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After Clause 1, insert the following new clause--

Statement of reasons

(". The Secretary of State shall require any person to whom subsidy is to be paid who refuses to make a private sector student loan to an eligible student to provide the student with a statement of reasons for the refusal.").

The noble Lord said: My Lords, there is a very straightforward reason for this amendment. It is that if anybody is refused a loan they should be able to find out the reason why. This follows directly from our last debate and this amendment is something of a fall-back position from it. If a student is refused a loan, surely it makes sense to let him or her know why. As the noble Lord said, having been refused a loan at the start of their adult careers they should be informed as to why they have been refused. That is a very reasonable step to be taken by those giving the new loans, which are government subsidised, if only to a small extent. This is a matter which the Government can quite easily agree to without damaging their own objectives for the Bill. It will also preserve the position for students applying for loans as they start out on their adult careers. I beg to move.

Baroness Farrington of Ribbleton: My Lords, there are many arguments in support of this amendment

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because of the vulnerability of students. The Minister's reply that it is possible for students to establish a sort of pattern of refusals by looking at other people's refusals, misses the point. There is anxiety. I shall be grateful if the Minister can answer the anxieties in particular of the National Bureau for Students with Disabilities (SKILL), which is concerned because, on 12th March, in a discussion about Amendment No. 10 as regards discrimination on grounds of race, sex or disability, the noble Lord, Lord Henley, confirmed that private lenders would be required to conform to the Disability Discrimination Act 1995. However, it is possible that that Act will still allow private lenders to discriminate against potential borrowers with disabilities. At present a borrower cannot be turned down by the Student Loans Company on the basis that he or she has a disability nor on the basis that he or she may be unable to pay back the loan. Borrowers from the Student Loans Company do not start to pay back their debt until their income passes a certain level and, if their income does not reach that level before the age of 50, the debt is written off.

The loans are covered by the Disability Discrimination Act, Part III of which relates to goods, facilities and services. Those provisions outlaw discrimination in general, but list exceptions where discrimination is lawful. One of those (Section 20(4)(c)) allows providers to offer less favourable terms to a disabled person if additional costs are involved. Statistics show that the disabled are less likely to gain employment than other people and that they are less likely to gain well paid employment. Therefore, they constitute a greater risk to a private lender and, as a group, will inevitably cause the lender to incur extra costs. Private lenders would therefore be legally justified in offering less favourable terms to borrowers with disabilities and possibly in refusing credit altogether. Surely it is important as a minimum protection for students in general, and in particular for students with disabilities, that they should be given a reason for any refusal to grant them a loan.

Baroness Park of Monmouth: My Lords, I should like to take the opportunity of this last chance of the Third Reading debate to indicate to my noble friend the Minister that the principle raised in my interventions and in those of my noble friend Lord Peyton, who unfortunately cannot be here tonight--that is, the right of Parliament to scrutinise--has not gone away; nor shall we allow it to do so.

My view is reinforced, if that were necessary, by the report of the Public Accounts Committee, published on 21st March. Its proceedings demonstrate all too clearly that we were right to press the Government to give a firm commitment that once the negotiations with the private sector--if, indeed, they take place--are signed and sealed, proper provision will be made for Parliament to scrutinise on the basis of an adequate amount of detail the arrangements concluded.

The serious breakdown in the operations of the Student Loans Company in the autumn of 1994-95, which left 35,000 students without money for a whole university term, can largely be attributed, on the evidence given to the Public Accounts Committee, to a

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series of failures to consult either the students or the universities; to secure expert advice on the design of the pro forma; or to make adequate contingency plans. All those mistakes could, and probably will, be repeated in the new scheme, should it ever be implemented.

Another major cause of trouble in the system was undoubtedly the failure to define clearly the responsibilities of the Student Loans Company and of the Department for Education and Employment respectively. As paragraph 25 of the report states:

    "We note that proposals currently being developed for the Department for a twin-track public/private loans scheme will have an impact on the Company's operations. We observe that Sir Eric Ash's successor as Chief Executive will have to oversee a period of significant change. While we accept that there is an arm's length relationship between the Department and the Company, we emphasise the importance of departmental oversight in this period of change and look to the Department to ensure that proper arrangements are in place".

It is hardly reassuring--indeed, it is deeply disturbing--that in paragraph 43 of the conclusions of the report we read:

    "We asked the Company how they expected their business activities to be affected by the proposals, recently introduced by the government, for a twin-track public/private loans scheme ... The Company told us that the subject was of 'burning interest' to them but that they did not have enough facts to make detailed plans ... the Company agreed that the process of planning the Company's operations was fraught with uncertainty and this would be a very considerable further complication".
Does the Student Loans Company have those facts now? Perhaps my noble friend the Minister will tell us, particularly as we are also told in the report that, in projecting staff levels, the company was not able to plan more than a few months ahead.

The report continues:

    "We asked what proportion of student loans might still be in the hands of the Company at the end of their three-year planning period. The Department told us that, for planning purposes, they had assumed that by the third year of a twin-track system, 25 per cent. of student loans would be provided by the private sector. However, the Government hoped that take-up by the private sector would be considerably greater than that. The Company told us that this would affect the scale of the work they did".

So, we have three players, the department, the Government and the company--and we learn from paragraph 92 of the evidence in the committee's report that the Minister's stated policy--stated in the other place--is,

    "to hope that all student loans will be done by the private sector in the future".
I think that my noble friend the Minister will agree that, if that is the Government's hope and intention, Parliament has strong grounds for scrutiny of the scheme once the commercial arrangements are in place.

We are entitled to feel concern at the ambiguous and ill-defined arm's length relationship between the department and the company and at the detachment displayed by the department. I cite the Permanent Secretary's reply when asked by the committee what the department did to help to put matters right when they went badly wrong or even to press the company to put things right. I quote:

    "There is no doubt in my mind at all that this project was poorly planned and poorly implemented but it was an operational matter for the Company".

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Where have we heard those words before? If, as the report says, consideration is being given to the company being designated as a non-departmental public body, I should like to know the implications for the future.

In its summary, the PAC echoed the concern that we are entitled to feel, and to which I shall return on future occasions. It states:

    "we accept that there is an arm's length relationship between the Department and the Company, we emphasise the importance of departmental oversight in this period of change and look to the Department to ensure that proper arrangements are in place".

I end with one last quotation from paragraph 49:

    "Given the level of uncertainty associated with the Department's proposals, we recommend that they pay particular attention to the potential impact of these proposals on the operations of the Company".
As Sir Eric Ash observed, the devil is in the detail. We have a right to be able to judge the scheme once it is in place in detail.

Lord Desai: My Lords, I rise briefly to say that I know the Minister will say that this matter should be left to the private sector and that it is a matter of choice. I have nothing against such a statement, but let us recall what happened with pensions when we moved from SERPS to asking people to take out personal pensions. The final result was tears, with one-seventh of those people being oversold a pension. We later had to amend that legislation with another piece of legislation.

Of course, there is not a strict parallel here, but we could end up with many people being refused credit without a proper reason being given. Six months or even two or three years later, we shall have to amend the legislation because the volume of consumer complaints will be too great. Therefore, I think that the amendment is making a perfectly reasonable request, especially when we remember that the student loan application will be the first loan application that many people make. No matter what the Minister says, if they are not given a proper reply, their copybook will be blotted. We must remember that credit companies share information and that, once somebody has been refused credit, they do not get it thereafter. That is a fact. People become red-lined, just as happens with certain housing areas. That is what will happen. I wish that the Minister would agree that disclosure of such information is not in conflict with freedom of choice.

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