Student Loans

HL Deb 21 December 1989 vol 514 cc345-9

11.24 a.m.

Viscount Davidson

My Lords, with the leave of the House I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Education and Science. The Statement is as follows:

"With permission, Mr. Speaker, I would like to make a Statement on the administration of student loans.

"I reported to the House yesterday —at the earliest opportunity —the background to the decision of the participating financial institutions to withdraw from the Student Loans Company. I indicated then that I would be happy to make a Statement today. The main points are as follows:

"The objectives, principles and framework of the scheme as outlined in the Education (Student Loans) Bill remain completely unchanged. I regret the banks' withdrawal but it affects neither the policy nor the Bill.

"As I announced yesterday, arrangements are now being made for the Student Loans Company to pass into government ownership. This will ensure that the preparations for the scheme can continue smoothly. A great deal of the preparatory work already undertaken is relevant to the new approach. The banks have agreed to contribute £0.5 million to these preparatory costs.

"The new approach may even be a cheaper option. It has always been the case that the Government would fund the administration of the scheme as well as the loans. We were prepared to pay a fee to the financial institutions in order to secure the benefits of their branch networks for students.

"The main result of the institutions' decision will be less easy access to loans for students. I would have preferred them to have that convenience. But the essential point is that nothing in the decision of the institutions alters either the Bill or the analysis behind it. The Bill will continue on course".

My Lords, that concludes the Statement.

11.26 a.m.

Lord Peston

My Lords, I thank the noble Viscount for the Statement. However, I am bound to say that for complacency and lack of content it exceeds any Statement that I have heard in your Lordships' House.

Is the noble Viscount aware that his right honourable friend the previous Secretary of State for Education and Science said in another place on 19th June 1989 (at cols. 22 and 23 of Commons Hansard): It is right that this scheme should be administered in the private sector, as our financial institutions possess skills in information and banking systems that are not readily available to the public sector"? He also said: We have had discussions with a number of banks and other financial institutions. I am clear that there will be substantial interest in participation in the scheme, subject to the negotiation of the final contract. In particular, it is clear that the major clearing banks will be ready to participate in the scheme". He ended by saying: That must be their decision, but I am confident, from assurances given personally to me, of substantial interest in participating in the scheme". That is the background to this extraordinary Statement today.

Perhaps I may draw your Lordships' attention to the words in the Statement that: arrangements are now being made for the Student Loans Company to pass into government ownership". We have an extraordinary example of the Government nationalising a company almost before it has been privatised.

One has to ask the noble Viscount some substantive questions, even though the Statement contains nothing. What scheme are we now really to have for student loans? Do the Government themselves even know what scheme will eventually be put into operation? Since costs have been incurred in order to persuade the banks to join the scheme, can the noble Viscount tell us the extent of the squandering of public money that has occurred here? I am told, and one has read, that at least £1 million has already been spent. If there were ever a case for an inquiry by the Public Accounts Committee this is it.

What about future costs? Have the Government any idea of what they are involving themselves in? Is there nothing more to be said about the extraordinary suggestion in the Statement that the new approach may even be a cheaper option? How can we possibly believe that? If it is a cheaper option, why was the new approach not the original approach?

Finally, many of us believe that we have to examine student finance. It is not a subject that we feel is over and done with. Is it not the time for the Government to abandon this totally ridiculous Bill, to do some thinking on the subject —and many of us who have worked in the field would be willing to help the Government in order to get the subject straightened out —and then to come back to the other place and to your Lordships' House with a serious scheme for the reform of student finance?

Lord Jenkins of Hillhead

My Lords, this is a remarkable Statement. As the noble Lord, Lord Peston, indicated, the Government are prepared to overcome even their anti-nationalisation dogmatism in order to pursue what they regard as a higher dogmatism of pressing on with the Bill, which quite clearly commands virtually no support. The banks regard it as undesirable and, according to most informed academic opinion, including that of the noble Lord, Lord Peston, my noble friend Lord Russell and the noble Lord, Lord Beloff, the scheme is highly undesirable. That view is wholly shared by all the authorities of the University of Oxford, primarily on the ground that they are convinced that it will narrow rather than widen the social base of student entry.

That is a serious matter for consideration. Has the time not arrived when the Government should take away this meaningless little enabling Bill and look at it again, as the noble Lord suggested? Do the Government never listen? Do they never recognise that emulation of the seamanship of the captain of the "Titanic" is not the highest form of statesmanship?

Viscount Davidson

My Lords, I am not sure whether I am grateful to the noble Lords, Lord Peston and Lord Jenkins of Hillhead, for their comments. I am not surprised by them, but I venture to remark that the Opposition parties have made quite a meal of a comparatively simple Statement. The Bill is in Committee stage in another place and will come before noble Lords in due course. I can tell the House that without any doubt at all. Government policy is to secure the introduction of the student loan system and to give extra resources to students. That remains our policy. The Student Loans Company will pass into the ownership of the Government, so as to ensure that preparation for the introduction of the scheme may continue without interruption. We are pressing ahead with the legislation. I listened to the noble Lords and I promise them that I shall draw my right honourable friend's attention to what has been said this morning in the House, but, standing at the Dispatch Box, I cannot go any further.

Lord Boyd-Carpenter

My Lords, is my noble friend aware that unhappiness about the scheme is not confined to the other side of the House? Is he also aware that, on the best possible outcome, it must be many years before any saving to public funds results from it? In those circumstances, would it not be wise to use the Christmas Recess to give further thought to it?

Viscount Davidson

My Lords, I read the papers. I am aware that there is a certain amount of disquiet in many quarters about the Bill. Again, I shall draw my noble friend's remarks to the attention of my right honourable friend.

Lord Rippon of Hexham

My Lords, I welcome the principle of student loans, but is my noble friend aware that the Bill as drafted is an affront to Parliament and gives no details whatever of any arrangements for student loans? Should it not be withdrawn until the Government can say something about what is intended?

Viscount Davidson

My Lords, again, I cannot say yes or no to that question, but I shall draw it to my right honourable friend's attention.

Lord Beloff

My Lords, perhaps I may ask the noble Viscount to look at col. 643 of our Hansard of 9th November 1988, when the scheme, in the form of a White Paper, was first brought before the House and we were told that two years had gone into its preparation. I said on that occasion that since the scheme was to be administered by the banks, it might have been wise to consult them during the preparation of the White Paper. I ventured to suggest to noble Lords that they might well find the terms unpalatable and that in the end they might well tell the Government to go away. If, with my limited sources of information, I could be wholly accurate in November 1988, why has it taken over a year for the Government to realise the mess that they have got themselves into?

We know —I believe this is why my noble friend Lord Boyd-Carpenter referred to the possibility of further thought —that the present Secretary of State for Education and Science had nothing to do with the preparation of the White Paper or the subsequent Bill. We owe that to the ingenuity of Mr. Robert Jackson, widely known as the Pol Pot of academia, and I see no reason in conscience why a new Secretary of State is bound to accept every part of a damnosa hereditas particularly when, as my noble friend Lord Boyd-Carpenter argued, it will make no difference to public expenditure for some years to come if the scheme, or some new scheme of student finance involving repayment, were to be introduced. It is officially accepted that the Treasury could not possibly benefit until the next century.

In the light of that, what is the tremendous hurry? We have serious business for the House to transact. Why should the Government persist in saying that they will bring forward a Bill which has no support in any quarter of the House, and which will take up valuable time which could be devoted to more important things? I seriously appeal through my noble friend the Minister to the new Secretary of State to give due consideration to what the noble Lord, Lord Peston, has said. I am quite sure that, if he were willing even at this late stage to consult the Committee of Vice-Chancellors and Principals and the Committee of Directors of Polytechnics, it should be possible to work out a scheme which they would assist in putting into place, instead of alienating them by persisting in a scheme or a variant of a scheme which they have repeatedly told the Government is impossible.

Viscount Davidson

My Lords, I shall ensure that my right honourable friend the Secretary of State is made aware of the remarks and feelings of my noble friend, if he is not already aware of them. As to the occasion in November 1988 to which he referred, perhaps I should say in the words of the song, "I remember it well".

Baroness White

My Lords, as the noble Viscount has said that the Opposition are making something of a meal of this, does he agree that it is the best Christmas dinner that any Opposition had for many years?

Viscount Davidson

My Lords, I can see that they are enjoying it.

Earl Russell

My Lords, I believe that the situation is a little too important for the scoring of party points. Rather than doing that, I should like to turn our attention to the question of whether students entering higher education next October, and their parents, may count on some visible means of support. With that in mind, I should like to ask the noble Viscount whether he can give a copper-bottomed guarantee, or, if not, whether he will ask his right honourable friends the Secretary of State and the Chancellor of the Exchequer whether they can give such a guarantee, that student grants will continue to increase in line with inflation unless or until a workable student loan scheme is in place.

I should also like to ask the noble Viscount about the timetable. He is no doubt aware that the Price Waterhouse report has already expressed grave misgivings about whether student loans can be in place for the next academic year. If that does not make the preparatory work slower it should do. Many of us in all quarters of the House have the gravest doubts as to whether the scheme can possibly be made effective for the next academic years and view with grave misgivings the prospects, should it be on the Statute Book, but not in place. Since I agree wholeheartedly with the noble Lord, Lord Rippon of Hexham, about the contents of the Bill, perhaps I may ask the Government to take it away and bring it back when it is ready.

Viscount Davidson

My Lords, I am sure that the noble Earl will realise that I am not in a position to give any copper-bottomed guarantee. I listened to what he said and to the misgivings that have been expressed in the House. I can assure the House that these comments will be passed on to my right honourable friend.

Lord Renton

My Lords, is my noble friend aware that although the Bill is indeed an enabling Bill, the way in which the Minister could exercise his powers under the Bill is very fully and precisely described? He will not have much discretion except to say whether or not his power should be used at all.

Viscount Davidson

Yes, my Lords, that is quite correct.

Lord Grimond

My Lords, now that this scheme, which the Government assured us was so perfect, has collapsed will the Minister ask his right honourable friend to consult again with the Vice-Chancellors and Principals and so forth on the other two schemes that have been put forward in some detail—either for graduate tax or for linking loans to national insurance? There are many people in this country who think that these are preferable to the current scheme in any case. Does he not agree that surely now they should be re-examined?

Viscount Davidson

My Lords, I shall of course ask my right honourable friend to look at it again.