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Lord Addington: My Lords, I have made two criticisms of the scheme. The first was that we do not give students enough to live on. I do not suppose that we can change that. The second was that it was

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something of a blunt instrument when it came to gathering in the money afterwards. If we allow the private sector to change the way repayment is made, many of the objections will disappear. The amendment is to:

    "make provision for the level of sums paid by the person borrowing in respect of repayment of any loan to be linked to the income of the person borrowing".
That means making individual arrangements for the individual in the scheme. Surely that is sensible. It would be responding to market forces, purchasing power, and so forth. Everything is there. We are referring repayments to the student's income. If it is a loan and the lender will get back the money, surely that makes sense. This is probably the last chance saloon for the Government to remove one of the major problems relating not just to this Bill but to the original Act. I fully support the amendment.

Baroness David: My Lords, I should like to support the amendment. I think that my noble friend Lord Borrie and I both made the point on Second Reading that the 85 per cent. of average earnings was a strict method of arranging repayments. It is hard on a number of students. Although it may have been £18 at the beginning, now that the loan is much greater with the grant being less, the figure becomes much greater. I do not understand the argument put forward by the Minister on Report when he said:

    "But it could be time-consuming and labour intensive to check the income of all borrowers. It would also be costly".--[Official Report, 25/3/96; col. 1528.]
I do not understand that, because surely if you are checking whether they have 85 per cent. of average earnings, their income has to be checked. I wonder whether the Minister could explain that. In the meantime, I support a more flexible repayment method which would, I hope, lead to rather fewer defaulters.

Lord Henley: My Lords, I rather resent the suggestion made by the noble Baroness, Lady Farrington, that I have not addressed the issue of income-contingent loans and whether they could be repaid through tax and national insurance contributions. I thought that I had made it clear that that is something that Dearing can no doubt look at. It is something that we have looked at in the past. I believe that such schemes are more complicated and more expensive to run than the current scheme which, whatever the criticisms made, has the advantage of being relatively simple and straightforward with, at the moment, a relatively good repayment recovery rate and low administrative costs.

The noble Baroness, Lady David, said that our scheme is surely already income-contingent. She admits that. It works on 85 per cent. She said we have to look at their incomes to decide that and so why cannot we look at other schemes. With the other schemes she suggests, I presume that there would be different repayment levels for different levels of income. That would mean that we would have to look finely at everyone's income rather than use a broad brush

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approach as to whether they are over or not over 85 per cent. It would be a more complicated scheme and therefore necessarily more expensive.

Perhaps I may repeat that the current scheme is, to some extent, income contingent. It is set, as the noble Baroness said, at 85 per cent. of average earnings. That figure, the repayment period of five years, and a whole host of other figures can be adjusted by means of the regulations that exist under the 1990 Act. The Bill does not change those matters at all.

We could move to a scheme which is yet more income contingent than the current scheme, although the current scheme is already income-contingent. If we did that there may be a greater degree of complexity. One would have to look at the division of costs. If the former student had a more favourable repayment period, one would have to accept that the whole system would be more expensive. These things have to balance. I accept that at the moment students are repaying a relatively low figure. I accept that that figure will increase over the years. That is why each year we have a new set of regulations which allows us to look at what should be the appropriate repayment figure, how long the period should be, and what the 85 per cent. figure should be.

Baroness David: My Lords, perhaps I may ask a question. If the figure was average earnings rather than 85 per cent. would it be possible to change to that in the regulations?

Lord Henley: My Lords, it would be possible, yes, because one can shift that percentage up or down. It could up to 100 per cent.; it could go down to whatever. We could do it with some figure other than average earnings. There is a whole host of things that we can do by means of regulations. But, having set up the Dearing review, and having asked Sir Ron to look at these issues in great detail, we feel that there is no point in making a major change at the moment other than the changes that we could make by means of the regulations. For that reason, it would not be wise or sensible for the House to pursue the amendment. I hope therefore that on this occasion the noble Baroness will feel able to withdraw it.

Lastly, the noble Baroness yet again, as did her noble friend Lord Morris, threw in my face the reports and views of some Conservative think tank. That think tank does not make Conservative policy. Policy is developed by Ministers, as is right and proper. I, on a previous occasion, threw back at the noble Baroness a supporter of one of our schemes--a friend of the noble Baroness, Mr. Frank Field, a Member of another place. I did that just once. It was unnecessary for the noble Baroness to come back yet a third time and mention some Conservative think tank whose views are different from those of the Government. As I said, I believe that these are matters that can and should be addressed by Sir Ron. I hope therefore that the noble Baroness will feel able to withdraw the amendment.

Baroness Farrington of Ribbleton: My Lords, I am amazed that if there is only a slight difference between the Government and a Conservative think tank, the

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Government, who claim to be so flexible, are not prepared to make that slight movement tonight. This is a major change in advance of the committee of inquiry reporting. It is the setting up of a whole new parallel structure which will come into effect just as the committee of inquiry reports.

Secondly, why on earth are the Government so rigid in the way that they want to regulate the private sector? The Minister has said on many occasions that the financial institutions will carry the burden of any failure to repay. Surely we can have confidence in the financial institutions which choose to bear, together with government public subsidy, the enormous cost of setting up a new scheme at the same time as the committee of inquiry is due to report on the change.

Why are the Government so concerned with rigid control and regulation in this instance? Why are the Government not prepared to take the view that if the private sector institutions are risking their money they should be able to make their own choices?

Finally, the Minister said that no one needs to take out a loan. It is not necessary for those with private financial means or family income to take out a loan, but for many students it is the only means of survival. I remain convinced, but can see little chance of convincing the Minister of his mistake. Therefore, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8 p.m.

Lord Henley: My Lords, I beg to move that the Bill do now pass. We have completed what is a relatively simple Bill, bar seeking the agreement of another place for the two amendments that I brought forward in Committee. The first was to implement fully our policy that students may take out only one loan per year, public or private. The second was to address the concern that higher education institutes might not obtain a fee for certifying eligibility for a private loan.

It is a relatively simple Bill which is designed to change the current scheme for student loans from a position where there is only one lender--the state in the form of the Student Loans Company--to one where there is the possibility of a plurality of lenders in the private sector while also retaining the Student Loans Company.

As I explained on Second Reading and at other stages, this will bring to the student the benefits of choice and it will bring to the taxpayer the advantages of shifting some of the risk of lending to the private sector. I hope also that it will bring benefits to the lenders themselves and that they will see the attractions and advantages of involvement in the scheme. The perfect deal or contract is, after all, one which leaves all sides of the agreement happy. This will, I trust, leave individual students, the taxpayers and all the financial institutions content.

For a relatively minor Bill, I feared that some if not all the concerns might go somewhat wider than this small part of the student loan scheme. Those concerns were heightened by many of the speeches made on Second Reading, the day on which we announced the forthcoming review of higher education by Sir Ron

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Dearing. I understand, as does the party opposite, why there are concerns about the funding and the future of higher education, in particular as we have seen a number of developments during the past 15 or 20 years. That is why, with the support of the party opposite, we set up the Dearing Committee.

Having done that, and having said that on Second Reading I noticed concerns which went somewhat wide of the Bill, I am grateful that during subsequent stages the debate has been largely devoted to the Bill itself. It has been constructive and largely conducted in an unacrimonious style for which I expressed gratitude. Perhaps I may thank my Whip who assisted me in these matters, my noble friend Lady Miller, and today my noble friend Lady Trumpington. I also thank my noble friends Lord Peyton and Lady Park for their interventions, even though I did not always fully agree with them. I thank them for their support in the Division Lobby on occasions when they felt they could support me.

I appreciate the concerns of my noble friend Lady Park about the parliamentary scrutiny of the proposed contracts with the financial institutions. Indeed, she repeated them today. After debating the matter in Committee and on Report, and after dividing on those issues, I am sure that my noble friends will appreciate that we cannot have parliamentary scrutiny before the contracts are signed or even that the contracts are conditional on parliamentary approval. I made that clear to my noble friend on previous occasions and I know that my noble friend Lord Peyton appreciates that fact.

Nevertheless, I hope that they will accept that I went some considerable way down the road to reassuring them and offering them appropriate assurance. I reassure my noble friend that I am still considering what would be the appropriate form of the statement that I mentioned on Report when we talked about parliamentary scrutiny (cols. 1478 to 1479). I believe it is right that we should announce that to the House in the proper way and I hope that thereafter my noble friend will find ways and means of debating those matters in the usual manner.

I also offer my thanks to noble Lords opposite, especially those on the Front Bench, for their constructive approach. The noble Lord, Lord Morris of Castle Morris, unlike some of us, has had the advantage of being able to start his holidays somewhat earlier. I thank the noble Baroness, Lady Farrington, and the noble Lord, Lord Williams of Mostyn, even if there were occasions when all three on the Front Bench spoke from the Dispatch Box on the same amendment. I dare say that that was designed to give some idea of numbers. Finally, I extend my thanks to noble Lords who contributed from the Liberal Democrat Benches, in particular the noble Lords, Lord Addington and Lord Tope. I thank them for their constructive approach and their helpful manner. I commend the Bill to the House.

Moved, That the Bill do now pass.--(Lord Henley.)

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