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("1977 c. 46.
The Insurance Brokers
(Registration) Act 1977.
The whole Act.")
I am glad that they have this opportunity to do so because, while it was still active, it was a difficult anomaly in the self-regulatory field in which I acted and I should not wish that anomaly to persist and annoy in years to come. I shall listen with great interest to the Minister's reply.
Lord Bach: I would like to thank the noble Lord, Lord Elton, for moving this helpful amendment. I can assure him that the Government are happy to accept the amendment in principle. He may have been told that before the amendment was called. Indeed, the Government have already announced their intention to repeal the 1977 Act as part of their reform of the financial services regulatory structure. However, I would ask that the matter is not pressed further at this stage.
The council is a statutory body, and it is therefore necessary to make provision for dealing with its abolition in statute. However, there are certain transitional matters arising from repeal that we need to ensure are adequately addressed. We will need, in particular, to consider whether we need to make provision to deal with any assets and liabilities that the council may have, and to deal with any contracts or litigation that arise.
I hope the Committee will understand that the final shape of transitional and consequential provisions depends on the substantive provisions in the Bill. My noble friend's officials are currently discussing the associated transitional issues with the council. Those issues are complex but they are technical rather than substantive. However, the Government accept the point in principle and will bring forward appropriate amendments as part of their package dealing with repeals. Once again, we express our thanks to the noble Lord.
Lord Elton: I am grateful to the noble Lord. If he nods, I take it that the amendments will be brought forward in this Bill on Report or at Third Reading. In that case, I am happy and satisfied to withdraw the amendment.
Lord Carter: My Lords, before my noble friend Lord Bach moves the Motion, perhaps I may apologise to the House for having to take these important orders so late at night. In particular, I thank the noble Baroness, Lady Blatch, for her forbearance and patience in waiting. We entered the House together in 1987 and we have followed each other's careers with interest ever since.
The noble Baroness has been a Minister and she will know that the business does not always proceed as smoothly as Chief Whips and Opposition spokesmen would like. I really am grateful to her for her co-operation in taking these orders at the end of business for reasons outside my own control, which I have explained to her, and for her patience in waiting to deal with them. Again, I thank the noble Baroness.
The noble Lord said: My Lords, these regulations will introduce a new system for the repayment of student loans. They will provide for the collection of repayments through the tax system. The level of repayments will be linked to levels of income.
These regulations are the first dealing with the repayment of student loans to be made under Section 22 of the Teaching and Higher Education Act 1998. They were laid before Parliament on 17th February and have been considered by the Joint Committee on
The regulations introduce three important changes to the present system of student loan repayment. They bring in, first, a new repayment threshold of £10,000 per year; secondly, a liability to repay 9 per cent of income above that level; and, thirdly, the collection of repayments through the tax system.
Perhaps I may briefly draw the House's attention to the main aspects of the regulations. Part I includes their extension to the United Kingdom, where they confer powers on the Board of the Inland Revenue. Part II contains general provisions, including liability to repay from 6th April after a borrower has completed or left higher education; when loans will be cancelled; and when borrowers will be entitled to a refund of repayments. Part III deals with recovery through self-assessment for tax. Borrowers, who are required for tax reasons to submit a self-assessment tax return, will be liable to repay 9 per cent of total annual income over £10,000, including any taxable unearned income in excess of £2,000. Provisions in that part of the regulations describe also which sources of income will be excluded from that liability.
Part IV covers recovery by employers, which is the main part of the regulations, as most recovery of student loans will be carried out by employers. Loan repayments will be collected and accounted for by employers in the same way as for income tax and national insurance. Deductions will be based on 9 per cent of a borrower's earnings over £192 per week, or £833 per month, which is equivalent to £10,000 per year. Part V gives the Secretary of State powers to recover student loans from borrowers who are not resident in the UK for income tax purposes.
The new arrangements will in time affect large numbers of graduates and employers. We have therefore consulted extensively. An employers group helped the Inland Revenue to identify ways of keeping additional work for employers to a minimum, and with a range of technical issues. My department held a 10-week public consultation. The regulations require employers to undertake a new activity, but the additional work has been kept to a minimum and the effect on employers generally is gradual. A regulatory impact assessment, lodged in the Libraries of both Houses, sets out the impact on employers, as well as the benefits of the new scheme.
We took particular note of the points raised in relation to small businesses and have agreed, importantly, to conduct a review of the impact on small firms after the first year of the scheme. We shall consider any additional help if the impact on small businesses is found to be unduly burdensome. In planning the introduction of the new arrangements, my department and the Inland Revenue have ensured that borrowers and employers have been kept well informed.
The draft regulations before the House will enable the Government to introduce a fairer and more effective system for recovering student loans. It will become an integral part of our new student support system. I beg to move.
Baroness Blatch: My Lords, I thank the Chief Whip, in his absence, for his kind remarks earlier. I hope that the House will forgive me, even at this late hour, if I say that I am somewhat puzzled. First, I agreed to debate these regulations some weeks ago on a Friday. They were pulled, or withdrawn--whatever the word is--because the noble Baroness, Lady Blackstone, could not be present. She is not present this evening, so I find it extraordinary that the debate could not have been carried out on that day as arranged.
Secondly, the Minister has just said that everyone has been kept informed. I might say everyone except myself. As the Shadow Minister for Education in this House, I have not been kept informed at all. Thirdly, I find it absolutely extraordinary that we have just had a statement from the Minister without a single mention of a report which I discovered had been released only by reading about it in a newspaper this morning--the report of the Scottish Fee Support Review. It slipped out yesterday.
On a daily basis I receive missives from the Department for Education and Employment, glossy brochures--usually with a foreword from the Secretary of State--photographs, illustrative drawings and massive supporting press releases. However, interestingly the Quigley report, which we have debated many times and asked when it is likely to be published, came out without a single press release, in an absolutely plain cover, with not a photograph in sight and absolutely no notification to me as the chief Opposition spokesman on this issue.
This matter is not only highly controversial, but has also been the subject of votes in this House. Votes have been won by this House when the matter has gone backwards and forwards between the two Houses; and yet the Government have seen fit not to give any publicity, as far as this House is concerned, in relation to this order, other than to lay it down technically yesterday.
The recommendation completely vindicates the stand that we took on the issue of the Scottish anomaly. The Government have not only lost this battle, but they have decided to concede it. When did that happen? When did the Secretary of State take that decision? They say that the Scottish Executive has also conceded the battle. When?
If this report was produced only yesterday, when did the meetings take place; who decided the outcome; and who was informed about them? I understand that the Secretary of State for Education and Employment, David Blunkett, welcomes the publication of the
The report has been somewhat overtaken as the anomaly has changed in that Scottish students in Scotland will not pay fees at all. They will have no obligation to pay fees up front, but when they have completed their degrees and are earning above a determined threshold, they will make a graduate contribution. So a completely different system and a completely new anomaly now exists.
It would be helpful to know exactly where the order fits into the report that has been laid, totally unannounced, before the House and the effect of the changes that have taken place in Scotland which create yet another anomaly between Scottish students and English, Welsh and Northern Ireland students. Is the concession whereby Scottish students in Scotland do not pay tuition fees, other than a graduate contribution when they have completed their degrees, enjoyed by EU students, but not by English, Welsh and Northern Ireland students, or is that concession exclusive to Scotland? If that is the case, why has it not been extended to EU students when the original concession was deemed to be a legal obligation that had to be extended to such students?
Given the short notice that I have had in regard to these orders, I find it extraordinary that the order states that it will come into force on 1st April. I am told that the DfEE was unaware of that--it had thought the date would be in the middle of April--and that it forgot to tell us until less than 48 hours ago that it had decided to go ahead with these regulations now as they come into force on Saturday.
I am sure that the noble Lord will agree that they are shatteringly complex. There are six or seven A4 pages of fairly close type just explaining the order, let alone reading the legalese of it. The Bill itself was passed in 1998. The orders were laid before Parliament in February 1999, which is more than a year ago. These matters should have been discussed weeks ago, as they were in the Commons. But, as I said, the Minister pulled out simply because the noble Baroness was unable to be here. Yet suddenly, in extremely indecent haste, we have to deal with this order past midnight on a Thursday night.
I now deal with some of the detail of the Bill. The noble Lord may not be familiar with it because he was not party to the detailed discussions on it. We still regard the threshold of £10,000 as being very low indeed. For someone with that income it represents 20 per cent which they would be ordered to repay. It
The noble Lord said that there had been a great deal of consultation with employers and that the impact on them would be minimal. We have not seen joined up government in the past three years from this Government. Each department is putting burdens on the employer. Family tax credits and so many other benefit systems are for the employer to sort out and no one else. This measure is just one more burden on the employer.
It is not just a question of taking this matter in isolation and saying that it will not impact very much on employers. It would be very helpful to know what the combined burden from all the Bills passing through Parliament will mean to employers. Has there been a costing and, if so, what is it? Has there been a financial appraisal? I have not seen one. When I was asked to take these orders at short notice I asked whether I could receive all related material. I have received nothing but the orders, other than picking up the Quigley report on my own.
If employers need not know the size of an employee's loan, how will the employer know when to cease taking payments from an ex-student? It is extraordinary that an employer need not know the extent of the loan. It would be helpful to know how the employer is expected to second guess that.
When this matter was discussed in another place the honourable gentleman, Mr Wicks, referred to the Inland Revenue, which would send a notice to employers to inform them that they have an employee who has a student loan and when repayments should start. What system will be used by the Inland Revenue to know where a student is working? For example, there are addresses and names. Many students have similar names. They do not always return to the home address. Frequently, they go to another address in another part of the country. What will be the system for keeping tabs on those students when they move away? Will it be the job of the Inland Revenue, the local authority, the ex-institution or a government department? How will that work?
Out of interest, will the £10,000 threshold for repayment be uprated for inflation as time passes? It would also be helpful if the noble Lord were able to explain how the two different systems--the Scottish and the English systems--will be dealt with by the Inland Revenue. Scotland is not charging fees for its students. It is charging a graduate contribution that will be paid when the student has completed a degree. Yet in England fees will be paid on an annual basis, including for the fourth year. So those are two completely different systems and yet we have a UK-wide Inland Revenue system which will have to operate separately and differently for different
Again, the noble Lord made no reference at all to the fact that we have the Bill as it is passed as an Act; we have the Act as it will be changed by the Quigley Report, because we now know that the Scottish Executive agreed it and the Secretary of State agreed it; and we also have the changed situation as a result of the recent Scottish Parliament decision.
Postgraduate students were referred to again by Mr. Wicks. The information he gave is interesting in relation to postgraduate courses. A postgraduate teacher-trainee does not pay fees. The UK Government exempted postgraduate teacher-trainees from paying for what would be their fourth year; they do their degree in three years and for the year in which they do their PGCE they will not be paying fees at all. What does the reference mean therefore when it says that PGCE students will be exempt from fees? They are already exempt from fees.
Yet another announcement that was made this morning by the Secretary of State for Education--again to Radio 4 in the morning but not to Parliament--was that postgraduate students in their fourth year doing their teacher-training year are to be given a grant of £6,000, and an extra £4,000 if at the end of that time they become employed in a school. I will point out an anomaly which I regard as grossly unfair. In this country there are around 24,000 schools, almost 20,000 of which are primary schools. Predominantly, the teachers who teach in our primary schools do four-year Bachelor of Education courses. The postgraduate courses are mainly taken by those people who go into secondary school teaching. Is it fair that the bulk of the teachers who teach in United Kingdom schools, and certainly in English, Welsh and Northern Ireland schools, will receive no relief for their fourth year, yet their fellow teachers who teach in secondary schools and do a fourth-year PGCE will not only be exempt from paying fees, but will have a grant of £6,000 followed by another grant of £4,000 if and when they receive a teaching job? I regard that as pretty unfair and extremely anomalous for our primary school teachers.
I understand that penalties levied by the Inland Revenue will be pretty severe. Given the complexity of the system--I have never seen anything quite so complex--it is possible that there will be students who default on their repayments simply because they do not understand the system. We know that there will also be those who can pay but wilfully will not pay. It is important that some sensitivity is exercised by the Inland Revenue and local authorities when considering the degree of wilfulness in terms of defaulting on repayment. When the system is in full swing it will affect up to 1 million students, almost all employers and almost all families. It is extremely important, therefore, that that issue is addressed. The Government are talking about a slow start and a slow build-up; but each year it will grow quite quickly.
The next issue relates to overseas students. Some overseas students will be UK-resident students who, at the end of their degree course, go and work abroad; there will then be the overseas students who come into our UK universities and at the end of their courses return to their country of origin. Given that only a small section in Part V of today's order mentions overseas students, it would be helpful to know the mechanism used to trace such students. At col. 7 of the Standing Committee's deliberations of 8th March, Mr. Wicks stated:
I understand that practically the first task students must complete before they go abroad is to inform the Inland Revenue that they are going abroad. I do not know if any noble Lords present have had a son or daughter prepare to leave the country, but I certainly have. My son left to undertake research in Japan. I know that the last thing on his mind was to let the Inland Revenue know what he was doing. He was much more preoccupied with the practical business of moving from the UK to another country. If he had forgotten to inform the Inland Revenue, what would be the penalty?
How will the payments be managed? How will they be enforced if these people simply disappear into the ether in other countries? What about European Union students? Although they reside in more neighbourly countries, how will they be traced?
A number of questions were asked of the Minister in another place, but they were not answered for lack of time. I shall ask them now because the Government have had a long time to think about the matter and I have no doubt that they have all the answers. If a student works in a foreign regime that is subject to a double taxation agreement, would the deduction of a loan repayment be regarded as a payment and reduce his net income?
Perhaps I may also refer to part-time and seasonal earnings. A student's income could fall below the £10,000 threshold in the course of a year. In that case, if he could produce a self-assessment form, could he reclaim some of the loan repayments he had already made? If not, his income might be reduced to an unacceptably low level. How will the repayments of self-employed students be calculated? Furthermore, how will they be phased? Their income may fall under Schedule B, which is taxed in the current year, or under Schedule E, which covers income from a trade and is taxed in the preceding year. Which will be used to calculate the deduction? Can the Minister confirm whether the £10,000 income will be upgraded each year in respect of average earnings?
Will the cut-off point for freedom from debt at pensionable age be set at 60 for women and 65 for men, or is it to be set at 65 for both? In paragraph 15(6) relating to capital receipts, will the unearned income under £2,000 that is to be disallowed include capital receipts? Paragraph 36 of the order covering deduction for employers makes it clear that an attachment of earnings order for income tax is a priority, but what will happen if an attachment of earnings order for income tax is already in place as well as one for another purpose? I am thinking of payments to the Child Support Agency, for example. What priority will be given to the loan? Whatever happened to phase 3 of the plans to sell the student loans portfolio? What are the most up-to-date drop-out rates from our universities?
The noble Lord will by now have guessed that not only am I pretty dissatisfied at having to respond to these orders at such late notice--given the reason that the noble Baroness could not be present on a previous occasion--but I am also extremely angry that we have had to undertake our own detective work to sort out Quigley and understand what it says. We have had to discover the information the Secretary of State had already decided not to give out in a press release, when almost anything that happens at the DfEE is released to the press. I have to say that if the department has good news to tell, one gets it quickly. However, if it is bad news it is hidden under a stone.
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