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On restructuring, the guarantees covering the liabilities of Northern Rock will be replaced by separate guarantee arrangements for Northern Rock (Asset Management) plc and Northern Rock plc. All retail deposits in Northern Rock plc continue to be guaranteed in full, and guarantees will not be lifted with less than three months' notice. Full details of the guarantee arrangements are available on the Treasury website (www.hm-treasury.gov.uk).

Both entities will continue to be wholly owned by the Government and operate at arm's length from Government on commercial principles. UK Financial Investments (UKFI) will take on management of the Government's shareholdings in these two companies. The restructuring will enable Northern Rock to increase its new lending and support the economic recovery.

Full details of the financial support provided by the Government to support the restructuring will be set out next month.

The Treasury has also made the Northern Rock plc (Tax Consequences) Regulations 2009. These regulations make provision to neutralise unintended tax consequences that could otherwise be triggered by transfers of assets and liabilities between these two companies wholly owned by the Government.

Student Loans

Statement

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Young of Norwood Green): My right honourable friend

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the Minister of State for Higher Education and Intellectual Property (David Lammy) has made the following Statement.

This year Government are spending more than £5 billion on student support in England, underpinning our commitment that finance should not be a barrier to higher education. The number of undergraduate entrants to higher education has increased by 19 per cent since 1997, and the 20 most deprived constituencies have shown higher than average growth in student numbers over that period.

Students need a simple and straightforward application service when they are applying for student support. As I said to the House on 14 October, this year's problems have had an unacceptable effect on individual students and their families. Even when they have not led to financial hardship, they have undoubtedly caused worry and frustration. It is clear that there were serious lapses in the customer service provided by the Student Loans Company (SLC).

At the beginning of September I became aware that, in this first year of operating the new service, there were delays in processing, customers were unable to speak to the company, and some documentary evidence could not be traced. I ordered that a number of actions be undertaken to enable the company to accelerate the processing of applications and to increase the number of calls being answered.

These issues are why, together with the recently appointed chair of the Student Loans Company, I commissioned Professor Sir Deian Hopkin to provide external scrutiny to the review of lessons to be learned from this year's processing problems. Professor Hopkin has now provided his report and I am very grateful to him for carrying out his work so swiftly.

While at the time of this Statement the Student Loans Company has paid 801,000 students, it is clear that this year the service has fallen short of expectations. The report says that: "While some aspects of the programme have been realised and some progress made on others, there has been a conspicuous failure in key areas of its delivery which has had a far-reaching impact on applicants and stakeholders".

The department accepts in full all the recommendations in Professor Sir Deian Hopkin's report and, as I would expect, the board of the Student Loans Company has also accepted the recommendations in their entirety.

I am now clear that decisive action is required to change the service and that the key to this is strengthening the leadership of the company and ensuring that the customer is at the heart of everything the company does. The chair of the Student Loans Company has confirmed that the senior management team of the company will be strengthened and reorganised.

I expect the chair to ensure that the company transforms how it communicates with its customers so that they know what to expect from the service, what is

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expected of them, and that risk management, contingency planning and staff training are all significantly improved.

I have asked my officials to consider the best practice in other public sector organisations to enable us to better challenge and scrutinise the company's performance. But there must be no confusion about roles: it is for the Student Loans Company board to hold the executive to account and to ensure it has the capacity and capability to deliver the service.

Key to moving forward and improving the service next year is early engagement with customers and stakeholders in the higher education sector. I have therefore asked the company to establish a stakeholder forum, which will include representation from the National Union of Students, higher education institutions and UCAS. This will help the company to develop Student Finance England, including implementation of the recommendations in Professor Hopkin's report and should mean, with stakeholders more closely involved in the company, that many of the issues experienced this year can be identified earlier and swift action taken to avoid them in the future.

We have invested significantly in a substantial programme of improvements which are designed to transform the way the student support service works for customers. Over the next few years, the centralised service-which takes over from applications to local authorities where the level of service was variable-will allow students to apply online; they will no longer need to send in their passports to verify their identity; and their sponsors will not need to send paper evidence of family income.

I acknowledge that some of the improvements will take time to implement, but I have received assurance from the chair that improvements in the way the service is managed will be made quickly. As the report says, the highest priority at the moment is to successfully complete this year's application cycle. There remain problems with disabled students' allowances and I have asked the Student Loans Company to engage directly with universities and assessment centres to speed up the process, and to increase staffing resource for these activities.

The chief executive and chair of the Student Loans Company have publicly apologised for the difficulties customers have suffered. As the Minister responsible for higher education, I too have expressed regret for the unacceptable service parents and students have experienced.

Customers must also play their part, and take responsibility for applying for their student support in good time if we are to ensure the service has the best chance of operating efficiently.

A copy of the report and a letter from the chair of the Student Loans Company are being deposited in the Libraries of the House and paper copies of the report will be placed in the Vote Office and Printed Paper Office.


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