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On Question, amendment agreed to.

Baroness Morgan of Drefelin moved Amendment No. 2:

The noble Baroness said: My Lords, Amendment No. 2 deals with value for money, which has rightly been at the centre of our debate. We have listened carefully to the arguments put forward by the noble Baronesses, Lady Verma and Lady Sharp, on this matter and have been persuaded that we should strengthen the commitment we have already given in debate.

Amendment No. 2 places a statutory obligation on the Secretary of State to report to Parliament within three months of each transaction. That report must inform Parliament about the assessment of value for money his department has made leading to the transaction going ahead. It should also reflect any guidance the Treasury had given to his department to ensure the required procedures used across the public sector for assessing value for money are adhered to.

The amendment would ensure that, throughout the long-term programme of sales, Parliament will receive prompt and transparent information to help it to exercise scrutiny over the sales. As I have said at earlier stages of the Bill, the Government will welcome that parliamentary scrutiny, and that of the National Audit Office, as it will help to ensure that the programme of sales develops over time and yields good value for money over the long term. At the same time, the process will preserve the essential flexibility that we need to retain to alter or supplement the exact criteria applied to each sale, for which we have argued in your Lordships’ House.

Amendment No. 5 ensures that the obligation to report to Parliament is confined to the Secretary of State and to sales for which he is responsible. Welsh Ministers and the Welsh Assembly Government, should they go ahead with sales, will be determined to fulfil their obligations to obtain good value for money and will account appropriately to the National Assembly for Wales.

I am extremely grateful to the noble Baronesses, Lady Verma and Lady Sharp, for their thoughtful and constructive approach to value for money. I am pleased to be able to move the amendment. I beg to move.

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3.15 pm

Baroness Verma: My Lords, the amendments are a version of something that we called for on Report, and it is pleasing to see the willingness of the Government to listen to this side of the House. Indeed, that has been a marked feature of every stage of this process, for which the Minister deserves our gratitude. The willingness of the Minister to respond to our scrutiny is testament to her open-mindedness and is an example of the way in which the parliamentary process is meant to work. I still feel that there are a few questions that need to be answered, and I will get straight to the point.

First, this is a minor point, which I hope will be taken up in the other place if I cannot get an adequate answer today. How will the independence of the report be guaranteed? Is there any way to ensure that the Treasury does not give guidance to make a sale look like there is value for money, when a more independent source would have disagreed? What is the precise nature of the guidance that is expected?

This morning, I listened to the segment on the “Today” programme about the sale of QinetiQ to the Carlyle Group, which the National Audit Office claims lost the taxpayer £90 million. The Government seem to defend the sale to the hilt, claiming that there was in fact value for money for the taxpayer, despite independent evidence to the contrary. That seems to me to be a gloomy foreshadowing of where we might be with the student loan sale. In fact, what I heard on the radio was precisely what I warned against on Report.

I repeat for the record that, if the report intimates that the taxpayer has lost out in any way and the Government try to persuade the public that this was the best deal in the current climate, or that in fact it was better than expected, that would be wholly unacceptable and deeply discouraging. It would annihilate any trust that taxpayers may cling to when it comes to safeguarding their money. I do not want to be the student loan Cassandra, but I have grave suspicions that I will be hearing a similar argument on the radio about the student loan book in the all-too-near future.

That leads me to my second question, which is about the fact that the Government have already spent the £3.4 billion that has been budgeted. It is my understanding that the sale of student loans this year must yield something near to that amount. Is that inaccurate? Was the projected revenue just a guess appended to the Comprehensive Spending Review, or was it factored into government spending? Will the Government have to sell more loans to generate this sort of money?

The assurances have been in the form of the repetition of the claim that the Government are committed to a vigorous value-for-money framework. My overriding question is how, considering the current market, it would be possible to give such a guarantee. Are there any investment analysts who think that now, or even soon, would be the best time to sell? I understand that the Minister took advice from Deutsche Bank regarding ways to make the loans more commercially attractive. At any time in the discussion, did it indicate that this was the best possible time to sell the debt? The answer to that question is extremely important.

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In the interest of establishing how ready the Government would be to wait to sell the loans to guarantee value for money, I should like to hear the answer to a final question. What would happen if the Government waited two years to sell the loans? Would the Government have to find the £3.4 billion from somewhere else? While a report is a welcome step in the right direction, it is by no means close to the destination—real confidence that the taxpayer is not going to be hurt.

Baroness Sharp of Guildford: My Lords, I should like to echo the words of the noble Baroness, Lady Verma, in saying how much we welcome the co-operation we have had from the Government Benches, particularly the attitude of the noble Baroness, Lady Morgan, to the Opposition Benches. We are very grateful to her for bringing forward various amendments, a number of them at our behest.

I too have a few reservations. I was slightly surprised that the Opposition accepted this amendment without question although I realise now that the noble Baroness, Lady Verma, is asking a few questions. We are now getting a quick report after the transfer arrangements have been put into effect. As the noble Baroness, Lady Morgan, explained to us, these transactions have to be simultaneous so that the sale takes place simultaneously with the clinching of transfer arrangements. Inevitably, the report is ex post rather than ex ante, whereas we were asking for an assurance that procedures would be gone through that meant that the Treasury and those involved in the sale were having to ask questions before they entered into these transactions to make sure that they were succeeding in getting value for money.

We were all agreed that there was a Catch-22 in this. In so far as the Government revealed their hand as to how they were going to proceed with the sale, it made the commercial transaction itself difficult to carry through because they would, to some extent, be revealing their hand. In some senses this is a second best. Again, we were agreed that the process of the National Audit Office and the report to the Public Accounts Committee—as happened with the sale of the Defence Research Agency and Carlyle—can point up where value for money has not been obtained. The difficulty is that by that time the deal will have been done. If it is bad value for money, the taxpayer suffers. Although there will be a quick report to Parliament here, the very fact that the Treasury guidance has to be revealed makes it the more likely that we shall see the Treasury looking for and wanting to gain value for money. Nevertheless, we are looking at whether we are succeeding in getting value for money after the event rather than before the event.

My final point, which I made again at Report, is that the present time is not a good time to try to securitise any loans. The noble Baroness was talking about listening to the “Today” programme this morning. I was listening to the “Money Programme” over the weekend and it was talking about the complete collapse of the securitisation of loans on both the American stock market and our own stock market. This is not a good time to try to securitise any set of loans. As I said

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last time, I wonder why the Government are determined to go ahead with the sale of a £3.4 billion tranche of the loans in the year 2008-09 rather than going for a smaller tranche of the loans to see how things would proceed, or even leaving it completely this coming year and proceeding when the market is more likely to be a good one. It seems to me that it would be sensible for the Government to begin by piloting a relatively small sale rather than going straight into a very large sale of £3.4 billion of the loans.

Baroness Morgan of Drefelin: My Lords, I shall do my best to respond to the questions of the noble Baronesses. I shall start with the question of the valuation of the student loan book. We have consistently said that the valuations that we referred to, including the £3.4 billion that was alluded to as a first tranche of the sale programme, were estimates for preparation for the CSR—the figures are not anything other than estimates for budgeting purposes. I make it absolutely clear that we have said all the way through the passage of this Bill that if the conditions for sale are not right, the sales will not be made. There are very strong duties on the accounting officer—in this case, the Permanent Secretary of the Department for Innovation, Universities and Skills—to ensure that value for money is obtained on behalf of the taxpayer.

The noble Baroness, Lady Verma, asked about the independence of the report and the nature of the guidance. There will be a government report on value for money, as we have discussed. We expect the National Audit Office to report on the initial sale or sales and, I would imagine, perhaps on further sales thereafter. The guidance involved covers all government expenditure and asset sales and will rightly apply to the sale of student loans portfolio.

I want to clarify the situation regarding the stories on the “Today” programme. As I said, the Government will welcome scrutiny of the sale of student loans by Parliament and the National Audit Office. That will help us to ensure that the programme of sales develops over time and yields good value for money over the long term.

I do not wish to comment particularly on the QinetiQ sale but that has created a leading FTSE 250 company. As the Public Accounts Committee highlighted, it has raised significant proceeds for the taxpayer and protected the viability of a business of strategic importance to UK defence. I understand why the noble Baroness drew attention to this question. The sale of student loans is very different from the sale of a defence company; it involves a long-term programme and the Government will seek to build on the advice that they receive, including that from Parliament and the National Audit Office. We are taking expert advice—the noble Baroness asked about this—from our sales adviser, Deutsche Bank, and are working very hard to make the most of that advice.

The noble Baroness generously accepted that we have tried to make practical sense of the concerns raised by the noble Baronesses, Lady Verma and Lady Sharp. We will bring forward what we see as a workable option for a report for the very long term.

On Question, amendment agreed to.

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Clause 4 [Loan regulations]:

Baroness Morgan of Drefelin moved Amendment No. 3 :

On Question, amendment agreed to.

Clause 8 [Wales]:

Baroness Morgan of Drefelin moved Amendments Nos. 4 and 5 :

“(aa) section 2(5) in so far as it has effect by virtue of section 2(5A),”

On Question, amendments agreed to.

Baroness Morgan of Drefelin: My Lords, I beg to move that this Bill do now pass.

I want briefly to thank the noble Baronesses, Lady Verma and Lady Sharp, for their positive contributions to our debates. I also thank all noble Lords who have taken part in debates on this important Bill and the officials and the Bill team, who have worked with me very professionally throughout the Bill’s passage through your Lordships’ House.

Moved, That the Bill do now pass.—(Baroness Morgan of Drefelin.)

On Question, Bill passed, and returned to the Commons with amendments.

Education and Skills Bill

3.30 pm

The Parliamentary Under-Secretary of State, Department for Children, Schools and Families (Lord Adonis): My Lords, I beg to move that this Bill be now read a second time.

The Bill legislates in five main areas to improve education and skills. First, it will make it compulsory by 2015 for all young people to participate in some form of education or training, at least part time, until they are 18 years old. Secondly, it will make various provisions to encourage, enable and assist young people’s participation. Thirdly, it will give adults certain rights to expect skills training and enable analysis to take place of the quality and value of such training. Fourthly, it will make a number of changes to the inspection and regulatory regime for independent schools and non-maintained special schools. Fifthly, it will help to ensure a fair and transparent admissions system to schools both pre- and post-16.

The most significant provisions raise the education and training leaving age to 17 in 2013 and 18 in 2015. The Bill’s first clause places on all young people resident in England a responsibility to participate in education or training up to their 18th birthday from those dates, provided that they have not first achieved a level 3

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qualification. Clauses 2 to 9 describe and define the range of ways in which young people can participate. These include: full-time education or training, including school, college and home education and informal learning programmes designed to re-engage young people; work-based learning, such as apprenticeships; and, for those who are employed, self-employed or volunteering, part-time education or training, provided it leads to an accredited qualification and takes up the equivalent of at least one day a week.

Clauses 10 to 35 place duties on local authorities, employers and parents to support young people in fulfilling their duty to participate. Clauses 40 to 48 set out the implementation process. Raising the education and training participation age will work only if the appropriate education and training is on offer and young people can access it effectively. However, if a young person refuses to engage, despite a local authority’s best efforts, it will have recourse to appropriate sanctions—a formal last chance to engage voluntarily, an attendance notice, a fixed penalty notice and ultimately, an appearance before a youth court, which could lead to a fine. However let me stress that these are ultimate sanctions. If at any point, even after sanctions have been sought, the young person starts to engage voluntarily, proceedings would be stopped. We expect that only a very few cases will get this far.

Clauses 54 to 60 transfer responsibility for the Connexions service, which encourages and supports young people’s participation, from central government to local authorities. They allow for its inspection by Ofsted and for guidance and some level of direction from the Secretary of State over its core functions. They also allow for Connexions services to gather records about young people’s activities, to enable them to provide effective advice.

Clause 66 puts a duty on schools to offer full and impartial information and careers education, especially to students approaching GCSE. Clauses 71 to 75 establish for adults a right to intermediate and basic skills training in certain circumstances and, for those aged between 19 and 25, to their first full level 3 qualification. To enable analysis of the effectiveness and economic value of adult skills training, they also provide for sharing anonymised information between the Department for Innovation, Universities and Skills, the Department for Work and Pensions, Her Majesty’s Revenue and Customs and the devolved Administrations.

Clauses 80 to 130 streamline the registration and regulation of independent schools. They transfer registration of these schools to Ofsted; they strengthen the independent schools standards by adding a new standard on leadership and management; and they repeal previous legislation creating a now unnecessary bureaucratic requirement for independent special schools to be formally approved by the Government for the purposes of accepting children with special educational needs. I should add that while the raising of the education and training age in the Bill applies directly to England only, at the request of my Welsh colleagues, I expect to move an amendment at a later stage to enable the National Assembly to apply similar provisions in Wales in future, should it so desire.

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Why are we raising the education and training participation age? The high number of people who drop out of education and training after the age of 16 represents a long-standing weakness in our national education system. We are currently placed 24th out of 29 in the OECD on participation in education or training at 17. Young people who drop out of education and training so early suffer serious loss in terms of their economic and social prospects, and their individual losses aggregate to a serious national weakness in terms of social cohesion and prosperity.

There is overwhelming evidence of the negative consequences of dropping out of education and training at the age of only 16. There is a strong correlation between becoming NEET—not in education, employment or training—and other risk factors. NEET status is proven to be a major predictor of poor health, depression and low income. Furthermore, young people with a level 2 qualification earn, on average, 25 per cent more than those without, or the equivalent of £100,000 over their lifetimes, at present values.

It is an important national priority that, whatever employment they enter, all young people have the transferable skills and gain the qualifications they need to prosper and to be able to adapt to the changes of employment that they will face during their lifetime. This imperative is set out graphically in the report on skills produced by my noble friend Lord Leitch, which predicts that the number of low-skilled jobs will decline by 81 per cent by 2020. Moreover, we know that those who leave education or training at 16 are disproportionately from poorer families, so making sure that all young people stay on until at least the age of 18 is also a matter of social justice.

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