HL Deb 19 March 1990 vol 517 cc100-82

8.40 p.m.

House again in Committee on Schedule 2.

Earl Haig moved Amendment No. 39: Page 3, line 40, at end insert: (" (d) make provision for differentials in rate of repayment for those with longer courses and for graduated scales of repayments according to various levels of income.")—

The noble Earl said: The amendment is a probing amendment. I am seeking an assurance from my noble friend the Minister that where there are repayment difficulties for graduates a way will be found to vary the amounts to be repaid according to the level of their income. Clearly all those who can pay off their loans will do so as quickly as possible. Those on longer courses, or those on postgraduate or travelling courses of some kind will be among those having to delay repayment. Longer courses include modem languages, architecture, medicine, dentistry, higher engineering courses, teacher training, speech therapy, audiology and virtually all Scottish honour degree courses.

The longer the delay, the greater the escalation due to inflation. The less well paid professions (doctors and artists) who would be unlikely to reach 85 per cent. of the average wage for some time, if ever, would be disadvantaged. The amendment recommends a graduated scheme which would encourage young people into higher education en route to lower paid professions without the threat of a future millstone of debt around their necks. A doctor might find himself above the 85 per cent. level with a debt of well over £ 2,500.

Extending a course by one year increases the size of the debt by over 60 per cent. That debt would make banking facilities hard to acquire and difficult to face at a time when a graduate was having to buy a house, start a family and take out a mortgage. Those difficulties will affect recruitment to longer courses. They will affect the Scottish system in particular. They will affect arts and crafts course students in the universities. That could lead to fewer graduates, and fewer teachers could lead to fewer students. Some 25 per cent. of Scottish university students are from outside Scotland. Faced with the prospect of higher debt levels many students will avoid going north. That will have a disastrous effect on our Scottish higher education institutions.

Some variant in the amount to be repaid on the loans for fourth year students is required. The amendment calls for a degree of flexibility so that students will feel that their special circumstances are being watered for so that the harsh effects of a sudden transition to repayment liability will be avoided. I beg to move.

Lord Peston

The noble Earl has put his finger on what is wrong with the Bill. If one were specifying a suitable student loans Bill such provisions would be intrinsic to the Bill. We would go out of our way to see that students on longer courses did not suffer because of that, as the noble Earl has said. Secondly, when one is considering repayment, instead of having the crude mechanism that the Government have invented (the 85 per cent. point for deferment) — one would have a graduated scale of repayment, according to the various levels of income, as the noble Earl has said. One would be on the way to the graduate tax version of this form of maintenance.

The noble Earl is right and one is sympathetic, but our problem is that the Government have set their face against any amendments to the Bill because they have set their course for disaster in order to get the Bill on to the statute book. That is up to the Government. I can say only that the type of considerations that the noble Earl is asking to have included in the Bill are right. We have argued this point before, as has the noble Earl, and there are several other amendments this evening upon which we will make much the same point. I must say— perhaps because it is already late— that I despair of this type of amendment because it is so sensible and the Government have decided that sense is not what they want to involve themselves in with respect to this legislation.

8.45 p.m.

Lord Addington

I made similar points last week. The problem is that no courses lasting more than three years were considered in the initial thinking or in the White Paper. The Minister said that he would look into the problem. I wonder whether any light has been cast upon it. How have any ideas developed: Scotland will be hard hit. I have gone on at some length about Scotland previously and I shall not repeat the arguments. The problems are fundamental because four-year courses do not come within the scope of the White Paper.

Lord Dormand of Easington

I understand that the amendment refers to continuous courses which are necessary to obtain a particular qualification. In certain subjects— I think particularly of physical education and music, but there are others— it is highly desirable from an educational point of view as regards the pupils, the schools and the whole educational system for an additional course to be taken. When the Minister replies, will he tell us whether the point would be considered in that context if the amendment were accepted.

Baroness Faithfull

Perhaps I may follow the point made by the noble Lord, Lord Dormand, and ask a question in relation to the amendment. I had been going to ask it in relation to another amendment but I shall ask it now in the light of what the noble Lord has said. It has been laid down by the Government that social workers should be trained for two years— we had all asked for a three-year training— return to their offices and then take a post-qualifying course of one, two or three years. I am not sure how the repayment of their loans will be manipulated. The point may fall under this amendment, and I merely ask that question of my noble friend.

The Earl of Caithness

I am glad to have the opportunity again to go over the question of repayment terms— a matter about which I believe some Members of the Committee already know. The Government recognise that it is important to get those terms right. The repayment regime has been carefully considered to take account of the need to protect those on low incomes and to produce a cost-effective administration of the scheme. The Bill sets the framework for deferment and cancellation, but, as the Committee knows, we do not intend to set the detailed repayment conditions in the Bill. We have already debated the nature of the Bill as enabling, and I have agreed that when the subordinate legislation is introduced to establish the scheme it will be subject to this House's approval under the affirmative resolution procedure. Your Lordships will then have the opportunity to debate the regulations which deal with repayments.

It might be helpful if I first repeated the intended repayment terms. Repayment can be deferred if income falls below 85 per cent. of national average earnings for whatever reason; the outstanding debt will be indexed in line with inflation to maintain its value in real terms; the debt will increase in this way during the period of deferment; there will be a fixed repayment period and repayments will be equal each year in real terms; any outstanding loan will be cancelled after 25 years or at the age of 50, whichever is earlier; or, for students starting courses at 40 or over, at 60— if there has been no evasion of repayments; and, in any case, in the event of death.

Amendment No. 39, which was moved by my noble friend Lord Haig, seeks to relate repayment scales directly to income. We do not believe that different rates of repayment are the right way forward. A graduate of a three-year course starting in 1990–91 who borrows the maximum loan faces a repayment of less than £ 400 a year, with the option to defer if income is low. The repayment period will be increased as the scheme develops and the size of the loans increase. We intend to ensure that annual repayments are kept around £ 400 at present prices.

The deferment threshold of 85 per cent. of national average earnings provides protection for those on low income. In today's circumstances, this threshold would mean that a graduate on an income of up to £ 11,500 could defer repayment for up to a year at a time. I ask your Lordships to consider whether £ 400 a year for five years out of salary of more than £ 11,500 is an unacceptable repayment.

If there were to be a variable repayment term according to income, the administrative complexity would increase. This would add to the cost of the scheme. I make no apology for using an argument of this kind: administrative complexity would lead to confusion and inefficiency.

A graduate would not know how long he would have to repay his debt, for his instalments would change according to income. The flow of repayments to the Exchequer would also be affected. This would delay the savings that should accrue to the taxpayer.

It is much simpler to have a fixed repayment term, from the point of view of administration and, more importantly, from the point of view of the borrower. We believe that repayment at the level of £ 400 a year will be reasonable for all graduates.

The amendment also seeks to make special provision for graduates on longer courses, and I shall be brief on this. As I have said before, we are examining the possibility of allowing longer repayment terms for those on courses longer than four years, so that repayments do not become too burdensome. It is a point about which the noble Lord, Lord Addington, asked me in particular. I cannot give any further information today. I shall do so at the earliest opportunity, because I know that it is of concern. I was more than surprised to hear the noble Lord, Lord Peston, say that we had set our face against any amendment. I though the one thing the Government had not done was to set their face against any amendment, and this is another area that we are looking at.

Lord Dormand of Easington

I wonder whether the Minister would care to deal with the points which I and his noble friend made.

The Earl of Caithness

I am sorry. I meant to cover those points and I did not. What is important, when we are talking about repayment, is not necessarily the course that the student has been on. It is the amount that that student has to repay, the amount which he took up in the way of a loan. Accordingly, students will not be asked to repay anything until they have completed the course. At the end of the course, there is a nine-month gap from the end of July to April the following year, when the repayment period will start. That repayment will start only if the income is above 85 per cent. of the national average, which is at the moment £ 11,500. So it is not the course that the student has been on but the income he receives which is the determining factor in the cases of both the noble Lord, Lord Dormand, and my noble friend Lady Faithfull.

Lord Peston

I am delighted to hear the noble Earl's remarks on the amendment and I wait to see what these acceptable amendments will turn out to be. I wait to see that on this coming Monday. What I am not clear about is this. We agree— do we not?— that a student on a longer course will have a larger loan. There is no disagreement about that. Therefore, a student on a longer course will incur larger costs. We must agree that that is a disincentive to such people and it must add to their burden.

As I understand it, the amendment of the noble Earl, Lord Haig, is directed towards the fact that there is something rather inequitable and, possibly, rather inefficient about that. It is at least possible to put forward a valid argument that says essentially that, even if they are on a five- or six-year course, everybody has three years' worth of debt because they are on a five- or six-year course not because they want to be but because it is in the nature of the course. I am certain that doctors would love to be educated and trained as rapidly as economists, but you cannot train a doctor as rapidly as that so it is more expensive to be a doctor.

As I understand it, the point that the noble Earl is making and the point that the medical profession has made in getting in touch with us is that that is a misunderstanding on the part of the Government of what is required here, and that consideration would not depend on administrative simplicity, which is the noble Earl's other argument. In other words, it is a possible suggestion that the noble Earl, Lord Haig, has put forward that the Government could take on board. It is not obvious why someone deciding to be a doctor— I use that as one example though there are many others— should as a result incur a greater debt to the taxpayer when in many ways the taxpayer wants that person to be a doctor.

Lord Flowers

Will the Minister also bear in mind one further point before he replies? He said that £ 400 a year is not so much to think of paying— and maybe it is not for many people. But what many of us assume is that it is the Government's intention that the loan element will as the years go by form a much greater proportion of the total maintenance support of the student, so the figure might rise from £ 400 to £ 2,000 or something of that sort. When levels of that kind are reached there is a case for graduated repayments, according to one's ability to pay, which does not apply with such force to a mere £ 400. We are not talking about the exact sums, but about the principle, in the expectation that the amount will get more important later on.

Earl Russell

We seem here to be running into a brick wall in government thinking. I am trying to work out exactly what that brick wall may be. I am wondering whether the problem that we have run into is the determination to apportion repayments exactly to the size of the individual borrower's debt; whether we have once again hit what the noble Earl had to expound to us so many times on the Local Government Finance Bill— the principle of accountability. Is it not more trouble that it is worth?

The Earl of Caithness

I hear and note carefully what the noble Lord, Lord Peston, and the noble Lord, Lord Flowers, said. What I said was that we are looking at those courses that last more than four years Clearly I have said that this evening; I said it this afternoon; I said in last Monday; and I think I said it at Second Reading. I hope that this time the noble Lord, Lord Peston, will understand that that is what we are doing. I shall come back with an answer, because we want to keep the level of repayment at about the £ 400 a year mark.

That takes me on to the point of the noble Lord, Lord Flowers, that in due course, as the loan builds up towards the 50/50 level, it becomes a larger amount. I repeat what my noble friend Lady Blatch said earlier this afternoon— that we will again look at the repayment period, so that we keep the level of repayment at a very reasonable level, which we are seeking to do. If it comes to that stage, then it could be extended at a later stage.

I do not think the noble Earl, Lord Russell, is throwing up a brick wall, unless he is facing in the opposite direction to me. I am trying to be as helpful and accommodating as I can. We think it is absolutely fair, and I am sure that the Committee agree with the Government, that if a student borrows from the taxpayer a certain amount of money it is right that in real terms he pays that back when as a graduate he can afford it.

Earl Haig

I thank my noble friend for his reply. However, I think that Members of the Committee from all sides must be rather disappointed in his response. I cannot see that there is any indication that there will be any change or flexibility in regard to the problems which I mentioned. I hope that before the Bill returns to another place there will be more thinking on the matter. As the noble Lord, Lord Peston, said, it raises crucial problems which produce among students the feeling of disquiet about a certain divisive situation which I think led to some of those noises about which we heard earlier today. However, it is now pointless to put the amendment to the Question. I beg leave to withdraw it.

Amendment, by leave, withdrawn.

9 p.m.

Earl Russell moved Amendment No. 38A: Page 3, line 40, at end insert: (" (d) make provision to ensure an individual borrower's liability remains that individual borrower's liability and does not pass to another person.").

The noble Earl said: I think that the noble Earl will find the point that the amendment is making extremely familiar. It concerns the joint or several liability which I recall this Chamber debating at great length during the passage of the Local Government Finance Bill. The suggestion behind the amendment is that the Government actually took the right decision on that occasion. They decided to stick strictly to the principle of individual liability; that it should not become a joint or shared responsibility; that it should not— as I believe the noble Earl assured us it should not— be a negative doubt; but that a loan should be the proper and sole responsibility of the borrower. I do not think that that conflicts with government thinking but I should be very glad to hear the noble Earl's confirmation on that point.

Baroness Blatch

The amendment would ensure that liability for the loan could not transfer to anyone other than the original borrower. I must remind the Committee that there will be a contract between the borrower and the Student Loans Company. There will be no provision in the contract making anyone other than the borrower liable for the loan. Even if there were, it would be ineffective unless the other person agreed to accept liability. Nor will there be any provision in the contract making the referees liable for the loan. Again, if there were, it would be ineffective unless the referee accepted it. Nor is there any provision in the Bill that could override the contract so as to transfer liabilities.

The arrangements for the loan will be set out in the regulations, which this Chamber will have the opportunity to discuss. These terms will then be embodied in the contract between the individual borrower and the Student Loans Company. The borrower will not of course be obliged to enter into the contract if he does not like the terms, though as they are extremely beneficial I do not expect many objections. But it would be quite wrong to seek to regulate in public legislation detailed contract terms which are essentially matters of private contract.

The amendment would prevent what cannot in any case happen. I repeat: the Government intend to do exactly what these amendments require.

I hope that I have allayed the fears of noble Lords and that on the basis of that assurance I have given the noble Earl will feel able to withdraw the amendment.

Earl Russell

I thank the noble Baroness warmly for that reply. Those assurances are precise and specific and go right to the point desired. I am delighted to accept them. In the circumstances, I happily beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Peston moved Amendment No. 39B: Page 3, line 40, at end insert: (" (d) make provision for the cancellation of liabilities in respect of loans taken out by students undertaking such courses of a vocational nature as may be designated by the Secretary of State from time to time in consultation with relevant bodies,").

The noble Lord said: With the leave of the Committee I should like to speak also to Amendments Nos. 42, 42B and 46. This set of amendments clearly involves certain principles or criteria which conflict with what one might call the "simplicity"— I purposely use the word in inverted commas— of the Bill.

On Second Reading, and on other occasions, several noble Lords indicated that once one introduces the Bill the Government have an opportunity to consider whether the full provisions of the legislation should apply to all students irrespective of the course they take and irrespective of the employment they eventually obtain.

The argument I have already put forward— and therefore I do not need to detain Members of the Committee too long— is that there are all sorts of graduates to whom the argument that is put forward in favour of loans or in favour of reducing the cost to the taxpayer does not apply. It does not apply partly because they do not earn that much. The Government have taken a view, first, that they will not cancel the loan but that on the 85 per cent. criterion they will defer repayment.

However, the first argument I press upon Members of the Committee for consideration is that graduates on average income are still not terribly well off, especially if one bears in mind certain points mentioned by other noble Lords. For example, one should bear in mind circumstances; but the Government have simply set their face against circumstances. Nevertheless, there is no doubt that some of the professions which I have in mind are clearly ones which involve serious costs for simply being in the profession. I refer to expenses which are unavoidable and which the Government's deferment scheme does not take into account.

That point leads to another matter. The economic case for student loans has overwhelmingly been built around the idea that graduates earn over their lifetimes— I emphasise this point— a great deal more than non-graduates. A key part of the argument which we have neglected a great deal is that that extra earning is itself a consequence of the graduates having been to university. Much of the research suggests that that proposition is problematic, but that is by the way.

Many of the professions that I and other noble Lords have in mind earn somewhat more than average earnings, but not a great deal more. In the White Paper the Government seem to base their case on calculating rates of return on investment in higher education over the whole range of graduates. However there is a world of difference between what is earned by the average or typical graduate and what is earned by any specific graduate. Many graduates will do rather worse than that. Except for the 85 per cent. criterion, which is only a deferment criterion, no account is taken of that. That is part of the reason for asking noble Lords to consider sympathetically this set of amendments.

The other part of the argument is that on grounds of efficiency and of how to staff certain of our under-staffed professions, this happens to be a sensible way of dealing with the problem. I regret to say that the noble Baroness, Lady Carnegy, is unable to be with us at the moment. She argued last Monday on our first day on the Committee stage that she believed that employers would bear the cost of the loans. Local education authorities anxious to recruit teachers would simply offer to pay off the loans for teachers. By implication, it was suggested that local authorities anxious to recruit social workers would do the same and that health authorities anxious to recruit nurses would do the same.

I argued at the time— and it is still a subject that interests me a great deal— that there is quite an interesting economic question as to who bears the full cost of the loan. Since last Monday I have inquired of those likely employers in the public sector whether they have available or are likely to use funds for that purpose. I agree that it is rather ad hoc; I have not been able to do a full piece of research to cover all local authorities. The response I received is that that is about as far-fetched an idea as one could possibly think of. Local health authorities have no spare money to use to pay the loan costs of nurses. The same point applies to social workers and largely to teachers.

Members of the Committee will also notice that under my Amendment No. 46 I include the clergy. The idea that vast sums of money are available to pay off the loans of clergymen only has to be mentioned to be seen to be as preposterous as it is. Therefore we must assume that unless such an amendment is accepted these individual people will largely bear the cost of the loans.

The Government have argued that they want individuals to bear more of the costs of their education. However, I wonder whether they want the specific groups to bear these costs. It must be assumed that if we introduce a greater burden on people— the point that the noble Baroness, Lady Seear, has made— that is bound to be a disincentive. Put differently, either it is a disincentive or the whole of the economics on which the Government allegedly claim to act are wrong. I cannot believe that they are willing to abandon the whole of the economics of the market mechanism to score a debating point on my amendments. Therefore they must agree that to place greater burdens on people will deter them from doing what they would otherwise do.

I now have to accept late on the second day of the Committee stage that there seems to be no way of persuading the Government to give up on this; they are determined to go through to the bitter end. If the Government insist on going down the path of this Bill, the least they could do is to modify the criteria for loan repayment according to certain professions. My list is merely for illustrative purposes; it is not meant to be complete.

I was interested in the response of the noble Earl to the previous question where he argued that one thought that lay behind the Bill was the criterion of administrative simplicity. I do not doubt and do not need to be persuaded that introducing the amendments I have in mind here will complicate the administration of the scheme. However, all of us who have looked at such schemes, all of us who have concerned ourselves with the reform of student maintenance— as the noble Earl will recall, in my Second Reading speech I welcomed the Government's interest at least in reforming student loan schemes— have been aware that to do the job properly requires a certain amount of sophistication in administration. It cannot be done easily.

I suppose that the difference between noble Lords on this side and those on the Government side is that we would rather accept some of the complexities of administration in order to get the content right than say, "For the sake of administrative simplicity and getting the Bill on the statute book, we shall have a rather imperfect content". I can well see the difference between us. That is the reasoning that lies behind this class of amendments. I appreciate that I sound rather cynical on these matters, but I am bound to say that it seems to me that if the Government were not in such a tearing hurry they could well incorporate these amendments in some form or other. I felt the same way about the earlier amendment of the noble Earl, Lord Haig. These amendments are in that same spirit. I wish the Gove rnment were not in such a tearing hurry because we could end up with a very much better Bill if the Government would only begin to take amendments of this kind seriously. I have covered all the ground I wished to cover and I shall conclude my remarks. I beg to move.

9.15 p.m.

Baroness Seear

I wish to support the noble Lord, Lord Peston, particularly as my name is down to Amendment No. 42B. I shall be brief as I do not have a great deal to add to what the noble Lord has said, except to underline that this is an opportunity for the Government to help us out of what will be an extraordinarily difficult position— as the Government have often stressed— in finding people for certain professions. The amendment provides an instrument which could be used quickly at times of acute undermanning of these central occupations. It will be extremely difficult to fill such vacancies unless some financial incentive can be provided quickly, outside improvements in the pay structure, by letting people off loan payments. In the interests not sc much of the major purposes of this Bill, but rather of providing the Government with an instrument to help us out of our future difficult labour market problems, I urge the Government strongly to accept these amendments.

Baroness Young

Like all Members of the Committee I shall listen carefully to what my noble friend has to say when he replies to this series of amendments. I wish to make two points. It is unfair to suggest that my noble friend has not been helpful on a number of amendments today. In our earlier discussions my noble friend gave an assurance that he would consider further the access funds. He also gave specific promises on the whole question of disabled students. That was helpful to everyone. As regards the previous amendment from my noble friend Lord Haig, the Minister gave an undertaking to consider the matter involved. I make those points because, having been in a similar position on the Front Bench myself, I often wish that I had been allowed to say as many generous things as my noble friend has been allowed to say. In the past I frequently had to argue difficult cases in this Chamber.

We are all bound to have a certain sympathy with this group of amendments. It would be much easier if we cculd stand pat on where we are. It would be so much easier if we had grants and unlimited amounts of money to give to everyone who wanted them. That would make us all feel much more comfortable. I have the feeling that perhaps the noble Lord, Lcrd Peston, will tell us at some stage that it is the po icy of the Labour Party to continue to give grants to everyone, as well as doubling the numbers of students in higher education at the same time. The noble Lord, Lord Glenamara, said that was what he wanted on Second Reading. However, when I re-read the end of the delightful speech of the noble Baroness, Lady Blackstone, I noticed that she did not commit herself to anything at all. That is perhaps fair game for the Opposition.

However, when one is considering a matter, one needs to know where everyone stands. It is easy to say that everyone must be an exception to the Bill. My noble friend has, I believe, identified a number of people who, we all agree, are exceptions; for example, the disabled, those who will be genuinely affected by the ending of housing benefit and those who undertake longer courses such as doctors, vets and chemists at Oxford who undertake a four-year course. The latter people have not been mentioned in the course of this Bill, but as the wife of a chemist I feel that I should put in that plea. Classicists and others are in a similar position.

As regards the people covered by this group of amendments, my noble friend has said that they will not have to repay their debt while they earn up to 85 per cent. of average earnings. Many of the people referred to in Amendment No. 42 obviously fall within that category because they will not be particularly well paid. At the same time no one has mentioned in the course of the debate any monitoring of how this will work. Sooner or later we must turn to that point. It is important that over the next few years we should monitor how this legislation is working and whether the fears that no one will enter teaching or the Church or some of the other professions that have been mentioned have been realised. There is a very clear case for looking at the matter again. However, the truth of the matter is that any government would find themselves in a very difficult position over the whole question of paying for higher education. It is very expensive.

What is being proposed for students next year is a far more generous grant, plus the loan and in addition the other items that have been added to the Bill as it has proceeded through the Chamber. I shall of course listen with interest to what my noble friend has to say, though I am bound to say that he has already made a number of very positive and helpful decisions which I hope will be seen in that light. I believe that it is up to some of those who have been so critical to say what they would do in similar circumstances rather than simply pick holes in what has been put before the Committee.

Earl Russell

I have listened with interest to the noble Baroness, Lady Young. I take her point about the difficulty in making everybody exceptions. I hope that she will also take the point that here is an area where the Government have to choose between two of their stated objectives.

I do not have the Notes on Clauses with me, but I believe that the phrase used was that the loan scheme was designed to increase students' economic awareness, or words to that effect. In other words, there is a design deliberately to influence the labour market by making students aware of the cost of their education. At the same time the Secretary of State is desperately aware of the need to alleviate the teacher shortage, which is becoming serious, significant and urgent. The point of the amendments, among other points, is to tell the Secretary of State that he cannot have both of those together. It is of considerable interest to us to know which he really wants.

Teaching is not the only profession to which the group of amendments could apply. It could apply to nursing. At Second Reading the noble Baroness, Lady Faithfull, mentioned social work, which seems to me very much to need consideration. I take the point which I am sure the Minister will make in his, or her, reply— I do not know who will reply— that there will be deferment for below 85 per cent. of average earnings. That is not a complete answer.

It is central to the thinking behind the Bill that it should create an incentive to students to earn higher salaries in order to pay off their loans. I believe that that is the meaning of the Notes on Clauses. Therefore, those who earn between 85 per cent. and 100 per cent. of average earnings must be under pressure to look for higher salaries. This Government, like other governments, seem to have a problem with public sector pay. We hear a good deal about it from time to time. A likely effect of the Bill will be to make that problem a good deal worse.

One of the points to which attention has been given in the drafting of the amendments is that a great deal of the problem in the public services is not so much a problem of recruitment as one or retention. That is why a progressive cancellation, stage by stage, is a very good idea indeed. It increases the incentive to stay rather longer in the profession and to give a bigger return on the training. It is very much like the provision that my late employers put in their contract for paying removal expenses. Liability for that was to be cancelled stage by stage over years. That had the effect of contributing to retention.

Among the amendments I particularly like Amendment No. 42B in the name of my noble friend Lady Seear. We on these Benches see virtue in flexibility on occasions. That is the amendment which I have come to think of as the tap. I can imagine situations in which a future Secretary of State would be very glad indeed to turn it on.

Baroness Blatch

The Government have designed a loans scheme that will be suitable for all eligible students, regardless of course of study or future profession. Any graduate earning less than 85 per cent. of national average income will enjoy deferment of repayments. If the scheme were in operation today, that would mean deferment for those earning less than £ 11,500 a year.

We must also keep in perspective the amount of annual repayment that will be required from those above the threshold. When the scheme matures, the typical debt will be about £ 1,500 in current prices for each year of study. Annual repayments will be around £ 400 a year in current prices, out of an income in excess of the equivalent at the time of £ 11,500 a year or £ 220 a week.

Former students whose incomes are below that threshold may defer their repayment for up to a year at a time. If their income remains low, deferment can be repeated year by year. If that continues for a period of 25 years or after the age of 50 (or 60 for students who start their course after the age of 40), the outstanding debt will be cancelled. So there is no need for the prospect of repayments to deter people from entering lower paid professions.

The deferment protection means that anyone not confident for any reason of securing a direct financial benefit from higher education need not be worried by the repayment obligation.

Contrary to what the noble Lord, Lord Peston, said last week— I quote from col. 1414 of Hansard — We do not expect that there will be a large number of cancellations because of the generous deferment arrangements for those on low incomes.

Turning first to Amendments Nos. 39B and 42B, which are similar in effect, Amendment No. 39B would require the Secretary of State to cancel the liabilities of students undertaking such courses of a vocational nature as he chooses, after consultation, to specify. Amendment No. 42B would require the Secretary of State to cancel the liabilities of borrowers who had undertaken certain courses or were in certain jobs that he had designated.

Both amendments are redundant because, under paragraph 1 (1) (c) of Schedule 2, the Bill already gives the Secretary of State the power to make provisions in regulations to cancel a person's liability.

We intend to set out in regulations that will be debated by your Lordships the provision that a borrower's loan liability should be cancelled after 25 years, or on the borrower reaching the age of 50, whichever is sooner. For a student starting a course after the age of 40, it will be cancelled on reaching the age of 60.

There is some confusion about the definition of 20 per cent. cancellation. It is not clear in the amendment. It could mean cancellation of 20 per cent. of the debt on leaving the course, uprated for inflation; or cancellation of 20 per cent. of the outstanding debt each year. The former would cancel the debt after five years. The latter would reduce the debt to a tenth of its value after 12 years. Under the most generous concession— cancellation of 20 per cent. of the debt on leaving the course— the cost by the turn of century would be tens of millions of pounds. The least generous option would be likely to cost at least £ 10 million.

I have said before that we do not intend to set specific conditions in the Bill by making exceptions to the general rule. We believe that it would be quite wrong to write special terms into primary legislation without evidence that they are needed or that they are the right solution for the difficulties that it is supposed that those groups might face.

I repeat assurances to my noble friend Lady Young and to the Committee that I have given before that the scheme will be monitored carefully and, if adjustments are necessary, the structure of the Bill provides for them to be introduced in regulations.

Amendments Nos. 39B and 42B would add nothing to the Bill.

The Government are determined to tackle poor recruitment in the shortage subjects. The noble Earl, Lord Russell, referred to that point. We shall continue to direct measures to boost recruitment in those subjects.

Those measures include bursaries for some trainee teachers (those on PGCE or two-year Bachelor of Education courses). The Secretary of State announced on 12th March an increase in the amount of the bursary and the extension of the scheme to modern languages. The level of the bursary paid to students will be increased to £ 1,500 in maths, chemistry, CDT, technology and modern languages. In physics, the bursary will be increased to £ 2,000 That differential reflects particularly poor recruitment to physics courses last year.

To pursue the point made by the noble Lord, Lord Peston. who is also a friend to boot, regarding local education authorities, there is no question of local education authorities paying off teachers' loans generally. Rather, that is an option which particular authorities might wish to use in recruiting teachers of certain subjects.

I have explained how graduates with low incomes will be able to defer making any repayment for a year at a time and how, if that is repeated, the loan will eventually be cancelled altogether. That is a crucial feature of the scheme. It offers protection to anyone entering a low paid profession— also to women who do not work while they raise a family. Amendments Nos. 42 and 46 would give an additional bonus to certain occupational groups irrespective of income. That is an unwarranted additional subsidy. The cost of giving a concession to all these groups would be in tens of millions of pounds each year.

We have heard the argument that loan repayments will lead graduates to press for higher pay. I do not thirk that repayments on the scale that I have describe d will weigh largely in pay bargaining. Many graduates now start employment with overdrafts from their student days. If repayments become an issue in recruitment, employers— including public sector employers— will have to decide how to react. But this is a matter for employers. It is not a student support issue.

The deferment and cancellation provision will provide protection for graduates on low incomes.

With that answer I hope that the noble Lord will feel able to withdraw the amendment.

9.30 p.m.

Baroness Seear

The noble Baroness has not taken the point that I was trying to make in Amendment No. 42B, which was not primarily about protection for students. The amendment is an instrument for dealing with a serious position in the labour market as regards recruitment. The noble Baroness says that students will not be worried about paying back the loan because the pay level is so low that they have to reach £ 11,500. I am afraid that the argument is very much on the other side. Presumably the people whom we want to enter nursing and teaching will be people who will stay and move up the career ladder. If the loan still has to be repaid— the noble Baroness said that it will be deferred, as the Bill indicates— as these people progress, do better and take on more responsibility, they will move into a position at which they will have to start repaying the loan, which is scarcely an encouragement.

My point was very much on the theme of this being a way to get people into jobs where we need them badly, not because it is good for them in this case but because it is good for the professions of teaching and nursing, which are not going to be able to recruit people. I think I devoted the whole of my short speech to saying that. If the people going into those professions know that for a period of years they will not have to repay the loan, surely that is a big inducement to encourage men and women to go into those professions. I tabled Amendment No. 42B not to protect the students but to protect the occupation.

Baroness Blatch

The noble Baroness makes a very good point. I dealt with whether the scheme would act as a deterrent for people entering those occupations. I also made reference to the options that employers could take. If I may put it this way, it seems to me that the difference between us is whether one has an across-the-board, on-the-face-of-the-Bill, special treatment for those named occupations or whether one allows the employers to determine particular shortages and special treatment for particular recruits. In other words, I think that it is still a matter for employers.

Baroness Seear

But the professions are not named. This simply gives the Secretary of State the right to do that where he sees fit. They are not named professions. When he is suddenly aware that he will not obtain his nurses and the teachers, he can say that over the next five-year period people coming into those professions will not have to repay the loans. We have not listed them. It is for him to choose.

Baroness Blatch

I still think that the same point applies. If one says that teachers are in short supply, to have something on the face of the Bill or even allowing the Secretary of State a power to name a whole occupation— whether it be teachers, nurses or social workers— and have an across-the-board exemption from the scheme or special treatment within the scheme is probably not as effective as determining particular shortages and having individual remedies or ways of attracting people into those professions. I do not think that there is a great deal of difference between us about the importance of attracting people to occupations where labour is short. We are probably arguing about the means to an end.

Earl Russell

I was a little dismayed to hear the noble Baroness quoting the 85 per cent. deferment provision as a protection for low paid professions. I hope that she will assure the Committee that that is not evidence of the Government's thinking on the likely direction of teachers' salaries. Since I believe I am right in saying that at the moment the starting salary of a university lecturer is low enough to obtain a student loan deferment, perhaps one cannot be sure.

The noble Baroness also said that considerable cost was involved. I accept that. It is an important point and one that should give rise to concern. But it is not enough to say simply that this proposal has a cost unless one can address the question: is the alternative cheaper? That is the question on which I should like to hear the thoughts of the noble Baroness.

She states that we need not regard repayments on this scale as a significant deterrent. I have said it before and I am sorry to say it again: I do not believe that the Government have absorbed what a burden buying a house now is to people starting a professional career. Repayments are often likely to be about 45 per cent. to 50 per cent. of income. In such a context one worries about a little extra even if the amount is small. If the Bill goes ahead government will need to spend more money on professional salaries, which would cost them a great deal more than accepting the amendments.

Baroness Blatch

The reference to 85 per cent. of national average wage does not signify government thinking on what teacher salaries should be. It was determined at a level of salary that allowed for a repayment of about £ 400 a year at today's prices, being a reasonable repayment cost in any one year.

On the point made by the noble Baroness, Lady Seear, about cancellation, I am reminded that the Bill does not need an amendment to allow for cancellation. The power is already in the Bill. If cancellation needs to be made then cancellation can indeed be given.

Lord Peston

I thank the noble Baroness for her response. In particular, I thank her for emphasising paragraph 1 (1) (c) of Schedule 2, which gives the Secretary of State power for concellation.

The Secretary of State ought to have taken the opportunity at this very moment to announce that in certain cases he is proposing to do precisely that. He could gain a certain amount of kudos for himself. For those on the other side of the Chamber who worry occasionally about the popularity of their party and Government, the Secretary of State might well have thought that this would be a suitable opportunity to intervene in a way which would make him a few friends in higher education. Perhaps he does not want any friends in higher education; I do not know. Nonetheless, the noble Baroness is right to say that in many ways these amendments could be made redundant simply by the Secretary of State saying that he proposes to act under that heading.

I thought that the figure of 85 per cent. was simply a rabbit pulled out of a hat. I can think of no rationale for 85 per cent. It is simply a number. I shall argue in due course that it is a rather inappropriate number. The idea that it has any logical foundation is simply absurd. Someone simply sat down and thought, "What number can we get away with? Eighty-five per cent. seems a reasonable number. It is not a prime number, so there are no problems there. Let's proceed with that". I shall be interested to hear any serious argument on why 85 per cent. is the right figure.

I thought the 20 per cent. was a little nitpicking on the part of the noble Baroness. The amendment quite clearly means that those who stay in these professions for five years would find the whole of their loan cancelled. If the wording is capable of being read differently— which certainly was not apparent to me at the time; but I have learnt that with legislation (which is not my subject) almost anything can be read to mean anything— and the Government were sympathetic, they could find wording that could not be misread. I was not happy with the suggestion that it was not clear in those terms.

Baroness Blatch

Perhaps the noble Lord will allow me to intervene. The point was not meant to be nitpicking. I was trying to give some costings and I had to take an interpretation. I therefore took the low and the high.

Lord Peston

The point on costing is that it will cost money. The noble Earl, Lord Russell, is quite right that it is never adequate to say, "This will cost money". One has to ask whether it will cost less than the alternative. Many of us believe that alternative recruitment schemes will cost the Government, whichever government are in power, enormously larger sums of money.

Members of the Committee know that my views on the subject are not biased. There has been no response from the noble Baroness on the problem of the clergy. I cannot see how the clergy can raise their productivity. I should be interested to know what they are supposed to do. It is not obvious to me how they can negotiate higher salaries in the sense that the rest of us can.

I speak as someone who, although not wealthy, is reasonably well off. However, for many of the people about whom we are talking, even though they are on salaries at or a little above the national average, £ 8 per week is still real money and money which they cannot find. On the whole, those people do not have the ability to save; yet somehow they must save the equivalent of £ 8 per week.

Therefore, if we forget the other points, that concerning the clergy is one which the Government should have taken on board. I have received a fair amount of correspondence from members of the clergy. Some are worried about the morality of the loans scheme, although we have stayed away from that. However, it seems to me that this burden will fall on people on whom I should have thought the Government would not particularly want it to fall. I believe that the Government should say something to them which may justify what is happening because I cannot think of a way of justifying it to them. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 39C to 39F not moved.]

Lord Peston moved Amendment No. 39G: Page 3, line 40, at end insert: (" (d) make provision to ensure that any person or body by whom functions are discharged under paragraphs 3 (1) or 3 (7) below shall publish annually details of any sources of data which it has used for the purposes of its functions").

The noble Lord said: This amendment refers to the Student Loans Company. Since the Student Loans Company as defined does not actually exist per se within the Bill, one must refer to it as the persons or bodies whose functions are discharged and so on.

Originally I had in mind a much longer debate on this issue which would enable us to clarify the nature of the Student Loans Company. I believe that it is a company in the ordinary sense but it is a company which is in the public sector and therefore akin to being a nationalised industry. However, I am not sure whether it is a nationalised industry within the Treasury definition. Earlier I heard the noble Earl, Lord Caithness, refer to it as being essentially a personal loans business. At some point I should welcome clarification on what precise phenomenon is the Student Loans Company.

This amendment is a minor part of the clarification. Whatever the company is, it should make public its mode of operation and in particular its data sources. That is not unrelated to the civil liberties question which we debated earlier and also not unrelated to the fact that many of us are somewhat mystified about what this company will get up to. If the company must state the sources of its data in connection with its functions, we might learn something about it rather than see it as a secret body which is not subject to proper scrutiny. I beg to move.

Lord Addington

I should like to support the amendment of the noble Lord, Lord Peston, and also speak to my Amendment No. 39H. The amendment is virtually self-explanatory. It proposes that there should be no immediate access by the Student Loans Company, or the body which functions as that, to the bank accounts of students or former students affected by the scheme. That is to ensure that the Student Loans Company does not have direct access to the money of those students who have gone through the system. It means that the students can have some control over their own repayments.

9.45 p.m.

The Earl of Caithness

The first amendment, tabled by the noble Lord, Lord Peston, would require the Student Loans Company, or any other person or body discharging functions under the scheme, to publish annually details of any sources of data which it has used for the purpose of carrying out its functions.

I should remind the Committee of one important point at the start. Unlike many credit companies, the Student Loans Company will not be vetting applicants for a loan for credit worthiness. It is a fundamental principle of the scheme that loans will be available for all eligible students, except those in default on a previous student loan. The company will not be picking and choosing those to whom it lends money.

As the company will not be checking credit-worthiness in advance of granting a loan, the main effect of the amendments would be to control any checks made by the company when borrowers apply for deferment of repayments. The Government have already published details of the verification procedures that will be open to the company when a borrower applies for deferment.

They include checks of current income with the borrower's employer or bank; and retrospective spot-checking against a graduate's actual income, by requiring the production of, for example, a P60. It is entirely proper that the company should have these options available.

Let us not forget that we are talking here about the recovery of money that is rightly due to the taxpayer. Honest borrowers who are entitled to defer repayments have nothing to fear from such checks. Those few borrowers who renege on their loan agreements and decide that they are not going to comply with the provisions of the scheme deserve no one's sympathy. They are quite simply defrauding the people of this country, who will, in very many cases, be earning less than those very same borrowers once they leave their university or college.

I do not believe that the company should be required to publish an annual report on sources of data. Preparation of such a report would be a mammoth and ultimately unproductive task.

I mention one final possible effect of the second amendment, in the name of the noble Lord, Lord Addington. This relates to the meaning of the phrase "secure access". There is room for laywers to debate this point, but it is arguable that it would prevent the company from making payments to students by means of transfers through the bankers automated clearing systems and from recovering repayments by direct debit. If the company were unable to pay and recover money by these means, its administrative costs would increase markedly. There would also be substantial delay and considerable inconvenience for the borrower. Payments would be made more slowly, and repayments would be more inconvenient. Furthermore, since it is the taxpayer who pays for the company's administrative expenses, it is he who would ultimately have to bear the additional costs.

The noble Lord, Lord Peston, asked specifically about the nature of the Student Loans Company. It is a Companies Act company limited by shares.

Lord Peston

I thank the noble Earl for his reply. My own view is that the Student Loans Company will turn out to be a loathsome and loathed company particularly because it will be following the principles which the noble Earl himself pointed out. I refer to the vigorous pursuit of defaulters whom it will assume are purposeful defaulters rather than defaulters who happen to become so because circumstances made them like that. That is one reason why I believe that what we are discussing here cannot survive in its present form. At the very least this company, when it eventually comes to realise that it should pay some attention to its public image for as long as it survives, ought to adopt a totally transparent approach to its functions. The purpose of my amendment, which I agree is not very expert although its spirit is clear, is, as it were, to guide the company in the right direction.

One point immediately worries me. The noble Earl said that the company could require to see a person's P60. I speak as a taxpayer and as someone who believes that a person should pay his taxes and his debts. But that is not my idea of how I would want graduates in this country to be treated. In due course Ministers will come to that view as well. That illustrates the Government's error in going down this road.

Perhaps I may refer back to the remarks of the noble Baroness, Lady Young, about what my party would do. I certainly have views on what I would do, but if anyone is inferior to a junior Minister on the Government Benches it is a spokesman or a spokeswoman on the Opposition Benches. He or she is certainly not allowed to step out of line and announce what he or she would do, but it should not be assumed that I do not have a good many ideas. I can tell the noble Baroness that the one thing I would not do— I said this on Monday last— is pursue this loan scheme. I hope to see the day when it is taken off the statute book. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 39H not moved.]

Lord Peston moved Amendment No. 40: Page 3, line 40, at end insert: (1A) The Secretary of State shall by regulations made under sub-paragraph (1) (c) above provide for the deferment of liability in respect of any person whose annual earnings in any year do not exceed 120 per cent. of the average male national wage in that year").

The noble Lord said: This amendment is linked with Amendment No. 41 and is a probing amendment. I can put the amendment simply in the form of a question. I require an explanation of why 85 per cent. has been chosen. The whole theory of student loans is based on the assumption that graduates earn more than the national average. They do not necessarily earn more than the national average in a year but they do so over their lifetimes. To put it in technical terms, at the test rate of discount, the discounted present value of the return on the investment in higher education more than justifies the cost. That is the whole theory that lies behind loans, graduate taxes, and so on.

That seems to lead inexorably either to the view expressed by the noble Baroness, Lady Seear, that the break-point should be average earnings, or to my view that it should be above average earnings to err on the side of not detering those who earn a little above the national average but not a lot.

Clearly I do not intend to divide on this amendment but my main aim is to see whether the Government can put up any kind of case for 85 per cent. I beg to move.

Baroness Seear

I should like to emphasise the word "male" in these amendments. The Government refer to the average wage, but the average male wage and the average female wage are quite different. Combining the two gives a much lower figure at which students will have to start paying back loans than if average male earnings are taken. That is why I put the word "male" in my amendment. What is the actual figure we are talking about?

The Earl of Caithness

I knew that this debate would eventually arise. It is no surprise to me that it has because wherever one had drawn the level— whether 85 per cent. of national average wages, 85 per cent. of male earnings, or 120 per cent. of the national average wage— I know that noble Lords opposite would have said that it was far too mean and that we should have a figure of 140 per cent., 180 per cent. or even 200 per cent. for a start. I could see that coming. I have been involved in enough legislation in this Chamber to know that every line the Government have drawn has been queried.

Overall, we looked at the fact that we wanted to have a generous level before the repayments were due from graduates. A person who goes to university and who takes out a loan has a greater potential for earning a significant amount of money than the person who does not. We thought that a reasonable repayment level would be 85 per cent. of average national earnings which at the moment equates, as we have said on numerous occasions, to £ 11,500. Over the repayment period that we have put forward that is about £ 400 a year.

I realise that that is a line that will be disputed by some people. However, it is a line that the Government have chosen and I have heard no arguments to say that it is not right.

Baroness Seear

We have heard no good arguments to say that it is right. The noble Earl has not answered my question as to whether average earnings refer to male or male and female taken together. It can be one or the other but we should be clear as to which it is. The noble Earl knows perfectly well that the two figures are different. Which figures is he talking about?

The Earl of Caithness

We are referring to the national average, taking into account the earnings of both the male and female. If we went for the male national average wage that would be about £ 15,275 in today's circumstances.

Lord Peston

I thank the noble Earl. He is being a little harsh. I have in mind certain figures he could have included in the Bill which would have so astonished me that I would not have been foolish enough to query them. However, I have to admit that he has had more experience of legislation than I have, so perhaps he is right and I would have been difficult over any number; but I do not think so.

The noble Earl said that no valid arguments had been put forward. I seem to recall that I did; that the whole point of the loan scheme is precisely because graduates earn more, on average, than the national average. This is the whole point and that is why the 85 per cent. seems difficult to justify. Having discovered that the noble Earl is unable to justify the point which is essentially the purpose of this amendment, I beg leave to withdraw it.

Amendment, by leave, withdrawn.

9.55 p.m.

[Amendments Nos. 41 and 42 not moved.]

Lord Addington moved Amendment No. 42A: Page 3, line 40, at end insert: (" (1A) The Secretary of State shall by regulations make provision to cancel 20 per cent. of the obligation of any person for each year during which that person is not in gainful employment or has no income of their own").

The noble Lord said: Amendments Nos. 42A, 42D and 4: 1 are all basically concerned with the deferment of repayment of a loan due to being without work or income. Amendment No. 42A, tabled in my name and that of the noble Lord, Lord Peston, is concerned that anyone who is unemployed for a year will at present find himself without an income and incurring an amount of debt— that is, the inflation rate on interest on that debt— with no means of repaying it. Thus he is incurring greater debt and he will be incurring other debts for other reasons.

The amendment proposes that 20 per cent. of the debt incurred over a year while not employed will be removed for the simple reason that in this way the person concerned will not be compounding debt or hardship.

The other amendments follow on in the same vein, giving relief to those who find themselves without income or any means of servicing a debt. I suggest that placing this extra burden of debt on people who have no way of repaying it at the time in question is of no help to anybody, and least of all to society as a whole. We are simply making people more hard up and giving them less incentive to return to a situation where they can begin repaying the debt. I beg to move.

Baroness Blatch

Amendment Nos. 42A and 42D are two of a number of amendments— for example, the grouping of Amendments Nos. 39B, 42, 42B and 46, which we have recently debated— that would require the Secretary of State to cancel the liability of a certain group of borrowers. My arguments against these amendments are similar to my arguments against other such amendments.

We intend that if a graduate's income falls below 85 per cent. of national average earnings, then he will be able to defer repayment for up to a year at a time. If income remains low he or she can repeat deferment year by year. This provision will provide adequate protection for those uncertain of the financial benefits of entering higher education. This condition will be introduced in regulations which your Lordships will have the opportunity to debate.

As my noble friend the Paymaster General sought to explain in a letter to the noble Baroness, Lady Blackstone, during a period of deferment the liability will be frozen in real terms, since it will be uprated only in line with inflation. A period of deferment will also not count as part of a person's repayment period. So if he started a period of deferment having to pay £ 400 over three years, he would still owe only £ 400 in real terms over three years at the end of deferment.

Amendment No. 42A seeks to cancel 20 per cent. of the obligation of a borrower for each year that he is not in gainful employment or has no income of his own. This would apply to graduates who are unemployed, to those who marry and leave work to raise a family, and to those undertaking a period of study.

The cost to the Exchequer in lost repayments would be very considerable. The taxpayer would stand to lose some tens of millions of pounds as a result. The provision could also have the damaging effect of writing off a substantial part of the loan while a student is studying. During study students could quite rightly claim that they were not in gainful employment and claim the cancellation of 20 per cent. of their liability. This would turn a substantial part (up to one-third) of the loan into a non-means tested grant. The cost of this would be hundreds of millions of pounds.

That would work entirely against the principle of providing a loan. It would increase rather than reduce the burden on the taxpayer. It would encourage students not to take part-time jobs, knowing that 20 per cent. of their loan would be cancelled for doing nothing.

This amendment would also encourage people to remain unemployed after leaving a course, knowing that the whole of the loan liability would be cancelled in five years if 20 per cent. were cancelled each year.

For some, that unwarranted cancellation during study would continue after graduating as it would also apply to periods of post-graduate study. Thus a graduate entering low-paid employment and deferring repayment would find that a peer entering a period of further study would have another large part of his loan cancelled.

Amendment No. 42D would require the Secretary of State to cancel the liabilities of borrowers whose personal disposable income fell below 85 per cent. of the national male average wage for a period of five consecutive years after completing the course.

The amendment would cancel the liability of large numbers of graduates; but after a period of deferment they will have an income from which they can repay. Those who remain on low income can opt to defer once more. The loss to the taxpayer from not receiving those repayments would be very considerable. The cost to the taxpayer would be tens of millions of pounds. We would effectively be giving those graduates a non-means-tested grant.

The amendment would also be a disincentive to seek employment after leaving a course, knowing that after five years the whole of the loan liability would be cancelled. It would throw up certain anomalies. It would mean for instance that some graduates who had started repaying because their gross income was above 85 per cent. of the national average earnings would find that if their disposable income was below 85 per cent. of national average male earnings for five years their loan would be cancelled; but during that five-year period they would have been repaying their loan. Only after five years had elapsed would they be eligible for cancellation. Would they then be entitled to a refund for repayments already made? That type of case highlights the problems of setting complex cancellation arrangements before the scheme has commenced.

Turning away from the contents of the amendments, the principle that I have referred to before remains clear; we do not intend to set the terms of the loan in the Bill. We believe that it would not be right to place special terms into the Bill without strong evidence that they were required or that they were the correct answer to the problems that it is feared that graduates might face.

I repeat assurances that I have given before to my noble friend Lady Young and others that we will monitor the scheme carefully. If alterations are necessary the enabling character of the Bill will allow them to be introduced through regulations.

Amendment No. 43 seeks to provide interest-free loans to borrowers during periods when they are not in gainful employment or when they have no income of their own. This would apply, like Amendment No. 42A, to graduates who are unemployed and to those who marry and leave work to raise a family. It could also apply to students while they are studying.

I have explained indexation previously. Perhaps I should give more detail of how the Government intend to index loans and why they intend to do it. The loans will be indexed in such a way that the value of what the borrower pays back is the same in real terms as the value of the sum borrowed. To achieve that the outstanding debt will be adjusted in line with inflation; but no positive interest will be charged over and above this. It is right that we should do that as a matter of equity. If we were not to index loans at all we would increase the cost to the taxpayer, as the amount of money repaid would be less in real terms than the amount borrowed. Under our scheme the amount of taxpayers' money borrowed by a student and the amount subsequently repaid will be the same in real terms.

Not indexing the loans would also encourage borrowers to defer their repayment so that over time their debt reduced in real terms. So by comparison those who did not defer would pay more in real terms than those who did. On the other hand if the loans bore interest at a rate higher than inflation that would unfairly penalise those who had legitimately deferred repayment because their income was low, as their debt would increase in real terms.

Under the Government's proposals, there is neither an incentive nor a disincentive to defer. Both legitimate deferment when a graduate's income is low, and standard repayment without deferment, will be financially neutral. Indexing the loan in that way is a good deal for students. A zero real rate of interest gives loans at a rate well below commercial loans and overdrafts.

Turning to the specific exclusions in Amendment No. 43, the Government intend that indexation should continue during periods of study and deferment. As I have already explained, it is important for both taxpayers and students that the value of outstanding debt is maintained in real terms. If there were to be no indexation during periods of study, students on courses of differing length would not be treated equally.

If there were no indexation during the deferment that we shall allow whenever income is low, then the outstanding debt would be eroded by inflation. When they resumed repayment, graduates in this position would find that they owed less in real terms than they did when they started deferment. We think it right that a graduate who experiences a period of low income should be able to defer repayments, but not that he should effectively be excused part of the debt when his income rises again. I hope that with that explanation the noble Lord will feel able to withdraw the amendment.

10 p.m.

Baroness David

I cannot accept all that the noble Baroness says. She seems to think that it is a person's choice whether or not he defers. It really depends on the sort of a job a person can get. The fact is that people who defer will be paying more in the long run than if they had not been able to defer.

I wish that the noble Lord, Lord Boyd-Carpenter, was here because he made a very strong speech on this point at Second Reading. He said: What has not wholly emerged is that a graduate who is earning below 85 per cent. of the average wage will not for many years be relieved of the burden. On the contrary, the loan will be left waiting for the 85 per cent. level to be exceeded and, of course, it will increase year by year in accordance with the rate of inflation for the years concerned. Therefore, it is a mistake to suggest that, because of the 85 per cent. rule, this scheme will not hurt the less well-off student. It is more than likely that someone, particularly with a degree, who is unable to earn more than 85 per cent. average earnings to begin with, will reach average earnings and above in due course. He will then be faced with a very substantial liability indeed" .— [Official Report, 27/2/90; col. 650.] Such people really will be penalised for deferring when they simply cannot help it. That is why we moved this amendment.

Baroness Blatch

The noble Baroness addresses herself to one part of the loan scheme and not another. The loan will not substantially increase in real terms. In real terms the effect is neutral. But at the same time 85 per cent. of the national average wage will also increase over a period. Therefore the actual effect of the repayment scheme will be neutral to the student.

Lord Addington

Having heard the noble Baroness, Lady David, I must agree that I do not think anybody will make himself poverty stricken for a period of years to avoid repayments on these loans, especially when we are told that these will not be very onerous repayments. I wonder whether the two positions are not in contrast to each other.

I agree that there may be some error in the drafting of Amendment No. 42A, and the danger of a student claiming two years of a course as being time spent ungainfully employed is certainly an area which I had not considered. But given the hour, I shall not press the amendment as the mood of the Committee is not right for it. Therefore I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 42B to 42D not moved.]

Baroness Blackstone moved Amendment No. 42E: Page 3, line 40, at end insert: (" (1A) Regulations made under sub-paragraph (1) (c) above shall—

  1. (a) make provision for deferment over a period of twelve months;
  2. (b) include the option to resume repayment voluntarily within the deferment period;
  3. (c) enable applications and deferments to have effect at any date in the repayment period;
  4. (d) provide for application up to one month in advance of the date from which deferment is sought, or three months retrospectively;
  5. (e) make provision for refunds on grounds of low income of repayments made within the relevant twelve month period;
  6. (f) provide for no interest to accrue during any period of deferral;
  7. (g) provide for all applications to be made to, and dealt with by, the Student Loans Co. Ltd.;
  8. (h) provide for applicants to be entitled to a deferment where—
(i) their personal disposable income is less than a figure to be determined by the Secretary of State in each year, which shall be not less than 85 per cent. of the most recently available figure for the average male national wage calculated according to the Department of Employment Average Earnings Index; or (ii) the applicant's personal circumstances (including numbers of dependants) are such that deferment is reasonable to avoid hardship").

The noble Baroness said: With the leave of the Committee I think I am meant to be moving Amendments Nos. 42E and 42F, which are grouped. I have to say that I am a little puzzled. I spent some time yesterday reading both amendments and they seemed to be completely identical, so I fear that we have got ourselves into a little mess here. Therefore I shall move Amendment No. 42E, which is exactly the same as Amendment No. 42F.

The purpose of this amendment is to ensure that deferment of liability can be arranged and that it follows a clear set of principles regarding the operation of the procedures for deferment. If I may take your Lordships through each of the subparagaphs of this amendment, subparagraph (a) enables the Secretary of State to make arrangements for deferral for up to a year at a time. A wide range of personal circumstances could cause the need for a deferral, mostly relating to low income. Subparagraph (b) maintains the option for repayments to be made during the deferment period should the person liable feel able to do so. This arrangement is obviously in the interests of both the ind ividual with the liability and the Exchequer, making it possible for the overall liability to be reduced once the principle of deferment has been accepted.

Subparagraph (c) ensures that it will be possible for reliable persons to arrange for deferment at any time. For example, if a person needs to stop work to care for a dependant, a deferment can be arranged immediately. Subparagraph (d) set down timescales within which applications should be made and deferments granted. Subparagraph (e) allows for repayments to be made by the Student Loans Company should a person's income fall below a certain level during any repayment period. Again, this will ensure that people who suddenly face real hardship through no fault of their own would be able to defer their loan liabilities until their income level had increased to an appropriate level.

Subparagraph (f) attempts to ensure justice in the deferment scheme. Those people on low incomes being forced to defer will be heavily penalised for having to defer under current plans. Interest will accrue at an increasing rate the longer the debts are incurred. For example, for graduate couples, the currently proposed arrangement could amount to a tax on the family. If a man or woman takes four or five years out of work to raise a family the loan debts will have multiplied by the time repayments can be made. Alternatively, it may be seen as a tax on misfortune. For example, if a reliable person became seriously ill for a period, was forced to leave work and then fell below the threshold levels, he or she could accrue a considerable debt during that period of illness which may then cause additional stress and even greater unjust burdens when returning to work at a later date. These are real problems which arise in connection with the current loans scheme and they will have to be answered.

Subparagraph (g) ensures that the responsibility for administering the applications for deferment should rest with the Student Loans Company and with no other body. Finally, subparagraph (h) states the principles whereby deferment would be granted in the case of personal income falling below 85 per cent. of average earnings. Account would be taken of an applicant's personal circumstances so as to avoid hardship; for example, those with dependants. The amendment aims to be helpful. It is designed to introduce into the Bill the practical arrangements for the implementation of deferment. I beg to move.

10.15 p.m.

Baroness Blatch

The noble Baroness is quite right. The two amendments are almost identical. There is one small difference to which I shall refer shortly. As the Committee will know, the first set of regulations relating to deferment will be subject to affirmative resolution.

I turn now to the substance of the amendments. In either case, provisions (a) to (d) inclusive are lifted, more or less word-for-word, from the rules and procedures document we published just before Second Reading. Those provisions will form the basis of the regulations on deferment which we intend to introduce after Royal Assent.

Subparagraph (e) of each amendment departs from the rules and procedures document which specified that there would be no refunds on low income grounds of repayments already made. The reason is that to make deferment retrospective is an invitation to deceit. The graduate would have made the repayments; he would then be saying that at the time his income had after all entitled him to deferment.

There would of course be cost implications. Moreover, the assessment of deferment would become more and more difficult the further back the period to which the application applied. We do not agree with this provision and we do not intend to include it in regulations. But if noble Lords remain concerned about the matter, they will be able to raise it again when the regulations are debated.

Subparagraph (f) of each amendment provides that no interest shall accrue during any period of deferment. We oppose that on the grounds that it would make loan repayments less valuable in real terms than the amounts borrowed. It infringes the principle of equity underlying the application of indexation to the outstanding amount. We believe it is right that interest should continue to accrue during deferment. It is incorrect to argue that this unfairly penalises those who defer. The sum they repay will be identical in real terms to what they would have paid if they had not deferred.

Subparagraph (g) of each amendment would ensure that the deferment process is handled exclusively by the Student Loans Company. That is presently our intention. The rules and procedures document indicates that the higher education institutions will have no role in the application process. We do not intend that the institutions should become involved at all in handling deferment applications. In due course, we shall be discussing the role of the institutions with representative bodies. They need not be concerned that we intend to foist this work upon them.

Subparagraph (h) contains the difference between the two amendments. Let me begin by dealing with the similarities. First, there is the requirement that deferment should relate to disposable income rather than gross income. We have discussed the point in relation to the particular needs and circumstances of disabled people, and Members of the Committee know what the Government are proposing in response to the representations received. This amendment extends to all borrowers one of the arguments advanced about disabled people: that they have a reduced disposable income because of the additional costs incurred as a result of their disabilities.

Now we are asked to assess the personal disposable income of all borrowers. How is personal disposable income to be defined? How is the assessment to be carried out? I submit that it would be impossible to achieve without looking at each application individually and in detail. That is not a proper task for the Student Loans Company and, even if it were, it would be prohibitively expensive. The deferment threshold is sufficiently high— £ 11,500 in today's terms— and the repayment sum sufficiently low— some £ 400 in today's prices— for the repayment not to be a burden, with the exception of the very special case of the disabled.

The Student Loans Company is also invited to assess whether an applicant's personal circumstances— including the number of dependants— are such that deferment is reasonable to avoid hardship. The same arguments apply. The company will not be equipped to judge what is and what is not hardship: that is a matter for the DSS. The DSS may be expected to provide social security benefits to those it judges to be at risk. In any case, it seems to me unlikely that anyone with a gross income above the threshold could be said to suffer hardship. Repayments of £ 400 a year represent no more than 3–5 per cent. of gross salary at that level currently.

The difference between the amendments is that one would judge deferment on the basis of national average earnings and the other in relation to the average male national wage. The former is what we propose; the latter would produce a higher threshold, since men earn more on average than women. That would make the scheme even more attractive to women. I say "even more" because, by using an average across both sexes, they already derive some advantage: the threshold will be relatively higher in relation to their average salaries than it will be for men. We believe that what we propose is quite sufficient. Even if the threshold is based on gross income, the alternative would mean a threshold of around £ 13,000 in today's prices. If the calculation is based on disposable income, the threshold would be substantially higher.

I repeat: these are properly matters for the regulations and can be debated then. The terms of the scheme are generous. For all those reasons I hope that the noble Baroness will feel able to withdraw her amendment.

Lord Beloff

Before the noble Baroness replies to that invitation perhaps I may make one point which has been borne in upon me during our proceedings today and which has just been reiterated. A great many matters will be debated on the regulations and we know that these are now to be under the affirmative procedure. While these pledges have been made I wonder whether anyone on the Government Front Bench has worked out the amount of time we shall require on the regulations. We usually deal with an order of delegated legislation in a dinner hour. Sometimes if it involves Northern Ireland it is a slightly prolonged dinner hour. However it would take all our dinner hours for the whole of the summer if all these detailed issues were to come before us in regulations which we are entitled to debate. I wonder whether the Government have given any thought to the timetable.

Baroness Blatch

First, I think I made the point about how complex some of these issues are. While they are being resolved all I can say on the second point is that the Committee won the concession for us to resort to an affirmative resolution. I suspect that we shall have to take as much time as it requires in order to discuss the matter.

Baroness Young

Before the noble Baroness rises to reply to the debate perhaps I may say in response to my noble friend Lord Beloff that once again he is being less than fair. The Government have agreed to the affirmative resolution procedure, which was requested from all parts of the Committee. I have not the slightest doubt that when the regulations come before the House the usual channels will be perfectly well aware of the extensive debates which have taken place on the Bill. To the best of my knowledge and belief the original proposal was that there would be one Committee day. It is now two and at our present rate of progress we shall be almost into three Committee days by the time we finish. There is no reason whatever for supposing that there will not be adequate time to debate these matters and any others that may come up.

Baroness Blackstone

I was about to say that I looked forward to debating these issues again when the regulations are brought before the Chamber. However, I do not look forward to spending every supper break during the summer on these matters. I am a little disappointed in the answers given by the noble Baroness who is speaking for the Government. I had hoped for one or two possible signs of concessions in discussing this amendment. However, we did not receive any.

I am particularly surprised that the noble Baroness claims that there will be no cases of hardship among those who are above the threshold. That seems to me highly unlikely. Earnings which are just above the threshold are not very high and people with particular difficulties such as those with large numbers of dependants and those who may have a dependant with high medical costs or something of that kind may find themselves in considerable hardship. Therefore, I was surprised at the comment of the noble Baroness. However, I have no intention of pressing the amendment this evening, and I look forward to hearing what the Government's intentions are in more detail when we come to discuss regulations. I hope that more consideration will be given to the problems of those with hardships who need to defer payment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 42F and 42G not moved.]

Lord Peston moved Amendment No. 42H: Page 4, line 5, leave out from ("as") to ("the") in line 6 and insert ("maintain").

The noble Lord said: In moving this amendment I wish to speak also to Amendment No. 42J to clarify something that at long last is on the face of the Bill. In discussing interest rates, subparagraph (2) (b) of Schedule 2 states that, the rates shall be such as appear to the Secretary of State to be requisite for maintaining the value of that amount in real terms".

For the moment we accept that the words "real terms" refer to the retail prices index, although one can find good arguments why the rate of inflation confronting students may rise above that of the Retail Prices Index. However, that is another matter. The amendment standing in my name and that of the noble Earl, Lord Russell, perhaps over-eggs the pudding by simply seeking to maintain the value of the loan in real terms but no more. I believe that another noble Lord was reassured by the noble Earl on the first day of the Committee stage that the Bill means exactly what it says and no more. I have tabled the amendment to gain further reassurance that when the Bill states that the value will be maintained in real terms, it means simply that and no more. I have tabled this amendment to allay certain anxieties. It has a purpose in that sense. I beg to move.

The Earl of Caithness

For a moment I felt positively excited that I had managed to reassure the noble Lord on something, but he was quick to dispel any illusion that I had achieved that. However, perhaps I can try yet again to reassure him. The general intention of these amendments is to tie the indexation of the loan to the inflation rate. As the Committee knows, this is exactly what the Government intend. However, I must say that the link cannot be exact because the inflation rate cannot be known in advance. Indexation of the loan in one year will have to be based on actual inflation in the previous year. Borrowers will then know in advance what the impact of indexation will be.

The first amendment would require an exact match between inflation and loan indexation. That would involve waiting until the actual inflation rate is known at the year's end, then applying it as an indexation factor retrospectively.

That would have two highly undesirable effects. For graduates repaying the loan, it would be impossible to calculate what the instalments should be to clear the debt. They would have to make repayments based on an estimated inflation rate, followed by a balancing item— which might be positive or negative— after the year's end. That would impose on them great uncertainties which are quite unnecessary and are avoided by the system that the Government propose.

Secondly, graduates who had completed repayments in the course of a year would not know until the year's end whether they had cleared the debt or not. They would have to wait until the retrospective indexation calculation was performed, then either make an additional final payment or receive a refund.

The Government's system will give borrowers under the scheme the certainty they need about its administration year by year. I can see that the intention behind the amendment may have been to offer greater certainty, but in practice it would generate confusion for borrowers.

The second amendment seeks to ensure that the indexation can never exceed the rate of inflation. That is of course what we mean by indexation— taking one year with another. But with the lagged system I have just described, when inflation falls in successive years, the loan will still bear indexation at the higher inflation rate of the previous year. Conversely of course if inflation rises the loan will continue to be indexed on the basis of the lower inflation rate in the previous year.

Lord Peston

I thank the noble Earl for his reply. Yet again I have learnt something, because I did not fully appreciate that that was what the Government would do. Perhaps I may ask the noble Earl to reassure me that I understood what he said. My understanding is that the inflation rate that will apply will be the inflation rate of the previous year. Therefore one would know the inflation rate in advance.

The intention of my amendment was not to object to that but simply to say that there should be a defined inflation rate. Essentially, as I understand it, the Minister has said that there will be a certain amount of averaging. When the inflation rate rose one would gain, but one would lose when it went down. There would be swings and roundabouts. My intention was to make clear that the inflation rate applied. Given that clarification, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 42J not moved.]

Baroness David moved Amendment No. 42K: Page 4, line 6, at end insert: (" (2A) No student in receipt of a loan payable in accordance with regulations made under sub-paragraph (1) above specifying the maximum amount of the loan, the time and manner of repayments or conditions for its possible deferment or cancellation shall be ineligible for Income Support or Housing Benefit during his period as a student whether as a consequence of the operation of the loans scheme under such regulations or of the provisions of or regulations made under this or any other enactment").

The noble Baroness said: With this amendment we come back to the question of students and social security. We talked about housing benefit earlier when the costs of housing were under discussion.

The purpose of the amendment is to enable students who are in receipt of loans to continue to claim income support and housing benefit. It is the Government's intention that from October this year full-time students, except students who are disabled or single parents, will no longer be eligible for unemployment benefit, income support or housing benefit during term time or vacations. On Monday 19th February the Department of Social Security published draft regulations— proposals for Social Security Benefits (Student Loans) (Amendment) Regulations— which have been referred to the Social Security Advisory Committee and the local authority associations for comment prior to regulations being laid before Parliament. Loss of entitlement to each benefit will be subject to the negative resolution procedure.

When in 1985 the Department of Social Security announced its intention that students should lose their eligibility for social security benefits it was given some very specific advice by the Social Security Advisory Committee, which said: As the grant has declined in value students have come to depend on benefits and we do not believe that this trend should be reversed by a transfer of resources to the grant system in which payments are made without reference to individual need".

The DSS, faced with that onerous task, decided to pass it over to the DES as part of the review of student financial support. The review team's findings have never been made public. However, it is obvious that it totally ignored the advice given. Instead, it has devised a system of loans which, linked to the withdrawal of benefit entitlement, takes no account of variation in individual need. The principle of social security is that of a safety net. Those who have the misfortune to be unemployed are entitled to a degree of support from the state. In the case of students, that is no longer to be the case. Students, merely by virtue of their occupation, are to be excluded from benefits while unemployed. Surely that is a dangerous precedent to set.

One of the arguments given in support of the removal of entitlement is that there is a growing dependency culture among students and that students are avoiding vacation employment. That is a myth. If the economic cycle of the past 10 years is examined with the associated high levels of unemployment over that period, we see an interesting phenomenon. According to data in the Government's publication, Employment Gazette, student unemployment rose more slowly than general unemployment. It peaked earlier at a lower level and it has fallen further. Surely that demonstrates, not a growing dependency among students, but a level of mobility within the labour market that the Government could only applaud.

On the question of the long vacation, under the Government's proposals, any student who is unable to find a job is to be literally left out in the cold. Many students have to rent accommodation for 52 weeks of the year. Many have to live in that accommodation and are not able to move to another area to find work. What are they to do?

If we compare the amount of loan on offer in different years of a course, for the first two years— that includes the summer vacation— the loan is £420 and, for the final year, it has decreased to £310. If we subtract the two, we may presume that, for each of two summer vacations while at college, a student is expected to live on a mere £110. Is it realistic for anyone to be forced to live on a mere £7.85 per week?

On the subject of housing costs, students are to be removed not only from income support and housing benefit during the summer vacation, but also from assistance with housing costs during term time and the short vacation.

If the Government heeded the advice of the Social Security Advisory Committee, they would have noted its view that it should be possible to devise a grant system which is sensitive to the variation in housing costs. Housing costs vary across the whole country as does the housing benefit entitlement of students. That point was mentioned earlier. Outside London a student receives assistance on a pound-for-pound basis when his or her rent rises above £18.67 per week. A student in Coventry may pay an average of between £15 and £22 per week while one in Kent pays between £30 and £40 per week. Yet they receive exactly the same size grant. At present they are compensated for the difference by housing benefit. The student in Coventry would receive nothing or only a few pounds per week, but the student in Kent would expect to claim up to £800 in housing benefit over the course of an academic year. The Government propose that, from next year, those same students should receive a loan of £310 for the academic year. The student in Coventry may be better off until he or she graduates and is then faced with repayments. But the student in Kent is likely to be over £400 out of pocket and faced with loan repayments to come.

The Government justify their case in terms of an increase in resources to students. They always do that by using survey data showing an average of benefit received per student of £187 over the calendar year. But that hides the average of £499 for the 49 per cent. of students in London who claim. Outside London, the mean amount per claimant is £ 275, but, as the example showed, there would be a concentration of high claims in the more expensive South-East.

It is easy to foresee students voting with their feet and giving up going to college in high-cost areas. The depression of demand for places last year in London is probably an indication of that already happening, as I mentioned earlier. The withdrawal of housing benefit will mean that colleges in London and the South-East will face major falls in applications. The Government may mistakenly believe that loans will tempt more students into college, but surely they cannot believe that making them worse off will be an incentive.

Two other important cases must also be considered. The DES-commissioned survey on student income and expenditure shows that mature students are among the highest claimants of social securi; y benefits. The average single mature student claims £ 682 per year. The average married student claims £ 947. If those groups are to lose their benefits in exchange for a £ 420 loan, are they likely to remain a feature of our higher education system? The case of a student who has no choice but to return home for the summer vacation must also be considered. He or she will have only £ 110 to live on so will inevitably become dependent on his or her parents.

The Government have claimed that they are reducing the burden on parents, but is that in fact the case? Certainly it will be a burden if those parents themselves are unemployed, as they too will have their benefit entitlement cut because of the presence of a non-dependent adult in the household. What will happen to those students and their parents?

To conclude, housing benefit and income support should be seen as an integral part of the student financial support system. They are the only elements of it that are entirely related to both need and varying costs. The Government are pretending to replace these benefits with a single flat rate top-up loan which neither takes into account the availability of work where a student lives nor his housing costs.

The Government have failed to understand the relationship between students as claimants and their overall social policies. The Housing Act 1988 allowed for rents to rise. That is clear from the Government's expenditure plans for housing benefit which show a massive rise in housing benefit per claimant. Students can expect to face the same scale of rent increases but suffer a complete loss of housing benefit When the Housing Act was debated the Secretary of State for the Environment promised that housing benefit would be available to all those whose incomes were low enough to qualify for full or partial benefit. In the case of students the Government are breaking that promise.

I am sorry that the noble Lord, Lord Boyd-Carpenter, is not in his place. Earlier he made the case that he did not see any reason why social security benefits should not be available as they give a very lair estimate of what is needed and they are based on need. I beg to move.

Viscount Eccles

I was at Oxford the other day and I spoke to the heads of two colleges. They both said that removal of the housing benefit was the one black spot in the whole of this loan scheme. I do not know what it costs but if a student can obtain a room in college it seems that the difference between that and probably a rather bad room from a landlady in Oxford is £ 1,000 a year. If nothing is done about that, one is creating a disabled class; namely, those who cannot get rooms in college.

I should feel very dubious about this part of the Bill unless the Government can give us some assurance that they are not creating two classes of student: one living in and the other living out.

Earl Russell

I am grateful to the noble Viscount, Lord Eccles, for what he has said. The Oxford heads of colleges tell him exactly the same as my pupils tell me. I know that it is late at night and I am mindful of the Committee's time, but as this is an issue of quite considerable magnitude, I hope that I shall be forgiven if I spend a few minutes on it.

First, I want to touch on the fact that this action is to be taken by regulations and is not embodied in a social security Bill. I should like to thank my noble kinsman, Lord Henley, for his Written Answer on 5th March, when in effect he argued that because the Government have the right to do this by regulation therefore they should do it by regulation. It reminds me a little of the car crash between the Englishman and the German. The Englishman leapt out of his Jaguar in a rage saying, "Didn't you see me coming?" and the German looked out of the wreck of his Mercedes and said, "Yes, but it was my road".

I do not think that rights necessarily need to be exercised on every occasion. But if that view is to be taken, maybe we should be a little more careful about conferring regulation-making powers.

My first concern is that the Government have simply got their sums wrong. They have grossly underestimated the amount of social security benefit which at present goes to students. We have had figures quoted that range from £ 65 million to £ 110 million. That is quite a considerable variation. Answering Questions in another place on 5th March, Mrs. Shephard, who had been asked for information about the total cost of housing benefit in each region, replied very fairly that information was not available in the form requested. Since it is not available in the form requested, perhaps there should be a pause in the matter until it is. The sense that the Government have their sums wrong is very widespread indeed. If the Government do not have any contrary figures, perhaps they ought to pause and consider.

In London we are told that the average amount claimed per student is £ 449 per year. That is a considerable sum. The NUS has been taken to task on this issue by the Parliamentary Under-Secretary in another place for seeking the worst cases of rent levels that it could find. My comment, based on a cross-check of what my pupils have been paying over the past few years, is that the NUS has rather undersold its case, that the rent levels are 5 per cent. to 10 per cent. above those alleged by the NUS. Therefore, with that amount on top of the community charge, there will not be an increase, as the Government suggest, but a rather serious diminution in the amount of money available.

However, this is not the most important point. The most important point was the principle raised by the withdrawal of a category of people from the social security system. We are told repeatedly that the Government think that students should not be in the social security system. I understand that. I do not altogether understand why. The Secretary of State for Education and Science, writing on 24th November to the chairman of the Committee of Vice-Chancellors and Principals, said that the Government's intention was to wean students gradually off the dependency culture. Apart from the choice of verb— which I find gratuitously offensive— I do not altogether understand what is meant by that.

On the other hand, I understand the feeling that the social security system was not designed for students and that it causes some surprise to find them within it. I remember listening to Mr. Philip Malcolm of the Federation of Conservative Students saying that social security was not designed for students. It was designed for the poor. I can see the point of that. I do not join issue with it. But, by any quantitative measure, present-day students are the poor, and if it is felt inappropriate that they should be in the system the only appropriate answer is to give them enough money to make sure that they are not in the system. Creating a category of citizens who are not entitled to social security means creating a class of second-class citizens. It should not be done lightly.

It is not the first time that the Government have done so. It was done for teenagers in the Social Security Act 1986 and this Chamber has debated some of the consequences that resulted. We seem to have another piece of the same thinking. It makes it more urgent to understand much better than I do now the thinking behind that issue.

These are responsible people. Those whom I teach— who are the only ones for whom I can answer— work very hard indeed. The only irresponsibility that I can see in the matter is that of the London borough of Brent, whose inability to pay housing benefit is notorious.

There are also some practical points. I cannot see the logic of excluding postgraduates from the social security system. I can follow the logic that because students are receiving the loan, and the loan is supposed to be sufficient, they should therefore not receive social security instead. But postgraduates are not receiving the loan. Part-timers are not receiving the loan and they are not being withdrawn from the social security system. Why, therefore, are postgraduates? I do not understand that. When we reach the point in the next century when there are practically no university teachers remaining, it will be rather urgent to recruit postgraduates quickly. We may find that there are none.

Here, I should like to raise one point which is rather tangental but is, I believe, relevant. It was reported in last week's Times Higher Education Supplement that postgraduate students of more than four years' standing are being denied student certification for the poll tax. This, in many cases, will bring their studies to a dead halt. I should be grateful if the noble Earl will check whether that is the case and if so, on what authority.

There is a wider problem. Often we are told that our system of student support is the most generous in the Western world. That is not unconnected with the fact that our undergraduate course is the shortest in the Western world. As my noble friend Lady Seear has already said, we have always assumed that people were capable of working full time during term and at least part time during vacation. If that is not to be so, then we shall need to ask for a fourth year. If we cannot have a fourth year, our degree will no longer be internationally competitive and we shall not continue to attract overseas students.

Students have no desire to be dependent. That is one of our problems. They do not like to be dependent either on the state or on their parents, on whom they are not being discouraged from being dependent. Therefore, when short of money they are going off and working surreptitiously part time. We know that that is going on and we know that, if they do that, they cannot do their courses properly. However, we know that, if we stop them, they will have to withdraw. That leaves us with the problem of having either to penalise them in their exams for something which is not their fault or else to take part in devaluing the degree. I believe that it is time that more thought is given to that.

10.45 p.m.

Baroness White

It is unfortunate that this debate should be taking place at this hour because it touches on one of the most serious aspects affected by the legislation before us. I am not adequately prepared and the time is too short to try to go into any great detail. Surely the Government must recognise that there is something wrong when they are accused, as they are in relation to housing benefits and students, of neither respecting real need nor ascertaining true cost. There is something quite fundamentally wrong about that.

I am concerned about the emphasis which the Government have quite properly placed in their discussions on higher education on mature students, who are placed in a very difficult position. They are less flexible in their housing arrangements than under-graduates. Very often they have to maintain a permanent home in one place and their student accommodation in another. I have yet to learn that that situation and the variations on it, which are legion, have been adequately discussed by anybody. I may be at fault. I try to read the Times Higher Education Supplement assiduously every week and other periodicals from time to time. One cannot believe that adequate thought has been given to the problem. I seriously believe that the House should now resume and adjourn so that we can have an adequate discussion and reply from the Government on this subject at a civilised hour.

Baroness Young

There is no doubt that everyone taking part in these proceedings recognises that this issue is extremely important. In fact we discussed the whole question of housing benefit on Amendment No. 35 earlier this afternoon. Indeed, the noble Baroness, Lady David, quoted my noble friend Lord Boyd-Carpenter. It is an important issue.

The social security system was never designed to become an adjunct of student education, which is in effect what it has become. It was designed for a quite different purpose. Whatever arguments have been set out in letters, that must be true. I am only too conscious that figures can be read in different ways— and plenty of figures have been bandied about— so it would be helpful if my noble friend the Minister could set out the figures. As I understand the position, from next September students will receive a greatly increased grant from the Government. It will be more for those in London than for those outside. Added to this will be the top-up loan, which is the subject of the debate, and there will still be a parental contribution. The important question is whether the total sum will be such that students cannot afford to live in a house other Khan purpose-built student accommodation.

Quite a proportion of students live in purpose-built accommodation. That is the case at Oxford although I recognise that it is not true at all universities. I am bound to say that members of my family who went to universities around the country lived in purpose-built accommodation for two out of three of their student years. I do not know what the figures are generally but it is certainly cheaper to live in purpose-built accommodation than to live out of it. We are not referring to all students. We are referring to a proportion of them.

It would be helpful to the Committee to know what s: udents will receive in October in relation to what they have received in the past and to know just how many we are talking about. We do not wish to exaggerate. The position of mature students is a separate issue. Mature students who choose to go to university and to live away from home have always faced difficulties. They are automatically committed to two homes. Whatever provision is made, that commitment is very expensive. I believe that a good many mature students— and I hope that more will be coming back— will choose a course which will enable them to live at home and possibly commute to an educational establishment reasonably near to their homes.

Baroness White

The chance of uninterrupted study in certain homes is minimal.

Baroness Young

I entirely agree with that. There will always be hard cases. What is remarkable is the number of people who succeed in getting a degree. I have seen the figures from the Open University. I admire enormously anyone who decides later in life to undertake a degree course and to do so via the Open University. It is a remarkable achievement. We ought to look at the successes of people. We should look at those who are really motivated to do something to overcome a good many difficulties. The point of our discussion is to see how the money that is available will be spent and how the figures really work out for that proportion of students who will be affected by this amendment. If I have the figures correct, students will not be disadvantaged. I think we should say so and welcome these proposals.

Viscount Eccles

If my noble friend is right that from next autumn students who are not living in college accommodation will get enough money to live quite well outside college, then those who are living inside college are getting too much money and we ought to take some away.

Baroness Young

Perhaps I may respond to my noble friend, although I realise that that is a job for my noble friends on the Front Bench. The truth of the matter is that from next September students will receive more money in real terms than they receive at the present time. They will receive a higher grant they will have a top-up loan and in some cases they will still have a parental contribution. My understanding is that they will be better off. That point needs to be made continuously. That is what is to happen next September. The anxiety is about how the scheme will proceed. Those who will be affected by the loss of housing benefit are by no means all students if those students are living outside purpose-built accommodation.

Lord Beloff

I find it difficult to follow the logic of the noble Baroness. We know that a very high proportion of students at Oxford, as elsewhere, live for the whole or part of their studies in rented accommodation. It is not merely, as my noble friend Lord Eccles said, a couple of heads of houses who have told him of their anxieties. The University of Oxford has looked into this. The vice-chancellor himself communicated with me and said that this is the immediate issue that is the most disturbing. It is not a question of the future but of what happens this autumn.

Although it may well be the case that the majority of students under these new arrangements will be as well off or, if you like, better off than they were last year, that does not apply to those students who have to pay for rented accommodation. That is agreed by the heads of all universities and in particular by the University of Oxford.

Lord Addington

I should like briefly to say that we seem to be covering much of the ground covered earlier today and the same arguments apply. The real point here is that there will always be some people who will be better off— those who manage to stay in university accommodation. The students we should be worrying about are those who are in institutes which do not have accommodation and those who fall outside them.

If we go down the academic tree we find those in the less prestigious institutions— generally the younger students with less money— are the hardest hit. It is those students we should be seeking to defend and not the others. If we miss out anyone or find that a substantial body of students are worse off then the scheme is faulty and we should reconsider it.

Baroness Seear

I do not want to delay the Committee but I should like to ask the Minister to comment particularly on graduate students. This issue was raised among a number of issues by my noble friend Lord Russell. Graduate students are not getting loans. They are going to have housing benefit withdrawn. Clearly they are to be worse off. Graduate students are, by definition, the cream of the undergraduate population. The academics of the future will be drawn from them and we would expect them to take a leading role in a number of areas. We must not cut down the number of graduate students, given that we only have the three-year undergraduate course which I agree and defend; and provided we allow them to work throughout the three years that is fine. Graduate students form a vital component of university work and are vital for the future. I ask the Minister to look again at housing benefit for graduate students given that they will not be able to get loans and therefore must be worse off.

Lord Butterfield

Perhaps I may briefly share with the Committee a remark I stumbled across when reading up Francis Bacon, later Lord Verulam. This brief quotation is very germane to the difficulties we seem to be experiencing in regard to information. He said: Where there is much controversy"— and that, it seems to me, is where we all stand tonight— there is at many times little enquiry". I look forward to having the true facts of this very awkward situation. I am particularly concerned about the poor graduate students who are so important. If any group of people in this country can be so described, they are the seed com.

11 p.m.

The Earl of Caithness

I shall take a little time to answer the points that have been made. To some Members of the Committee it will not be the repetitious argument that has gone on for most of today, but some of it will.

First, it is a fundamental plank of the Government's student support policies that financial assistance provided to students out of public funds should be directed through the education system according to educational criteria.

We do not believe that the social security system is an appropriate mechanism for channelling support to students, for the following reasons. First, the decision to undertake full-time study is a decision to opt out of the labour market: it is not the function of the benefit system to subsidise able-bodied people without family responsibilities in this way.

Nevertheless, we do recognise the need to protect those in vulnerable groups, such as students with families and disabled students, and have undertaken that those in such groups will retain eligibility for benefits. So some of the concerns that my noble friend Lord Beloff, among others, has expressed to the Committee are taken care of by what I have just said.

Secondly, the benefit system was never intended for the support of students. For a variety of reasons the scale of student claims has increased very significantly over the past two decades, putting an unintended and inappropriate burden on the welfare system.

Thirdly, the short term, cyclical nature of students' benefit claims generates administrative problems and costs which are out of all proportion with the amounts actually claimed. For all these reasons, the Government believe that it is now appropriate to remove students' entitlement to benefits and place the responsibility for student support where it properly belongs— with the education system.

Not only is support through the benefit system innappropriate for students; it is also unnecessary. The Government's policies are generous to students, giving the great majority more in loans than they might otherwise have claimed in benefits. From the recent survey of students' income and expenditure we estimate that in 1990–91 young single students who would have been able to claim benefits would have received an average of £ 315 over a full year. The average for all such students, including those who would have claimed nothing, would have been £ 210. Instead of this level of benefit entitlement, students will have available a loan of in most cases £ 420.

I turn to the arguments of the noble Baroness, Lady David. Later, as my noble friend Lady Young reminded us, I return to Amendment No. 35. We are sorry that the noble Baroness, Lady White, was not with us then.

Baroness White

I was. I heard everything that the noble Earl said which was based on regional differences of costs. That is not what we are discussing now.

The Earl of Caithness

It was very much what the noble Baroness, Lady David, was talking about during a great deal of what she said and I have to deal with it. As I said earlier today, the total amount available to students in loan and access funds will far outweigh what would have been available in benefits. We estimate that in the first year of the scheme expenditure on loans and access funds for undergraduates will be £ 183 million compared with savings on social security expenditure of only £ 68 million.

The Government therefore will be spending well over £ 100 million more on students next year as a result of the new student support system. I hope that that clarifies the figures for my noble friend Lady Young. They are impressive figures. There is an increase in spending of over £ 100 million.

Baroness Seear

The noble Earl will admit, will he not, that the first money was spent and the second amount of money was lent? There is a difference.

The Earl of Caithness

It is an increase of new money available to the students should they wish to take it up. Let me repeat, particularly to my noble friend Lord Eccles who raised this point, that we acknowledge that, even given this extra sum of money, there is concern in some quarters about the effect on individuals of the loss of benefit entitlement. We accept of course that a few students might have been able to claim more in benefits than they will have been able to claim in loans. We have taken great note. I can reassure the Committee that the Government have not neglected the position of such students. If students are in financial difficulty as a result of the withdrawal of benefit entitlement, they will be able to apply for assistance from the access funds. And the Committee knows that we are considering carefully the size of the access funds at the moment. That point answers the noble Baroness, Lady Seear, and the noble Lord, Lord Butterfield, who were concerned about graduate students. They too will have an access fund designed to meet that problem. I know that it is a matter of concern. I am only too well aware of what has been said today. As the Committee is aware because of the discussion on Amendment No. 35, that is one of the matters that I shall be taking up with my right honourable friend the Secretary of State.

I shall now answer two of the particular worries of the noble Earl, Lord Russell, who is paying homage to the Labour Front Bench in a wonderful way. There is no need for him to be so courteous to the Labour Front Bench. He talked about taking powers by regulation to remove benefit entitlement. He will be aware that the 1975 and 1986 social security Acts conferred a power to implement by regulation the benefit changes proposed by the Government. Those powers have been conferred by Parliament. It is proper for them to be used. The regulations are subject to consultation in the usual way.

The other point that the noble Earl made was that students are the poor. Social security statistics show that a minority only of students claim benefits, and a proportion of those who do will retain entitlement to benefits because they are lone parents, disabled or student families. Some of the Committee's concerns are already catered for by those groups which will not have the benefits to which they are at the moment entitled removed. For the others there is the access fund in addition to the loan, which, as I have already made clear, exceeds by over £ 100 million the value of the benefit that we are withdrawing.

The Committee has expressed its views strongly on the question of access funds. That is also a matter that I have promised to take away for further consultation with my right honourable friend the Secretary of State.

Baroness David

First, I should like to thank all noble Lords who have spoken in support of the amendment, which has had strong support. The only voice that defended the Government was that of the noble Baroness, Lady Young, who often comes to the rescue of her Front Bench when she sees it in difficulty. Her points were based on the average student. A total of 60 per cent. of students live in the private rented sector. There is no doubt that they will be worse off.

I have some figures which show how students will be worse off under the loan scheme. If we take a rent of £ 45–50, which is the average London rent, under the new loan scheme the student will be £ 1,126–64 worse off. The average rent outside London is £ 25.40. The student will be worse off by £ 575.30. On a rent of £20, which is below average outside London, the student will be worse off by £ 195.50. The Minister has made a great deal of the fact that the grant and loan will give students a 25 per cent. increase, but we must remember that the grant has been eroded over the past 10 years. The grant and the loan together do not bring students back to where they would have been in 1979.

The Minister has made a great deal of the access loans. We know that he will look at them. I repeat what I said earlier: if we average out the £ 5 million which will be available for undergraduates, that comes to £ 10 per student. That is ridiculous. The access loans will have to do so much that unless they are vastly increased they will not make a significant difference.

I should also like to point out that polytechnic students and those in colleges of further education will be in even greater difficulty than university students because far fewer polytechnics than universities have halls of residence. I know of this from my own home town of Cambridge, where we have both a university and something which is about to be a polytechnic. Having served on the governing body of the technical college for some time, I know that at almost every governors' meeting problems of accommodation arise and we are told how difficult it is to find accommodation for the students who are coming.

I should like to make one other point. These regulations which will change the social security arrangements are now out. Prior to the regulations being laid before Parliament they were referred to the Social Security Advisory Committee and the local authority associations for comment. It is not too late to have another look at this. After all that has been said tonight and earlier this afternoon it would be sensible for the Government just to say that they will take it back and think about it. It is not too late, so I wonder whether the Minister could think again and consider. May I give him the opportunity to say that he will consider that?

The Earl of Caithness

For a start, the noble Baroness referred to access loans. They are not loans, they are payments; and of course she calculated them on the basis that every student would be claiming them regardless, which is a totally inequitable position from which to attack that problem.

As I said earlier, I will refer to my right honourable friend the Secretary of State the comments made on this matter of social security, because it has been before the Standing Committee in another place. I said earlier to the Committee that it was very much part of a package. It was at that stage that the noble Baroness, Lady White, mentioned the question of the community charge. I then upped the ante and said that one must take into account that they are paying rates as I also did as a student.

This is a package put forward by the Government. It is very much a question of a substantial increase in the monies available to a student through a form of loan. It is the access funds which are not loans, which will be targeted on those students who will still be in serious difficulty. The same applies to graduates, because the noble Lord, Lord Butterfield, raised a valid point. It takes into account the fact that one will be withdrawing from the students £ 68 million that they currently get in benefits.

Baroness David

I have found another figure which I shall quote. It is a Government figure which shows that over 77 per cent. of undergraduate students have claimed welfare benefits, some receiving sums well in excess of the proposed top-up loans; those benefits will no longer be available. If a similar proportion to 77 per cent. seek assistance from the access fund, it will provide only an average of £ 15 per student per annum. I do not think we have had a satisfactory answer, and as there is a great deal of anxiety on all sides all I can do is test the opinion of the Committee.

11.13 p.m.

On Question, Whether the said amendment (No. 42K) shall be agreed to?

Their Lordships divided: Contents, 19; Not-Contents, 51.

Addington, L. Lockwood, B.
Adrian, L. Peston, L.
Beloff, L. Pitt of Hampstead, L.
Blackstone, B. Ponsonby of Shulbrede, L. [Teller.]
Butterfield, L.
Carter, L. Russell, E.
David, B. Seear, B.
Fitt, L. Sherfield, L.
Flowers, L. Tordoff, L. [Teller.]
Kilmarnock, L. White, B.
Arran, E. Johnston of Rockport, L.
Balfour, E. Joseph, L.
Belstead, L. Kimball, L.
Blatch, B. Lindsey and Abingdon, E.
Boardman, L. Long, V.
Borthwick, L. Lyell, L.
Brabazon of Tara, L. Mackay of Clashfern, L.
Brougham and Vaux, L. Mills, V.
Butterworth, L. Mottistone, L.
Caithness, E. Mountgarret, V.
Carnegy of Lour, B. Rankeillour, L.
Carnock, L. Reay, L.
Colwyn, L. Romney, E.
Davidson, V. [Teller.] Sanderson of Bowden, L.
Denham, L. [Teller.] Skelmersdale, L.
Downshire, M. Stockton, E.
Eccles, V. Strathclyde, L.
Elliott of Morpeth, L. Strathmore and Kinghorne, E.
Ferrers, E. Swinton, E.
Fraser of Carmyllie, L. Thomas of Gwydir, L.
Gisborough, L. Trumpington, B.
Goold, L. Uliswater, V.
Henley, L. Vinson, L.
Hesketh, L. Wynford, L.
Hives, L. Young, B.
Hooper, B.

Resolved in the negative, and amendment disagreed to accordingly.

11.20 p.m.

[Amendment No. 43 not moved.]

Baroness Blackstone moved Amendment No. 43A: Page 4, line 8, leave out ("have regard to") and insert ("apply").

The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 43B. The way in which the Bill is worded is extremely puzzling. Schedule 2, paragraph 1 (3) says that, the Secretary of State shall have regard to the retail prices index published by the Central Statistical Office of the Chancellor of the Exchequer, any substituted index or index figures published by that Office or such other index as appears to him to be appropriate".

Rather than stating clearly, so that we all know where we are, that the index of inflation will be the RPI, the Bill gives the Secretary of State carte blanche to use any other index. We could have a Secretary of State who decided all of a sudden to use average earnings, for example, or an index of educational costs or house prices, or even an index of the popularity of the Conservative Party. I must say that in today's circumstances he might wish to use it inversely.

When we discussed Amendment No. 44, grouped with an earlier amendment, the Minister said, with reference to the use of another index, that this was merely a safeguard in case the retail prices index was unsuitable. It is not exactly clear to me in what circumstances it would be unsuitable. Perhaps he can tell us. What is wrong with sticking to the retail prices index? It is the best measure of inflation that we have. It is clearly understood by most graduates, I should have thought. Perhaps I should report that some years ago when Lord Rothschild went round the Cabinet of the day— this was in the early 1970s— to find out what studies he ought to take on as the new director general of the Central Policy Review Staff", he found out that only three of the Cabinet of that day knew what the RPI was. I have no doubt that things have changed since then. I believe that most graduates understand what it is.

In giving students a loan we are taking out a contract with them. They should know what the basis of the contract is and not be in a situation where the goalposts can be moved. If for some reason the Government wish to introduce a different index, it should be the subject of proper parliamentary scrutiny. I can see no reason whatever why the amendment could possibly be rejected. I beg to move.

The Earl of Caithness

We have a little repetition again, I am afraid. The first amendment would allow no choice but to apply the inflation rate as the indexation factor. It would thus deprive a future Secretary of State of the option of indexing the loans at a rate below that of inflation. We have heard many arguments to the effect that the loans should not be indexed at all, or not for particular groups. It does not surprise me that we now have an amendment which is totally contrary to those which the Opposition have moved before by removing the possibility of using something less than the rate of inflation.

I do not say that this Government would wish to depart in either direction from the inflation rate as the basis of indexation. The Committee must bear in mind that indexation is compulsory. Paragraph 2 of Schedule 1 is governed by the verb "shall".

The second amendment would remove the possibility of basing indexation on some measure of inflation other than the retail prices index. The RPI is indeed the measure that we intend to use. But we must provide for the possibility of its being abolished and replaced by some other index. At that point it will be necessary to be able to adopt the alternative measure, and the Bill as drafted allows for that.

The amendments are designed to fix in the Bill exactly what the Government intend. However, the Committee is familiar with the arguments about flexibility. In future the loans scheme may have to deal with quite different circumstances that we cannot foresee today. Members of the Committee opposite have also suggested that it should apply to a quite different range of students. The Government at that time must have the flexibility to deal with such changes.

Baroness Blackstone: I was a little surprised to hear the Minister suggest that the RPI might be abolished. I am not sure how long that index has been in operation but I believe it is a long time. I cannot foresee any circumstances in which any Government would wish to abolish it. It is of proven usefulness and is the normal measure used for indexation. I am surprised by the arguments that the Minister has used in responding to this amendment. At this late time of night I have no intention of pressing the amendment any further, but I hope that the Government will think again about it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 43B and 44 not moved.]

Lord Colwyn moved Amendment No. 45:

Page 4, line 10, at end insert: ("() Students on courses of more than three years' duration shall have the repayments cancelled on that proportion of their loan;; incurred in any years subsequent to the initial three years of their course.").

The noble Lord said: At a little before eleven o'clock this time last week my noble friend the Minister said that he was greatly excited at the prospect of reaching Amendment No. 45.I hope he still feels the same way this evening about the effect of my amendment which will limit the loan scheme to the first three years of any course. Any student with a course of five years or more would thus have a loan in the normal way for the first three years of the course but the top-up element for any subsequent years would be in the form of a grant. The amendment does not seek to challenge the underlying principles of the Bill but would represent a compromise recognising that a loan inevitably bears more heavily on those with longer courses.

As the Committee is aware, I am a practising dentist and for that reason I speak with particular reference to dental students and of course to other students whose courses exceed three years in duration. I was pleased to hear in previous discussions on this matter that my noble friend has this problem under consideration and has agreed that annual repayments for students on longer courses could be a major burden. Dental and medical students undergo a rigorous course which usually runs for five years. In addition, each academic year is 45 weeks instead of the usual 30 weeks. Long hours and long terms provide little opportunity for dental and medical students to supplement their grants with part-time work. I managed this myself and was able to supplement my grant by playing my trumpet, but jobs in any of the normal university holiday periods were out of the question.

Students must also purchase expensive equipment as well as textbooks, although I shall not make a major issue of that as many students of medicine and dentistry are able to buy most of their books and instruments second-hand from recently qualified students. It will come as no surprise that many dental and medical students already face large debts on qualification. A survey of final-year clinical academic students undertaken by the British Dental Association in February this year found that in London the average student's annual essential expenditure— that is, excluding any social activities— totalled £ 3,488, but the maximum grant awarded is only £ 2,650. As a result, the survey found that 71 per cent. of the students possessed an overdraft of which more than two-thirds exceeded £ 500. One-third of the students also possessed a bank loan, often amounting to more than £ 1,500. A similar survey of medical students has shown that 60 per cent. of final-year students have an overdraft and that 46 per cent. of these have an overdraft of over £ 1,000.

Allowing for 5 per cent. inflation, a junior doctor could be faced with a total loan as a proportion of income of 35 per cent. by the year 2006. I accept that in the first academic year the top-up loan will include the total resources available to students that year. I also understand that the repayments will be deferred if the graduate's income is low. Nevertheless, it is clear that a student embarking on a three-year course will face a lower repayment than a student starting a five-year course.

My noble friend the Minister has made much of the evidence from abroad showing that loans do not deter those from poorer backgrounds because such students make rational decisions knowing that a degree will ultimately lead to a higher income. That I accept. However, for a student considering the pros and cons of a three-year course or a five-year course, the rational decision will be to choose the shorter one unless the rewards of the longer course are proportionately higher.

I do not wish to plead poverty on behalf of the medical and dental professions. However, the introduction of student loans is against a background of falling numbers of applicants for dentistry courses. Since 1980 the number of applicants to dental schools has declined by one-third. The introduction of loans might not be such a worry if we had too many dental students, but we have too few.

In conclusion, I believe that I am correct in saying that one-third of all medical and dental school places are in London, where the cost of living is highest. The loss of housing benefit and the introduction of the 20 per cent. contribution to the community charge may also deter potential students, particularly those from low income families, from applying to London medical and dental schools. My concern is that the medical and dental professions should not be restricted further and that the quality of students should not suffer through lack of choice. This amendment to the Bill would put longer courses, such as dentistry and medicine, on an equal footing with three-year courses and encourage students of the right calibre to enter the professions and continue to provide the first-class standards of medicine and dentistry that we have today. I beg to move.

11.30 p.m.

Lord Adrian

I should like to support the amendment moved by the noble Lord, Lord Colwyn. Perhaps in doing so I should declare an interest, having been a medical student a good many years ago.

It seems to me that if one of the arguments for loans and repayments is that students will earn more because of their courses, one needs to show that students who have taken five-year courses will earn more than those students who have taken three-year courses. I do not believe that that is the case.

On the basis of that argument, it does not seem unreasonable to burden students on five-year courses with the same repayments as those on three-year courses. I hope that the Minister will think about the suggestion and bring forward an amendment of his own later in the proceedings on the Bill.

Lord Pitt of Hampstead

I should like to support the amendment. There is a serious situation in relation to medical students. Not only do they take five-year courses, but they continue for a further two, three or four years before they are in a position to repay the loan. Having completed their undergraduate courses they qualify, but merely qualifying is not enough. They must then qualify themselves further. If they are to be GPs they have to take a vocational course for another three years. If they are going to be specialists they must train for a further three or five years before they are in a position to earn enough to be able to repay the loan.

I am not in favour of the plan, but, if we are to go ahead with it, let us decide that certain students, because of their position, must be safeguarded. We must therefore stop at a certain stage. The vast majority require only a three-year course, so the loan received by anyone on a course longer than three years should be regarded as a grant. That is what is required. I hope that the Government will accept that principle; otherwise, we shall create problems for many people who will be needed by society. We need doctors and dentists. We need all the chaps who will be burdened unless we find a way of dealing with this matter. I hope that the Government will accept the proposal in the amendment.

Lord Addington

I am glad that the principle that I and the noble Earl, Lord Haig, proposed is receiving the full backing of the medical profession; namely, that longer courses require different consideration. Having said that, this is the third time that we have covered the subject. I hope that the Minister appreciates the considerable concern in virtually all parts of the educational establishment, whether in Scotland or among teachers or the medical profession.

Lord Butterfield

I hope that the Minister will not be cross with me for adding to the plea for consideration of that point. My point relates to the extension of the general course of training for doctors, dentists and other professions; namely, the tendency we all have to find the best students and encourage them to take an intercalated BSc to turn them into the intellectual leaders of the profession when their training is over. I hope that the Government will give serious consideration to ensuring that we offer minimum impedance to that development among our ablest young men and women in those professions. Only in that way will our professions be able to hold up their heads with the professions in the States, Europe, Japan and elsewhere.

Baroness Blackstone

Amendments were tabled on the first day of the Committee stage on the subject of students on longer courses, but rather disappointing answers were given by the Government. There appeared to be little acknowledgement of the fact that those students will be disadvantaged compared with others on shorter courses or the standard three-year undergraduate degree courses.

I was therefore pleased to hear both the noble Baroness, Lady Blatch, and the noble Earl say, in response to an earlier amendment this afternoon, that consideration will now be given to the possibility of repayment over a longer period for such students. We shall look forward to hearing the outcome of the Government's deliberations with reference to the amendment of the noble Earl, Lord Haig.

However, the present amendment seeks to go a little further than that of the noble Earl in cancelling repayment for students on longer courses for that part of their course which is over the standard three-year length. As has been said, students who have to take those long courses— it is not just doctors and dentists; there are also architects, vets and other groups— will have greater debts under the present proposals.

There are two questions here; first, that of equity and, secondly, what the effects will be on the demand for such courses, especially once the amount of loan has increased to 50 per cent. of all maintenance costs. Do we want potential doctors, dentists or architects— professions in which we certainly need the highest quality young people— to change their plans and decide to study something else even though their convictions and talents would lead them into those professions which have longer courses of study? Repayments over a longer period will help but will still not eliminate the fact that those students will be penalised. This amendment is a way to avoid penalising them. We support it from these Benches.

The Earl of Caithness

My noble friend Lord Colwyn reminded us that I had brought this amendment to the attention of the Committee. I commented on it way back during our discussion on Amendment No. 16. It was then that I said that we intended that the annual repayment should be kept manageable for students on courses longer than four years. The noble Lord, Lord Addington, has also been ploughing that furrow, even at Second Reading. As he said, we covered that point at least three times. I do lot object to covering it yet again, even though I have to be repetitious.

Let me reassure my noble friend Lord Colwyn that we are actively considering how this may best be done. The terms of this provision will be set out in regulations. I remind the Committee once more of our commitment to monitor the scheme. If my noble friend Lord Colwyn is right and we see adverse effects on recruitment to longer courses— and I must say that I do not agree with him— it will be possible to rrake any changes swiftly by amending the regulations. But we are not in a position now to be certain that special provision will be required for this particular group. As I said, I doubt the need. If this is a group that needs special provision, we are equally not in a position now to be certain that the solution proposed in the amendment— cancellation of part of their loan— would in fact meet their circumstances. I hope that my noble friend will bear with the Government a little longer while we consider our position with regard to the longer courses. But his argument is well taken.

I should just like to deal with a point made by the noble Lord, Lord Butterfield, on the matter of the intercalated year. I remind the Committee that the grant is not automatically available for the intercalated year with medical students but the loan will be available. I think that that is the point that exactly meets the concern of the noble Lord, Lord Butte-field.

Lord Colwyn

I am grateful for the support that I have had this evening from all Members of the Committee who have spoken. Despite the late hour there is obviously strong feeling about this matter. I shall look forward to reading what my noble friend the Minister said, with a view to taking advice on it. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 46 and 47 not moved.]

Lord Flowers moved Amendment No. 47A: Page 4, line 22, at end insert— (" (3) Prior to the making of regulations under sub-paragraphs (1) and (2) above, the Secretary of State shall hold consuItations with representatives from the institutions which will be required to provide certification and jointly agree a method by which certificates are to be provided.").

The noble Lord said: I tabled this amendment as a simple precaution and I shall be very brief. Under paragraph 2 of Schedule 2 the Government require institutions to certify that a student has been accepted on a course before he or she may apply for a loan That is a perfectly reasonable requirement but it will involve some administration on the part of the institutions. How much administration it will need is a question of what precisely is required to be done.

The people who know about these matters and would be responsible for administering them are not the officials of the DES but the registrars of the institutions of higher education. This amendment ensures that the DES will discuss its requirements for certification with the registrars before making its regulations. I shall be perfectly content if the Minister will himself undertake to amend the Bill in order to give effect to what I have proposed. I beg to move.

Lord Adrian

In rising to support this amendment, my chief feeling is one of sadness that it should be necessary to spell out on the face of this forlorn and unloved Bill what should surely be the normal state of affairs. That it is not the normal state of affairs and that it should seem necessary to oblige the Secretary of State to hold consultations with institutions I believe is largely a consequence of the way matters have gone so far.

Essentially the universities and polytechnics do not know what they are expected to do and how whatever they are expected to do will be financed. I understand that when institutions have made their own proposals they have been told that they cannot be discussed and that the Secretary of State may have to make amendments to force acquiescence in whatever scheme emerges from the DES.

The amendment we are considering may be seen as an inevitable riposte to the possibility that the Secretary of State will amend the Bill to bend universities to his own will. If we can be assured that the Secretary of State is seeking agreement with the universities and polytechnics about the mechanisms of implementation, I for one would hope that the noble Lord, Lord Flowers, might be able to withdraw his amendment. I should be happy to see the amendment withdrawn if it could be shown in that way that it was unnecessary. I am fully conscious that the amendment must be no less distressing to the Secretary of State than I fear his proposed or threatened amendments will be to the universities.

11.45 p.m.

Lord Peston

I rise, first, to support the amendment, and, secondly, to echo some of the words of warning that the noble Lords, Lord Flowers and Lord Adrian, have given.

I had originally understood when we were considering the Bill that all that higher education institutions were required to do was fairly straightforward, with no fuss; namely, that they would write, "X is a student at this university." That is what I assumed the certification required. I also noticed that the schedule in connection with certificates used the words: The Secretary of State may by regulations require". Therefore, I had somewhat taken for granted originally that the Secretary of State would not do that: he would simply discuss the matter with the universities and polytechnics and they would agree that it was perfectly reasonable for them to issue that simple certificate.

However, for reasons that I do not fully understand— one learns about most of this by rumour and leaks to the press— there seems to be some ill feeling now between the Secretary of State and those who are responsible for the running of these major institutions. We hear of the matter having reached the rather dreadful state to which the noble Lord, Lord Adrian, has drawn our attention; namely, that the Secretary of State himself may well be introducing regulations or amendments to the Bill that go very much further than the very simple position as I had understood it.

Lord Flowers

Perhaps I may intervene to say that there is no ill feeling between the heads of universities and the Secretary of State.

Lord Peston

As a university professor, albeit retired and emeritus, I am sorry to hear that. From what we have heard there ought to be a modicum of ill feeling between the Secretary of State and the institutions if the institutions are being threatened, which is the point at issue. I speak entirely from the outside.

Clearly the key point is that threats should not be the way to deal with the matter. Co-operation and consultation should be used. The two amendments say precisely that. I should hope that there is nothing between any of us on this matter. All that one requires is some reassurance, first, that the Government have in mind only a simple certificate; secondly, that the Government will consult; and, thirdly, that the whole matter will proceed without any ill will because that is how matters ought always to take place with regard to higher education.

Baroness Blatch

As the noble Lord, Lord Flowers, has stated, the amendment would require the Secretary of State to consult with representatives of the higher education institutions and to agree with them how the certification process should operate. However, contrary to what the noble Lord, Lord Adrian, said, we have consulted widely at all stages of formulating our policy on student loans. We have listened carefully to all representations and taken account of all views put to us both before the introduction of the Bill and since. Even where we have not thought it right to incorporate such views in the scheme, we have been grateful for them.

Officials of the Department of Education and Science and the company have been hard at work on a procedure for certifying eligibility. My right honourable friend the Secretary of State expects to annuonce shortly how this will operate. The aim will be to make the certification process simple and straightforward, both for the institutions and for their students.

There has to come a point in the development of any scheme where one recognises that the time for formal consultations has passed. However, that does not mean that informal discussions on related matters are impossible. My right honourable friend's door is always open. In particular we wish to discuss with the representative bodies how best to brief the institutions on their responsibilities before the start of the autumn term. We shall always be ready to listen to the views of the institutions as the scheme matures and, if necessary, to make improvements. We are by no means opposed to talking to the institutions. Indeed, we welcome such dialogue. However, to oblige my right honourable friend the Secretary of State to embark on formal consultations at this stage would impose an unacceptable delay which would not be in the interests of students or the institutions themselves.

To compel my right honourable friend to reach agreement with the representative bodies of the institutions concerned would be undemocratic and unworkable. The amendment would allow one party to withhold, however unreasonably, its consent to the proposed certification process. That would be unacceptable.

We have consulted widely on this Bill and have listened to all the views put to us. The amendment would delay the scheme and effectively allow one particular interest group to overrule the will of Parliament if it so chose.

The Secretary of State has been in touch with the Committee of Vice Chancellors and Principals, the Committee of Directors of Polytechnics and the Standing Conference of Principals. Discussions of the detailed administrative arrangements have been offered as soon as possible after Third Reading. With that explanation, I hope that the noble Lord, Lord Flowers, will feel able to withdraw his amendment.

Lord Flowers

This is a question of what one means by consultation. By consultation I mean sitting round a table, arguing it out, talking about the "ifs" and "buts" and the details and discussing what would or would not work. It is not a question of somebody throwing out an idea to this House or in a letter to a Minister and civil servants and the DES considering the matter and advising the Minister that the idea will not work. That is not consultation.

We have been told many times by Ministers in this Chamber during the passage of this Bill that there has been much consultation. In my sense of the word, there has been no consultation on almost any detail of this Bill. However, the noble Baroness suggested that the Secretary of State's door is open. I am very glad to hear that. I knew that and have walked through that door on at least one occasion and may have to do so again. That being so, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 47B not moved.]

The Deputy Chairman of Committees (Baroness Lockwood)

If this amendment is carried, I cannot call Amendment No. 48.

Baroness David moved Amendment No. 47C: Page 4, line 24, leave out ("arrangements may") and insert ("Student Loans Company Ltd. shall").

The noble Baroness said: In speaking to Amendment No. 47C, I shall speak also to Amendments Nos. 48B, 48E and 48K.

If these amendments are accepted paragraph 3 (1) will state: The Student Loans Company shall provide for the loans to be made and recovered, and other functions in relation to the loans to be discharged".

The purpose is to make the Student Loans Company the only body which can be responsible for the student loans scheme. The Student Loans Company was originally proposed as a company to be wholly run by the banks. Following the withdrawal of the banks in December of last year, the Secretary of State set up a company. That is a private company, limited by shares, and all the present shares are owned by the Government. The Government have appointed Mr. John Vereker, who is the Deputy Secretary of DES, to be the company chairman. At Second Reading I asked whether such a job is normally taken on by civil servants and whether this was not a precedent. I received no answer. I hope to receive one tonight when the noble Earl replies to the amendment.

As a private company the Student Loans Company could be sold and privatised. When asked about this in Committee in another place, the Under-Secretary of State, Mr. Jackson, said: There is no problem about that. Many organisations lend money to customers and collect money from them. The chief executive of the company has great experience in consumer credit and wi11 do a good job".

The Under-Secretary of State confirmed that the company could be sold as a banking business. Obviously the company will have enormous value as a banking and credit business as it will have access to the country's graduate workforce. This amendment requires that the Student Loans Company is kept as a company and is not subsumed into a banking and credit agency. We want to be told whether it is possible for the company to be sold. Will it be sold? Is it the Government's intention that it might be sold? Could it be sold to an overseas company? I look forward to the answers to those quest ions. I beg to move.

The Eari of Caithness

These amendments seek to ensure that the loans scheme is administered exclusively by the Student Loans Company. I first assure the Committee that it is the Government's intention, subject to the passage of the legislation, to administer the loans scheme through the Student Loans Company. Since its formation in November 1989 the company has made excellent progress in preparatory work for the scheme. It has secured premises, staff and computer systems. The company is on schedule to deliver loans to students this autumn.

There is every expectation that the loans company will prove to be a cost-effective vehicle for the administration of the Government's scheme. However, the Government must retain the option of administering the loans scheme in other ways. The Bill, as presently drafted, provides the essential element of flexibility which will allow the administration of the scheme to be developed to take account of new opportunities and changed circumstances. While it is the Government's intention to enter into arrangements with the Student Loans Company for the administration of the scheme, there is no reason in principle why this should be a perpetual arrangement. The Government will monitor the administration of the loans scheme in order to ensure that it gives value for money for the taxpayer and efficient access to loans for the student. The Government must be able to take advantage of new opportunities and react to changing circumstances as the scheme matures.

These amendments would not only restrict administrative options; they would also severely limit the discretion open to the company. Such restrictions cannot be to the benefit of students. The company will follow best commercial practice, operating within the framework of the published rules and procedures. Within that general framework there must be sufficient flexibility to allow the company to respond to the specific requirements of individual students; for example, where students are seeking especially tailored repayment schedules in order that they may meet their obligations to repay their debt. It is not possible to say with certainty that a person's financial and other circumstances will always fit within written rules. The loans scheme must recognise that fact. That is why the Bill provides that essential element of discretion for the person or body with responsibility for the administration of the scheme.

The noble Baroness reminded me of a point that she raised at Second Reading and which I have omitted to answer. Now that she has chided me for not replying earlier, perhaps she will allow me to do so as soon as possible.

Baroness David

I thank the Minister for his reply but he did not answer two specific questions: could the company be sold, and could it be sold to an overseas company?

The Eal of Caithness

As I understand the position, it could be sold at some future date as a result of the legislation before us. But the intention is to get the company up and running for the benefit of students.

Baroness David

I cannot say that I am altogether satisfied with that last reply. I should like to think about it and consider whether we should come back with a slightly different amendment at Report stage. For the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 48 to 48F not moved.]

12 midnight

Lord Peston moved Amendment No. 48G: Page 4, line 30, after ("shall") insert (" (a) ").

The noble Lord said: I speak also to Amendment No. 48H. It is absurd that at midnight we are debating amendments of this nature. I can only echo the remarks made sometime ago by my noble friend Lady White that arrangements are such that we reach a fundamental matter when very few noble Lords are able to be present in the Chamber and when we are tired.

Essentially the purpose of these amendments is to clarify the financial basis of the Student Loans Company and yet again endeavour to ascertain some information about the company. We know very little about it and the more I hear the less I feel I know. Earlier this evening the noble Earl said that the company was guaranteed by something or other— I cannot remember his words. At any rate, I am not clear in one respect. Is the company owned by the Government in some sense? Is it in the public sector? I assume the answer is that it is in the public sector.

I asked point blank: is it a nationalised industry? I still do not have a yes or no to that question. It seems to me that it is a nationalised industry— a company owned by the Government. Perhaps one way to throw light on that question is to ask which Select Committee in the other place would be able to query this company. Would noble Lords in this Chamber be able to ask questions about the Student Loans Company and actually receive answers other than "That is a matter for the Student Loans Company and the Minister cannot answer"?

However, all that is background to the general question which concerns me. We must have an explicit statement of the financial basis of the company. Will it essentially work by the Government giving the company a loan? Is that how it will operate, or will it receive a gift of money? In other words, what is the nature of its balance sheet?

Given its balance sheet, which is at least in part about disbursing money to students and also receiving money back from students as the Government hope, that does not generate income on which the company can operate. All that that involves is the flow of money out to students and the flow of money back from graduates. I take the point further. If the company is to operate on the basis of a loan from the Treasury, presumably that loan will be calculated at an appropriate market rate of interest whereas the repayments, as the Government are keen to emphasise, will be at a rather more favourable rate of interest; that is, the rate of inflation. Therefore, by definition the company is a loss-making enterprise with an income which will always be less than expenditure.

All that sets aside one further matter. None of that covers the operating costs of the company. Therefore, I ask again: will the Treasury simply make subventions to the company to cover its operating costs, and how will that be controlled? These are just some of the many questions that arise when we consider the economics of this extraordinary company about which we know very little. Therefore, if we are to learn anything about the company, if we are to scrutinise and to take seriously its operations, then at the very least the company needs to make a specific report to the Secretary of State in much more detail than the report which it would make under the Companies Act legislation. In making that report to the Secretary of State, what we have in mind is that the report will be made to the Houses of Parliament so that we can look at it.

I have used this amendment, the imperfections of which I am well aware of, as a probing amendment simply to try to discover what the Student Loans Company is about. The Government have certainly not issued any statements or detailed documents that I have seen that actually describe the company as an economic enterprise. Nonetheless, the noble Earl, in answer just now to my noble friend Lady David, made two remarks, one of which was explicit. I am not certain whether the other was implicit. Whatever the company is, the noble Earl said that it could be sold.

If my view of its economics is right, it may be capable of being sold but it certainly has no market value. The only way it could possibly have a market value is if it were able to do other things and, in particular, to sell information which I now understand it will not be able to do. Even worse, we were told that if it were sold to the highest bidder it might go to a foreign person. I am as much an internationalist as anybody in this Committee. I do not believe in adopting a xenophobic view of foreigners as opposed to British people.

The issue concerns an economic enterprise. I find it very difficult to view the Student Loans Company as an economic enterprise. In the end, it seems to be just a branch of government. Almost the only way in which I can describe it is as a government office, and one can invent all the rest as a kind of fiction around it. I am sorry to have to moan on at this late hour on a matter which I regard as deeply significant. There is no other way in which we are going to find out about this company before this legislation is passed into law. There is no other time and there are no other Committee days. We cannot rely on Report stage because we may need to raise the matter further at that time on the basis of the answers that we receive now.

I end with my original remonstrance. I do not believe that we should be discussing these matters at this hour and in this condition. The fact that we have been forced to do so does not reflect well on our proceedings.

Earl Russell

I wish to add one simple question to what the noble Lord, Lord Peston, has said: are the staff of the Student Loans Company to be civil servants?

The Earl of Caithness

The noble Lord, Lord Peston, has made complaint about the lateness of the hour at which we are discussing an amendment such as this. My noble friend the Leader of the House has heard it. All I can say is that I have sat not in his position but behind him when we were in opposition. We were kept up to all hours of the night by the Labour Party when it was in power in the 1970s. It is a complaint made by whoever is in opposition. Whenever it gets a little late one tends to think that the next amendment is the most important and that it should be taken at a more convenient hour for a particular person.

This amendment seeks to ensure that the Student Loans Company will make a full annual report to the Secretary of State on its income and expenditure. But that is exactly what the company will be obliged to undertake under arrangements made between the company and the Secretary of State. As Members of the Committee will know already, the Secretary of State intends that the annual report of the company as well as its audited accounts will be made available to Parliament.

The loans company will be subject to the Companies Acts and its audited accounts will be submitted to the Registrar of Companies. These accciunts, as I have said already, will be made available to Parliament. The loans company will be fully accountable to the Secretary of State for its use of public funds. In the usual ways, Parliament will have the opportunity to question the Secretary of State on the issue of these funds. Additionally, the permanent secretary, as accounting officer, will be answerable to Parliament. It is likely that as presently constituted the company will generate income. That may occur, for example, through the company sub-letting office space or selling equipment which, for the company's purposes, is surplus to requirement or obsolete. Any such income will of course be included in the company's accounts. Moreover, it will be offset against the company's running costs to be met by the Government.

I hope that I have covered most of the points raised by the noble Lord. To answer one of his questions, those who work for the Student Loans Company will not be civil servants. However, the company is owned by the Government and its shares are owned by the Secretary of State. For loan outgoings the company will be funded by the Government and repayments from graduates will be returned to the Government. No interest will be charged to the company by the Government. Operating costs will be fully funded separately by the Government as they arise.

Lord Peston

I thank the Minister for his answer. To describe such a company as a company, given all that he has said, seems extremely far-fetched. It is a government office. I cannot but congratulate the Minister on his ingenuity when he said that it might generate some income. What were the two examples? It would sub-let office space. Where did it get that office space in the first place that it is now sub-letting? The other was that it would get rid of obsolete equipment. Again, that is a strange concept of income. The whole thing is odd.

On the other hand, the Minister has done what I askec; which was to tell me something more about the company. I hope— I shall raise this point again on Report— that the Government might take the opportunity some time in the next week to try to inform this place rather more about the nature of the company. We are learning about it, and I thank the Minister for the lesson that he gives us every so often A definitive statement overall would be much more welcome than having to pick up these points. Nonetheless, we have learnt something from the amendment. I thank the Minister for that, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 48H to 49 not moved.]

Baroness Blackstone moved Amendment No. 49A: Page 4, line 51, at end insert— (" (8) The Student Loans Company Ltd., or any body or person acting on its behalf for the purpose of the recovery of loans, shall exercise any such right through due process of law. (9) The courts shall, where it appears to them that no repayment can be secured by reasonable arrangements made by them for staged payments by the person owing the debt, order the Company to cancel the debt or such part of it as cannot be paid other than by such means,").

The noble Baroness said: The purpose of the amendment is to require the loan to be collected through means provided by statute. The proposal is that the courts should provide for the repayment of the loan by stage payments if possible or cancel it. Subparagraph (7) provides for the Student Loans Company to assign a debt collection agency to recover loans. Subparagraph (8) puts on the face of the Bill the important principle that loan recovery must be through the due process of the law; in other words, the Student Loans Company and its agents must resort to the courts to recover loans and not resort to any intimidatory tactics that might be employed by debt collecting agencies.

Subparagraph (9) provides for the courts to intervene in cases where difficulties have arisen with the repayments. The courts may decide, after examining the debtor's personal affairs, to order reasonable repayments. Alternatively, they may conclude that it is not reasonable to recover the debt. The latter provision will be of benefit to many students who take long courses and then do postgraduate study or take jobs where the pay is low. Although such people will not be repaying the loan because they are not earning more than 85 per cent. of average earnings, when they do earn above that level the repayments will become larger due to the accrued interest. The amendment will ensure that the repayments are reasonable. A former student may never be able to repay the loan due to serious illness or a serious accident. This amendment provides a means of cancelling their debts before they reach the age of 50 or 60, as proposed by the Government in the rules and procedures. I beg to move.

12.15 a.m.

Baroness Blatch

This amendment is in two parts. The effect of the first part is that the Student Loans Company would, when exercising its right to recover loans from borrowers in default, have to pursue them through the courts. The second part would compel the courts to order the company to cancel some or all of a borrower's outstanding loan, if it appeared to them that repayment could not be secured by reasonable arrangements made by them for staged payment by the borrower.

I have to say that neither part of the amendment is sensible. The first part is otiose. It is entirely appropriate that the Student Loans Company should seek to recover loans from defaulters by the usual lawful means open to companies providing consumer credit. It goes without saying, however, that if a defaulter refused requests to repay, the company (or any debt collection agency it instructed) would have to consider suing for the debt in the courts. This, of course, would be very much a last resort.

The noble Baroness seems to wish the company to take defaulters to court, rather than employing other lawful means to seek recovery. The resultant burden on the court system would be quite unjustifiable. Furthermore, if this amendment were passed, borrowers would find themselves before the courts much quicker and much more frequently than if the company had access as well to the other usual means of seeking recovery of loans.

The second part of the amendment would fetter the discretion of the courts in a totally unacceptable way. It has long been the tradition in this country that Parliament makes laws and the courts decide how to enforce them. This amendment would force the courts to deliver a particular judgment in individual cases. The court's function is to establish whether the debtor is liable. The question of whether a debtor has the means to repay is irrelevant to determining liability.

Furthermore, the amendment would reward those borrowers whose recklessness had got them into financial difficulty. There would be a positive incentive for borrowers to spend all their money as fast as they could, in the knowledge that the courts would release them from their obligations to repay what the Student Loans Company had lent them in good faith.

The scheme makes generous provision for the deferment of repayments where a borrower's income is only moderate. It also provides for cancellation in certain circumstances. Given those generous provisions, a borrower who defaults on repayments does not deserve the sympathy either of the courts or of the general public. In the light of my answer, I hope the noble Baroness feels able to withdraw her amendment.

Baroness Blackstone

Before the noble Baroness sits down, can she say what the Government intend to do about those students who have had a very serious illness with subsequent infirmity, or a very serious accident that prevents them from working for the rest of their lives?

Baroness Blatch

I think that the deferment scheme would work. If they were not working, for whatever reason whether through accident, illness or simply not being able to get a job— the deferment scheme would work.

Baroness Blackstone

My concern is that in cases of this sort it would surely be far more sensible to cancel the requirement for repayment, rather than leaving a debt of this kind hanging round the necks of such unfortunate people.

Baroness Blatch

The level of income assumed to be reasonable for someone to repay at the rate of at today's prices £ 400 a year is £ 11,500. If, for whatever reason, a person is earning at that level or above, there will be a requirement to repay the scheme. If through illness or any other reason a person is not able to earn up to that level, then the deferment part of the scheme would apply.

Baroness Blackstone

There is a substantial difference between deferment and cancellation, so I do not think the noble Baroness has answered my question. But at this time of night I have no intention of pressing the amendment further. I shall read what she has said and consider it further. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Earl Russell moved Amendment No. 49B: Page 4, line 51, at end insert— (" (8) No person exercising a right of recovery of loans shall approach or otherwise seek information from any referee, teacher or other person who is or has been in a position of responsibility or trust in relation to the borrower and no such person shall be required to act as a guarantor").

The noble Earl said: I should declare an interest in speaking to this amendment as the position of referee is one in which I might perfectly well find myself I do not mean to speak at present to the second part of this amendment dealing with the use of the referee as guarantor. The noble Earl the Minister has already said something about that tonight and I want to read what he said before I consider the matter further.

However, I intend to pursue the provision on the use of the referee to provide information. It seems to be part of a move towards privatisation of law enforcement which has potentially undesirable implications. It also creates a problem of trust. The referee will normally know the person for whom he or she is acting because of a relationship of trust which carries with it an obligation, so far as is possible, to act in that person's interest. Obviously anyone will wish to encourage people to pay their just and true debts. But, what worries me is the obligation to convey information which will lead to the person getting into trouble and being held responsible for default.

I do not think that it would be very easy to combine the relationship of trust which would put one in a position to hold this office with what I would see as the breach of trust which is involved in giving the necessary information. I think that the case should be regarded as being analogous to that of solicitor and client. One cannot expect a solicitor to carry out his job and yet, at the same time, provide information to the courts which will ensure that his client is convicted. The situation that we have here is very similar and unless the position is clarified there will be a good many people in the academic world who will be very reluctant to act as referees. I wonder whether the noble Earl can explain a little more carefully exactly what the referees are supposed to do and what they are not supposed to do.

Lord Beloff

The problem we are discussing was brought to my attention not by an academic but by a head mistress from Manchester. Representations from Manchester always go straight to my heart. Her school is a comprehensive which has both boys and girls. She pointed out that when pupils wish to go on to higher education, she regards herself— rightly, as she is a graduate from Oxford— as one of the people in the school to whom they would naturally turn for advice; that is, advice as to whether they are up to the standard for higher education, to what institution they should seek admission, and so on.

When she saw the proposals for the introduction of referees she felt that she would be the natural person for them to consult. On the other hand, because of the implications that at some future date she might be required to give information about them, she would be reluctant to act as a referee because, to take up the point made by the noble Earl, Lord Russell, that might damage the trust which she feels is essential to the proper running of her school in this respect.

Again, this is one of the many cases which has led to my deep depression over the Bill. The Government seem to be very remote from the concerns of ordinary people. They see the Bill from above as a method of altering financial arrangements which may or may not be to the general advantage; they do not see how it is interpreted on the ground by students, by prospective students and by their teachers. Therefore, I ask my noble friend the Minister to consider why a referee is required.

My noble friend the Minister has repeatedly stated that this is an unusual form of loan: there is no test as to the person's financial viability; and, as we discussed, anyone who is certified as being a student in one of the eligible categories is entitled, without question, to a loan. The person asks for a loan and, so far as we understand the position, the Student Loans Company has no option but to give it to him. Why then is a referee introduced into the situation?

I accept the statement from the Minister that it is a mistake to believe, as some people apparently do, that the referee would be a sort of guarantor. But why, if the loan is automatic, is a referee needed and why should this additional worry be created when there are already so many others?

Lord Flowers

May we take it that nobody shall have his name used as a referee without his permission? Quite often I am asked to give references. Usually the person who wishes me to do so approaches me first and asks whether I would mind if he gave my name. I say yes or no, according to my whim. But some give my name without consulting me— they get a very bad reference. I hope that it would be understood that, when the names of referees are given on a form, the referee's signature will also be on the form to indicate his consent.

The Earl of Caithness

I think it would be helpful if I made one thing clear right at the start. It relates to a point that the noble Earl, Lord Russell, made which was picked up by my noble friend Lord Beloff. I wrote to him on the matter. I wish to make it absolutely clear so that everybody knows that there is no question of referees acting as guarantors for a loan taken out by a student. That should be placed firmly on the record so that there can be no dispute.

I turn now to what the noble Earl, Lord Russell, concentrated on— the first part of his amendment. The amendment would prohibit the company from seeking information from any referee, teacher or other person who is or has been in fiduciary relationship with the borrower. This part of the amendment is misconceived. The scheme makes generous provision for the deferment of repayments where a borrower's income is limited. It also provides for the entire loan to be cancelled in prescribed circumstances. Those who default on their loans will therefore be those who have deliberately decided to renege on the terms of their loan agreement and to deprive the taxpayer of the repayment rightly due to the exchequer.

At this point I remind the Committee that the noble Earl, Lord Russell, mentioned the word "trust". There is a contract between the Student Loans Company and the student. We expect— and rightly, particularly with taxpayers' money— that the student will repay that. If he does not do so he is breaching an act of trust and I know that the noble Earl will take that seriously.

In such circumstances, it is entirely appropriate that the Student Loans Company should be able to adopt all proper commercial practices to ensure that the money due is recovered. This may well include seeking information from the borrower's referees as to his current whereabouts. As I have explained, that is one of the reasons why the student must nominate two referees.

As for approaching other persons who have been in a position of responsibility or trust with regard to the borrower, it will be for the company to decide whether this would be appropriate in a particular case. In most cases, it probably will not be. But I do not believe that it would be appropriate to impose restrictions on the company to which other entirely respectable credit companies are not subject.

I think that the noble Earl, Lord Russell, mentioned that he might be a referee and my noble friend Lord Beloff suggested a teacher. We are obviously looking for two people to whom we could go to seek an address and no more. A friend or relative might be a more appropriate person than a teacher or lecturer.

I agree with the noble Lord, Lord Flowers: I should be very annoyed if somebody used my name as a referee without my permission. On the situation that he posed to me that we should prevent this, I am not sure how we could do so. If the student used his name as a referee without him knowing about it, what action would he anticipate being able to take or expect the Student Loans Company to take?

Lord Flowers

That is very easy. On the form on which the student gives the names of his referees, the proposed referees also have to sign to indicate their agreement.

The Earl of Caithness

I note what the noble Lord says and I shall take up the point later.

Lord Flowers

This is another case where proper consultation around a table would have shown up the problem at an early stage.

Baroness Seear

In view of what the noble Lord said, if the academic concerned— the headmistress, for example— decided that she would not be prepared to act as a referee, what would be the position? I think it is quite likely that that might happen.

12.30 a.m.

The Earl of Caithness

I wonder whether, on consideration, this matter of not acting as a referee is as serious as the Committee considers it. I of course take account of what the noble Baroness has said. However, as I have explained, the purpose of the measure is to help the Student Loans Company to try to trace graduates who are in debt. It may not even be necessary to go to a referee. I do not see that as being a great deterrent to being a referee.

Lord Peston

I did not intend to take part in this discussion because I had assumed that what the noble Lord, Lord Beloff, had said was right and that the role of the referee was negligible. However, I now discover from listening to the noble Earl that the role of the referee is rather serious. It appears that the referee is to be a sneak and a copper's nark. He is to be someone who is approached for information.

As the kind of person who would expect to be asked to be a referee and would feel a moral obligation to fulfil that role, I should say that there is a class aspect to this matter that people are often not aware of. People from poorer social backgrounds do not have the access that Members of the Committee have to referees. We know lots of people who will write letters for us, but the kind of people I am concerned about do not know such people. There are only two people that those people can approach. One is a teacher. I do not share the view of the noble Earl that this is all rather trivial. I feel that if most teachers are told that their role will be that of a sneak, they will not be able to take on the job. The other person who could fulfil the role is a doctor. I feel that doctors may take the same view of the matter.

Having thought that this was a fairly minor matter on which we would obtain some straightforward reassurance, I now feel this is a serious matter that the noble Earl should reconsider. It will introduce into the pupil/teacher relationship an element of a wholly undesirable kind which essentially states that teachers shall act in this sneaky role. The noble Earl is constantly harping on deliberate default. There will be defaulters who are not deliberate defaulters. After all, one is a defaulter if one does not start to repay when one attains 85 per cent. of the national average wage. People do not go around all day asking themselves whether their salary is equal to 85 per cent. of the average national wage. That does not exercise them a lot of the time.

We cannot predict total numbers, but some people will be defaulters through nothing but negligence, as it were, because the matter has genuinely slipped their minds. They may be involved with other matters— for example, bringing up their families and starting work. It appears that we should worry about those people and not the deliberate defaulters. I do not entirely accept the scenario of the noble Earl, but I am now very worried about the points that caused this amendment to be tabled. When we put it down, I thought it was a minor matter on which we could easily reassure teachers. However, I now think it is a much more serious matter to which I, for one, will want to return on Report.

The Earl of Caithness

I have listened with care to what the noble Lord, Lord Peston, said. I take his point that some people will for some reason quite inadvertently get behind with their payments or will not start paying when they should. I understand that, but I believe there will also be the deliberate defaulters. However, what amazes me is the attitude of the noble Lord as regards helping to track those people down. Those people have borrowed off the taxpayer and are due to repay the taxpayer. The attitude of the noble Lord as regards recouping that money filled me with amazement.

However, having said that, the four Members of the Committee who have spoken in the debate have all been involved in higher education, whereas I have not. They have registered a concern which I shall pass on to my right honourable friend.

Earl Russell

We are in danger of having a clash between right and right. With respect, allowing for the point that the noble Lord, Lord Peston, made about default sometimes being involuntary, there is also force in what the Minister said about defrauding the taxpayer. I did not mean to say anything that suggested that I had no respect or understanding for that point.

The question here is what the liability of the person concerned should be. The Minister did not help me by invoking the question of a relative. I could also find myself in this position in the capacity of parent. I hope that the Minister knows that in that capacity I would do everything in my power as a private citizen to cause the people concerned to pay their debts. Were I to fail I should be bitterly disappointed. However, I hope that the Minister will understand that in that situation I would not regard it as part of my parental duty to go to the authorities to help to shop the people concerned. I believe that that would deprive me of the chance to have an influence on them in favour of paying their debts which I ought to have and would attempt to exercise.

We have here something approaching the dimensions of a culture clash. We have had that before when we have talked about higher education. I can see situations arising like those in which a priest or a doctor is found guilty of contempt of court because he will not testify against a parishioner or patient. There are two genuine obligations. Both need to be respected. Where we have a culture clash we need a cultural dictionary. As the noble Lord, Lord Flowers, said, that calls for people sitting round a table and seeing whether they can find a practical way of solving the matter where, I hope I am right in saying, the ultimate objectives are not in conflict.

I do not want to divide the Committee at this time of night. However, I wonder whether the Minister could say any more to persuade me that my concerns have been taken on board and that he realises that, in its present form, the system he is proposing is unworkable.

The Earl of Caithness

I am not convinced of the last remark of the noble Earl although I was impressed by his earlier arguments. I should like to reassure the Committee that, as I said earlier, I shall look at the matter again and bring it to the attention of my right honourable friend in view of the concerns that have been expressed. There are some arguments that I should like to tease out, perhaps later today.

Earl Russell

I should like to thank the Minister for that reply, for which I am grateful. I shall read what he said very carefully, and I look forward with a great deal of interest to what he has to say on the subject at a later stage. I beg leave to withdraw the amendment

Amendment, by leave, withdrawn.

[Amendment No. 49C not moved.]

Earl Russell moved Amendment No. 50: Page 4, line 51, at end insert— {''Repayment 3A.— (1) Loans made under section I shall be repaid in equal monthly instalments within a standard period ("the standard period"). (2] The standard period shall be five years, or such other period as may be prescribed by regulations made by the Secretary of State. (3) Where more than one loan has been received under section 1, the total of such loans shall be consolidated into a single debt repayable within the standard period in force at the end of the latest period of study. (4) Payments under sub-paragraph (1) shall be calculated to repay the whole amount of the loan and the interest as determined in accordance with sub-paragraph (2), within the stancard period. (5) Loans shall bear interest as laid down in paragraph 1 (2) and (3) above. (6) Repayments shall be made by direct debit, or by such other method as may be agreed by the borrower with the authorised person or body which shall be activated automatically on 1st April in the year following the completion of a course of higher education as specified in Schedule 1. (7) Exemptions from repayments shall be granted only where—

  1. (a) the borrower notifies the authorised person or persons referred to in paragraph 3 (1) above that he intends to extend his course or begin a new course of higher education; or
  2. (b) the borrower has agreed to defer repayment in accordance with the provisions of paragraph 3B below.
(8) Nothing in sub-paragraphs (1) and (2) above shall prevent full or partial early repayment of any loan. (9) The borrower may increase the amount of his regular instal ments, but such increase shall be applied only to bringing forward the date of completion of repayment.").

The noble Earl said: The amendment is one which I hope will not be offensive to the Government because it is simply taken from their own leaflet, translated with professional assistance for which I am extremely grateful, into proper legal language. I shall rot elaborate on the arguments for having a properly drafted Bill. I have made them before. I beg to move.

Lord Beloff moved, as an amendment to Amendment No. 50, Amendment No. 50A: Line 3, at beginning insert ("Subject to the provisions of the legislation to be introduced under section 4 (6) above,").

The noble Lord said: The purpose of Amendment No. 50A is to call attention to Amendment No. 63, with which it is linked. The intention is to suggest, even at this late hour, that it is wrong to imply that those who have criticised the various details of the Bill, as we have now over two long days of Committee, are inherently opposed to the idea that the beneficiaries of higher education should pay something back into general funds out of money which may have come to them as a result of the higher education paid for by other people. That has been throughout common ground in most parts of the Chamber. It is certainly admitted by the universities and, I think, the polytechnics.

I should like to put on record the view, which I hope the noble Lords, Lord Adrian and Lord Flowers, who are associated with the amendment, will support, that there is a perfectly adequate alternative in the shape of the scheme put forward by the Committee of Vice-Chancellors and Principals for what is loosely known as a graduate tax. As I have said before in the Chamber, it is wrong to regard that as a hypothecated tax. It would be money going into the Government's general funds in the way in which, if the present scheme were adopted, the money paid into the Student Loans Company would go into the Government's general fund. It is another way of collecting what is regarded as a debt to society. It has the enormous merit of being simple.

The Minister has repeatedly referred to a general package of arrangements for student support— the grant, which will continue, although as a smaller proportion of the whole; the parental contribution which is to continue; the loan; the possibility of access funds for certain cases, and so on. That is an enormously complicated apparatus administered by different institutions— in the case of the grant, by local government; in the case of the loan, by the Student Loans Company; and, in the case of the access funds, by the institutions. All of that must involve a great deal of administrative expense. It cannot be done cheaply. Anyone who administers any part of the scheme would have large administrative expenses, although it has been difficult to tease out exactly what they would be in the case of the Student Loans Company.

In contrast to that, a scheme by which the Inland Revenue would be able to recover in a given period of years up to a given sum what it is thought proper that someone should repay has enormous merits. No one who was not paying income tax would come within the threshold; so the problem of a threshold would be simplified. Records are kept. The Inland Revenue has the facilities for collecting money. It seems to me that this point should be on record. If the Government pesist with the scheme and find it as unpopular among the young and their teachers as I fear it will be— I believe it to be a grave political as well as a grave administrative mistake— it would be desirable to have it on record that they turned down a scheme which many of us in higher education think is more just and both simple and cheap. I beg to move.

Lord Flowers

I wish to support this group of amendments because I believe that the Government's proposal can be improved upon. To make my position clear, together with that of my university senate, I should much prefer that there was no scheme at all. However, if there is to be one, I should prefer some more equitable variant of what is proposed.

I must reiterate that, until the last couple of weeks, there has been no opportunity to discuss the Government's ideas with them or the possible alternatives, contrary to what was said at Second Reading and earlier in Committee. It may be that the Government have heard what we have been saying but have not been prepared to discuss it. On the contrary, all along the propaganda has been that there was no acceptable alternative to the Government's proposals. That was difficult to deny when nobody outside the DES, except presumably the Treasury, knew what the proposals were.

The CVCP has put forward an alternative scheme with which I am perfectly happy. However, other variants are also possible. Perhaps I may briefly describe my own variant. It is a mechanism more than a scheme. It begins with the Government creating a fund. To that extent I suppose that the pejorative word "hypothecated" could be used. I would prefer it to be a trust fund. Although that is not essential, it helps to explain what I have in mind. In any case it could be administered by the Student Loans Company.

A student who has been accepted on a course can apply to the company for partial support from that fund. It is a matter for negotiation with the higher education institutions whether they would administer that part of the process and who would bear the cost of doing so. If the student accepts that offer, he enters into an irrevocable commitment to contribute to the fund when later he takes a job. To give effect to this the loans company will inform the Inland Revenue of the commitment, so that when the eventual employer is told the employee's tax code it will have been appropriately annotated with the letter G or something. That is the only role for the Inland Revenue in this scheme.

Payments into the loan fund will be made by the employer by deduction from the monthly pay packet. That would resemble charitable giving which many firms nowadays administer, sometimes themselves contributing matching donations. Perhaps I may point out that it might be worth while for some employers to bear some share of the monthly contributions in order to attract graduates to their employment. But that also is not essential. In any case the employer carries the cost of administering the payments. The monthly deduction would be calculated by the employer from a simple formula laid down by the Government in which the only variable— apart from annual inflation and such like— would be the employee's personal tax code.

In essence that is the mechanism. Is it a loan or is it a tax? I suggest that that depends on how the payments are terminated. If they terminate after a predetermined sum has been paid, allowing for interest, then it is simply a loan, albeit one repayable at a rate that the employee can afford as judged by his tax code. But in that case someone— and it would probably have to be the Inland Revenue— would have to keep the amounts to determine when the loan had been repaid. That might involve too much administration. On the other hand, if the commitment were to make monthly repayments for a fixed period of years, it would not attract the cost of accounting for the repayment of a loan.

Some would then say that the scheme is a short-term graduate tax except that it is payable into a trust fund instead of the Inland Revenue. The formula which determines the rate of contribution would have to be adjusted each year to ensure that the fund remained in approximate balance. So one could perhaps say that it was a loan scheme repayable on the average.

The self-employed will have to do their own sums and the problem of defaulters is no different from that in the Government's own scheme. I shall say no more about it, except to emphasise that there are many details open to discussion. Subject to that, it seems socially fair as well as flexible.

The Government may believe that their scheme is the best possible. I do not believe that. I call upon them to consider this proposal and indeed other and probably better suggestions that people may wish to make. The present amendment allows the Committee to consider whether it is worth while to discuss alternatives of this kind. I therefore support the amendment.

12.45 a.m.

Lord Adrian

I shall say no more than that I agree entirely with what the noble Lords, Lord Beloff and Lord Flowers, have said. At this hour of the morning I do not want to repeat their arguments. I do not disagree that some repayment by students is appropriate, but I do not agree that the scheme that has been put before us by the Government— or at least that part of it that we have been permitted to see— is a good scheme. Indeed, the more I hear of it the less I like it. I believe that the CVCP's proposals, or some derivative of them, are a substantial improvement on what is presently proposed by the Government.

Lord Peston

Although it is late this is our only opportunity to debate these matters and I see no reason for being brief This is genuinely the only chance that we have to deal with certain very important matters, as the noble Earl, Lord Caithness, has already pointed out. I shall concentrate on Amendments Nos. 50A and 63, since the noble Earl, Lord Russell, has put the other amendments into appropriate perspective.

The reason why it is necessary to put forward an amendment such as Amendment No. 63— I do not like its form of words; I do not believe that the noble Lord, Lord Beloff, would have wished to go about it in this way had he had an alternative— is because the way that the Government have written the legislation leaves us with no alternative.

In taking part in the Committee, and at the earlier Second Reading, I have learned a great deal about the subject. I have done research and have lectured in the field. I have learned that the question of student maintenance is a good deal more complex than I ever understood. Merely by scrutinising the govemment loan scheme, I have learned a great deal about loan schemes in general. The noble Baroness, Lady Young, chided me about what scheme I would put farward. I am inclined to agree that, were I in a position to put forward a scheme, I might find, if it were subjected to critical scrutiny for example, with regard to many of the lectures I have given in the past concerning the correctness and ease of application of a graduate tax— it turning out not to be quite so correct and easy. However, the problem that has confronted us in dealing with this subject is that we have not been in a position to debate any of those matters because it is impossible to put down such amendments to the Bill. For example, the suggestions put forward by the Committee of Vice-Chancellors are not allowable in the context of the Bill. That is the nature of our problem.

If the legislation had been written in another form, much as I dislike the government loan scheme, like the noble Lord, Lord Adrian, I might have discovered that it was making the best of a bad job. But how am I ever to discover that it is making the best of a bad job if I am not allowed to discover any of the other possibilities? Therefore we are indebted to noble Lords for raising these matters.

Perhaps I may emphasise that it is not too late. It is still possible for the Government, without ruining their desire, to put more material before us so that we can clarify these matters. I am very sensitive to the notion that Members of the Committee should not wreck a government Bill on which the Government are keen. But I am also sensitive to the notion that we have a responsibility to prevent the Government doing something stupid even if they insist on it. I can find few justifications for this Chamber better than the desire at least to ask the Government, "Have you really thought through what you are doing?" One of our great problems is that we have not reached that point.

Perhaps I may mention a matter that deeply troubles me. The noble Earl and the noble Baroness have referred to widespread consultation. What they have omitted to mention is that they do not have any supporters as a result of their widespread consultation. No one supports the Government. It might well be that if we were to subject the alternative schemes to the scrutiny to which we have subjected the government scheme the Government might find themselves with some support because they would then be able to demonstrate that they had considered all the alternative possibilities.

However, as I can testify, it is not merely the students who are opposed to the scheme. The National Union of Students certainly reflects the views of students, which have been overwhelming, in my experience. But no one I know in higher education, even among those who are most devoted to the Government and their welfare, supports the scheme. It is difficult to know how the Government have managed to invent a scheme which offends all interested parties. However, I say that en passant.

Even now, I ask the Government to think again. This is not the last minute before the twelfth hour because we are now into Tuesday which is something for which I do not particularly care. The fact remains that the Government would do a great deal of good for education if, even at this late stage, they would take the suggestion of the noble Lords, Lord Beloff, Lord Adrian, Lord Flowers and Lord Kilmarnock, and if they could convince the Committee that they have seriously considered the alternative possibilities on their merits.

I repeat something for the last time. I regard myself as open minded. I am ready to be persuaded that this is the best of a bad job. Until the Committee has the opportunity to consider all the alternatives, it will remain unpersuaded. I hope that we shall not divide because I do not believe that this is a matter for Division. However, we must say to the Government that they have not approached this properly. They have not done their job properly.

Baroness Young

It is valuable that, even at this late hour, the graduate tax point has been raised. It has been uppermost in the minds of many Members of the Committee. Like others, I have received a copy of the vice-chancellors' memorandum setting out the graduate tax.

However, it is perfectly clear that the Government could not possibly accept these amendments. They run completely counter to the rest of the Bill. At this stage to introduce a completely different scheme would be quite impossible. I understand the desire of those who support the scheme. That is the scheme they like. However, it is very unfair to say that no one has known anything about the matter. My right honourable friend wrote to the noble Lord, Lord Annan, on Second Reading about the graduate tax. My right honourable friend held a meeting in the time between Second Reading and Committee at which he went over in great detail the whole question of the graduate tax. Therefore, to say that that has not been looked at, thought about or discussed is grossly unfair.

The truth of the matter is that everybody in the university world, for completely understandable reasons, would rather continue as we are. The noble Lord, Lord Peston, shakes his head but he has said consistently throughout the discussions on this Bill that he prefers not to have the loan scheme but to continue as we are.

Lord Peston

I realise we are all tired. However, if the noble Baroness reads my Second Reading speech, she will see that I went to a great deal of trouble to say that I fully accepted that we had to rethink the whole question of student maintenance. I went to a lot of trouble to say that the status quo is not sustainable. I repeat that the status quo is not sustainable. However, the Government have produced something worse than the status quo and that takes some doing.

Baroness Seear

From these Benches we have repeatedly said that we accept that there must be a system of repayment. We must not let it be said that everybody is opposing a system of repayment.

Baroness Young

I do not wish to put words into people's mouths which are not true. I take back anything which I have said which has implied that. I accept that everybody agrees that there must be change. We have discussed the Bill at considerable length. For students, the present scheme is infinitely better than any future scheme of loans, a graduate tax or anything else which may be devised. Therefore, it is not surprising that they are unhappy about the proposals. That seems perfectly reasonable. They think that they will not be as well off in the future as they are today. Time will tell.

I do not see how the Government could accept the amendment. We have had the opportunity to discuss it. I believe that my right honourable friend the Secretary of State has gone into the matter in considerable detail with others. I hope that the mover of the amendment will withdraw it, having discussed the matter.

1 a.m.

Baroness Blackstone

In an earlier intervention the noble Baroness, Lady Young, made reference to the need for the Opposition to say what they would do. Of course it is a long time since the noble Baroness has been in opposition, but it will not be very long now. We shall watch with interest the commitments she makes when she speaks on behalf of the Opposition. I should also like to remind her that her party's record on setting out clearly what it will do is not all that good. It said for a long time that it would abolish rates but it never said what would be put in their place.

On this side of the Committee we recognise the need to explore different ways of funding student maintenance. I agree with my noble friend Lord Peston on this point. If we are to double the number of students in higher education we know that it will be expensive. But we are convinced that the Government's scheme is not a sensible one, as many Members of the Committee have argued. I suspect that one of the reasons why the Government have gone down this route is that they have been conned. They have been conned largely by the gentlemen and perhaps ladies of the Inland Revenue.

The noble Baroness, Lady Young, referred to the discussions with the Secretary of State between Second Reading and the Committee stage. She may have been convinced by what the Secretary of State said. I was not, although it was helpful that he was willing to talk to us. He made a number of comments on what the Inland Revenue had said about the problems of introducing a graduate tax. I shall give two or three examples. He said that the Inland Revenue was concerned about the issue of thresholds. It was concerned that if we linked the repayment of loans to the standard rate of tax the threshold would be very much lower than that of the current loan scheme. There is absolutely no reason why repayments should be linked to the standard rate of tax. The threshold can be fixed at any level the Inland Revenue or the Government decide.

The Inland Revenue apparently said that it would have to co-ordinate and co-operate with employers. We all know very well that the Inland Revenue is in constant touch with employers about every aspect of the taxation system. There was reference to the fact that special arrangements would be needed for the self-employed. Again, special arrangements for the self-employed already exist. We were told that the Inland Revenue would have to handle requests for information. Well, well, well. Of course it would, but it has to handle countless requests for information about many aspects of the taxation system.

We were told that it would have to police the PAYE return for graduates from employers. I assume that it polices the PAYE returns already. We were also told that the Inland Revenue believes that the cost of extra manpower would be very considerable and much greater than the costs involved in the student loans scheme. I simply do not believe that. I should like to see the figures. I should like to see details from the Inland Revenue as to why the cost of extra manpower would be greater than in the case of the student loans scheme. I suspect that the position would be quite the reverse. If one sets up a completely new system with a completely new organisation one will have higher manpower costs than if one makes use of existing structures and existing organisations. We were told the new computer support needed by the Inland Revenue would cost a good deal of money and would cost more than that which would be deployed by the Student Loans Company. I cannot see how this could possibly be the case. I should be grateful if we could be supplied with more details.

The Government have been conned partly by the well known reluctance of the Inland Revenue ever to take on anything new. We have heard this from the Inland Revenue on countless occasions over the years. I am surprised that Ministers have not been prepared to stand up to the Inland Revenue on these matters. I also believe that the Government have been conned by the overenthusiasm of their DES advisers who seem to fancy themselves as directors of companies, a role not normally played by civil servants. I suspect that they have been caught in a pincer movement, with the Inland Revenue's tendency to exaggerate the difficulties and the over-enthusiasm of the DES.

Above all, some form of graduate tax would allow the highly paid to contribute more than the low paid. That is not allowed for under the Government's current proposals. To have some kind of progressive system for recouping the costs of student maintenance would be infinitely preferable to the proposals in the Bill. A graduate tax would also get us away from the absurd and silly view that loans, and only loans, will deal with the culture of dependence that some Ministers have conjured up as an affliction of our current students. For those reasons I support the amendment.

Lord Elton

In a few words I should like to draw the Committee's attention to what I regard as a danger which is developing. We have a Bill which has been passed on Second Reading for one system but we have spent a great deal of time repeatedly discussing another system. If that is to become a habit we shall be wasting a great deal of time. I am not objecting but warning that if that becomes a habit it will be a great waste of time.

Earl Russell

If the Government are to make a habit of tabling Bills which they cannot convince us can be put into operation they must expect fairly lengthy discussions.

Lord Elton

One does not pass on Second Reading a Bill which one does not believe will work.

Lord Tordoff

Can the noble Lord tell us what the system is that is contained in the Bill?

Lord Elton

It is described in the Long Title to the Bill which the noble Lord can read.

The Earl of Caithness

The original amendment is Amendment No. 50 in the name of the noble Earl, Lord Russell. That is a classic case of the noble Earl saying that he does not have enough information and when we provide that information the noble Earl seeks, almost word for word, to put it on the face of the Bill. I hope that he will accept that in principle I have agreed the amendment of my noble friend Lady Young that this will all be subject to affirmative resolution procedures, when it will be discussed.

Amendment No. 50 and the subsequent amendments, which also take word for word the information produced by the Government, are not necessary and do not need to be put on the face of the Bill. I know that the noble Earl considers his amendment to contain an important point but perhaps I can save repetition on subsequent amendments.

Amendment No. 50A, which is an amendment to Amendment No. 50, is a paving amendment for Amendment No. 63. As we have discussed this Bill both sides of the Ides of March, I feel like a person some centuries ago who was warned that some of his friends were causing trouble. The name of my noble Friend Lord Beloff seems to have been ringing round the Chamber for the past few weeks and here is his amendment. I realise that this is a somewhat strange amendment that has been proposed in order to allow us to debate the pros and cons of a graduate tax. The amendment says nothing about a graduate tax as a possible alternative to the student loans scheme. There are a number of other alternatives. If my noble friend had wanted us to discuss a graduate tax I am sure he would have tabled an amendment to that effect.

Lord Beloff

Perhaps the Minister will give way. There is a little matter of House of Commons privilege which prevents any Member of this House from proposing a tax.

The Earl of Caithness

I am sure that my noble friend is ingenious enough to get the subject into discussion. He has done so very much through a side door but it is a well marked side door.

As well as being a probing amendment facilitating debate on a range of alternatives including graduate tax— I now choose my words with care— this is also a wrecking amendment. It would limit the life of the scheme to less than two years. By April 1992 the Government will have been obliged to replace both the loan scheme and the existing mandatory awards provision set out in the Education Act 1962. If the Bill were not approved in time to take effect in 1992 the loan at least would cease to be available to students who would be left, at best, with only a devalued grant.

The amendment would effectively compel Parliament to approve whatever may be in the Bill. I should add in passing that the replacement of one scheme by another in April would give rise to all kinds of difficulties. I challenge any noble Lord to defend the concept of changing the entire student support system in the middle of the academic year. I have heard no justification for that from any Members of the Committee and nor would I expect to.

I call this a wrecking amendment because I am sure that Parliament would not countenance the passage of a Bill requiring the establishment of an administrative structure that would have to be torn down again almost immediately. That would be an irresponsible waste of taxpayers' money.

I now wish to go over some ground that I have been over before; I went over it at Second Reading. It is the history to what has gone before. There has been a great deal of consideration and research into alternatives for higher education funding. Our manifesto for the 1987 election indicated that we were thinking along these lines. We then published a detailed White Paper on which consultations were held with a great many people whose thoughts we sought.

The response of the Committee of Vice-Chancellors and Principals to the Governments' White Paper Top-Up Loans for Students (Cmnd. 520), consisted of 13 paragraphs, four of which were related to an alternative approach. That was on 3rd February 1989. Since then there have been discussions with a number of groups. As I understand it, the Committee of Vice-Chancellors and Principals took the view that it would be better not to have a graduate tax, but to have some kind of scheme linked to national insurance contributions.

My right honourable friend the Secretary of State wrote to the Committee of Vice-Chancellors and Principals on 9th February this year about the national insurance contributions, which it was thought was rather a good wheeze, setting out the disadvantages. Members of the Committee have seen that letter. The very day that letter was sent was the day that the Committee of Vice-Chancellors and Principals issued a press release about some kind of graduate tax in vague outline. That was February of this year and that was after the Bill had been through another place in all its stages. Then we had Second Reading here.

I have heard more tonight about the ideas and principles behind the proposals of the Committee of Vice-Chancellors and Principals than has ever been put to my right honourable friend the Secretary of State. No scheme has been put to him. For anybody to say that this matter has been discussed in any kind of way that compares with what we have done, which has taken many years of gestation, is a complete fallacy.

My noble friend Lady Young and I have been pressing the noble Lord, Lord Peston, to put forward his alternatives clearly. While we put ours in the manifesto, the noble Lord has remained utterly silent and it is depressing that he has remained so. Alas, we expect nothing more. The noble Baroness, Lady Blackstone, has little idea of the tax system in this country or how it operates. Australia is the only other country which has a graduate tax. It has been in operation for one year. There is a very big difference between the tax system in Australia and the tax system here and that is the question of PAYE. It is wise to remember that our cumulative PAYE systems mean that we do not need to call for annual tax returns for the large majority of UK taxpayers.

That would all have to change and we would have completely to re-organise the system to get anywhere near the principles of the scheme that has been outlined today. We have plenty of evidence from Europe that a mixture of loans and grants— which is what we are proposing and what most people in Europe are now moving to— has worked very successfully for a number of years. Of course, the Liberal Party, which is so keen to tell us that all that is in Europe is good and that we should hurry along and follow, has been markedly reluctant to say anything nice about what the Europeans have been doing for many years.

1.15 a.m.

Baroness Seear

Before the Minister gets away with that cheap jibe perhaps I may point out that we do not have to accept every mortal thing that goes on in Europe because we are good Europeans. We believe in getting into Europe, putting our point of view and arguing when we do not agree. If the Government did that we would be a great deal further on the way.

The Earl of Caithness

I have been doing that a few years, especially in the Environmental Council and, more recently, the Budget Council.

I turn finally to what the noble Lord, Lord Flowers, said. He said that the Government's proposals can be improved upon. I hope that he has realised that through our debates in Committee that is what we have done. I have accepted amendments; I have made commitments; I have taken matters away to think about again with my right honourable friend, to improve the Bill. This is a revising Chamber, and in the two days in Committee that is what this place has done and done well, if I may say so.

Earl Russell

Before the Minister sits down, does he accept that many of us believe that the words "wrecking amendment" are not nearly as appropriate as "salvage amendment"?

Lord Beloff

I do not propose to detain the Committee. My object has been achieved. We have at long last had a discussion on possible alternatives, and it may be that in a year or two the Government will turn back to the Hansard of today and wonder why they did not take them up. I beg leave to withdraw the amendment.

Lord Denham


On Question, Amendment No. 50A, as an amendment to Amendment No. 50, negatived.

Earl Russell

I tabled Amendment No. 50 with the intention of pressing it and incorporating it into the Bill. It does not seem appropriate to do so at the moment. I beg leave to withdraw it.

Amendment No. 50, by leave, withdrawn.

Earl Russell moved Amendment No. 51: Page 4, line 51, at end insert— ("Deferment 3B.— (1) Borrowers whose current gross personal income is below a threshold ("the threshold") which is 85 per cent. of the national average income shall be able to defer repayment of any loan for a year. (2) The threshold shall be calculated from the most recent available Average Earnings Index, and shall be determined annually in August by the Secretary of State, to apply from 1st September. (3) No allowances shall be made against the borrower's income for the purposes of determining whether such income falls below the threshold defined in sub-paragraph (1) above. (4) Borrowers applying for deferment shall certify that their total gross personal income is below the threshold, and shall produce supporting evidence. (5) Applications for deferment may be made, and deferment may begin, at any time within the standard period. (6) Applications for deferment shall be subject to verification by the authorised person or body constituted under paragraph 3 (1), and shall be subject to the retrospective checking against the borrower's actual income by requiring the production of either—

  1. (a) for employees, their most recent form P60; or
  2. (b) for the self-employed, their most recent accounts agreed by the Inland Revenue.
(7) Nothing in sub-paragraphs (1) to (5) above shall prevent the borrower from resuming repayment voluntarily within the period of deferment. (8) Applications for deferment shall be made by the borrower directly to the authorised person or body. (9) Applications may be made up to one month in advance of the date from which deferment is sought, or up to three months retrospectively, but no refunds shall be made of payments already made. (10) Misrepresentations by the borrower of his financial position may lead to—
  1. (a) rejection of his application;
  2. (b) accelerated repayment of his outstanding debt;
  3. (c) the provision of information on such misrepresentation to credit— reference agencies; or
  4. (d) proceedings for fraud.").

The noble Earl said: This is a probing amendment. There are points here which we need to understand further and points which call for further thought. Now that the Bill has reached this far I should like the scheme to become effective, if possible. I speak to the amendment in that hope.

I want to raise the point that no allowances shall be allowed as provided for in paragraph (3). How much thought has been given to the question: is this going to give rise to real inequity? Income and disposable income are not the same. In cases of large mortgage commitments, or even more in case of alimony, the provision may have the effect of considerably increasing the amount of bad debt, which was not the object that was originally considered.

I should also like to raise the question of paragraph (10) which again is based on the government leaflet. I was a little puzzled by the first part of that, which says: Misrepresentations by the borrower of his financial position may lead to rejection of his application".

This is an application from an 18 year-old, presumably with no economic record. I do not see what sort of financial position would need to be represented here or how it would be misrepresented. I wonder whether that has merely been copied at great haste from a normal commercial credit company's rules of operation. I should like also to hear a little more about what is meant by accelerated repayment. But I am not pressing that point further at the moment. I beg to move.

The Earl of Caithness

There is one point that I should like to make after the last discussion that we have had; and I see that the noble Lord, Lord Adrian, is still in his place. I should like to confirm, just so that there is absolutely no misunderstanding, the point that my noble friend Lady Blatch and I have been making at great length. My right honourable friend's door is open for further discussions on the scheme that we have before us. I know that the noble Lord has been to see my right honourable friend and I hope that that has been valuable. I hope, too, that if he feels there is any point that he would like to discuss with me or my right honourable friend he will take the opportunity to do so.

On the amendment before us, yes, on sub-paragraph (3) that the noble Earl has raised, considerable discussion has gone on. We have discussed in great detail over the past two days the question of thresholds, why we have arrived at the figure we have and the proposals for deferment. But I must take the noble Earl back.

He talked about mortgages and other costs that there might be. When one is a student one will be offered a loan. If one accepts that, one enters into a contract with the Student Loans Company and it is only right, I am sure, that that student, when he completes the course and nine months afterwards is or is not in a position to repay, should take into account that he or she will be required to do so. It is fundamental that if one is borrowing, particularly if one is borrowing taxpayers' money, that should be taken into account, and we have done so.

With regard to sub-paragraph (10), we think it is also appropriate that these matters should be in regulations, because if the borrower has misled the Student Loans Company he is dealing with taxpayers' money and it is right that there should be a remedy for that, to get the monies back as quickly as possible if that is appropriate. It might not be, but equally it might very well be so. There might also be under sub-paragraph (10) (d) proceedings for fraud. That, too, might be appropriate. I do not say that this would be so in every case, but it is appropriate that the alternatives are there.

Earl Russell

I entirely agree with the noble Earl about taxpayers' money. If there is to be a loan scheme at all, the money must be recovered. I will repeat that as many times as is needed. I hope that all I was saying about the point of allowances was something that would be within the commercial practice of any normal banking manager, of making as much allowance as is necessary for maximum efficiency in recovering the debt.

I do not undersand what the noble Earl said about rejection of the application. I entirely agree that anyone who obtains taxpayers' money by misrepresentation should not do so and should be proceeded against. But I do not understand where misrepresentation comes into the application, because I understood that that came before there was an economic record. Nevertheless I beg leave.

The Earl of Caithness

I shall try to help the noble Earl very briefly. What we are talking about here is misrepresentation in an application for deferment, not for the loan.

Earl Russell

That helps considerably and, with that assurance, I am happy to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 52 to 54 not moved.]

Schedule 2 agreed to.

Baroness David moved Amendment No. 55: Before Clause 2, insert the following new clause: ("Monitoring of scheme: participation in higher education..— (1) From the commencement of the student loans and grants scheme, the Secretary of State shall gather information relating to the effects of the loans system on the participation of students in higher education. (2) In relation to subsection (1) above, the Secretary of State shall gather information particularly on—

  1. (a) students by socio-economic background;
  2. (b) students from ethnic minorities;
  3. (c) students with disabilities;
  4. (d) students aged over 25 years at the commencement of their course;
  5. (e) women students; and
  6. (f) such other categories of student as may be determined by the Secretary of State in consultation with appropriate bodies.
(3) The information gathered under subsections (1) and (2) above shall be laid annually before each House of Parliament, and shall be taken into account by the Secretary of State in prescribing the maximum amount of loan that may be made available to students in any year under paragraph 1 (1) (a) of Schedule 2 to this Act.").

The noble Baroness said: In moving this amendment I shall, with leave of the Committee, speak also to Amendment No. 58. The purpose of Amendment No. 55 is to ensure that there is full and proper monitoring of the loans scheme and its effects on participation, especially from those groups listed in paragraphs (a), (b) and (c), which seem most threatened by the student loans scheme.

Ministers in both places have stated that there will be monitoring procedures for the loans scheme, both for financial costs and for participation. Mr. McGregor the Secretary of State, stated during the Report stage in another place: I assure my honourable friend, the Member for Leeds North West (Dr. Hampson) that we shall be monitoring the scheme". [Official Report. Commons, 15/2/90; col. 448.J

Unfortunately, the mechanisms cited as examples for such monitoring present no new initiatives specific to the loans scheme, especially concerning its effects on participation. Answers to parliamentary Questions on the current situation and likely effects on disabled students have shown up a gap in knowledge within the DES. Similarly, parliamentary Answers to Questions concerning the withdrawal of benefits from students have shown that there is very limited information available for such policies to be confidently implemented.

The Secretary of State has stated that the Education and Science Select Committee may consider such information. However, this does not put any obligation on the DES or the Minister to monitor systematically the effects of the scheme. The fact is that the Select Committee determines its own subjects for scrutiny and does not have a monitoring-reviewing function that is comparable with relevant and systematic investigation of the loans scheme. Reference is also made to the possibility of income and expenditure surveys. Again, these are vague references and will only provide limited ad hoc information. Annual reports and accounts of the Student Loans Company Limited have been promised, although the level of scrutiny to be undertaken in Parliament is minimal. There is wide support for the principle of proper monitoring on participation in both Chambers.

In several debates during the previous Committee day on the Bill in this place the Minister gave assurances that the effects of the scheme on various groups— namely, people with dependants, women and certain other types of students— would be monitored. In a similar response the noble Baroness, Lady Blatch, stated on behalf of the Government that she returned to the basic assumption and repeated the assurance that the scheme would be monitored. The Government have still not specified how this monitoring will take place, especially in relation to participation. The loans scheme is controversial and new. It deserves to have full and proper monitoring.

The experience of loans schemes abroad shows that regardless of overall rates of participation any problems resulting from participation are felt most acutely by certain groups of the population, as identified in the amendment. While no one knows the precise likely effect of the scheme on participation until the scheme is in operation, clear mechanisms need to be set up to ensure that the accurate information needed is collated. This is not the case at present as the Bill stands.

After earlier assurances about monitoring, I see no reason for the Government to turn down the amendment. Amendment No. 58, tabled in the name of my noble friend Lord Peston, asks for the monitoring of accounts in relation to the scheme and for the laying of these accounts before the other place. I hope therefore that the Minister will feel able to accept the amendment. I beg to move.

Lord Flowers

; As the noble Lord, Lord Beloff, is no longer present in the Chamber perhaps I may say a word on behalf of the universities. I consider such monitoring to be most important. I say that because our main concern all along with the scheme has been that it will frustrate the Government's other excellent intentions to broaden access to higher education. I very much fear that such a scheme will not have that effect. In any event it must be monitored to see whether it produces the desired effect.

The groups of students mentioned in subsection (2) of the proposed new clause are the very students about whom we would be most anxious. I hope therefore that when she replies, even if the clause is not acceptable, the noble Baroness will be able to give us some indication that the monitoring requested in the amendment will go ahead.

Baroness Blatch

It appears to me that throughout the first day of the Committee stage and, indeed, today I have given a number of assurances that monitoring of the scheme will take place. We regard monitoring as extremely important. The details of the scheme are not set in stone, and the Bill is designed to permit a swift response through regulations if changes are required. The effect of loans on participation is one of the major areas in which the monitoring effort will be concentrated.

The monitoring of the loans scheme will of course take place alongside the Government's more general monitoring and evaluation of higher education policies such as the switch to fees and the promotion of improved participation and access for groups traditionally under-represented in higher education.

The key to this aim is education for young people aged 16 to 19 years. Our school and further education reforms are designed to equip more young people with the qualifications and motivation to enter higher education. I include among these the introduction of the General Certificate of Secondary Education, the national curriculum and the associated assessment arrangements, and our recent initiative on core skills for 16 to 19 year-olds. The Council for National Academic Awards and the Committee of Vice-Chancellors and Principals are also encouraging higher education institutions to consider applicants with qualifications other than GCE Advanced and Advanced Supplementary levels mainly by means of the access course recognition scheme.

There are also other initiatives aimed at promoting access among adults as well as younger students. We are encouraging more flexible forms of further and higher education provision, such as part-time and distance learning, and credit accumulation and transfer. We are also funding projects to help develop programmes to improve access and promoting the development of access courses and their acceptance as a suitable route into higher education. Many such courses are designed for particular groups such as women or ethnic minorities.

Amendment No. 58 would require the Secretary of State to submit annually to the House of Commons accounts relating to the loans scheme in such form as may be determined by the Comptroller and Auditor General.

The Student Loans Company is a limited company and therefore its accounts must be audited under the provision of the Companies Acts and a copy of its accounts lodged with the registrar of companies.

My honourable friend the Parliamentary Under-Secretary of State has confirmed in another place that the audited accounts of the Student Loans Company Limited will be made available to Parliament. In addition, the company will be required to produce an annual report on the discharge of its responsibilities. That too will be made available to Parliament.

The Government will be accountable to Parliament for expenditure on top-up loans in the same way as they are for expenditure in grants or other aspects of education expenditure. The usual process of Parliamentary accountability supplemented by the audited accounts and annual report of the company will provide Parliament with all the information it requires about the loans scheme.

There is no need for an elaborate statutory framework for monitoring. The Government are alive tc the importance of monitoring the effect of the loans scheme, particularly the effect on participation by under-represented groups. The audited accounts of the Student Loans Company will be made available to Parliament as will the company's annual report. The Secretary of State will be accountable to Parliament for all education expenditure including that on student loans.

Since I believe that the amendments are unnecessary, I hope that the noble Baroness will feel able to withdraw her amendment.

Baroness David

That is an unsatisfactory reply. The noble Baroness has gone at great length into many matters which do not have much to do with my amendment. She again makes the point that there will be monitoring. I think it odd that the amendment cannot be accepted. I shall not press it at this time of night, but it is likely that I shall return to the matter at the next stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 56 to 58 not moved]

Clause 2 agreed to.

Clause 3 [Financial provisions]:

Earl Haig moved Amendment No. 59: Page 2, line 29, at end insert ("including all costs of implemen: ing the scheme.").

The noble Earl said: The purpose of this amendment is to give maximum play to the advantages of the Bill in order to encourage as many young people into higher education as possible. They are being offered the advantages of a student loans benefit scheme at no cost to themselves.

It would be more encouraging to them, particularly the doubting Thomases among them, if the fact that the Secretary of State will pay all the costs of implementing the scheme were spelt out clearly in the Bill. This would also reassure them that these costs will not fall on the institutions which they will attend. They will be well aware that these institutions are likely to be hard pressed financially and that their resources will be already committed to the various costs of education including teaching and books. This amendment is of some importance given the probable high costs of administering the scheme. I beg to move.

The Earl of Caithness

I would like, first, to explain briefly the Government's plans for the administration of the student loans scheme. It is the Government's intention, subject to the passage of this Bill, that the Student Loans Company Limited will administer the loans scheme. Thus applications will be made to the company which will make the appropriate payments to students. The company will also collect repayments and determine whether loans should be cancelled or repayments deferred. It is therefore the loans company that will bear responsibility for the administration of the scheme. I confirm to my noble friend that the Government will meet the company's costs in full. However, my noble friend raised the important point of the role of those in the higher education institutions. I confirm to my noble friend that we are considering whether it would be desirable to seek to amend the Bill to place the higher education institutions under the duty they require. That is an important point on which I know the noble Lords, Lord Flowers and Lord Adrian, will seek reassurance. Any question of remuneration would have to be considered in the light of that decision. The Government intend that loans will be made available to students in the most cost-effective manner.

Earl Haig

I thank my noble friend for reassurance and for clarification. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 agreed to.

[Amendment No. 60 not moved.]

Clause 4 [Short title, citation, interpretation and extent]:

[Amendment No. 61 not moved.]

[Amendment No. 62 had been withdrawn from the Marshalled List.]

[Amendment No. 63 not moved.]

Clause 4 agreed to.

House resumed: Bill reported without amendment.