Student Loans (Hansard, 30 January 1990)

§ 7. Mr. Darling
To ask the Secretary of State for Education and Science what estimate he has made of the cost of administering student loans in respect of students attending universities in (a) England, (b) Wales and (c) Scotland in each year until 2010.

§ The Parliamentary Under-Secretary of State for Education and Science (Mr. Robert Jackson)
The administration costs of the loans scheme for United Kingdom students will be in the order of £10 million to £20 million in the first three years. Precise costs will be published shortly.

§ Mr. Darling
I understand that the banks have agreed to write off half the cost of the sums incurred when it was thought that the banks would go ahead with the scheme. What is the Government's share of the money that has now been written off and when does the Minister expect to know how much the Student Loans Company will cost during the next 20 years? Who will pay for that, or will those sums be recovered from the banks by way of the retribution that the Prime Minister has apparently promised them?

§ Mr. Jackson
Much of the expenditure incurred in line with the supplementary estimate approved by the House is adaptable to the student loans scheme in its new form, so the question of additional costs to the Government does not arise. The banks' £500,000 contribution will be gratefully received. As to long-term costs, with any loans scheme there is a period when money is being advanced before it starts to come back. We have told the House that we expect current savings from the beginning of the next century.

§ Mr. Allan Stewart
Does my hon. Friend agree that what really bothers the hon. Member for Edinburgh, Central (Mr. Darling) is that all that money will be spent in central Glasgow? Can my hon. Friend give an up-to-date estimate of the number of jobs that the Student Loans Company will create for the Glasgow area?

§ Mr. Jackson
We estimate that some 200 additional jobs will be created in Glasgow as a consequence of the company's premises being located there.

§ Rev. Martin Smyth
Will students attending colleges and universities in Northern Ireland draw from the same scheme or will there be a separate one for them?

§ Mr. Jackson
The loans scheme will be national, so students in Northern Ireland will also draw from it.

§ Mr. Bowis
Has my hon. Friend been able to estimate the cost of existing bank loans to students when they have to pay for them at the full commercial rate? Will he reveal the savings that students will enjoy as a result of his new scheme?

§ Mr. Jackson
Our survey suggests that the average student has an overdraft at the end of each year of study of the order of £340. Much of that money is loaned at commercial rates of interest, whereas the Government scheme will operate at a zero rate of interest, with repayments deferable if income is below 85 per cent. of national average earnings.

§ Mr. Andrew Smith
Will the Minister admit that his estimates of additional costs amounting to £2.17 billion over the next 20 years, over and above the cost of uprating grants in line with inflation, excludes administrative costs and interest rates subsidy—both of which will add hundreds of millions of pounds to the cost of the scheme —and provides for no expansion in student numbers beyond the end of the century? Does not that show that his deeply flawed scheme is financially as well as educationally bankrupt and ought to be abandoned forthwith?

§ Mr. Jackson
The hon. Gentleman complains that the Government are being too generous to students.

§ Mr. John Marshall
Will my hon. Friend confirm that the number of students entering higher education in 1989 and the number making applications to do so in 1990 confirms that the scheme provides no barrier to entry?

§ Mr. Jackson
Yes, I can confirm my hon. Friend's proposition. Last year's recruitment of higher education students reached a record. They were also the first generation of students applying in the knowledge that there will be a student loans scheme.