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8 May 2008 : Column GC167
8 May 2008 : Column GC167
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Thursday, 8 May 2008.
The Committee met at two o'clock.
[The Deputy Chairman of Committees (Lord Tordoff) in the Chair.]
Sale of Student Loans Bill
(First Day)
Clause 1 [Sale of student loans]:
Baroness Sharp of Guildford moved Amendment No. 1:
The noble Baroness said: I shall speak also to Amendment No. 26, which stands in my name on the Order Paper. All the amendments in this group are concerned with data protection issues. The first of the two amendments tabled by the Liberal Democrats is the more substantive. The reason for it is that there is concern that public sector organisations do not treat personal financial data as securely as they should. We have seen several examples in the past year of failures of public sector organisations in this respect, most famously the loss of personal data by Her Majesty’s Revenue and Customs, including the names, addresses, bank account details and national insurance numbers of 1.2 million people who were claiming child tax credits, but other examples have come to light of public sector organisations—for example, the Child Support Agency or the agency dealing with pension credits—where personal financial data have been treated in a very cavalier fashion by public servants. The incident last November at Her Majesty’s Revenue and Customs in relation to the child tax credit is a case in point. The full details of what happened have never really come to light, but it appears that the National Audit Office asked for data for its investigation, that request was passed to a relatively junior official who copied the data on to an ordinary CD without proper encryption which he sent through the internal mail by TNT and somehow it never arrived where it was supposed to arrive. The result was to waste many hours of police time in what ended up being a totally futile search.
Why does this worry us, and what relation does it have to the Bill? I was involved in the report of the Science and Technology Committee of the House of Lords on internet security. Identity fraud is one of the big issues that came up in the debate on internet security. From the point of view of those wishing to hack into the internet, what better than to provide them with all these data linking names, addresses, bank accounts and earnings on a CD-ROM? What a blessing that would be.
The question arises: why were procedures so lax? The Minister may well argue that these incidents are totally irrelevant, that the collection of money from former students through the Student Loans Company, as well as the loans, will be sold off in tranches, and
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Clause 6(3) makes it clear that Her Majesty’s Revenue and Customs may be asked to pass over information to the Student Loans Company—whether the person or body requires the information in that capacity or the capacity of any agent of the loan purchaser. Subsection (4)(b) of that clause expressly permits onward disclosure of information to a loan purchaser or its agent in relation to the loan transfer.
Information is clearly going to be exchanged. The amendments merely reinforce the obligation on Her Majesty’s Revenue and Customs, the Student Loans Company and any other body involved in that exchange to treat all these personal financial data with the normal precautions and protections. Experience has indicated that directives and regulations are not enough. These days, civil servants, teachers and social workers are subject to so many regulations that they almost fall off them like water off a duck’s back. It really helps for these matters to be reinforced by being mentioned in the Bill. The aim of the amendments is to put into the Bill the need for public servants to take the normal protections and precautions. I beg to move.
Baroness Verma: It is often noted that our job in this Committee is to give in-depth, line-by-line scrutiny to legislation that sometimes gets rushed through another place. I do not necessarily want to suggest that the Bill has been rushed through, but that does not remove the mantle of our responsibility to give it a thorough inspection.
There are two kinds of scrutiny. There is scrutiny that arises out of the particularities of the policies in a given Bill. Yet other issues arise, not because of the policies themselves, but because of the Government’s history in handling and implementing particular schemes. This, then, requires us to keep in mind a different way of approaching legislation.
The amendments of the noble Baroness, Lady Sharp, in this group are a good example of this second kind of scrutiny. To reiterate the noble Baroness’s point, the Government's history with data protection is not good. In fact, saying it is disappointing would be euphemistic. Whether it is keeping diseases in labs or disks in offices, this Government do not seem to be able to keep track of a great number of extremely important things. The 25 million people whose data were lost have been discussed at great length. I do not really want to make a cheap political point but, considering the sensitivity of the information that will be stored and passed around in connection with the Bill, why should we believe any assurances about data protection this time?
We understand the Government’s amendments and the need for data to be used to generate models so that the loans will be saleable. Yet with so much sensitive information being transferred out of the Government’s hands, what policies are in place to guarantee that personal data are protected? As some
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The Parliamentary Under-Secretary of State, Department for Innovation, Universities and Skills (Baroness Morgan of Drefelin): I thank the noble Baronesses, Lady Sharp and Lady Verma, for their comments, giving me the opportunity, I hope, to offer significant reassurance on their concerns. I should like to say to the noble Baroness, Lady Sharp, that I do not think that identity fraud and concerns about the internet are irrelevant. They are extremely important and I know through other work unconnected with this Bill how seriously my department takes these issues, particularly with regard to the student loan companies. I appreciate her concerns.
I agree wholeheartedly with the noble Baroness, Lady Verma, about scrutiny and hope that we do not appear to be rushing this Bill through. We very much appreciate and enjoy detailed scrutiny in this House and I am sure that we will see some improvements as a result of our discussions. I hope that I can offer reassurance, particularly on the progression of protection through the Data Protection Act.
I welcome this opportunity to restate the Government’s wholehearted commitment to the proper protection of borrowers’ personal information, which is very important. These amendments are proposed by the noble Baroness, Lady Sharp, in respect of Clauses 1 and 6, and by the Government with respect to Clause 6. I share the noble Baroness’s determination that there should be no doubt as to the purchaser’s obligations to protect borrowers’ information. These provisions ensure that in addition to purchasers of loans being subject to the Data Protection Act in how they handle borrowers’ data, they will also be covered by the criminal sanction of improper disclosure of HMRC personal information, as set out in Clause 6. That is a significant step.
Amendment No. 1 seeks to ensure that purchasers will take on the Secretary of State’s obligation to protect personal data. Under the Data Protection Act, an owner of sold loans who was in possession of personal information about a borrower would be a data controller in respect of it and would automatically have the same obligations as the Secretary of State for unsold loans. So it is unnecessary to include the specific provisions set out in Amendment No. 1 because the obligations are there. In any event, the Secretary of State’s obligations would neither cease nor transfer so long as he, too, remained in possession of the information, whatever the status of the loan. Amendment No. 26 is motivated, as the noble Baroness said, by the same concern to protect personal data.
2.15 pm
Clause 6 relates to what is known as a statutory gateway that allows the disclosure and onward
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I turn now to the government amendments. It makes sense for me to talk to Amendments Nos. 22 to 25 as a single set of broadly technical changes clarifying Clause 6. As I said at Second Reading, and as has been made clear in greater detail in another place, the Bill intends that only anonymised data can be disclosed to potential purchasers, or those who advise them. However, the personal data of borrowers are subject to greater safeguards, and can be made available only to the actual purchasers and their agents. As I have indicated, the existing criminal sanction on wrongful disclosure of personal information originating from HMRC is being extended by the Bill to cover personal data on sold loans.
The proposed changes to subsections (1) and (2) in Amendments Nos. 22 and 23 provide a similar expression that disclosure of anonymised data may relate both to loans being offered for sale and those that have already been sold.
As Members of the Committee will be aware, we expect that sales will include a securitisation process. That means that a range of parties will properly need to consider financial models, containing anonymised data on loans, to assess how the loans to be sold may perform and make informed decisions about whether to be involved in the purchase of student loans and bonds.
In addition, Amendment No. 24 proposes a change to subsection (4) to describe a class of disclosure of anonymised HMRC financial information, so that it may go to those who have a purpose connected with the loans being offered for sale or that have been sold. We believe that this is the most effective way to ensure that such non-personal data can be given to those who need them, including potential purchasers and investors, and financial institutions involved in the transaction. Across a long-term programme of loan sales we could never create a complete list of such parties that would stand the test of time. If this amendment is passed, we will describe the parties in the next version of the Explanatory Notes to the Bill. I stress again that such parties would only ever be entitled to anonymised data. There is no question of
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Finally, on the much more restricted access to personal data, Amendment No. 25 is intended to make it clear that the narrower definition of actual purchaser or its agent should include the purchaser’s auditor. Without the explicit reference we were advised that this might be misunderstood.
I hope that with this rather dry, technical explanation, the noble Baroness will consider withdrawing her amendment. I take very seriously her comments and I hope that with the reassurance I have given about the role of the Data Protection Act and the additional criminal sanction for the wrongful disclosure of HMRC data, she will consider supporting the government amendments.
Baroness Sharp of Guildford: I am grateful to the Minister for her reply and her sympathy with the cause that I have argued. She said that the role of general data protection applies for the onward sale of loans and that, as an additional precaution, only anonymised data will be passed on to the purchaser or their agent. If that is case, we can be reassured.
Baroness Morgan of Drefelin: Anonymised information will be available to those who are interested in becoming purchasers. Personal data would be made available to the actual purchaser. We are concerned with two groups of people.
Baroness Sharp of Guildford: I thank the Minister for that clarification. She is of course correct.
The useful note to the Bill lists the four main functions of the Student Loans Company. The first two are: delivering financial support to eligible students and paying to the higher education institutions the public contribution towards tuition fees. Its third function is significant: supplying information needed by HM Revenue and Customs to ensure repayments are collected on time from all those due to repay under the income-contingent repayment loans scheme. The final function is managing the direct collection of repayments for loans granted under the former mortgage-style loan scheme.
It is clear that there will be exchange of information between the Student Loans Company and HMRC, and between those two organisations and the actual purchaser. The actual purchaser will have the right to personal information. The Data Protection Act comes into play, but it was under the security of that that the CD-ROM containing data was sent by HMRC. I concede that one cannot allow for public servants not adhering to regulations, which is why it perhaps would have been useful to reinforce the obligation in the Bill.
There is no point in pursuing the amendment. It is sensible to withdraw it.
Baroness Verma: A purchaser in the UK will abide by the legislative requirements here, but where is the data protection if those sales are made abroad? What covers that?
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Baroness Morgan of Drefelin: It might be helpful if I write to the noble Baroness on that unless I come back to her later with a better answer.
Baroness Sharp of Guildford: It is a pertinent point, because we may see student loans sold on to foreign-owned banks. An answer to that question would be useful.
There is not much more to pursue on this issue. I will read the Minister’s answer with care. We may bring back the matter on Report if we feel that there is cause to do so. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Sharp of Guildford moved Amendment No. 2:
“( ) Transfer arrangements shall not confer on the loan purchaser the right to alter loan arrangements made under the terms of subsection (4)(b).”
The noble Baroness said: In moving Amendment No. 2 I shall speak also to Amendment No. 4 in this group. Paragraph 8 of the introductory note that explains the purpose of the Bill says:
“The primary protection for borrowers is that the purchaser of loans cannot alter the terms and conditions of that loan (for example, interest rate, repayment rate or repayment threshold)”.
The question underlying Amendments Nos. 2 and 3 is whether it is sufficient to leave this commitment to regulations or whether more detail needs to be written into the Bill. There is nothing in Clauses 1 or 2 to provide any guarantee to students that the onward sale of their loans will not involve any change in the terms and conditions of that loan. All we have is subsection (4)(d), which enables the Secretary of State to,
- “require a loan purchaser to make specified arrangements in connection with the administration of loans”,
and subsection (4)(e), which prohibits,
Amendment No. 2 would strengthen the commitment by writing into the Bill the principle which has throughout the proceedings in the other place been stressed by Ministers and incorporated into the introductory note. The amendment merely adds a new subsection stating the principle that:
“Transfer arrangements shall not confer on the loan purchaser the right to alter loan arrangements made under the terms of subsection (4)(b)”.
In fact, the amendment should really refer to loan regulations rather than—or, perhaps, as well as—loan arrangements. However, in preparing these notes I noticed that paragraph 16 of the Explanatory Notes says explicitly:
“The Secretary of State is not obliged to transfer all of his rights and obligations with respect to the loans in any contract with a purchaser—he may retain some of them if he wishes. For example, the Government does not intend to grant purchasers the right to alter the repayment terms of sold debts. Such terms
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Whether regulations or loan arrangements, the principle remains the same. This is an important aspect of the sale arrangements and should be written into the Bill, not left to reliance on Ministers’ intentions as written into the Explanatory Notes or in Hansard.
Amendment No. 4 deals with a different issue. It is the intention of the Secretary of State that repayments of student loans should continue to be administered by the Student Loans Company and collected for it by Her Majesty’s Revenue and Customs. In this respect, as was pointed in debates in the other place, for the borrower nothing has changed. The terms and conditions of repayment remain the same. The bodies with which they deal remain the same. Is there any reason why the borrower should not know that the loan has been sold on? Again, the Explanatory Notes are helpful. Paragraph 18 says that it is common practice for sales of this type,
- “to proceed without the permission of the borrowers whose loans are being sold, and without giving them prior notice of the sale”.
“The Government intends to write to borrowers whose loans have been sold soon after the sale has been completed to inform them of the new owner of their debt”.
This is necessary because borrowers will read in the newspaper about the sale of the debt and many may be very alarmed at the thought that the new commercial owners will demand a commercial rate of return on their loans. Amendment No. 4 makes it an obligation on the part of the Secretary of State that has statutory standing. It writes into the Bill what is at present merely an intention expressed in the Explanatory Notes. We feel that this would be of advantage. I beg to move.
2.30 pm
Baroness Verma: I shall speak to Amendments Nos. 3 and 5. I want to touch briefly on a matter that was the cause of some concern in another place, and as a result, some assurances have been given. However, I do not feel that they are entirely sufficient.
The first of our amendments in this group concerns guarantees that there will be no effect on the students. In this respect, our amendment is very close in sentiment, if not in wording, to that tabled by the noble Baroness, Lady Sharp. The point of our amendment is to strike at one of the primary concerns regarding this Bill, which is protecting students’ interests. I appreciate that the Government have made strong statements that there will be no real impact on students. But how far does this limitation affect the commercial viability of these loans as a product? I understand that the Government have had considerable consultation on this matter and I hope that the Minister will explain the point in detail.
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