for the reason that I mentioned a few moments ago in response to the intervention made by my right hon. Friend the Member for Wokingham (Mr. Redwood): the fact that it is crucial that we obtain good value for money and, moreover, that this House is able to test that in an empirical way. The House deserves proper information about where a sale was made, how it was made, why it was made at a particular time, the prevailing market conditions and so on.
Mr. Redwood: Has my hon. Friend put it to the Minister that selling a book of loans in the middle of a credit crunch is not the normal way to maximise value for the taxpayer? Doing it at the same time as running off a mortgage book at Northern Rock, which the Government strangely decided to buy, is doubly hazardous.
Mr. Hayes: My right hon. Friend’s lucidity is matched only by his assiduity. He makes his point with a force that I would be reluctant to use. I mentioned the possibility of inappropriate sales at an inappropriate time, but as ever he draws the issue into sharp focus. It is entirely possible that the Government might be forced to sell part of the loan book at the least desirable time, in the circumstances that he describes. That would be scandalous, because the loan book is an important public asset. It is right that we should consider selling it—that has been Conservative policy for some years—and we welcome the spirit that lies behind the Bill, but the devil is in the detail. We need to get the terms and conditions right, as well as the circumstances, and ensure that Parliament has the ability to scrutinise the sale.
The report that the Government will bring to the House on the sale will include, as we have argued both publicly and privately with Ministers, any advice given by the Treasury about the assessment of value for money. The Minister has said throughout that a value-for-money framework lies at the heart of the Government’s strategy, and we would simply argue that all hon. Members should have access to that so that they can test the Government’s adoption of the powers in the Bill against the circumstances in which the loans are sold. I am delighted that the Minister has moved a considerable way towards our position on that point by adding an amendment that makes the report a statutory requirement and requires it to be laid within three months of the date on which the Secretary of State enters into transfer arrangements.
So we will get the report, understand the advice that has been given to the Government and see the value-for-money framework. That would mean that the Opposition
—indeed all hon. Members—would be able to scrutinise the Government accordingly. Whatever pressure has been put on the Minister by the Treasury, he will be answerable for the circumstances of the sale, credit crunch or no credit crunch.
Our amendment to Lords amendment No. 7 would insert the requirement that
“The report must also include an assessment of the impact of the sale on borrowers.”
The effect on borrowers should also be taken into account, given that no impact assessment was made when the Bill was published and I understand that the Government are unlikely to add one at this late stage. At the very least, a retrospective analysis of the impact on borrowers should form part of the report that the Government make to the House. I have tested the Minister on this point privately. I asked him in writing—I am sure that we would be willing to make that correspondence public—why there was no impact assessment originally, why one should not be made now and why, given the permissive nature of the amendments introduced in the Lords, we should not test the issue even at this late stage.
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Sadly, even given the Minister’s eminent sense of fair play and professionalism, he has yet to bring an impact assessment before the House. It is, therefore, all the more important that the impact on borrowers be included in the report that we get retrospectively. I shall be interested to hear his comments on that. We are delighted that this amendment was tabled. We first raised our concerns on Second Reading and in Committee, and pointed out that it would be “useful” to have a provision on value for money that was set in stone. On Report, my hon. Friend the Member for Reading, East (Mr. Wilson) moved an amendment that would have placed value-for-money criteria on the face of the Bill. At the time the Minister described the amendment as unnecessary and I am glad that, following detailed discussions and correspondence, we have been able to find a way forward.
On Second Reading, the Minister explained that the loan book had last been valued at £18.1 billion, and he said that it was the Government’s intention to raise £6 billion in receipts over the next three years—almost exactly a third of the book’s value. I hope that he will be able to give us some idea of the Government’s immediate intentions. Do they intend to sell a third of the loan book over the next six months to a year? If they do not intend to sell a third, what proportion do they intend to sell? We would also like some idea of the timetable, given that these amendments deal with value for money, and it is difficult for us to understand the scale of the issue unless we understand the detail of the Government’s intentions.
My right hon. Friend the Member for Wokingham mentioned the credit crunch and the uncertain financial markets, which have worsened since Second Reading, which was held on 22 November last year. It would be useful to know whether any subsequent valuation of the loan book has been made, because it may well be that the Government need to sell more than a third to raise the stated £6 billion. It could be less, of course—I do not want to be too pessimistic.
Mr. Redwood: I would have thought that the ideal outcome would be for the Government to pass the legislation but await a market improvement. Then the incoming Conservative Government could have the receipts in their first year.
Mr. Hayes: That would be nirvana, a perfect outcome. We would support the Bill with alacrity on the basis that we would spend the cash, and we would, of course, put it to altogether better use than the present Administration. However, I do not wish to be unkind. After all, it is my birthday and I am even more tempted to be generous than my character leads me to be every other day of the year.
We do not know whether the value of the loan book has gone up or down since November. We can guess, based on market conditions, but it would be useful if the Minister could give us a little more detail. He has told us on numerous occasions that if value for money cannot be ensured, the sale will not go ahead. This amendment will ensure that proper parliamentary scrutiny takes place, but it is also important that we have some idea of the effect on borrowers. Our amendment would ensure that borrowers had that certainty about their future circumstances.
As I said, it is unusual for the Government to table as significant an amendment as Lords amendment No. 2 to a Bill after its Commons stage. When the Bill was introduced, a full impact assessment was not conducted because, as I argued, the Government did not feel that it was necessary. They said that no aspect of the Bill would
“create a material impact on borrowers, higher education institutions or employers”.
However, the new provisions will allow the Secretary of State either to fix or to change regulations in relation to those loans that are to be sold, with a consequent material impact on borrowers. Given that Lords amendment No. 2 changes the terms of the Bill, one possible way forward would be for the Government to conduct a retrospective assessment of the impact of each sale on the holders of student loans. The permissive nature of the amendment has created considerable uncertainty about the potential impact of sales and a full assessment would provide much-needed clarity on that point and thus might allay Opposition concerns, as I said when I wrote to the Minister about these matters.
I want to say a few words about Lords amendments Nos. 11 to 14. The explanatory notes on the Lords amendments say:
“These amendments would make drafting changes to the clause on sharing of information with purchasers and potential purchasers. Lords Amendments 11 and 12 would make explicit that HMRC information may be disclosed in relation to loans that have not yet been sold, as well as those that have been sold. Restrictions already contained in the Bill restrict the disclosure of personalised data to actual purchasers and their agents.”
The Minister has repeatedly made it clear that data would be anonymised in as much as they needed to be shared—for example, for accounting purposes. The explanatory notes go on:
“Amendment 13 would define the permitted onward disclosure of anonymised HMRC data by reference to the purpose of disclosure—in connection with loans that have been or may be transferred—rather than by reference to the identity of parties who may receive such data. Amendment 14 would make explicit that the narrow group to which onward disclosure of personalised HMRC data is permissible does include loan purchasers’ auditors.”
It would be useful if the Minister said a further word about all that.
There have been doubts about the maintenance and transfer of personal data. I do not want to raise again the issue of the failures and errors of the Government in handling data. To do so would perhaps be harsh on the Minister, who has not been personally responsible for such problems. However, he takes collective responsibility for the shambolic behaviour of those on the Labour Front Bench and, as a result, it is important that we have assurances from him today about precisely what will happen in respect of data handling.
We are pleased that the Government have made amendments to the Bill to clarify the provisions on who will have access to HMRC data. We have expressed concerns throughout the passage of the Bill, in the measured way that I have today, about the danger of data falling into the wrong hands, being misused or, heaven forbid, being lost altogether. That danger is particularly acute if the book is broken up into many parts as a result of onward sales.
The Minister said earlier that he does not expect the loan book to be collateralised and sold on. He has made that point repeatedly during our considerations, but I find it hard to believe. It might well be sold on as that is the nature of the sale of debt. I accept his assurances that control can be exercised in respect of the initial sale, but the hon. Member for Bristol, West was right to insist that, because of the potentially convoluted and complex nature of the data that will be held and shared, a clear audit trail is very important.
I am grateful for the Minister’s assurance that the Student Loans Company will be the responsible agency for that information, but once again borrowers will want assurances about not only the accuracy of the data that are being transferred but where the data will reside, who has access to them and who might get access to them by fair means or foul. It is important that the Minister should say a word or two more given the prevailing circumstances, not all of his making, of public doubts about data, their maintenance and their security.
I hope that the Minister will be able to come back specifically on Lords amendment No. 2 and our amendment to it. I hope that he will say a further word about the security of data and that he will also tell us something about the reason for the amendment and the background to it, in order to clear up the uncertainty that has arisen from the original letter from Baroness Morgan and the subsequent discussion. I hope that he might also give us some feel of the value of the book and the Government’s intentions in respect of sales, of how those sales might operate and of how the report to Parliament might shape up in practice. All Members of this House are determined that borrowers’ and taxpayers’ interests should be preserved. This House is the place to ensure that Ministers are held to account accordingly.
I hope that our amendment, our response to Government amendments and the views expressed by Opposition Members in the other place and here have made those matters paramount in the Minister’s mind, so we wait to hear him express his thoughts in a few moments’ time.
Stephen Williams:
The Conservative Front-Bench spokesman, with some help from a distinguished Back Bencher, the right hon. Member for Wokingham
(Mr. Redwood), has already well rehearsed the arguments about how the Government must weigh up the interests of the taxpayer while at the same time protecting the interests of the graduates who have borrowed from the Student Loans Company.
I understand that to secure value for money for the taxpayer and to get the best possible circumstances for a successful sale, the Government might want to reduce the uncertainty for any potential purchaser but, none the less, I am worried that Lords amendment No. 2, inserted by the Government, perhaps limits the scope for future Parliaments—or, indeed, for future Governments, as the Government probably have a defined life that may well end quite soon—to alter the terms of loan repayments.
There are four aspects of loan repayments that graduates have to face and it would be entirely valid for this Government or future Governments to reconsider them. There is the threshold for the commencement of loan repayments, which is set at a salary level of £15,000. That threshold has been in place for several years now and, unlike virtually all other effective aspects of the tax code, it is not indexed each year, alongside the personal allowance and higher rate tax bands. It has been left frozen at £15,000 for some time and is therefore quite regressive in its impact. It would be legitimate for a future Government or this Parliament to reconsider that threshold. The repayment rate of 9 per cent. is effectively a flat-rate tax—I understand that there are enthusiasts for flat-rate taxes on the Opposition Benches.
Bill Rammell: For clarity’s sake, is the hon. Gentleman advocating an annual uprating of the threshold?
Stephen Williams: It should certainly be considered. The Minister will be aware, as I am—I represent a constituency with many graduates who face these punitive loan repayments—that concerns have been expressed by individuals and by the National Union of Students about the repayment terms. The rate of repayment, which is 9 per cent. of earnings, is a hefty flat-rate tax to face early on in a graduate career. The cut-off period of 25 years is a progressive part of the loan regime, which we would want to protect, but none the less the discretion of a future Parliament to review it should not be fettered.
The terms of the rate of interest, its calculation and whether it is related to the consumer prices index or the retail prices index has, as I am sure the Minister will know, been the subject of much discussion in student circles in the past couple of years as those rates have deviated from each other. The Government choose one measure of inflation to calculate people’s salary increases—particularly of people in the public sector, who include many graduates—but choose another to uprate the terms of their underlying graduate debt. A future Government may wish to consider all those things; I hope that the Minister is not fettering the scope of such deliberation.
I shall not say much about amendment No. 3. Instead, I turn to amendment No. 7, which is about value for money for the taxpayer. That issue exercised us greatly on Report in January, and it was rightly the subject of much debate in another place. It is good that the Government have now conceded that they will make a report to Parliament within three months of any sale. It will include the publication of the Treasury guidance to
the accounting officer of the Department for Innovation, Universities and Skills. I wonder who will audit the report. Will there be any external audit? Obviously, the report will be about a substantial part of the Government’s income.
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Mr. Hayes: I presume that those matters could be considered by the Public Accounts Committee, for example. Indeed, once the loan book had been sold, I would be surprised if the Committee did not want to consider them in detail.
Stephen Williams: The hon. Gentleman’s intervention anticipated my next point. As I said on Report back in January, we assume that the transaction is of such magnitude that the National Audit Office will want to consider it retrospectively to make sure that the Government have obtained value for money for the taxpayer. In the ordinary course of events, that will lead to a hearing in front of the Public Accounts Committee, of which I used to be a member, and to another report. Will there be an additional external audit, independent of the National Audit Office, of the report that will come to Parliament? There is often a significant gap between a transaction resulting from a Government action, the National Audit Office’s consideration of that transaction, the Public Accounts Committee’s consideration of it and the publication of the PAC report; often there will 12-plus months in between. It is important that the report that comes to Parliament within three months should be independently verified.
Mr. Hayes: The hon. Gentleman has made an extremely strong point. Will the Government encourage the National Audit Office and the Public Accounts Committee to take a look after the sale of each tranche of the book? The Minister may want to say something about that today. It seems appropriate for the PAC to do that, given the potential delay mentioned by the hon. Member for Bristol, West (Stephen Williams). If we are to have a report to Parliament in three months, why should the National Audit Office and the Public Accounts Committee not scrutinise each report?
Stephen Williams: The hon. Gentleman’s point is helpful, I am sure. None the less, the independence of the Public Accounts Committee is an important part of parliamentary procedure; perhaps it should not take suggestions from the Government on when it is or is not appropriate for it to consider a particular transaction. I shall, however, be interested in the Minister’s reaction to the hon. Gentleman’s suggestion.
A second, practical aspect of the matter is the time limit of three months. Let us suppose that the Bill goes through tonight and receives Royal Assent shortly. If they wished, the Government could then embark on a series of sales. In three months’ time, I shall probably be in Bournemouth and the Minister may well be preparing to go to wherever his conference is this year. How flexible will the period be?
During the discussion on our earlier string of amendments, we had a debate on the meaning of the words “aim to”; amendment No. 7 refers to a precise period of three months. How will it be possible to make a report to Parliament within three months if Parliament is not sitting?
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