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In discussions with the Minister, it has been made clear that, if the Government were to make changes in such things, those changes would apply only to that block of loans sold. That was reiterated in Committee, when the Minister said:

This implies that it would be impossible for any future Government to make it easier for those who already have student loans. On the other hand, it would be

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possible for them to make changes for those getting student loans from that time onwards; they could change the terms of student loans because those purchasing them would know what those changes in terms were. I was slightly concerned because the Minister also talked about,

However, she had said earlier that,

A degree of clarification is perhaps needed, but I am probably right in assuming that, if regulations were changed, that could apply to future loans but not past loans. We see that in itself as a difficulty.

Two further difficulties have been raised. The first is the question of classification, involving Eurostat and the Office for National Statistics. How far does simply offering compensation change the terms on which the Government seek to make the sale? Also, is it the case that the Government are not actually selling the loan on because, if they are prepared to offer compensation in this way, it stays on the government books? It is of course important for the Government that, by selling on the student loans, the loans should not remain part of the national debt. Our attitude on these Benches, since we do not have that much sympathy with the amendment anyhow, is to some extent “Tant pis!”. However, that does not help the Government much.

Our final objection to the amendment is that its terms are so wide-ranging. It says, for example:

That is so wide-ranging that we must ask whether we want to give the Government these powers. We object to the amendment on those three grounds.

6.15 pm

Baroness Verma: My Lords, this is a crucial amendment. It was debated at length in Grand Committee and we are still hoping for further assurances in the Chamber. I agree with the noble Baroness, Lady Sharp, that it is a wide amendment and does not really answer or cover many of the points that we raised in Grand Committee.

The Minister said that the original motivation for laying these amendments was,

My understanding is that it allows the Government a wider scope to append conditions to the sale to make certain that purchasers do not have too much unquantifiable risk in the form of a future Government.

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It seems that the necessity of these amendments was oversight; that is, the first mechanism that was designed to give this certainty to investors was a programme that allowed for compensation should any changes be made. This, according to the Minister, was insufficient to give investors certainty. Can she confirm that this assessment—that the compensation package might mean that the loan book was less attractive—was provided by Deutsche Bank?

Other discussions revealed another issue that did not seem to preoccupy the Government; namely, whether the Office for National Statistics was able to classify the sale as a genuine sale and a legitimate transfer of risk given that Eurostat is reviewing its guidance. Surely this creates a substantial element of uncertainty. We understand that this guidance often changes. However, if this amendment is really about ensuring increased certainty by allowing for other channels to be considered, does it not make sense to wait until Eurostat has finished revising its guidance? Surely that would enable a clearer picture to emerge of what it is necessary to do to ensure value for money.

These amendments bring home the point that the Bill is a rushed job. If the Government’s intentions are as pure as they claim, why are they rushing through a Bill when the jury is still out on one of its primary mechanisms? Are they legislating for failure? Is the Treasury so desperate for the cash that it does not want to make a decision based on all the best information about the nature of the sale? Although we sympathise with the need to do what it takes to get value for money, this confusion remains a serious worry. Obviously, we will have to wait for precise figures to emerge when a sale is imminent, although we do not know when that will be. All the facts seem to point to a bad result. To cover up for badly managed funds, the Government are planning to sell loans in the worst credit market in history without the benefit of knowing where the goalposts lie. This does not seem to be a situation in which the taxpayer will win.

Let us be clear: a newspaper headline that read, “Government get good deal on loans in bad markets”, would be utterly unacceptable. The point about this enormous asset is that ensuring value for money must not constitute the best course in a bad bunch but the best possible course of action. If the markets seem unwilling to recover, has the Minister considered delaying the sale by, say, two years or so? It is important that she should explain the likelihood of the Government abandoning the sale. Value for money for the taxpayer should be deemed an absolute value in our calculations. I sincerely hope that, during the Government’s efforts to ensure that we get it, economists will do the work, not press officers. Telling the public that the loans were sold to protect the taxpayers’ interest when the Government might have been able to get a much better deal had they waited would be tantamount to dishonesty. If uncertainty remains in the classification that makes these amendments necessary, why not wait until that uncertainty can be banished and the taxpayer would be better off?

Baroness Morgan of Drefelin: My Lords, I thank both noble Baronesses for their contributions to this thought-provoking debate. I stress that the rationale

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behind these amendments is very much about creating a process for the sale of the student loans book that will be long-lasting and sufficiently flexible to meet the Government’s needs both in the near future and for some years ahead. I do not wish to speculate on how many months or years the first sale of the student loans portfolio might take under the Bill if it is enacted as it would be inappropriate for me to do so. However, the noble Baroness, Lady Verma, is right to be concerned about Eurostat and the review of the guidance. Eurostat is reviewing its guidance, but it may periodically conduct other reviews. So even if we await the outcome of this review, there could be others. That is why the sales arrangers—Deutsche Bank—have advised that it would be appropriate for us to have the possibility of reducing the uncertainty around the sales process, to promote value for money and have the prospect of making the undertakings.

I understand the concerns of the noble Baroness, Lady Sharp, in principle, but we need to remember that the Government are responsible for policy around student finance. If the Government were to make undertakings to fix the terms and conditions for a student loan that was sold, and if in the future a Government wished to look at the financial circumstances of the cohort of students with sold student loans, there would be many instruments for them to use to do so. Remember that they are not commercial loans but loans providing students with funding, which they then repay in real terms at the same level at which they originally borrowed. The provisions are not unreasonable for a loan so taken out. We are talking about a government process for making it possible for students to take the considerable benefits that a higher education offers and make the most of them. I stress for the noble Baroness that, should a future Government wish to make the financial circumstances of students with sold loans more favourable, many instruments would be open to them to do so, looking at the whole of the student finance and benefit system and whatever other ideas might be at their disposal.

We are talking about the potential for undertakings specifically for sold loans, not for unsold loans. However, we are also talking about Amendment No. 6, which is important. It seeks to ensure that borrowers will not be in a worse position as a consequence of their loan being sold. That is not just about loans being made following undertakings, but about all loans sold.

Given the clarifications and commitments that we have made regarding value for money and future options for government, I hope very much that noble Lords will support the amendments. We are ensuring that no student will be adversely affected as a result of their loan being sold, through this group of amendments. I hope that the House will support that.

On Question, amendment agreed to.

Clause 3 [Onward sales]:

Baroness Morgan of Drefelin moved Amendment No. 4:

On Question, amendment agreed to.



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Baroness Morgan of Drefelin moved Amendment No. 5:

The noble Baroness said: My Lords, in Grand Committee, in response to an amendment tabled by the noble Baroness, Lady Verma, I undertook to consider onward sales and how the Secretary of State can ensure that borrowers are protected. We are united in our view that borrower interests must be fully protected in any sales process and beyond. As I said in Grand Committee, the borrower’s primary protection lies in the fact that purchasers will not be able to change the repayment terms, which remain governed by regulations. However, we want the added safeguard that the Secretary of State can enforce any protections contained in the sales contract too, such as having access to the same complaints system. That is why subsection (6) enables the initial sales contract, to which the Secretary of State is obviously a party, to contain provisions that make sure that he is also a party to any onward sales contract.

Although, as I said previously, we think it unlikely that the legal title to the loans will be sold on, we want to be absolutely sure that the Secretary of State can enforce any contractual terms that he might need to in order to protect borrowers. We have listened to noble Lords’ arguments and to the points made in another place and we propose an amendment that makes it a requirement that the Secretary of State ensures in the initial sale contract that he is party to any subsequent contract transferring legal title to the loans. We have drafted the amendment in such a way as to enable that to be achieved by either of the contractual devices set out in subsection 3(6)(b) and (c) or by other methods with the same effect.

I am grateful to the noble Baroness, Lady Verma, for her constructive suggestions as we seek to ensure that borrowers are fully reassured that they are protected. I beg to move.

Baroness Verma: My Lords, my understanding of the amendment is that it would make the Secretary of State party to all onward sales, and I am grateful to the noble Baroness for explaining that. She noted that in the “extremely unlikely” event of an onward sale, the vehicle would change. But in the most unlikely contingencies lurk the most unlikely problems. What would happen if an attempt to purchase the loans was made by a power outside the Secretary of State’s jurisdiction? Would that be banned? Would a potential purchaser have to understand that his onward sale capacity would be restricted to this country? The amendment makes the Secretary of State party only to onward sales. Presumably this would not give him or her any power to influence such a decision.

Essentially the question which must be addressed is to what degree the amendment would restrict the potential of onward transfers. On the one hand, there seems to be the need for a considerable amount of restriction or we risk the loans escaping the Secretary

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of State’s jurisdiction. On the other hand, will this not be used as a bargaining chip to drive down the price? We on this side of the House think that there need to be a fuller explanation of the mechanisms that will ensure this extra control and the likely impact on the nature and price of the sale.

Baroness Sharp of Guildford: My Lords, from these Benches we are pleased to see this amendment. We supported the official Opposition in their previous amendments but, on the whole, we do not share their objections. We feel that this is an adequate amendment.

Baroness Morgan of Drefelin: My Lords, perhaps I may make one point in response to the questions of the noble Baroness, Lady Verma. We need to remember that the whole benefit to the special purpose vehicle of owning student loans is the receipt of revenue from HMRC. Therein lay the Secretary of State’s most important lever to ensure that the contracts are honoured and fulfilled. I have said several times that it is extremely unlikely that there would be onward sales, but I appreciate the noble Baroness’ concern to have reassurance. We need to be clear that a contract is in place and that all sides are contributing to it. The Government’s most important contributions are the revenues. That is what the process of securitisation is about. If another party were not to honour its commitments, there is the other side to it: the payment of revenue from the student loan book which would be balanced against that failure.

On Question, amendment agreed to.

Clause 4 [Loan regulations]:

Baroness Morgan of Drefelin moved Amendment No. 6:

On Question, amendment agreed to.

Bangladesh: Refugees

6.30 pm

Baroness Tonge asked Her Majesty’s Government what progress they have made in the negotiations to extend full Bangladeshi citizenship to the Biharis living in refugee camps in Bangladesh.

The noble Baroness said: My Lords, the liberation struggle leading to the birth of Bangladesh in 1971 was remarkable and successful. The people wanted self-determination; they were a unified group; they fought for it and they won. However, this excluded the Urdu-speaking poor Indians whom we call the Biharis, who were widely regarded by other Bangladeshis as supporters of Pakistan during the liberation war. It is a tragedy that for 40 years they have lived in overcrowded urban slum camps. I am sure that noble Lords will have visited them, as I have, all over the world. They live in appalling conditions. They are reviled by many

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other Bangladeshis and they have no rights or access to healthcare or education because they are not citizens of Bangladesh.

I really became interested in this group of people, and became a working trustee of the Dhaka Initiative, because of my interest in the causes of terrorism. All the ingredients are there in these camps: poverty, no education, no future, overcrowding, no status for the people, and a high proportion of young, volatile men in the population with nowhere to go and nothing at all to which to aspire. I remind noble Lords that the UNHCR had looked at this problem but had decided that the Biharis were not refugees according to the Geneva convention and were not stateless under the accepted definition of international law. In other words, they live in limbo, unrecognised.

The Dhaka Initiative was founded by the late Lord Ennals, and my noble friend Lord McNally has carried on the good work. It has had all-party support from the noble Lord, Lord Glentoran, and the noble Baroness, Lady Blood. Our organiser, Nigel McCollum, whom I cannot praise highly enough for his energy and dedication to the problem, has spent four years fundraising, co-ordinating donors, forcing progress and troubleshooting on the way. He has worked closely with Bangladeshi civil society to formulate a questionnaire on a whole range of issues of concern to Biharis, including, but not only, the questions of where they want to live and who they want to be. He had a lot of help from Professor Quamruzzaman from the Dhaka Community Hospital—in fact, he founded that hospital and was a war hero in the liberation war—and Professor Siddiqui and Professor Abrar from Dhaka University.

Community workers from the Dhaka Community Hospital who carried out the survey were not aware of its prime purpose, which was to find out the wishes of the Biharis, but they were very well trained and experienced in this type of work. Resistance was met from the Stranded Pakistanis General Repatriation Committee, known as the SPGRC—a group that does tremendous welfare work in the camps and is funded by wealthy sources in the Gulf states and Pakistan. However, the SPGRC maintains that all Biharis want to go back to Pakistan, even though the vast majority have never been there.

It has to be said that the Biharis are afraid of the SPGRC, and many believe the story that if they accept Bangladeshi citizenship, their homes, such as they are, will be demolished. Therefore, the survey had to be done very discreetly and quietly, and our workers from the community hospital managed to do that. The details of the survey are in the report, which will be published very soon. It revealed that 70 per cent of the Bihari camps were covered by the survey and that 80 per cent of camp dwellers were born after liberation and so could not be accused of fighting for the enemy in the liberation war. It also showed that 1.5 per cent of Biharis in those camps wanted to go to Pakistan, which means that 98 per cent wanted to become Bangladeshi citizens. That 1.5 per cent, out of a total of around 150,000 people in the camps, represents 300 people and, even if they were all given permission to go to Pakistan, that would hardly be a mass movement. However, it is important that the

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international community recognises those wishes and works with Bangladesh and Pakistan to help those people to go back if they so wish and as requested by the SPGRC.

During the four years of the project, as I have already mentioned, I visited Bangladesh and the camps in Dhaka. I met all the groups in the camps: the SPGRC, of course, and the Stranded Pakistanis Youth Rehabilitation Movement, which was headed by a very dynamic and vociferous lot of young men, who blamed the UK for lots of things and in particular for forgetting the Biharis. They made hero-worship remarks about Osama bin Laden, confirming my feeling that this was yet another situation in which young people could be persuaded to espouse terrible ideologies. I also met senior representatives of the two main political parties—the BNP and the Awami League—and Jamaat-e-Islami. I want to thank those representatives for their support and for promising to depoliticise the issue and to treat the Biharis’ situation as a humanitarian tragedy.

As I have said, the conditions in the camps are appalling, as are the conditions in those same areas for the ordinary Bangladeshi poor who still live in and among the Biharis. They are as bad as any I have seen anywhere in the third world. We have had discussions with and agreement from the Department for International Development, the European Union and the UN-HABITAT programme to make funds available for the rehabilitation of these areas to benefit both Biharis and Bangladeshis so that there is no ill feeling between the two groups. When I was a member of the Select Committee for International Development in the other place, I saw similar projects in the slums of Calcutta. Such projects can transform lives without actually moving people out of the area that they know.

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