THE STUDENT LOANS COMPANY (Hansard, 15 February 1990)

Mr. Smith
In speaking to new clauses 4 and 5, I wish to make it clear that we support also new clause 12 in the name of the hon. Member for Southwark and Bermondsey (Mr. Hughes). I stress that, in tabling the new clauses, we in no way show acceptance of the student loans scheme. I say that because, in Committee, a similar clause was interpreted in that way by the Conservatives. We reject the scheme totally, as do the Conservative students in Oxford who, according to the Cherwell newspaper, have split the university Conservative association and propose to run separate candidates in the student union elections in Oxford on a platform of opposition to student loans and to the poll tax.
According to Cherwell, an election candidate said: How could they"— that is, the Conservative party— expect us to run on a platform supporting student loans, payment of the community charge by students and voluntary membership of the NUS? All of these we fundamentally oppose. It is clear that nobody supports the student loans scheme apart from the Prime Minister and the Under-Secretary of State. We reject wholly the unjust and wasteful bureaucratic nonsense of the scheme and would, of course, have no student loans company.
7.15 pm
If there is to be a student loans company, it should be dedicated to the service of students, and it should be accountable. It should not become a plaything of the financial markets, where profit maximisation for shareholders would come first and students second, and where the information held on individuals would be vulnerable. The unscrupulous might be tempted to make a quick buck out of selling, or otherwise using commercially, the profiles collected as part of the operation of the student loans company.

Mr. Jackson
The hon. Gentleman should not disappoint his public. Everyone thought that he was a member of the new look Labour party which did not look with disfavour on profits.

Mr. Smith
Making profits out of education is one thing which we totally and utterly reject. A fundamental objection to the whole Bill, shared by most of the public, is that the student loans scheme is the thin end of a very nasty wedge. which would make education the privilege of the few on ability to pay, and not the right of all on ability to benefit.

§ Mr. Pawsey
I am grateful to the hon. Gentleman for giving way in his usual courteous manner. During the debates in Commitee, the hon. Gentleman was most violent in his regret at the withdrawal of the banks. The banks were in it for profit. How can he reconcile the two? The hon. Gentleman says that profit made by the banks is all right but profit made by a private company is wrong. It is difficult to square that circle.

Mr. Smith
The scheme changed fundamentally with the withdrawal of the banks. The Secretary of State and the Minister pretend otherwise, but there was a fundamental change, sufficiently important to cause the Prime Minister to "fizz with fury", no less. The formation of a student loans company must be the first instance of 456 nationalisation before a company has done anything. Now the Government, having nationalised it, want to privatise it well before it has done anything.
It is precisely because of the scope of privatisation and the commitment of the Government to hive the company off into the private sector at the earliest opportunity that these new clauses are particularly important. They relate to the status and operation of the Student Loans Company, which has become a very different beast during the deliberations in Committee, following the withdrawal of the banks.
I will summarise what the new clauses would do. New clause 4 proposes that the Student Loans Company would be limited by guarantee and should not be sold or otherwise transferred without the approval of both Houses of Parliament. New clause 5 would require the Secretary of State to make regulations covering the functioning and the finances of the Student Loans Company, and would require those regulations to be subject to parliamentary approval. New clause 12 would add the requirement that information was stored and handled in compliance with the Data Protection Act 1984 and that information on a borrower's liability should not be sold or otherwise passed on to third parties.
Taken together, the new clauses would write the existence of the Student Loans Company into the Bill and provide it with a legal status conducive to service rather than commercial exploitation. They would ensure that changes in the status and mode of operation of the Company would be controlled where they should be controlled—in Parliament. They would provide essential protection for civil liberties, which are not safeguarded by the cavalier attitude of Ministers to the ownership of the Student Loans Company and its commercial exploitation.
There has been much criticism of the way in which this waif and stray of a Bill operates solely in an enabling fashion. It is incredible, as well as irresponsible, that the Bill makes no reference to the Student Loans Company, the principal vehicle by which the scheme will be administered. Over the years, files will he built up on hundreds of thousands, ultimately millions, of individuals. Outside national insurance, the Department of Social Security and the Inland Revenue, it will be one of the largest centralised registers of information on individuals.
It is wholly wrong that the Government should deny Parliament the opportunity to determine the status and mode of operation of the company holding that information. I shall return to the important implications for civil liberties in a moment, but first I press the Government to supply what the Minister was unable to supply in Committee—meaningful information on the administration of the scheme.
The £450,000 Price Waterhouse feasibility study on the student loans scheme, and the Under-Secretary in. Committee on 18 January, said that it would cost £15 million to £20 million a year to administer the scheme by 1995. That is based on exactly the same forecast as Price Waterhouse applied to the operation of the company by the banks.
Since then, the Government have published revised public expenditure figures for the total cost of the student loans scheme. They suggested an outlay of £563 million of taxpayers' money in the three years to which the public expenditure White Paper applies. It is worth pointing out that that £563 million of new expenditure of taxpayers' money is £78 million more than the sum earmarked for 457 capital investment in the universities, which desperately need equipment for labs, books for libraries and investment in computing facilities. It is £235 million more than the amount allocated over that period for the school buildings grant, and £269 million more than the total capital investment earmarked for our polytechnics.
I do not want to repeat the points already made in the debate, but the expenditure on loans is wasteful and it is not targeted to help the students who need it most. Nor will it provide assistance for those seeking access to our higher education system, who are presently denied opportunities that should be available to all.
All the Government's costings, such as they are, are based on no expansion of student numbers beyond the year 2000. For that reason, the Government have backed away from the commitment made by the former Secretary of State, the right hon. Member for Mole Valley (Mr. Baker), to double participation. The Student Loans Company and the money spent on it will be a further barrier to access to educational opportunity, at a time when we should be opening up avenues of access to higher education, rather than putting problems in people's way.
It is no good the Government making professions of good will on the important matter of civil liberties and leaving it at that. Students, the public and Parliament have a right to know exactly what protection will be available. Given the Government's evident enthusiasm for selling off the Student Loans Company, serious questions must be asked about the uses to which the data could be put. In Committee, the Under-Secretary of State said: the Students Loans Company will have considerable potential as the basis for a banking business."—[Official Report, Standing Committee B, 23 January 1990; c. 398.] It is also significant that, earlier this evening, the Secretary of State said that the repayment regime would reflect commercial practice. Previously, the Under-Secretary of State said that there was no problem about privatising the Student Loans Company. Indeed, he cited the chief executive's debt collecting credentials. I do not know whether those credentials extend to wandering through the Amazonian rain forest or elsewhere overseas to collect the outstanding debts of those who have gone abroad, as it was suggested earlier that he would have to do. There are serious worries that the debt collection power and the information held on individuals will simply be sold off into the private sector without the safeguards which the amendments and new clauses offer.
Privatisation has enormous potential commercial possibilities. Present practices, and even the Data Protection Act 1984, do not afford the safeguards which many members of the public, and perhaps hon. Members and even Ministers, might assume exist. An interesting article in The Times on 5 February speculated on whether the sale of the Student Loans Company might be illegal: Mr. Rodney Austin, a senior lecturer in law at University College London, said that under the Data Protection Act it would be unlawful for firms to use for other purposes information gathered to administer loans. He added that companies could make use of the profiles held by the student loans company only if students gave their permission. No one would be more delighted than me if the proposed sale of the Student Loans Company was scuppered in that way. If it is sold, the qualifications which would have to be put on the protection afforded by the Data Protection Act 458 would be considerable and would give rise to enormous anxieties. That is what makes the final part of new clause 12 so important.
To use the student loans files on individuals as, for example, a mailing list would require only the passive assent of the people involved. A piece of small print asking them to let the company know if they objected would suffice. If people did not object, all sorts of target mailing would be likely to arrive through people's doors, which would bear as much relationship to student loans as the bumf sent out by the AA has to rescuing its members when their car breaks down. Such mail would deluge through graduates' letter boxes. The Student Loans Company could, at the least, offer further loans or even credit card arrangements. Would that be inconsistent with the original purpose for which the company was set up?

Mr. Jackson
What is wrong with all that?

Mr. Smith
I hear the Under-Secretary say from a sedentary position, "What is wrong with all that?" What is wrong with it is that files on individuals would be passed into the commercial domain for exploitation for profit by a company holding private information on people. In the banking context it would breach the fundamental rules of banking to circulate that information. That is a gross threat to and infringement of civil liberties.

Mr. Jackson
Nonsense.

Mr. Smith
The Under-Secretary mutters, "Nonsense". That will do nothing to reassure people outside the House who are worried about the inadequacy of the protection that the Government are prepared to provide.
What is more, there would be nothing to stop a privatised Student Loans Company offering inducements, perhaps discounts on loan repayments, in return for assent to use the files for other purposes. Once that rubicon was crossed, the commercial potential for selling the list indiscriminately would be enormous. We can all imagine just how interested life assurance companies and pension companies would be in acquiring that information. Once assent had been given, that information on individuals would be up for sale. The pressures that might be put on people to allow such information to be used in that way are worrying and are a real threat to civil liberties.
Will the Minister give us an assurance now that, under his proposals, such use would not and could not be made of that information? If he cannot give such an assurance now, and if he does not give it during his speech, I strongly urge him to think about the new clauses again and to accept them when the Bill passes to the other place for consideration because these new clauses alone can safeguard the public interest, and parliamentary accountability, and can protect the civil liberties of those about whom files will be built up by the Student Loans Company.
7.30 pm
This afternoon I attended and spoke at a large rally in Hyde Park at which between 25,000 and 30,000 students were gathered in opposition to the student loan scheme, the Student Loans Company and the whole philosophy behind the legislation. Reference has already been made to the considerable and widening lead that our party holds in the opinion polls. The whole philosophy of the legislation 459 represents the thin edge of the wedge in making education dependent on ability to pay rather than on ability to benefit from it.
The people of this country reject that principle and want education to be available to all. They also want all those who can benefit from that education to be properly supported in it. The support that those views enjoy and the support for the protection of civil liberties, as set out in our new clauses, is just one of the many factors that will ensure our victory at the next election, as will our ability to repeal this invidious student loan scheme and to introduce a decent and fair system of support.

§ Mr. Matthew Taylor (Truro)
The amendments go directly to the heart of the Government's difficulties and embarrassment over the Bill. They draw attention to the Government's embarrassment not so many months ago, when the high street banks pulled out of the system that the Government are trying to set up and forced the Government into taking over the Student Loans Company and administering it by way of a nationalised institution.
Having said that, I wish to address my remarks chiefly to the amendment on civil liberties that was tabled by my hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes). I very much welcome the support of the Labour Front Bench for our civil liberties amendment and reciprocate by stressing our support for new clauses 4 and 5, which were tabled by the Labour party.
The purpose of this series of new clauses is to establish as part of the Bill that the Student Loans Company shall exist, to define its role and function, to ensure that it has accountability to this House and, finally, to ensure that information kept by the Student Loans Company is not traded or stored in breach of the principles of the Data Protection Act 1984.
The first peculiarity of the Bill, and one of the reasons for the new clauses, is the fact that the Government are seeking to enable themselves to do something about which they cannot give the House any detail and about which they cannot write any detail into the Bill. Indeed, I do not believe that they have any detail yet. In the circumstances that the Government now face, at the very least the Student Loans Company should appear on the face of the Bill—as is suggested in new clause 4—because that is how the Government state that they will operate the system and run the scheme. The actions of that company, whether they he the sale or transfer of its assets, should not occur without the prior approval of the House.
My view is that the Bill should not he before the House in its present form and without the kind of detail that is necessary for its proper scrutiny. However, given that it has been introduced in these terms, at the very least the operation of the company itself and its future should be subject to debate and further action in the House should there be any major change such as that outlined in new clause 4. Equally, as is suggested in new clause 5, the discharge of its functions should be considered by the House.
If we are not being given the opportunity to debate it here and now, when frankly it should be debated, before we as a House decide whether this is something that we wish to implement, at the very least Ministers should have to return to the House to answer properly and in detail for the rules once they have been implemented. I find it disturbing that, in one piece of legislation after another that has been introduced by the Government, we seem to 460 be putting ever greater distances between the executive powers of Ministers and the ability of the House to exercise control over what they may do.
The Bill does not even guarantee that there shall be any proper financial accountability to the House, yet the House has the public responsibility to make proper use of what are, as the Government frequently point out, the funds of individual taxpayers. The Government should at least have to come here to ensure their accountability to hon. Members. It is extraordinary that a Government who never-endingly talk about the fact that the money that is raised through taxes is taxpayers' money and should be accounted for should leave so much on trust that that function will be properly discharged.

Mr. Jackson
The hon. Gentleman does not understand the legislation. The simple fact is that it will be subject to the normal processes of financial accountability that exist for public expenditure throughout the whole area of Government expenditure.

§ Mr. Taylor
As the Minister is equally aware—this is a debate that we have frequently, whatever the Bill coining from the Government—there is no automatic debate on the Floor of the House of such details. I have frequently heard Ministers argue, on all manner of Bills, that the legislation is subject to the normal procedures of the House, but the truth is that the normal procedures of the House do not allow proper scrutiny unless it is written on the face of the Bill, as our amendments argue.
I have said that the main bulk of my comments will be directed towards the specific concerns that we have outlined in new clause 12, which Liberal Democrats have tabled in our party's tradition of arguing for civil liberties and seeking to ensure the protection of the individual.
There is no guidance in the Bill on whether at some time the Student Loans Company might be sold off into the private sector, and Ministers have regularly said that that is the future that they would prefer for the company. However, if the company falls into the hands of the private sector, there is no guarantee about what will happen to the information that that company may hold. If the company were to stay within Government hands, it would be easier to lay down guidelines for its operation and for the use of its information.
In our discussions on the Local Government Finance Act 1988, which introduced the poll tax, I recall that we debated at length the issue of whether the information contained on the poll tax register should go to the private sector. I talked then about the problems with some of the companies that follow up such information, of the use that is made of it and of the dubious practices in which some of those companies are engaged. The information held by the Student Loans Company goes far beyond anything held on the community charge register. It is detailed financial information regarding what ultimately may prove to be millions of former students who have gone through this country's education system.
It was interesting that some such concerns have been reflected in debates about bad debt as have been expressed by others outside the House. An article in The Daily Telegraph on 2 December 1989 reported that Sir Gordon Borrie, Director General of Fair Trading, when asked for his initial reaction to the position of students who failed to repay their loans—one piece of sensitive information that the company may have—said: 461 It is important not to treat students as defaulters. The worst scenario would be if the banks started acting in a tough way and created a whole new class of people in a default category. That was when the banks were to have been running the system. The future of the Student Loans Company is even more uncertain—it may be with banks or credit companies; we do not know.

Mr. Jackson
No student will be pursued as a defaulter. We are talking about the pursuit of people who have incurred obligations to the taxpayer, possibly mature people in their 30s or 40s, who fail to repay the money borrowed from the taxpayer. Is the hon. Gentleman seriously suggesting that they should not be pursued in the normal way to retrieve that money on behalf of the taxpayer and other students?

§ Mr. Taylor
I am well aware that we are talking about ex-students. However, two direct problems arise for Ministers when they make their case in favour of the pursuit of defaulters. In fact, there are three; I shall come to the third in a moment. However, of the two with which I am immediately concerned, the first is that these will not necessarily be ex-students on a reasonable income. They may well be people who decided to go into caring professions in which the sort of return they would make, particularly in the early years after leaving university, would he low.

Mr. Jackson
They will be deferred.

§ Mr. Taylor
The Minister says "deferred", but teachers' repayments will not be deferred.

§ Mr. Simon Hughes
Nor will the nurses'.

§ Mr. Taylor
My hon. Friend the Member for Southwark and Bermondsey mentions nurses; such people will not be in a good financial position in their early years after university.

§ Mr. Harry Barnes
There could even be people who had pursued courses and failed and, because of their failure, put themselves in a worse financial position than they would have been if they had not gone to university and involved themselves in full-time education. They would still have to repay the money. They would suffer considerably under these arrangements.

§ Mr. Taylor
That is absolutely right. We could risk straying too wide of the amendments if we pursued this matter much further. These arguments have all been fully debated in the House and my only regret is that Ministers seem deaf to the concerns.
My second point is that the companies that may he asked to pursue such people will by no means be the most pleasant ones. Many of us, as Members of Parliament, have met people who have run into problems with debt collection agencies. We have had no guarantees from Ministers about who will pursue the had debts. It is one thing for the Government to take on the responsibility themselves. While I cannot say that all Government Members are necessarily my best friends, they are honourable gentlemen, and I would not wish to cast aspersions on them. If the company is sold off, or even if 462 it is not, we have no evidence that Ministers, or even their civil servants, will be knocking on people's doors—it may well be debt collection sharks.

§ Mr. Simon Hughes
It is unlikely to be Ministers.

§ Mr. Taylor
My hon. Friend says it is unlikely to be Ministers, and it would be a nasty shock if they did. It is much more likely to be staff of debt collection agencies. The Government's silence about whom it will be only confirms that that will be so. I should like, and hope to get, an assurance from the Minister that I am wrong, and that professional Government employees, subject to the protections and constraints of public employees, will be responsible for this service. However, I fear that is not so, and the Minister will confirm that. The very fact that he is not reassuring me about this suggests that that is the case.
Thirdly, all too often in present circumstances, it will not be former students who get into trouble with the credit company. The information, which may be made available, can he used against third parties—other people in the same home. That is an issue of customer privacy that was aired at the conference of the Institute of Credit Management in London at the beginning of December and, again, reported in The Daily Telegraph on 2 December. The Data Protection Registrar, Eric Howe, said that he wanted lenders to stop using information about third party when assessing loan applications. The report states: Lenders insist that the whole household's credit record is essential information; they have already agreed no longer to use details about family members who have moved away from home. Discussions between the two sides have not resulted in any agreement and Mr. Howe is considering serving enforcement notices on four credit reference agencies. The people who may be penalised as a result of the information being made available are not the former students in their 30s and 40s, about whom the Minister talks, who are doing very nicely and for some reason not paying their debts. Instead, they are third parties who are blackened as a result of others' actions. I hope that no hon. Member would approve of that. I suspect that, if an individual came to any of our surgeries and said that this had happened to him or her, we would be most sympathetic and try to overcome the problem. Why should the Government contribute to those difficulties?
These are the sort of issues raised in the Bill. I was a student only a few years ago. I am probably the most recent full-time student in the House. I was also the president of the students' union which had the highest turnout in elections—more than half, and that is better than most—of any students' union in the country. My involvement, both as a student and as a students' union president, gave me first-hand experience and also experience of those who came to the union with various financial problems.
Such experience allows me to appreciate the sort of questions that students are now asking, because they were asked then. I was then involved in the successful campaign against the introduction of student loans. Information about the privacy of the information that may be given, the accountability of the Student Loans Company, on what basis information may be sought or debts pursued, are precisely the facts that students want and the Government are currently refusing to give. I do not believe that any student who is told about the Government's present plans, without being given proper information, is likely to be satisfied.

§ Mr. Pawsey
rose——

§ Mr. Taylor
Perhaps the hon. Gentleman can correct me.

§ Mr. Pawsey
Does the hon. Gentleman agree that a balance should be struck between the interests of the taxpayer and those of the student or graduate? It seems that the hon. Gentleman has lost sight of that balance. The system that we are introducing makes allowance for deferral of payment until one earns more than 85 per cent.——

§ Mr. Deputy Speaker (Mr. Harold Walker)
Order. I think that the hon. Gentleman is losing sight of the specific terms of the new clause.

§ Mr. Taylor
My concern is for all former students who may be hit by the operation of the company, particularly if it is privatised. I am concerned about the privacy of personal information which may be recorded as a result of the Bill and which should never have been recorded. The hon. Gentleman talks about the interests of the taxpayer, but the taxpayer's interests are not served by a system which, for many years to come, will cost the taxpayer large sums of money—

§ Mr. Deputy Speaker
Order. The hon. Gentleman just heard me direct the attention of the House to the terms of the new clause. I hope that he will have regard to what I said.

§ Mr. Taylor
My concern is that the operation of the company, particularly if it gives the kind of information that Ministers have suggested that it will be allowed to give, will hit taxpayers and former students, as the Bill will do.

§ Dr. Hampson
I have been struggling to find answers in the reports of the Committee's proceedings, but I have been unable to do so. It is useful to have new clause 5 so that the provision of regulations governing the functions and finances of the Student Loans Company can be debated on the Floor of the House by Members who were not present in Committee but who have important questions about the company's operation.
The Student Loans Company will be a Government operation. Student loan repayments will not be collected through the Inland Revenue, as some of us have argued would be the most equitable method. That is the system adopted by the Australians. Therefore, I must ask my hon. Friend the Minister what provision he will make for chasing defaulters, particularly after 1992 and the increased mobility of labour across Europe.
How many staff have been designated as investigators to check the process of repayment, and what will that cost? If hordes of people are needed to track down potential defaulters, the cost of the operation will be substantially increased. That is the experience of the Americans. It is extraordinarily difficult to find defaulters who go to earth for a few years, travel round the world, come back and get a job somewhere else. How will such people be found? That question was not answered in Committee.
How will the system operate? We are talking not simply about how to take out a loan, but about what sort of courses will be eligible for loans. It is no longer a matter of discussing with somebody in a bank whether a course is eligible for a loan. The leaflet that has been sent to students implies that there has been a major expansion of the range 464 of courses. They go way beyond the courses that are presently eligible tinder the grant system. The leaflet mentions paramedical courses which, as far as I am aware, are not now eligible for mandatory grants.

Mr. Jackson
I am happy to confirm to my hon. Friend that some 50,000 students not presently eligible for grants will come within the scope of our loan scheme, which is one of its many generous features.

§ Dr. Hampson
I am delighted to hear that, but who will be designating the courses? I assume that it will be the Secretary of State. What is a worthwhile course is a wide-open question. The leaflet says that people on higher national certificate courses will be eligible. I may be wrong, but, by definition, all higher national certificate courses used to be part-time and diploma courses were full-time. I welcome part-timers being eligible for loans, but a person doing a part-time university degree course will not be eligible while a person doing a part-time higher national certificate course in a polytechnic will. The choice of courses to be made eligible is crucial to steering the system.
When will students know whether the course that they are thinking of taking will be eligible for a loan? Will they be told at school, or will they have to wait until they go to university? Where does the onus for giving such advice rest? It is not now with the local hank manager. Will the institutions, the polytechnic or the university, be responsible and so bear the cost? Or will peripatetic counsellors from the Student Loans Company give advice in schools? Young people must think through their choice of course before they apply for a place so that they know the exact financial benefit. Loans could be a major benefit, but they must make a judgment because one course may be eligible while a similar one is not.

§ Mr. Simon Hughes
What view should this year's school leavers take when they still do not know the financial basis on which their studies will start, let alone continue?

§ Mr. Deputy Speaker
Order. The new clause relates to the functions of the Student Loans Company. I hope that we shall get back to that.

§ Dr. Hampson
Peripatetic counsellors from the Student Loans Company may be required to give advice about the type of courses for which the company is prepared to give loans. It is fundamental to the working of the entire system that people should know what courses will be eligible for student loans. Will the cost of that fall on the Student Loans Company, the institutions or the schools, or will young people be expected to discover the information for themselves? The leaflet does not say. It simply gives a broad range of courses that will be available. It says, "e. g. paramedical courses". It does not list which vocational courses are included.
The leaflet sent out on behalf of the Student Loans Company to instruct students about the process implies that there will be no change on two critical matters. For example, it suggests that the other place will not say that five years is too short a period for repayment. It says that loans must be paid back within five years. We must be more flexible. We are saying that everybody who has to repay a loan to the Student Loans Company who happens to have an income which is more than 85 per cent. of the national average will have to pay back the full whack within five years, despite the fact that there is a range of incomes just over £10,000.
465 Ministers have said that not more than £400 a year will have to be paid back, but how will that be done? By what apparatus will the Student Loans Company be able to say that someone's income has fallen below a certain level in a particular year because he has been out of work, or for some other reason, and that he does not have to pay any money?

§ Mr. Deputy Speaker
Order. The hon. Gentleman is dealing with general matters which might be more relevant on Third Reading.

§ Dr. Hampson
I was hoping not to have to make a speech on Third Reading, Mr. Deputy Speaker.
New clause 5 says that the Secretary of State shall make regulations which shall govern the discharge of functions by, and regulate the finances of". I am trying to get Ministers to say how some of those functions will operate. The perceived fairness of the repayment to the company is essential to the acceptability of the scheme. How will the company achieve that? Ministers say that the repayment will not be onerous because it will not be more than £400 a year, but how will that be determined without a flexible system such as the Inland Revenue's computer system which can assess the circumstances of individual students and relate repayment to them?
The other place may decide that interest should be charged. The leaflet—not the Bill—says that the loan will be interest-free, but why? My right hon. Friend said that to abolish parental contributions would cost £390 million. The other place may say that the Student Loans Company should charge interest so that the money can be recycled much more quickly. On that basis I hope that the Treasury will put enough money up front to get rid of the parental contribution.

Mr. Jackson
I am sorry that my hon. Friend objects to yet another generous feature of our proposal, which is that the scheme should be interest-free. I do not know whether there is much support for the idea of charging a nominal rate of interest.

§ Dr. Hampson
There is more support for interest being charged than for its not being charged, for two reasons. The whole purpose of the Bill is to encourage more students into higher education. The only way in which the money can be recycled on any scale is to charge interest. Loans might be heavily subsidised, but interest would still be below a commercial rate and represent a major incentive. Money would be recycled far quicker, and one could even avoid the parental contribution, thus the loan could be recovered even more quickly than under the Government scheme. That is why I suggest an interest rate of 3 per cent. or 4 per cent. as charged in the rest of the western world.
There is no need to bribe people with a wholly interest-free scheme. The fact that the Government have negotiated with the Treasury to make the scheme interest-free has not won a single extra supporter. I rest my case in the hope that my hon. Friend the Minister, when he winds up, will explain some of the mechanisms by which the loan company will operate.

§ Mr. Tam Dalyell (Linlithgow)
I am extremely diffident about speaking, because right hon. and hon. Members who were not involved in the hard work of the Committee stage should be reticent by comparison with their hard-working colleagues. I can only plead that I was involved in the Committee stage of the Property Services Agency and Crown Suppliers Bill, which ran concurrently.
Having long had an interest in the subject of student loans, I have two factual questions for the Minister. Why was it that Sir Jeremy Morse, Sir Kit McMahon and John Quinton objected in the final analysis to the Government's proposals? In Committee, the Under-Secretary said that he would answer that question, but it appears that he never got around to doing so. There was a great deal of banter, and that omission may not have been the Minister's fault. Perhaps he will take this opportunity to spell out why it was that those three distinguished bankers apparently decided at the last moment to risk the wrath of the Prime Minister. Whoever may be the Government of the day, such men are not automatically anti-Government. Bankers do not take such a decision lightly. Why did they do so on this occasion, and why do their objections not apply to the whole agency set-up now proposed?
I say in particular to the Minister of State, Scottish Office, who has special responsibility for education, that I am especially concerned about the expectations of students in the Scottish context. If one feels, as a graduate, that one is obliged to repay a loan, whether or not it is interest-free, that commitment hangs over one, albatross-like, and one is under pressure to enter well-paid, money-making jobs. The hon. Member for Argyll and Bute (Mrs. Michie) knows precisely the point that I am about to make. Has any investigation been undertaken either by the Department of Education and Science or by the Scottish Office into the likely effect of the scheme on people wanting to become, for example, schoolteachers or Health Service workers? Only last night, the dean of Westminster expressed considerable concern to some hon. Members about the effect of the scheme on people wanting to enter the Church. All those jobs are, at least in the opinion of some, valuable to society.
When my right hon. and hon. Friends were busy on the Bill in Committee morning, noon and night, others of my right hon. and hon. Friends were busy with the Property Services Agency and Crown Suppliers Bill. For the first time in 20 years, I persuaded the Solicitor-General to attend the Committee, which, most courteously, he did.
I am tempted to ask what detailed advice has been given by the Law Officers on the question of liability. The Under-Secretary interestingly remarked that the scheme would incur responsibilities for people in their 30s and 40s. If, in parliamentary work, one tries to unravel the past in terms of something that occurred 20 years ago one finds it very difficult. How does the Under-Secretary know that he will not be confronted by a series of Jarndyce v. Jarndyce cases? The Minister may laugh, and he can interrupt me if I am wrong.

Mr. Jackson
A graduate, having graduated, might defer for a number of years and then re-enter the labour market, at which point he might have an income higher than the threshold, making him eligible to repay the 467 money that he borrowed from the taxpayer. The person may by that time be in his 30s or 40s. He would simply be repaying a normal debt.

§ Mr. Dalyell
That is a great give-away. The borrower will be in and out of eligibility. First, he will not be eligible to make repayments, then something will change his circumstances and he will be eligible again. Can one imagine what would happen in the courts and all the legal wrangles that would arise? It is a question of Jarndyce v. Jarndyce. Anyone of a litigious frame of mind—and there are plenty of them—would be in the courts month after month, year after year. There would be no way round it if equity is to be achieved. If equity is not to be achieved, we had better be told.
I anticipate the answer to my question as to what studies have been made by the DES and the Scottish Office. I forecast that the scheme will all end in tears, and that the Under-Secretary will regret that he ever set his hand to it.

Mr. Jackson
The hon. Member for Linlithgow (Mr. Dalyell) is always a most beguiling Cassandra, but the proposals before the House will not have the consequences that he described. As to why the banks withdrew from the scheme, that question is not for me but for the three bankers to whom the hon. Gentleman referred. They made it clear that they had no objections to the principles of the scheme but that they had made a judgment in their own commercial interests. That does not reflect on the merits of the scheme itself, which is designed to be in the public interest, in providing more money to support students while they are studying. The banks' withdrawal from the scheme is irrelevant.
As to the questions of my hon. Friend the Member for Leeds, North-West (Dr. Hampson), I may tell him first that the designation of courses should be straightforward. If he reads the Bill, he will see that in the case of what are described as public sector institutions, eligible courses are spelt out. One of their characteristics is that they are full-time courses. The list of courses designated in the private sector that are eligible for loans will, as in the case of those eligible for grant, be announced in good time for the autumn.
My hon. Friend asked about counselling. It will be available to students just as it is for grants.

§ Dr. Hampson
From whom?

Mr. Jackson
Counselling will be available from a variety of sources, including the local authorities from which the grants will be obtained and the institutions where applicants will be studying. Advice is already available in the form of the leaflet to which my hon. Friend referred.
My hon. Friend inquired also about the repayment term. In Committee, it was made clear—and I am sorry that word of this did not reach him—that the repayment term will be extended as the scheme matures. We envisage a term of five years initially, and I told the Committee that we did not expect that repayments would normally be in excess of £400 per year at current values.

§ Dr. Hampson
I mentioned that figure, but that is not my point. It was not that the repayment would be extended as the scheme matures. I was asking my hon. Friend whether the Student Loans Company was capable of producing what I would call a mortgage repayment profile 468 in which, as the person starts off in a job with a low income, he pays back a relatively small amount, and then pays more as his income increases. Can the payments be adjusted to resources? Can the company do it? If not, why cannot public funds be recollected by a public agency—the obligation to the taxpayer was mentioned—that is, by the Inland Revenue? How else can it be done?

Mr. Jackson
My right hon. Friend the Secretary of State has explained some of the reasons why the Government do not find the suggestion that the Inland Revenue should collect back the loans acceptable.
There are many student loan schemes around the world and nearly all of them are similar to the scheme that we are proposing, and they are operating successfully. Only one scheme uses the Inland Revenue in the way that my hon. Friend suggested. It is only two years old, and it will be interesting to see whether it survives.
The scheme that we are proposing is responsive to the graduate's income. There will be no obligation to repay the loan if income falls below 85 per cent. of the national average. Our proposal is more generous than my hon. Friend seems to envisage, because we do not intend that the graduate should pay any positive interest rate.

§ Mr. Andrew Smith
I shall pursue the question that my hon. Friend the Member for Linlithgow (Mr. Dalyell) asked, which has also been alluded to by the hon. Member for Leeds, North-West (Dr. Hampson). After 10 or 12 years have elapsed, how will the Student Loans Company know that the liable person's income has passed beyond the 85 per cent. threshold?

Mr. Jackson
The Government are proposing a simple test which will rely on the honesty of graduates, and we expect it to he fulfilled. There will be a process of self-declaration, subject to sample checking. It is simple to ascertain graduates' income and how it relates to the threshold, which will be promulgated and announced. People will have to assess for themselves whether their income is above or below the threshold, and the whole process will be subject to sample survey.

§ Mr. Smith
Is the Under-Secretary saying that, after 10 years on a low income, it is up to the person to decide whether his income exceeds the relevant level and to ring up the Student Loans Company and say, "Please activate my direct debit"? Is that how it will work? It is a farce.

Mr. Jackson
There will be more contact than the hon. Gentleman supposes between the Student Loans Company and graduates. They will be regularly solicited to establish whether they are eligible to start repaying the loan.
My hon. Friend the Member for Leeds. North-West referred to the default rate in the United States. That subject was covered extensively in Committee. The default rate there is high, but that is because the American loan scheme is more wide-ranging than the scheme that we are proposing. The loan scheme that operates in Scandinavia would make a proper comparison, except that it is less generous to students than ours. Default rates there are running at between 1 and 2 per cent. and we believe that British graduates will he as honest as the Scandinavians.

§ Dr. Hampson
That may he the case, but I have studied the matter carefully. I have seen the work of Dr. Woodall and many others, and I have been a teacher in the States 469 and I know that there are differences between federal and state schemes. I assure my hon. Friend that one of the problems in the United States has been that when it has been left to a state institution, in particular to a college or university, to track people down, it has not had the resources to do so. Once it gets round the student world that one can virtually escape repayment, it requires massive resources, such as those now proposed by the Federal Congress, to ease the burden that has built up.

Mr. Jackson
I think that my hon. Friend is making a meal of this. We are talking about consumer credit, which is provided extensively by many agencies around the country. The business of collecting relatively small sums from a relatively large number of people is well established. Many practices and procedures are connected with it, and are perfectly acceptable in a commercial operation. My hon. Friend may wish to consider the biography of the chief executive of the Students Loans Company. He started by running consumer credit for the Ford Motor Company, for large numbers of people borrowing money for motor cars. He did similar work for Philips, and for companies operating in Canada. My hon. Friend must not suppose that there is anything new, dramatic, unusual or shocking about this procedure.

§ Mr. Matthew Taylor
rose——

Mr. Jackson
I think, Mr. Deputy Speaker, that you will want me to make progress now with the new clauses. I have given way to several hon. Members, but they have raised issues which were mentioned in debate but which are not relevant to the new clauses. But I give way to the hon. Gentleman.

§ Mr. Taylor
My question, which arises from the Under-Secretary's reference to sampling, is: who will be responsible for sampling students? How many will be checked? What information are they expected to get—will it be from the Inland Revenue or the employer?

Mr. Jackson
I am not sure that that point is relevant. We envisage that deferment will have to be applied for and justified annually to the Student Loans Company, and the company will do that.
The new clause relates to the legal characteristics of the Student Loans Company, which is limited by shares, and at present all the shares are owned by the Government. The Government's present intention is, subject to the passage of the legislation, to contract with the Student Loans Company for the administration of the scheme. It will not necessarily be a perpetual contract, and nor should it be. We must retain the option in later years of letting a fresh contract, which may be with a new body, on a competitive basis. It is important to avoid anything in the legislation that might prevent the Executive from serving the public interest by securing a competitive arrangement.
The new clause envisages that what will essentially be a private law commercial arrangement, such as the sale of the Student Loans Company, should be subject to parliamentary approval. That is entirely inappropriate. It must be a commercial transaction, and the new clause is even more inappropriate, as it provides that any disposal of assets by the Student Loans Company requires 470 parliamentary approval. I do not know whether the hon. Member for Oxford, East (Mr. Smith) thought the new clause through. One implication is that every time the Student Loans Company wants to sell a desk or a typewriter that it has finished with, it will have to come back to both Houses of Parliament for approval. I cannot believe that Opposition Members seriously envisaged that.
We believe that it would be inappropriate for the detailed arrangements between the Government and the Student Loans Company to be established by legislation. It would make no practical sense to do so. The route that is conventionally employed in those cases is a financial memorandum or contract. The arrangements will necessarily be complex but will be routine in character and it would simply not be a proper use of parliamentary time—whether Government's or Opposition's—to go into that extensively.
The nature of the relationship between the Government and the company may change. The Secretary of State needs flexibility to develop the scheme, and could not do so if he was tied in the way that the new clause proposes.
Some hon. Members referred to privatisation. The ownership of the Student Loans Company clearly lies with the Government at present, but they do not want to close the door on opportunity for privatisation at a later stage. It may well be to the advantage of the taxpayer to be able to reduce some of the costs of the administration of the scheme by putting it into private hands. Should the Student Loans Company revert to private ownership—and we must remember that it was originally conceived as a vehicle in private hands—at a later stage, the mechanism for the transfer of ownership would probably be a sale of share capital.
There is no reason why the Student Loans Company should not remain in its present form, as a company limited by shares. Changing it to a company limited by guarantee confers no obvious benefit, although the Opposition may think that it does, and nor does it impose any restriction. If the Student Loans Company were in the form proposed in the new clause, it would still be able to dispose of assets, and the new clause would not achieve the object stated for it.
Several Opposition Members seemed to make out that they alone were concerned about civil liberties. I yield to no one in the House in my concern for student liberties. It is irresponsible of Opposition Members to try to run a hare to scare people about this issue.
The Student Loans Company, whether in or out of public ownership, will be subject to the Data Protection Act in the same way as all similar operations and enterprises. The Act—which was passed under the present Government—provides valuable protection for the individual, while recognising the need for controlled exchange in the use of personal data. The Goverment are wholly committed to the enforcement of the Act through the Office of the Data Protection Registrar.
Borrowers will be given the same protection as they would receive if they had borrowed from a commercial lender. All the people concerned will have bank accounts, which will be treated in exactly the same way as accounts with the Student Loans Company. The company, like other commercial operators, can hold personal data only if those data are registered under the Act, and can use them only for the registered purposes. The data may not be disclosed without the authority of the individual to whom the information relates, as with normal commercial 471 banking operations. Furthermore, under the Data Protection Act the individual is entitled to receive a copy of any data relating to him held by a data user, on payment of a reasonable fee. Those protections will apply irrespective of who owns the Student Loans Company.
The Opposition's proposal is completely unnecessary. It would he absurd to pass a law stating that companies must do what the law already obliges them to do. The Student Loans Company, and any sub-contracted company, will be as tightly controlled by the Office of the Data Protection Registrar as any other company holding personal data. That, I believe, is a complete answer to the canard about civil liberties that Opposition Members sought to introduce.

§ Mr. Dalyell
rose——

Mr Deputy Speaker
Order. The hon. Member for Linlithgow (Mr. Dalyell) has already spoken once; he cannot speak again.

§ Mr. Andrew Smith
It is abundantly clear from the Minister's inability to deal satisfactorily with the most elementary inquiries about the administration of the student loans scheme that it has not been thought through properly. I see that my hon. Friend the Member for Linlithgow (Mr. Dalyell) wishes to intervene: I gladly give way to him.

§ Mr. Dalyell
The Minister's reply to me was extraordinary. He said, in effect, "If you want to know the answer to your question, you must ask the people concerned." That might be all right in some contexts, but it would certainly not be all right in the context of my question. I simply asked why the chairmen of Lloyds bank and the Midland bank—serious people—had decided not to go along with the Government's scheme. Surely a Minister should have had the curiosity to find out why such people should consider the scheme—as I suspect—unworkable.
I have asked Sir Kit McMahon many things, but it is not my business to ask him such a question. It is a Minister's business to do so. The Minister should have had the curiosity to ask, and the candour to tell the House of Commons what reply he received.

§ Mr. Smith
I will give way to the Minister if he wishes to respond to my hon. Friend. Obviously he does not: it appears that he is unable to answer. The lack of replies to our straightforward questions is extraordinary. It is clear to us at least that the banks pulled out because they have no confidence in the scheme, which—as we have shown—is an administrative nightmare.
In the interests of hon. Members who are keen to speak on later amendments, I shall seek leave to withdraw the motion, leaving the Government to reflect on the wisdom of the arguments that have been put to them. They have not thought through their proposals, and—as my hon. Friend the Member for Linlithgow said—it will end in tears.
I beg to ask leave to withdraw the motion.