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Lord Henley: My Lords, for upsetting the distinguished grammarian I can only unreservedly apologise to the House. It is one of the dangers of serving in the Department for Education and Employment that one has to examine one's letters and one's speeches with much greater care than is perhaps the case with the slightly more robust approach taken, for example, in the Ministry of Defence or other departments I could mention.

I have a degree of sympathy for the principle behind the amendment, not that I think the noble Lord specifically spoke to the amendment as such. I suspect that to some extent it was a further probing amendment. As I made clear in my letter--I hope that this will not cause the noble Lord the confusion that he said it caused him--we shall not be paying subsidy to the private lenders simply in order that they may lend money. They can do that perfectly well without our help. We are paying subsidy to the private lenders--those private lenders who sign up--so that they can offer loans on similar preferential terms to those offered by the Student Loans Company. It is as simple as that.

They are already in the position where they can lend money to students or to whomsoever they so wish. We are paying subsidy so that they can do it on similar terms to those offered by the SLC. They are like the fishmongers, mentioned by my noble friend Lord Beloff on a number of occasions, who are not just selling fish but are selling it at special offer prices. I am concerned, just as this amendment is concerned, to ensure that the benefits of subsidy will go to the student borrowers

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themselves. But those same special terms mean that the subsidy arrangements will be somewhat more complicated than the amendment envisages.

The subsidy will need to take into account the fact that owing to the special deferment arrangements lenders will be expected to service unprofitable loans for long periods. Lenders may have to wait a long time for loans to be paid off and they can begin to treat borrowers as ordinary profitable customers. There is also a risk attached to lending, not least where the lending is to students with very little credit history. Those are all factors which may be taken into account when the financial institutions are putting together their bids.

As to the noble Lord's worries about "form" and "level" of subsidy, I should have thought that the words there are perfectly clear. The "level" of subsidy the noble Lord understands; "form" might mean, for example, the manner in which it was paid--whether it was paid all at once or spread out over the year, or whatever. But it is up to the financial institutions themselves to put together fair bids and then to negotiate with the department. But I can reassure the noble Lord, as I think I have done on a number of occasions, that we will only accept bids which offer a cost-effective deal for the taxpayer and which offer real choice for the student.

The noble Lord also asked whether we might not consider making use of the national insurance scheme to repay student loans. Others have suggested making use of the tax system. These matters have been considered on a number of occasions and other countries have pursued similar lines. However, I have to say that there are considerable complications in making use of the national insurance system that would not necessarily bring about the simplicities which the noble Lord desires. The Student Loans Company and what we are suggesting--the extension to the banks--keep matters relatively simple. But, as always, I can give an assurance that Dearing--Dearing Mark III, if we can call it that--will be addressing or can address these matters as the inquiry feels fit.

The private lenders will naturally want a return on their money and that will be reflected in their tenders. As I have emphasised, we shall not sign any contracts unless we are convinced that they will realise the full benefits to the students and the full benefits to the taxpayer of private sector involvement, and those full benefits cost effectively. Again I repeat--the noble Lord repeated it for me but I repeat it again--that if we are not convinced of this we shall not sign contracts. The private lender subsidies will be settled on the basis of competitive tenders. We have, as noble Lords will know, a number of financial institutions which are interested. I expect those tenders to take into account the long-term benefits to them as financial institutions of being selected for subsidised loans to the students.

I hope I have dealt with most of the points put by the noble Lord but I shall certainly look carefully at what he has had to say and particularly at some of the points made in my letter of 19th March to which he referred. Certainly, I should be more than happy to have a further

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discussion with the noble Lord on these matters between now and Third Reading should he so wish. However, as regards the amendment itself, I do not believe it is necessarily a practical way forward and I hope therefore that he will withdraw it.

5.45 p.m.

Lord Morris of Castle Morris: My Lords, I am grateful to the Minister for what he has said and for answering a selection of my questions. The distinction which he draws between "form" and "level" in his letter still puzzles me and I find the distinction which the Minister makes between the two terms pleasingly poetic. We shall come to the question of the repayment mechanism later but I am grateful to him for opening it out at this stage. I shall ponder what he says when other noble Lords are speaking to other amendments and return to it in its proper place. His offer of discussions is a welcome one to me. If, after I have had the opportunity tomorrow to read in Hansard what everyone has said, I feel it is necessary to ask for a half hour of his time, I am grateful that I shall not be turned away. With that said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Morris of Castle Morris moved Amendment No. 5:

After Clause 1, insert the following new clause--

Refusal of student loan not refusal of credit

(". A refusal to an eligible student of a private sector student loan shall not be regarded as a refusal of credit for any purpose and may not be required to be declared in any other application for credit.").

The noble Lord said: My Lords, when we discussed the whole matter of creditworthiness in relation to this Bill at Committee stage, my noble friend Lord Williams of Mostyn (whose forensic skills have no superior and few rivals) succeeded in eliciting from the Minister clarifications and concessions which we found helpful. Chief among them was the answer to my noble friend's question as to whether a student who had been refused a private loan and then applied for a Student Loans Company loan would be obliged to report the refusal in his SLC application. The Minister said:

    "I do not see that there would be any obligation to report to the Student Loans Company the fact that the student had been refused a loan elsewhere".
That is clear, unequivocal, welcome, helpful and, indeed, goes a little beyond what was requested.

I hope that the Minister will not be offended by our seemingly insatiable appetite for further and further concessions over and above what he has already given, but the words of this amendment are precise:

    "may not be required to be declared in any other application for credit".
That is not just to the Student Loans Company but "any other application for credit".

We are pursuing this because students must now apply for loans and any refusal of credit is an extremely serious and continuous handicap long after they have ceased to be students. It can last for the rest of their lives. The student refused credit may find that the

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remembrance of it is grievous unto him or her and that the burden of it is intolerable. Once to be refused credit may be to carry that for the rest of one's financial life. The student may well say, with Coleridge's Ancient Mariner,

    "Instead of a Cross the Albatross

    About my neck was hung".

I beg to move.

Lord Williams of Mostyn: My Lords, perhaps I may simply add a syllable or two. The real mischief here--and putting one's eye to Amendment No. 7--is that if there is no obligation to give a reason for refusal, serious unfairness may result which has in effect a financial penal consequence for the rest of the student's adult life. A refusal of a loan may well be made on non-financial grounds. If that were so, without the obligation for giving a reason for refusal, injustice could creep in. The loan might be refused, for instance, because the lending institution does not seek to support a particular discipline. It might come to the reasoned view that there was a superabundance of professors of English literature around and about the place and it might not want to fund any more. It might think, for instance, that the wage levels in the intended profession were too low, and the institution did not want to lend on that basis. It might ask someone what they have in mind as regards future employment. The institution might think that the prospects are very poor. A student who said, for instance, that he was hoping to become a Conservative Member of Parliament might well be refused a loan on the basis that his employment prospects were dismal in the extreme for the next 10 years or so.

It is important that a student who is obliged, as the noble Lord, Lord Morris of Castle Morris, said, to look for loan facilities should not be penalised in later life and particularly--if I may repeat again at the risk of tedium--if no reason is required to be given. Therefore, there cannot be a safeguard for the student, and that is capable of doing him or her an injustice for a very long time.

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