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Lord Tope: My Lords, I thank the Minister for his assurance, which was welcome. I am not sure that I wish to follow the noble Lord, Lord Morris, in awarding marks, but perhaps six out of 10 would be high. Perhaps the Minister should be awarded five out of 10.

It is not our purpose to regulate the private sector for the sake of doing so or to restrict its responsibilities. In moving the amendments our purpose is to protect

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students who must find themselves in increasingly vulnerable positions as some form of loan becomes a way of life in higher education.

I am sorry that the Minister did not feel able to go further. I continue to be concerned that if we have no obvious assurance that there will not be discrimination on the basis of course or institution, and if students are given no reason for refusal of an application, we could be heading into a situation in which students are treated unfairly. However, I am grateful for the assurance that the Minister gave in response to my opening comments. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 9 not moved.]

Schedule [Consequential amendments]:

Lord Morris of Castle Morris moved Amendment No. 10:

Page 3, line 21, after ("student",") insert--
("(aa) after sub-paragraph (1)(c) insert--
"(d) make provision for the level of sums paid by the person borrowing in respect of repayment of a loan to be linked to the income of the person borrowing",").

The noble Lord said: My Lords, in Committee my noble friend Lord Desai attempted to encourage discussion about long-term loans versus short-term loans. We have not yet had that discussion. The idea did not commend itself to the Minister nor to his colleagues in government, but it will not go away because it can so easily and often cause hardship. The mortgage style repayments provided for in the Bill mean that graduates must repay loans within a short period at a time when their income will be at its lowest level. Loans from the Student Loans Company must be repaid over 60 months once the student's earnings reach 85 per cent. of the national average. Private sector loans will not differ vastly.

On Second Reading in the other place the Minister of State claimed that the average repayment was £18 a month (Official Report, Commons, 27/11/95; col. 945.). That is based on the repayments being made now by students who took out loans in the early years of the scheme's operation when loans made up a smaller percentage of the total support package. As the loan becomes half of the package in 1996-97 debts and the size of repayments will increase.

Researchers at the University of Northumbria--a university which has established its excellence in many areas and upon whose work we can certainly rely--has estimated that the growth of student loan debt based on the current five-year repayment period will mean that students graduating after a three-year course in 1997 must pay £75 a month. After a four-year course the estimated figure is £100 a month.

That seems to us to be an unnecessarily heavy burden on young people at a crucial period of their financial lives. Can the Minister give us an idea of how much it would cost to ease the burden for people in that position, as described by researchers at the University of Northumbria? If debt is too onerous it brings default. As I said earlier, it is difficult for young people in their final year at school, or in their first year at university

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when they are probably scared out of their wits that they will fail their first year examinations, to work out what they will honestly be able to afford to repay in several years' time. They have no experience on which to base that estimate. The people whom they will be consulting will be people in the private sector who are legitimately in that business for the sordid motive of private profit. They are not there to help the students in the first instance. They are there to satisfy their shareholders; to do a decent job for the banks; and to make money. The bottom line is private profit. Those people are not giving disinterested advice; and disinterested advice for students in that position is not easily come by.

Default is a real possibility. As at 31st July 1995, 435,000 borrowers were due to make loan repayments, of which 187,000 were granted deferment for a year, and of the 248,000 liable to make payments, 9,000 were in arrears and 35,000 were in default. That is not a brilliant record.

The problems caused by the current mortgage-style repayment scheme are widely recognised, and not simply by noble Lords on all of these Benches on this side of the House. The Minister cannot brush under the carpet the fact that the Conservative Political Centre National Policy Group on Higher Education, to which I referred earlier and on which he congratulated me on having got its statements right and on reading--

Lord Henley: My Lords, I was wondering whether the noble Lord was going to refer to his colleague, Mr. Field.

Lord Morris of Castle Morris: My Lords, no, but I could do. However, the Conservative Political Centre National Policy Group has identified a number of disadvantages with the mortgage loan scheme and has found advantages in an income-contingent loan scheme where repayments can be collected through the national insurance and income tax system. The Minister must realise that one of his principal advisers is very much on our side in this regard. We are not making a party-political point. It just seems simple common sense.

In Committee the Minister said that he had no wish to pre-empt the Dearing inquiry on that issue. But regulations for the existing scheme could easily be changed to allow income-related payments. He does not have to defer the decision to or beyond Dearing, and in any event he cannot have Dearing both ways.

The DFEE has written to the Committee of Vice-Chancellors and Principals listing reasons why alternative repayment schemes are absolutely out of the question, beyond the pale and not possible. I have seen that letter and I am deeply unimpressed by its arguments. They are redolent of a fixed determination not to find a way out of this and not to find any way in which change could be considered.

If the Minister does nothing else as a result of today's discussions, I invite him to think again about this problem and to find a way to meet us on the question of repayment methods, about which students are deeply

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concerned. If it can be done in other countries, there is no reason why, if the will is there, it cannot be done in the United Kingdom. I beg to move.

Lord Tope: My Lords, I spoke on Second Reading about repayments and I support this amendment. We should be and need to be looking at some form of income-contingent repayment scheme. As I understand it, that is what this amendment seeks to achieve. I commend it to the Minister in the terms in which it was moved by the noble Lord, Lord Morris of Castle Morris.

Baroness Park of Monmouth: My Lords, I should like to repeat what I have said many times, including on Second Reading, about the sound common sense of having an income-contingent repayment system. Among other things, it might actually get back some money for the Treasury, and I sorely doubt whether the present system will achieve that within the next 10 years. That is one point.

I hope that at the very least, when the Minister returns to the department he will ensure that when the question of support for students is considered by the Dearing Committee, that letter is not taken as the only briefing to the committee on the line to take. I hope that there will be serious examination of all options by the Dearing Committee.

6.45 p.m.

Lord Henley: My Lords, we are going somewhat beyond the Bill in debating income-contingent schemes. As I made clear on another occasion, these are matters which should properly be left to the Dearing Committee.

The system that we have at present is in part income-contingent. It does not begin to bite, as the noble Lord, Lord Morris, put it, until earnings reach 85 per cent. of average earnings, currently £15,204. That figure can be changed by means of order under the 1990 Act. That 85 per cent. figure can be changed by means of regulation under the 1990 Act, as can the time taken to repay. A great deal can be done under the powers provided by the 1990 Act.

The noble Lord, Lord Morris of Castle Morris, quoted my honourable friend in another place as saying that the current average repayment is only some £18. I should have to look at the figures given by the University of Northumbria to see whether that is right. That figure will increase over the years and each year, as the necessary regulations are brought forward, Ministers will have to consider whether the repayment period should be lengthened or whether the level of average earnings should be adjusted upwards and so on. But those matters can be addressed each year.

Introducing a greater degree of income-contingency would introduce unnecessary complexity into the scheme. Having said that, I hope that that is a matter which Sir Ron will look at as part of his inquiry. But it could be time-consuming and labour intensive to check the income of all borrowers. It would also be costly. Either students or taxpayers would have to pay for that.

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I should like to pose one or two questions to the noble Lord about his amendment. I should like to know whether noble Lords opposite intend that the amount collected by the scheme should be increased by charging students more or whether they intend that repayments should be reduced and that the taxpayer should pay more. They certainly cannot have both. It is not possible both to reduce the financial burden on students and to increase the amount of money collected by the scheme.

Perhaps the noble Lord intends, as the amendment would allow, that students should pay more than they actually borrowed by means of a graduate tax. I am sure that students would wish to know whether that is the intention of the amendment. Whatever is the case, if noble Lords are advocating a more generous scheme, I should like to know how they propose to fund that and whether that has been included in their spending plans.

I believe that the present scheme achieves an extremely good balance between the costs of higher education both for the taxpayer and the student. Therefore, we intend that the current repayment arrangements will apply to private sector loans. But, as I said, if we believe that the burden on the students is increasing unnecessarily, we have the means to address that problem.

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