Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Morris of Castle Morris: My Lords, can the Minister explain how a student can go to the ombudsman with a complaint if he does not know why his loan has been refused?

Lord Henley: My Lords, I made that perfectly clear. I do not believe that it is absolutely necessary to have written evidence from the institution to make that complaint. There are other forms of evidence which will be available, such as the attitude of the institution. That evidence may be sufficient for the student to take the complaint to the ombudsman.

Lord Tope: My Lords, the Minister said that lenders must be free to decide whether to accept or reject loan applications. Nobody disputes that. What we are saying is that they must give a reason if they reject the application. I believe that the noble Lord, Lord Williams

25 Mar 1996 : Column 1522

of Mostyn, is right. Usually, decisions are better made if those who make them know that they will have to justify them in public. Therefore, the fact that they have to give a simple statement of reasons for refusal is likely to lead to better considered decisions.

I return to the point that noble Lords have been pressing. How does an applicant apply to the ombudsman and prove that he has a substantial case? It may be that the bank manager was rude to the applicant when he went to see him; it may be that he had to stand in a queue for a long time; it may be any number of those reasons, but, as the Minister said, if the institutions are keen to make loans, that is probably unlikely, and, frankly, rather frivolous. If we are asking people to feel that they may put a case to the ombudsman, to say that they will have no written reason and will need no written reason, is not good enough. We have not had a sufficient answer to this. The Minister has not justified why there should not be a written reason. Indeed the case for having a written reason when making a submission to the ombudsman is overpowering. We shall need to consider this matter further, but, in the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Tope moved Amendment No. 8:

After Clause 1, insert the following new clause--

Assessment criteria

(". No subsidy may be paid by the Secretary of State under subsection 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 include consideration of the applicant's course of study or the institution he attends.").

The noble Lord said: My Lords, this is another what is termed "cherry picking" amendment. It bears some resemblance to an amendment with which we dealt in Committee. We are trying to ensure that, when choosing a course and an institution at which to take that course, a student should determine that solely upon academic merit, individual choice, and vocational merit, and should not be put into the position of having to give any consideration as to whether the course or institution would prove creditworthy for a private sector student loan. That is the essence of the amendment.

In Committee, and previously, the Minister has said that the tender document seeks from prospective private lenders details of their policies and processes for considering applications, and asks for an estimate of the proportion of applicants they might reject.

I hope that the Minister will assure us today that when they look seriously at those tender documents, as he has assured us they will, and we accept that they will, they will ensure that there is no possibility of any discrimination or decisions being based upon disapproval of a type of course or upon a judgment about the merits or otherwise of a particular learning institution. That is what the amendment seeks to address. I beg to move.

Lord Morris of Castle Morris: My Lords, it is a pleasure to support the noble Lord, Lord Tope, in the

25 Mar 1996 : Column 1523

amendment, especially as he has supported me so stoutly in many another. I trust that he will feel able to do so for the rest of the Bill, and, indeed, many a Bill hereafter.

I have read and re-read what the Minister had to say on this question when we discussed it in Committee in--I must agree with the noble Lord, Lord Tope--very much the same terms as those in which we have brought it back. The Minister spoke at 8.45 p.m. Perhaps he, and we, and all of us, were becoming rather tired, but I am bound to say that sadly it was not, in my view, the very best reply that he gave in Committee. I hope that he will be able to improve on his performance today. He said--I paraphrase--that there was little that he could add to his previous responses. He said that bank managers were honourable persons; that lawyers were also good fellows; and that the Dearing terms of reference were a matter for a another occasion; and, then, getting to the point, that the Government had asked prospective private lenders for--both the noble Lord, Lord Tope, and I seem to have noticed this--details of their policies and processes for considering applications and an estimate of what proportion of applicants they thought that they might reject. That is not good enough, nor is it true.

Bankers are in a tough, harsh, unforgiving, competitive business these days. No longer is your typical bank manager a wise, experienced, mellow and beneficent pipe-smoking patriarchal sort of a fellow. She is more likely to be a smart and street-wise lady under stern instructions from head office to jerk up the percentage profit this year, otherwise she will be out on her ear. Banks have changed. So far as I can see, they seem to have changed a great deal since the Minister last went into one.

My noble friend Lord Ponsonby of Shulbrede, who has the advantage of being younger than most of us, exemplified that point, and the point that the amendment strives to make, when he told us that when he was taking his postgraduate degree in petroleum engineering he was regularly harassed--he used the word "harassed"--by his bank with offers of more and more complicated loans: "Take out another loan--any kind of conditions you like. Petroleum engineers are bound to be important fellows before very long, and these people are worth having on our books". He said in Committee that banks make such calculations, and I believe him. He is right. They have to.

A student of fine art, or a student from a former polytechnic whose excellence has not yet been fully established--I have chosen that phrase with great care to avoid trouble from half the country's universities--may well seem less attractive a prospect than my noble friend Lord Ponsonby of Shulbrede, for a wide variety of reasons.

Private institutions need no protection or defence. The private individual (the young student) needs both. That is why I strongly support the amendment.

Baroness Farrington of Ribbleton: My Lords, first, perhaps I may ask the House to note that in my experience the most usual bank manager is still male,

25 Mar 1996 : Column 1524

and not female. I can only assume that female bank managers have all gone to the Principality, and that circumstances there are different.

There is a great deal of prejudice about the types of course that students take at university. The employment potential of people on arts courses may be misunderstood. It is unlikely that a bank manager in a part of the country where a particular course is not available will know the details, for example, of courses in technical illustration and the possibility of a 100 per cent. placement in employment.

The second point upon which I would ask the Minister to comment is that one of his government's Secretaries of State in the early 1980s--a person for whom I had great respect on many occasions--once made a statement about there being no need to provide so many sociology and psychology courses. The Secretary of State had to correct that misunderstanding when it was explained to him that psychology was essential if people wanted to become the educational psychologists who would be needed in ever-increasing numbers to implement the Government's special educational needs legislation. That is a type of prejudice.

Can the Minister say that a uniform policy will be applied by institutions, if they change their minds and bid for this type of work; that a student applying in Aberdeen for a psychology course will be treated in the same way as a student applying in Edinburgh, Cardiff or Lancashire? It is important that the policy is clear. Before the Minister says that this is a matter purely of commercial judgment, perhaps I may remind him that, throughout, the Government's statements have been about student choice. What choice is there if, from a basis of ignorance, lack of knowledge or prejudice, someone precludes certain students from access to loans merely because of the type of course they are taking?

6.30 p.m.

Lord Henley: My Lords, I received 10 out of 10 from the noble Lord, Lord Morris of Castle Morris, for one of my earlier answers. However, I expect that the response I gave in Committee at 8.45 p.m. did not receive 10 out of 10 from him but possibly only one or two out of 10. We shall see whether I can improve on that. However, in speaking to the amendment in Committee I had addressed a number of similar amendments and I believed that I should be wasting the Committee's time if I spoke at great length. That is why I opened my innings by saying that I was not sure that there was much more I could add to what I had said earlier in response to other similar amendments. On this occasion I shall try to respond at greater length, this being the only amendment in that group to return.

Perhaps I may make it clear that we neither want nor expect the private lenders to assess applications in the way noble Lords fear. On the contrary, we want to involve the private sector so that all students have opportunities to get the benefits of its expertise in personal lending. But to get these benefits we need to put in place a system which allows the banks and building societies to operate efficiently along normal commercial lines. The instinct of noble Lords opposite to regulate would prevent that.

25 Mar 1996 : Column 1525

Secondly, as I said on a number of occasions, the financial institutions will be lending their own money and bearing most of the risk in so doing. In these circumstances, decisions on whether to lend to a particular applicant must be left to them.

We could, of course, require that private lenders accept any application from an eligible student. But that kind of provision would work against the grain of the private sector's approach. It is doubtful whether it would be acceptable to the banks and building societies. And, frankly, we see nothing to be gained by compelling first their involvement and then their acceptance of any eligible application.

Thirdly, while I understand noble Lords' concerns that some students might suffer rejection because of their course or institution, I believe that possibility to be 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 this market in a substantial way. Once in, why should they take a restrictive view of applicants' credit-worthiness? The incentive will be to maximise their share of the market. There will be strong competition. They will be competing against other private lenders. They will also be competing against the Student Loans Company, which will also 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 this scheme and then court adverse publicity by rejecting a large number of applicants?

As I made clear in Committee, we have asked prospective private lenders to include in their tenders details of their policies and processes for considering applications. We have also asked for an estimate of what proportion of applicants they might reject. I can assure the noble Lord, Lord Tope, that in evaluation of the tenders we shall look carefully at their responses. I can give an assurance that we shall take into account any tenders which appear to be designed to exclude large classes for peculiar reasons. If we are not satisfied that will be a factor in our decision on which tenders to accept.

However, I do not believe that it would be right to follow the policy advocated by the noble Baroness, Lady Farrington, of insisting on a uniform policy for all banks and institutions wherever they are in the country. As I said earlier, that must be a matter for them.

I accept that the amendment is well intentioned but it goes against the grain of what we are trying to achieve with the private sector. Therefore, I hope that the noble Lord will feel able to withdraw it.

Next Section Back to Table of Contents Lords Hansard Home Page