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Lord Desai: My Lords, what my noble friend said about issuing guidelines for students is probably necessary for everybody. Needless confusion has been created about the simplest loan system there is. The noble Baroness, Lady Maddock, said that there are three regimes being followed and that there is confusion. But every year there are three cohorts of students going to college and they are different. Therefore, no one has to know all three systems. The students know that. I am a great devotee of the income contingent loan system. The beauty of it, once it is made clear, is that it is not like a mortgage or hire purchase. It is flexible, but one has to write down all the rules. Once that message has been put across, perhaps more to local authorities, teachers and politicians rather than to students, then it will be clear that we are adopting one of the easiest systems to cope with. The existing student loan system is much more stringent.
What my noble friend and the Commons amendments are doing is to make the system much more transparent and not only user friendly, but friendly also to the tax authorities. Therefore, we should welcome the scheme. When the system is seen in operation there is no confusion. The income contingent loan is the easiest thing to explain. I hope that my noble friend will take up this idea. Perhaps we should have a one-sheet A4 explanation or maybe 10 or more sheets, if necessary. It is a very simple idea. The beauty of the idea has not been conveyed properly to people.
Lord Whitty: My Lords, I am grateful for my noble friend's intervention. His first point is absolutely right. There are always three systems in operation even when moving from one system to another. That is no different from other circumstances. Repayments under the scheme will not start until April 2000 and even then it will apply to a limited number of students. As I said at an earlier stage of this amendment or as regards a previous group of amendments, we intend to spell out in clear English what the students' entitlements are and what the repayment system will be. It is in that form, rather than through regulations, that students will come to understand the system, if they do not know it already.
The Inland Revenue provisions are the simplest way of making repayments. I believe that that is generally accepted. However, tax regimes alter from time to time. There are mistakes under that system both by the payers and the administration itself. They have to be rectified. All the amendments do is allow regulations to be changed when there are changes in the tax regime or something impacts on it. There is provision for compensation or penalties when the system does not work properly and mistakes are made, deliberately or otherwise. That applies in all Inland Revenue collection systems.
We are not inventing a new principle here but simply applying the best method of loan recoupment through the Inland Revenue to the new system. I believe that in practice graduates will find this system a much easier method of repayment than almost any form of loan repayment that existed under the previous regime. I make no apology for the fact that we have to tailor the scheme to the Inland Revenue system. I make no substantive apology for the fact that it has come somewhat late. That was because agreement had not been reached among government departments when the Bill first appeared in this House. At the point we announced that in principle we were going to pay through the Inland Revenue, everyone agreed that that was a good method. These are the consequences, and I believe we should accept them.
Lord Whitty: My Lords, do the loans apply against the PSBR? The noble Baroness will have to wait until there is a further announcement in that regard. Clearly, administrative costs are part of public expenditure.
Lord Peston: My Lords, will my noble friend confirm that expenditure on student maintenance is public expenditure? Even the Opposition must remember that from a year ago. It counts on that side of the balance sheet. In due course, when the loans are gradually repaid, they will count on the revenue side of the balance sheet and that will lower the PSBR. Perhaps the noble Baroness will agree with me that we should recast our public sector accounts so that none of this expenditure gets into the PSBR. When one argued that
I also support my noble friend in pointing out that my right honourable friend the Chancellor is working very hard to sort out the public accounts and I hope that we will not have this nonsense in the future.
("(i) requiring prescribed amounts payable to eligible students under loans under this section to be paid directly to institutions who have previously made loans of any prescribed description to those persons;
(j) modifying any enactment or instrument (whenever passed or made) so as to provide for the treatment, in connection with any calculation with respect to the income (however defined) of persons to whom grants or loans are made under this section, of amounts due from or payable to such persons under such grants or loans;
(k) for appeals with respect to matters arising under the regulations (including provision for determining, or enabling the determination of, the procedure to be followed in connection with appeals).").
("(ba) for the payment, in respect of amounts overpaid by borrowers, of interest at such rate, and calculated in such manner, as may be determined by the Secretary of State from time to time;").
("(c) for a borrower not to be liable to make any repayment in respect of such a loan--
(i) during such period as may be prescribed from time to time, or
(ii) in such circumstances as may be so prescribed,
including provision for the cancellation of any further such liability of the borrower in any such circumstances;").
(ii) shall at no time exceed the specified rate for low interest loans").
("(ca) requiring the payment, by persons or bodies to whom requirements imposed in pursuance of any of paragraphs (a) to (c) apply, of--
(i) penalties in cases of non-compliance with, or otherwise framed by reference to, such requirements, and
(ii) interest in respect of periods when such penalties are due but unpaid;
(cb) requiring the payment by borrowers, in respect of periods when amounts due under their loans are unpaid, of--
(i) interest (applied to such amounts at a rate calculated otherwise than in accordance with subsection (4)(a)), or
(ii) both such interest and one or more surcharges (together with further interest in respect of periods when such surcharges are due but unpaid);").