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A noble Lord: There is one here.

Lord Addington: There is a possible disagreement between Front and Back Benches, which is interesting. At this moment I shall resist opening that can of worms. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Desai moved Amendment No. 12:

After Clause 1, insert the following new clause--

Discrimination on grounds of social or economic status

(". No subsidy may be paid by the Secretary of State under section 1(1A) of the Education (Student Loans) Act 1990 unless the Secretary of State is satisfied that the person by whom the private sector student loan will be made has ensured that the assessment criteria to be used in assessing applications by eligible students do not discriminate on grounds of the applicant's social or economic status, or that of his family, as defined by any system of classification.").

The noble Lord said: In this, as in the previous two amendments, we are pushing the same sort of argument. We argue that there are a variety of grounds on which discrimination will be practised unless care is taken specifically to introduce a ban against it. The ways in which discrimination on grounds of social or economic status can take place are very simple. In political discourse we talk about C1s, C2s, the Ds and the Es as though they were separate nations almost. It would be very easy for a form to be prepared on which a student could be asked the father's occupation or income or even his place of residence. That could easily be used in a computer program to grade people as coming from those classifications and therefore count as disqualification. It sounds incredible but that is exactly how many people do not get loans.

We must take care that assessment criteria are not so designed as to facilitate or even mask discrimination on the ground of social or economic status. It is a matter of fairness as regards people applying for loans. I beg to move.

Lord Addington: I believe that discrimination on the ground effectively of one's family background and income would be utterly inappropriate for people starting out on a new form of training. I support the amendment.

Baroness Farrington of Ribbleton: In supporting this amendment I ask the Minister to have regard to the fact that there is evidence that finance companies and finance credit rating are often denied to people simply because of the locality in which they live. The student making an application and going straight from school will be using the parental home. There is a danger here of finance companies applying a similar mechanism.

Lord Henley: In view of the hour I shall respond briefly. Here again is an issue which goes to the heart of the differences in approach between ourselves and the parties opposite. There are a number of reasons why

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this amendment is misconceived in its view of the private sector and the role that it will play in increasing choice and improving service quality.

Perhaps I may first make clear that we neither want nor expect private lenders to assess applications in the way that some fear. On the contrary, we want to involve the private sector so that students get the benefits in service quality of the expertise that it has in personal lending. To get these benefits we need to put a system in place which allows the banks and the building societies to operate efficiently along normal commercial lines.

Secondly, we must not lose sight of the fact that the financial institutions will be lending their own money and putting their own money at risk. In those circumstances, decisions on whether to lend to a particular applicant must be left to the private lenders.

Thirdly, although I understand the concerns that some students might suffer rejection because of their background, I believe that that possibility has been exaggerated. If the banks and building societies tender for the right to offer subsidised loans, they will do so because of the advantages of being in that market in a substantial way. Once in, why should they then take a restrictive view of applicants' creditworthiness? The incentive will be to maximise their share of the market. We trust that there will be strong competition and that they will be competing against other private lenders. They will also be competing against the Student Loans Company, which will obviously have a substantial share of the market. The private lenders will have market share to build up and reputations to protect. Why should they want to get involved in the scheme and then court adverse publicity by rejecting a large number of applicants? I hope, therefore, that noble Lords will feel that the amendment is unnecessary and that their fears are unjustified. I hope also that the noble Lord, Lord Desai, will feel able to withdraw his amendment.

7.30 p.m.

Baroness Farrington of Ribbleton: My Lords, I can only express deep concern about the tenor of the Minister's response to this series of amendments. We have heard almost an inversion of the words associated with the Statue of Liberty. The Minister keeps referring to the financial institutions wanting to maximise their share of the market. There is no evidence for that assertion. Perhaps their financial motive will be to maximise their share of the market with the least possible risk, having received a subsidy from the Government, from the public purse to help them to offset that risk.

I cannot accept that a young person of 18 will go to the media and make a fuss because the locality in which he or she lives happens to have been turned down by the financial institutions. We are not talking about a purely hypothetical issue. I have experience of it. I worked in a shop which dealt with a finance company. I have to tell the Minister that I came across cases of people being turned down for credit because they were considered unsuitable but, as a mere cog in the machine, I never

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heard why. However, it was not difficult to spot the trend. It seemed that anyone called Singh or Patel was considered uncreditworthy, although it was impossible to prove. It seemed that people living in a certain area of town were deemed to be feckless because of the location of their home. I have no evidence that people in those circumstances have the confidence to make a fuss or that young people at the start of their careers would want to risk going to the media because they had been turned down.

I find the Government's attitude unacceptable. This is about cherry picking and choice for private sector institutions masquerading under the Government's public statements as choice for students. A student who is discriminated against may have no recourse. I am sorry, but the Government cannot get away with claiming that they are providing student choice. This is about two issues. The first is the Government's wish to reduce the public sector borrowing requirement so that they can have maximum scope for making their own future financial decisions as a government. The second is that they want the private sector to be able to pick and choose between students. I find those answers unacceptable.

Lord Henley: I find the noble Baroness's remarks incomprehensible. They show complete and utter misunderstanding of the private sector. Obviously, we could compel private lenders to accept any application from any eligible student, but such a provision would work very much against the grain of the private sector's approach which I dare say the noble Baroness does not begin to understand. It is doubtful whether such an approach would be acceptable to the banks and the building societies. Frankly, we see nothing to be gained by compelling, first, their involvement and then their acceptance of all eligible applications.

We could seek to persuade the private lenders to take any applicant, but there would then inevitably be a much higher cost in higher subsidies. If the taxpayer were to meet that extra cost of universal provision in the private sector, how could we also ask the taxpayer to continue to fund the operation of the public sector through the Student Loans Company? For that reason, I do not accept what the noble Baroness said.

Lord Addington: Are we not dealing with a universally available system of higher education and are we not referring to its funding on an individual basis? If the financial institutions can pick and choose to whom to lend, they are going against the Government's intention of encouraging greater numbers into higher education.

Lord Henley: The expansion of higher education is something of which we can be proud. I believe that the numbers have doubled and doubled again since 1979. In addition, and in the teeth of opposition from the parties opposite, we recognise that those benefiting from higher education should make some direct contribution to it themselves. Hence we introduced the student loans scheme back in 1990, the principle of which now seems to have a degree of universal acceptance. Having said that, we shall always have the Student Loans Company

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to provide a loan to anyone who wishes to make use of it. Finance will also be available through the private institutions. Those private institutions have to be free to make their own decisions, on good commercial grounds, as to whom they should accept.

Baroness Farrington of Ribbleton: The Government need to make clear to this Chamber and to people in the country whether they are talking about providing a genuine choice for students with a scheme in which the private sector takes part in return for a degree--I believe that I quote the Minister--of shared risk. The question between us is whether in those circumstances the private sector should be allowed to pick and choose students as it wishes without any control.

If that is the Government's approach and if market forces alone are to determine whether or not the private sector takes part, why are the Government putting hard-earned taxpayers' money into subsidies? If the private sector is to come in entirely on its own terms, surely it could do that anyway, yet the Government are putting up public money to encourage that involvement. Surely the Government have a responsibility to ensure that everyone is equally entitled to benefit from that subsidy of public money which has been paid not only by the parents of the young people who will be considered a good risk but also by the parents of those who are not regarded as a good risk by the financial institutions. If the Government are not going to protect the latter, they have no right to use their money.

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