HL Deb 26 March 1990 vol 517 cc647-720

Consideration of amendments on Report resumed on Clause 1.

[Amendment No. 18 not moved.]

Earl Russell moved Amendment No.19:

Page 2, line 18, at end insert: (" (7) A draft of the first regulations to be made under this section or Schedule 2 to this Act shall be laid before each House of Parliament; and if either House of Parliament passes a resolution requiring the draft to be amended the Secretary of State shall withdraw the draft and shall prepare a draft in substitution for the one which is withdrawn. (8) No resolution shall be passed by either House of Parliament under subsection (7) above in respect of a draft after the expiration of the period of 40 days beginning with the day on which a copy of the draft was laid before that House; but for the purposes of this subsection no account shall be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days. (9) If, on the expiry of the period of 40 days mentioned in subsection (8) above, no resolution requiring amendment of the code has been passed by either House of Parliament, the draft shall not come into force until it has been approved by resolution of both Houses of Parliament. (10) Where the Secretary of State withdraws a draft under subsection (7) above, he shall lay an amended draft before Parliament and the amended draft shall not come into force until it has been approved by resolution of both Houses of Parliament.").

The noble Earl said: My Lords, this amendment does not repeat the ground covered in the amendment moved by the noble Baroness, Lady Young. I am grateful to her for that amendment and for the victory which has resulted from it. But her amendment secures only that matters involved in the regulations will be discussed in the House.

We have said many times that the difficulty with doing everything by regulation is not only the danger of matters not being discussed, but also that they cannot be amended. As my honourable friend Mr. Beith said in another place, when this Bill was discussed on Report, it is not to be imagined that the regulations, when they emerge, will be entirely without any manner of fault or flaw. Therefore, it is a matter of legitimate concern in a revising Chamber that we should be able to amend matters that come before us especially if they are of really major importance such as the size of the loan.

The procedure invoked with this amendment is one which results from my reading of Erskine May and can be found on page 546. It is a procedure which has not been used frequently, though there are a fair number of precedents. If we continue discussing Bills which put quite so much into regulations as this Bill has done, we may find that this procedure needs to be used more frequently in future. Erskine May states: Power has occasionally been given to both Houses to approve a draft Order in Council or draft departmental order with modifications, and in such cases the orders could only be made with such modifications as have been agreed to by both Houses. If the two Houses differ in their amendments, machinery must be improvised for reconciling the differences". That is something with which we are quite familiar. The procedure concerned has been used in the Education (Scotland) Act 1962. A fairly similar procedure, which is probably familiar to a number of your Lordships, is that used under the Emergency Powers Act 1920. It was used in the Government of India Act 1935 and in a number of similar pieces of legislation. So the power exists. If Parliament pleases, it may confer on the Minister power to do things by regulations subject to this procedure.

In a sense it is a misnomer to say that it confers the power to amend regulations. Strictly speaking, once you have delegated a power you cannot have it back. In a slightly different sense, the power necessarily arises from the power to approve or reject. It is a point which is familiar to all of us. It happens regularly in Committee that, when we have the power to approve or reject, we may easily say, "We would approve subject to the following modification". So it is the power to approve or reject which is being used in a conditional sense. The House takes the power to say that it would approve the regulations if the regulations were modified in a manner which the House then specifies. The Minister then has to take back the regulations and lay an amended form.

When we have such major matters as the size of the loan not spelt out in the Bill, and many of us wish very strongly to discuss whether the loan is big enough, the practical advantages of using a procedure of this kind are very clear indeed. At times, our debates have been lengthy and repetitive. I regret that. I recall the phrase used by the noble Lord, Lord Kilmarnock, at Second Reading of this Bill. He said that it was extremely difficult to make our amendments purchase on the slippery surfaces of this Bill. It has often been a matter of real doubt where to place an amendment in order to discuss an issue which is of major interest and importance to the House.

If we could— and it would be much more appropriate— put down a Motion to ask the Minister to modify the regulations when they come forward, then we should be able to give this Bill the kind of scrutiny which is properly appropriate to a revising Chamber. We should attempt to exercise that scrutiny with responsibility. I beg to move.

The Earl of Caithness

My Lords, as the House is aware, we have agreed that the regulations first made to establish the scheme should be subject to the affirmative procedure. We have therefore met the main objective of this amendment.

I do appreciate the concern behind the secondary effect of the amendment. Regulations cannot normally be amended, under either affirmative or negative procedure. If the House makes its objections plain, the Government may withdraw; otherwise the only option is to vote to reject the regulations. The amendment seeks to provide a means of amending draft regulations submitted for approval under the affirmative procedure.

But in practice the effect is the same. Under the procedure proposed in the amendment, the House would have to vote to require amendment of the regulations. That may look a smaller step than voting to reject the regulations, but either way the vote would have to be secured. After that, the steps would be the same in either case. The Secretary of State would have to take the draft regulations away, and present fresh ones meeting the House's wishes.

The amendment in reality adds nothing to our normal procedures, despite the noble Earl's ingenuity in putting it before the House. We have met his main concern; namely, that the affirmative resolution should apply when the regulations are first made.

Earl Russell

The noble Earl has not met my main concern. I tried to spell that out at the beginning of my speech moving this amendment. I am grateful for the opportunity to discuss resolutions under the affirmative procedure. I wanted the opportunity to amend them. That is the most important power that this House has. Throughout this Bill I have noticed that the Government have slightly different ideas of the functions of a revising Chamber from those of the Opposition parties. As closely as I can follow it, the Government's idea is that they arrange for matters to be discussed; they are graciously pleased to listen to what is said and then occasionally, out of the goodness of their heart, they make a small modification for which we are duly grateful.

In the Opposition parties there is concern for being able to move amendments, to press them to a Division and occasionally to win them in the Lobbies. I am aware, and I am learning daily, that the power of the Division Lobby does not lie only in its use. Indeed sometimes it may be a form of nuclear deterrent which has more power when it is not used. But it is a visible fact in this House that where the power to call a Division exists, there the Government show a good deal more flexibility even if they do not expect to lose the Division. The fact that there could be a Division makes a considerable difference to the process of bargaining and consultation that goes on in debate. That is of considerable importance to us.

The noble Earl said that on an ordinary affirmative resolution we can put down a Motion asking the Minister to withdraw the regulations and to bring them back with modifications. I am glad to have that admission on the record because it is one that I have heard denied in this House from time to time. The noble Earl is perfectly correct in what he said. I think that it would be of considerable value to have it absolutely clearly spelt out and agreed in the House that we can put down modifications to the regulations. That might be of some assistance in the drafting of the regulations.

The House should know by this time that this point is of greater importance to me than anything else involved in the Bill. In those circumstances, I should like to test the opinion of the House.

8.11 p.m.

On Question, whether the said amendment (No. 19) shall be agreed to?

Their Lordships divided: Contents, 57; Not-Contents, 56.

DIVISION NO. 4
CONTENTS
Addington, L. Kilbracken, L.
Adrian, L. Kirkwood, L.
Airedale, L. Llewelyn-Davies of Hastoe, B.
Ardwick, L.
Avebury, L. Lockwood, B.
Beloff, L. Macaulay of Bragar, L.
Blackstone, B. McIntosh of Haringey, L.
Blease, L. Mason of Barnsley, L.
Carmichael of Kelvingrove, L. Mayhew, L.
Monkswell, L.
Cledwyn of Penrhos, L. Monson, L.
Cocks of Hartcliffe, L. Northfield, L.
David, B. Ogmore, L.
Donoughue, L. Oram, L.
Dormand of Easington, L. Peston, L.
Flowers, L. Pitt of Hampstead, L.
Foot, L. Russell, E. [Teller.]
Gallacher, L. Seear, B.
Graham of Edmonton, L. Serota, B.
Grey, E. Strabolgi, L.
Grimond, L. Thurlow, L.
Hatch of Lusby, L. Turner of Camden, B. [Teller.]
Henderson of Brompton, L.
Hirshfield, L. Underhill, L.
Hooson, L. Walston, L.
Howie of Troon, L. Warnock, B.
Jay, L. Wedderburn of Charlton, L.
Jenkins of Hillhead, L. Whaddon, L.
John-Mackie, L. White, B.
Kagan, L. Young of Dartington, L.
NOT-CONTENTS
Astor of Hever, L. Boardman, L.
Balfour, E. Borthwick, L.
Belstead, L. Brougham and Vaux, L.
Blatch, B. Butterworth, L.
Caithness, E. Kimball, L.
Carnegy of Lour, B. Lindsey and Abingdon, E.
Carnock, L. Liverpool, E.
Clanwilliam, E. Long, V.
Colnbrook, L. Lyell, L.
Craigavon, V. McColl of Dulwich, L.
Cullen of Ashbourne, L. Mackay of Clashfern, L.
Dacre of Glanton, L. Margadale, L.
Davidson, V. [Teller.] Massereene and Ferrard, V.
Denham, L. [Teller.] Mersey, V.
Downshire, M. Rankeillour, L.
Eccles, V. Reay, L.
Elles, B. Sanderson of Bowden, L.
Elliot of Harwood, B. Skelmersdale, L.
Elliott of Morpeth, L. Strange, B.
Fraser of Carmyllie, L. Strathmore and Kinghorne, E.
Glenarthur, L.
Goold, L. Swinton, E.
Greenway, L. Trefgarne, L.
Harmar-Nicholls, L. Ullswater, V.
Henley, L. Whitelaw, V.
Hesketh, L. Wise, L.
Hives, L. Wynford, L.
Hooper, B. Young, B.
Johnston of Rockport, L.

Resolved in the affirmative, and amendment agreed to accordingly.

8.20 p.m.

Schedule 2 [Loans for students]:

[Amendments Nos. 20 and 21 not moved.]

Earl Russell moved Amendment No. 22:

Page 3, line 38, after ("made") insert ("provided that those who accept permanent employment abroad shall not be liable for any further repayments abroad until they return to the United Kingdom").

The noble Earl said: My Lords, I should perhaps begin by assuring the House that this is a probing amendment. It is not a compassionate amendment. I see no reason why people who go overseas, possibly for a higher salary, have claim to be excused from student loan repayments on compassionate grounds. Moreover, it is not a public policy amendment. I am not advancing an argument of public policy to say that people ought to be encouraged to go overseas. It is simply a practical amendment. My object is to find out whether the Government are capable of recovering student loans from those who go overseas. It is only if they are not capable of so doing that I think they would be unwise to try. When the law enacts measures which it cannot achieve and cannot enforce, it brings itself into disrepute and encourages people to go ahead and break it.

Therefore if the Government can convince me that they are capable of recovering the loan from people who go abroad, I should be quite happy to withdraw the amendment. But, so far as I understand the position, there is no way of doing that except by repeatedly bringing proceedings in foreign courts. That is really taking a sledgehammer to crack a nut. It is a very expensive way of recovering the money and a difficult procedure to enforce.

Tracing people all around the world will create considerable problems. Further, if the Government cannot stop-up this loophole it will inevitably produce a leak in the whole scheme and one which is capable of creating a haemorrhage bringing the whole system to a halt. I shall listen with great interest to what the noble Earl has to say about how the Government propose to tackle the problem. I beg to move.

The Earl of Caithness

My Lords, it cannot be right that those who have benefited from taxpayer support— in the form of preferential loans when students in this country— should avoid repaying the taxpayer by working permanently abroad.

As individuals, students who on graduating work abroad will receive a substantial return on their personal investment in higher education. So will students who work in this country. Society as a whole— the UK taxpayer— will also benefit from the collective investment in the higher education of graduates who work in this country. The return to society on its investment in the higher education of graduates who choose to work permanently abroad may or may not be substantial. It depends what those graduates do. If they work for overseas concerns, the return to the UK taxpayer would be minimal. It therefore cannot be right that, in addition, those graduates should also be excused, by a law passed in the UK Parliament, from repaying their own personal debt to the UK taxpayer. If I may say so what the noble Earl proposes is very close to outrageous, if not outrageous.

The amendment offers an incentive to work abroad. It may very well produce what some academics complain presently exists— namely, a brain drain. Some graduates might not return until their loans had been cancelled. Such a policy would be wholly inappropriate as 1992 approaches and increasing numbers of graduates cross national borders to go to work. We need to find ways to ensure that administrative procedures work throughout Europe, rather than disapplying them when a person chooses to live outside this country.

There would also be a potentially significant effect on the flow of repayments, reducing the rate at which savings accrue to the taxpayer. And there would be no repayments at all from those who chose not to return until after cancellation.

We intend that the Student Loans Company should process repayments in the manner outlined in the rules and procedures document. That specifies that repayment methods for graduates living abroad will be available by negotiation with the company, since the standard direct debit procedure will be inoperable in such circumstances. The document suggests some possible alternatives, such as standing order, cheque, or paying-in book, but this will be a matter for the company to sort out with individual borrowers.

It will also be for the company to decide what debt collection procedures to adopt for graduates who seek to evade repayments by living abroad. They will not want to spend more in retrieving the loan than the value of the loan itself. Nevertheless, we are determined that this will not be an easy manner of escaping the commitment to repay the loan.

Earl Russell

My Lords, I agree with a very large part of what the noble Earl said. I agree in principle with the statements that he made. However, I wish to understand what he will do to bring about this desirable state of affairs. If he can convince me that he can do this, fair enough. But he had very little to say about it. He said that arrangements would be by "negotiation with the company". That seems to me to raise problems. It seems to suggest that if you once take a student loan you cannot go and live abroad without first informing the Student Loans Company. I should like to know how that provision will be enforced and how the company will know whether people travelling from Heathrow are going on holiday or going abroad? Is this a requirement for exit visas, or is it a piece of pie in the sky? Before the noble Earl asks me to withdraw the amendment, I should be most grateful if he could explain in more detail exactly what is the Government's thinking on the matter.

The Earl of Caithness

My Lords, whether the noble Earl withdraws his amendment is a matter for him. In any event, I hope that he listened carefully to what I said about the repayment process as outlined in the rules and procedure document which I am sure he has read carefully. There is no question of an exit visa, but I think it is appropriate that the company, as a commercial entity, should have the power to collect loans by whatever method it so chooses from undergraduates who have taken loans and who then go to live and work abroad.

Perhaps I may repeat for the benefit of the noble Earl the fact that when so doing the company will wish to bear in mind what the cost will be of ensuring that the loan is repaid. That will be a material factor which the company will wish to take into account.

Earl Russell

My Lords, I said that this was a probing amendment. I probed and I found a gaping hole. I cannot see that the Government have any procedure to recover loans from those who go abroad. Under those circumstances to claim that they intend to do so can only be a pious aspiration. Nevertheless, because I agree with what the noble Earl said— namely, that people who go abroad do not have any equitable claim to renege on their debts— and because I agree with him that the House should not encourage them to do so, I do not intend to press the amendment. However, I should like to put on record the fact that I think we have discovered a haemorrhage in the Government's scheme which may well result in all the money leaking out of it and the scheme becoming inoperable. However, that is their problem. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8.30 p.m.

Lord Peston moved Amendment No. 23:

Page 3, line 38 after ("and") insert: (" () make provision for the option to be maintained that weekly repayments to be made at a rate of no more than £ 8 per week at current prices (to be increased with regard to the retail prices index published by the Central Statistical Office of the Chancellor of the Exchequer); subject to provisions concerning deferment or cancellation described in 1 (1) (c) below' and").

The noble Lord said: My Lords, the amendment covers a topic at which we have looked before to some degree. In Committee I thought that the noble Earl made one or two important statements about repayment periods and the limited weekly or annual commitment that any individual graduate would have in respect of repaying the loan.

I have read the statements made on the matter by the noble Earl, and possibly the noble Baroness. They do not seem to me to be as clear as I should have liked. I shall put the matter as bluntly as I can. I am not clear as to whether they rest their case on the kind of words which I think they used; namely, that no graduate would have to pay more than a reasonable amount, or words to that effect. Occasionally they said that they would not have to pay more than £ 400 a year, at constant prices. That is a much more precise statement. Essentially, I am trying to probe the Government's mind about which of these positions they currently wish us to believe they have adopted.

Perhaps I may use this occasion to ask a more general question. If we make the assumption that the Bill will pass into law— which is the assumption that one tends to make— shall we at an early stage receive a full statement of what the student loans scheme amounts to? We have learned more and more about it as we have carried out our job in your Lordships' House in terms of the Committee and Report stages. However, we still do not have an overall definitive statement of the student loans scheme. I ask whether there will be such a statement. Of equal interest is when there will be such a statement. I do not necessarily expect an answer to that at this moment, I simply place on record a question which concerns all noble Lords who have taken part in the debates.

That follows on generally from my specific question as to what the Government can tell us at the moment about the annual commitment in terms of repayment. I beg to move.

The Earl of Caithness

My Lords, it is the Government's intention that repayments should be about £ 400 a year. As I have already announced, we are extending the period of repayment to seven years initially for those who borrow over five years so that their repayments do not exceed this level. As the scheme develops and the maximum loan each year increases in real terms, we shall extend the repayment period so that repayments remain at a manageable level.

As your Lordships know, repayment can be deferred for up to a year if a graduate's income is below 85 per cent. of national average earnings— about £ 11,500 in today's circumstances.

We do not believe that we should fix these terms on the face of the Bill. The details of the repayment arrangements will be set in regulations which your Lordships will debate under the affirmative resolution procedure before the introduction of the scheme. As we increase the repayment period we shall need to amend the regulations; that process will be subject to parliamentary scrutiny under the negative resolution procedure.

The noble Lord, Lord Peston, asked for a statement on the student loans scheme. I am not quite sure what kind of statement he wishes me to make. I seem to have been making quite a lot of statements about the scheme, providing information to the House and answering the questions that the noble Lord has asked. I think he refers to regulations. In addition, there are the points that we discussed on some of the administrative procedures which will not come before your Lordships' House. I should have thought that I had given your Lordships more than enough information about the scheme and how we intend to proceed with it. If the noble Lord has any particular point on which he needs clarification, in addition to the amendments that we have discussed and those which are down in his name for future discussion, I shall be only too happy to try to answer.

Lord Peston

My Lords, I thank the noble Earl. On the latter point, perhaps I should clear up what I tried to convey. My point is that the noble Earl has given us more and more information every time he gets up. We are grateful to him for that. Some of us have been trying to put the pieces together, to convert them into one large patchwork quilt which has a logical structure or pattern to it. However, it seems to me that the time will come— I am not pressing him to do this at the moment— when the Government themselves will wish to produce a complete document stating, "All that has now been said amounts to the following … "That is all I have in mind.

I am not complaining about each individual piece of information. The Government ought to put the bits together rather than relying on me or other noble Lords doing so. I think the noble Earl will understand what I have in mind.

On the specific amendment, perhaps I may place on record that, if I understand the noble Earl correctly, when the scheme is in full operation and in broad terms operating as suggested at the moment, the typical three-year graduate will have an indebtedness of about £ 4,500. That is three times £ 1,500. That will be uprated by the rate of inflation, I am speaking in terms of constant prices. If the student repays £ 400 a year at constant prices, we are talking about the student who starts to pay back as quickly as possible over an 11-year repayment period. That is my reading of what the Government have stated.

Some students will pay back over a still longer period. Four-year students will do so, as will the students who delay and so forth. It is worth pointing out the logical consequence of what the noble Earl has said. That is the whole point of my thanking him for the information and for his response. Having taken the matter as far as I can, this is the time to leave it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness David moved Amendment No. 24:

Page 3, line 40, at end insert: (" (d) make provision to ensure that no person or body by whom functions are discharged under paragraphs 3 (1) or 3 (7) below shall secure access to any record held by an institution which provides or has provided courses or which have been specified in Schedule I above, where any such record concerns a person who is or has been an elegible student")

The noble Baroness said: My Lords, this is a probing amendment. Its purpose is to restrict the ability of those administering the scheme— that is the Student Loans Company— to gather information on students from the institutions which students have attended while receiving a loan.

Given the confusion over how the administration of the student loans scheme is to take place, it is important that by moving this amendment we can at least deal with which bodies will hold and have access to various levels of information concerning students with loan liabilities.

While there is a certain legitimacy for the Student Loans Company to hold information on the financial arrangements of eligible students, it is important to put limits on wider levels of information. It would be totally inappropriate that the SLC should have access to general files held by colleges on students.

There have been several discussions in the House on protecting information held on students, which has resulted in a general acceptance that maximum protection is desirable. In practice, protection of this information is not so simple, as debates have shown. If the amendment is not accepted, either in itself or in spirit, there is a danger that colleges will be inundated with inquiries from the SLC.

What obligations will there be on institutions to respond to inquiries from the Student Loans Company? At what point can the institutions refuse to provide information? What resources will be given to institutions if they are to deal with follow-up inquiries from the SLC in addition to certification at the application stage?

The amendment is even more apposite when it is applied not just to information sought by the SLC, but also to third party arrangements such as with debt collectors. It seems outrageous that debt collectors taken on by the SLC should be able to receive information from colleges, particularly when its scope is not restricted. I hope that the Minister will be able to alleviate some of the anxieties when he replies. I beg to move.

Baroness Young

My Lords, before my noble friend gets up to reply to the amendment, can he tell us whether the relationship of the Student Loans Company in this would be different from the relationship that would have pertained had the banks been running the scheme? Would institutions stand in the same relationship to the Student Loans Company as they would have stood in relation to the banks? I have always understood that to be the case. It would be helpful to know whether similar businesslike arrangements will apply.

Perhaps I may say to my noble friend that it has been helpful to have the extra information about what is involved in the whole matter of certification. It has clearly explained that there is a limited role for institutions. I should have thought it would be helpful if, as I had assumed, there were the same kind of relationship on other matters as would have applied to the banks. Perhaps my noble friend can clarify the second point.

Lord Grimond

My Lords, I too should like further information on this matter. It does not seem to me at all clear exactly how the Student Loans Company will work. It is a wholly separate limited company; it is not under the direct command of the Minister. He cannot tell it what to do, I take it. It will be bound by the laws of limited liability and by this Bill when it becomes a statute. It seems to me that in fulfilling its functions it is going to make large demands on universities and colleges for information to enable it to follow up students. The previous series of amendments raises important and difficult matters in this regard. It may be known to universities if ex-students have gone abroad, as they tend to keep in touch with their former graduates. Where graduates go after graduation and what they are doing are all questions which the company, whether the Minister likes it or not, may want to raise with institutions. I believe that a large amount of work may be placed upon institutions and they will be in some difficulty as regards knowing whether they are entitled to reply to inquiries or whether they should reply.

As I have said, most universities and colleges maintain some contact with many of their former students. It is difficult to see how a lot of that information can be obtained except from those institutions. If that is the case, they will face a great burden of work. I believe that that burden is at the discretion of the Student Loans Company and not of the Minister. Unless something is written in the Bill prominently, or we are informed of the situation to a greater extent, we may find that we have laid on universities a large and rather open-ended burden. I should be grateful for some information on that matter.

The Earl of Caithness

My Lords, this amendment would require the Secretary of State to prohibit by regulation access by the Student Loans Company (or any other person or body discharging functions under the arrangements) to any record held by a higher education institution concerning an eligible student. There is no qualification that the access would have to be without the institution's consent. I assume therefore that the noble Baroness wishes to prevent such access even where the institution does consent.

In so far as the amendment would apply to data held electronically, it is unnecessary. Higher education institutions are already subject to the provisions of the Data Protection Act. This Act provides valuable protection for data subjects. It prohibits the disclosure of personal data without the authority of the person to whom the data relate. The protection sought by this amendment in respect of electronically held data is therefore already embodied in legislation. It is pointless to provide in a Bill that a person or body must comply with an Act when it is already subject to that Act.

The amendment would, however, also apply to data held manually. Such data are not covered by the Data Protection Act. We debated at Committee stage whether the company should be subject to restrictions not imposed on other companies in respect of its use of manually held data. The Government's feeling was that it should not. Nevertheless, I undertook to consider the reservations expressed by a number of your Lordships on this issue and, as your Lordships will be aware, I have now put down Amendment No. 51 which would restrict the company in its use of data, including those data held manually. The company will be able to operate the loans scheme within those restrictions, although they will certainly limit its activities. However, the present amendment would impose a major obstacle to the efficient operation of the scheme.

As your Lordships know, the Government propose that after certifying a student's eligibility for a loan, the institution should post a copy of the certificate of eligibility to the company. The institution would retain a copy of the certificate, together with a document containing various questions answered by the student, designed to establish whether he is eligible. The answers to these questions will not be sent to the company, which will normally accept as valid a certificate issued by the institution.

However, the company may wish to request access to this document where doubts arise later about whether a particular student was in fact eligible or simply for audit purposes. The amendment would prohibit this. It could also be argued that the institution would be unable to send to the company a copy of the certificate of eligibility because this would be a record concerning the named student which the institution held before posting it.

The Government have a duty to ensure that taxpayers' money is lent and recovered in a secure and efficient way under the scheme. This amendment would jeopardise taxpayers' money.

When the noble Baroness, Lady David, introduced this amendment she said there was some confusion concerning the role of colleges in the future. Perhaps that thought had occurred to her before she looked at Amendments Nos. 35, 36, 44, 47, 48 and 54 standing in my name. I am sure the noble Baroness will find that those amendments clarify the situation beyond any doubts that she may have. I should make it clear that there is no question of the Student Loans Company needing or having access to college files on students. Colleges will have no role beyond establishing their students' eligibility. They will have no role in repayment or debt collection. I hope that is clear.

My noble friend Lady Young asked about the similarity between the Student Loans Company operating the scheme and the banks operating it. As I understand the situation, the question of confidentiality would be the same in both cases. However, there would rightly be a difference in the details of the procedure to be operated. I hope that what I have said has now satisfied the noble Lord, Lord Grimond. There is nothing for the Student Loans Company to follow up with colleges. After students leave, colleges will have no role to play in this matter at all because repayment is entirely a matter for the graduate and the SLC.

8.45 p.m.

Baroness David

My Lords, I thank the Minister for that full reply. I admit that my amendment was tabled well before his. However, I think it has been helpful to clarify the situation. I am grateful for his explanation. I shall of course read his words with great interest to make sure that all my points have been cleared up. Certainly at this moment I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 25 and 26 not moved.]

Lord Peston moved Amendment No. 27:

Page 3, line 40, at end insert: (" (1A) No student in receipt of a loan payable in accordance with regulations made under this paragraph shall be ineligible for Housing Benefit during his period as a student whether as a consequence of such regulations or of the provisions of or regulations made under this or any other enactment.").

The noble Lord said: My Lords, I have not spoken on housing benefit during your Lordships' deliberations on this Bill until now. That is not because I do not think this is a tremendously important matter but simply because others who are more expert than I have taken the lead. However, this is now my opportunity to emphasise how important this is and how mistaken I believe the Government to be in all that they are doing concerning the provision of social security for students.

I shall start with one general proposition. I heard one or two noble Lords say that they thought that the social security provisions were inappropriate for students. I have looked right back through the history of the provision of social security in this country, not least at the original definitive work of Sir William Beveridge, who later became Lord Beveridge. I can see nothing in that history in terms of the philosophy of what should lie behind social security that would suggest that the Government are remotely right in saying that social security is inappropriate for students. Indeed, I believe they are completely mistaken in that.

The only way in which they could possibly be right is if students were given sufficiently large disposable incomes to enable them to do without social security. But the point is that they are not given such incomes and therefore social security becomes the appropriate way of dealing with these matters. I must emphasise to the Government that I believe that their general position is mistaken.

I have several points on housing that I wish to draw yet again to the attention of your Lordships. One is that if one does one's sums and compares the gains that students might obtain under this legislation, including the restoration of the real value of the grant to its 1979 level, one realises that many students who would have been on housing benefit, and certainly students in a place such as London, will simply lose out. I am advised that students in London who face, for example, rents of £ 45 or £ 55 a week and who would have obtained housing benefit with that kind of rent, will be net losers once the loans scheme is introduced. They will be losers to the tune of several hundreds of pounds. According to one calculation, they will lose out to the tune of over £ 1,000. That is even the case for students living outside London where rents are lower. They too will lose out.

It seems to me that the Government are simply taking away with one hand, and not so much giving back with another but giving back a good deal less with another when it comes to housing benefit. That seems to me to be the serious matter. The point applies a fortiori to postgraduate students who are not going to be allowed into the loans scheme, although some of us have argued that they are the key group who ought to have had loans tried out on them in the first place. However, they will lose out on housing benefit.

I welcomed earlier the statement that the noble Earl made, repeating something said by his right honourable friend the Secretary of State, that the Government are now going to provide rather more in the way of funds under the heading of access funds. But I have to say that much as the increase is welcome, it is actually again a drop in the ocean compared with the money being taken away under the housing benefit heading. Therefore, I must press your Lordships to reconsider the matter.

I have one further point to make and then I shall sit down. The reason for sitting down is not to underestimate the importance of the matter, but simply because of how much more business we have to get through. I should like to place on record my opposition to certain remarks made in the original White Paper, and reiterated by the Parliamentary Under-Secretary for Education and Science in another place on 25th January 1990, where the White Paper lays emphasis in terms on helping students who have problems and for whom access funds will be worthwhile; that they might be sponsored; that they might find paid employment, and things of that sort.

I do not totally oppose that; but I have to emphasise, probably as a rather old-fashioned university teacher, that I still regard study as the main function of students. I am simply not happy with the introduction of financing systems which emphasise medical students taking part in drug trials and other students getting paid employment, etc. It is not unacceptable so long as it is in the general de minimis range; but if students in this country do not realise that they are there chiefly to study, if we do not see the role of grants to support them so that they can study, we are in a difficult position. I beg to move.

Earl Russell

My Lords, I must confess that I still do not altogether understand why the Government are quite so determined to take students out of the social security system. The main point that they seem to make consistently is that student support should come from educational sources. I have no wish to argue with that point, but the proper way to achieve that laudable objective is to pay students maintenance above benefit levels. If the Government can do that, then any move to deprive students of social security entitlement is entirely redundant.

If the Government tell us that the move to deprive students of social security entitlement is not redundant, then they are telling us in the same breath that with their new loans scheme they are failing to pay students above benefit levels. The attempt to withdraw students from social security is actually a confession of the inadequacy of the Government's own financial measures.

There are three benefits involved, and there are different cases involved in each. This amendment is in fact only addressed to one of them. We are not addressing unemployment benefit. I agree with what the noble Lord, Lord Peston, said about students working. It would be much easier of course if they had a grant that could maintain them all the year, but that is another matter.

With income support it is possible to argue a case on the grounds that they have withdrawn from productive employment. The difficulty is that the logic of that case would apply equally to young mothers who have chosen to stay at home with children, and that I would regard as a very dangerous extension of the argument. However, that is by the way. This amendment is concerned only with housing benefit.

All the undergraduates that I have talked to, and all my departmental colleagues, agree that of all the social security benefits, housing benefit is by far the most important. When I returned to my college last Tuesday after a day in the House I was actually taken to task for not making enough fuss in this House about housing benefit, by which I must confess I was a little disappointed.

Housing benefit is of course a targeted benefit. Where the rents are highest, where the need is greatest, that is where the money goes. The Social Security Advisory Committee has already drawn attention to the fact that attempts to replace this are not targeted with anything like the equivalent precision. It seems to me also that there are dangerous issues involved in withdrawing an entitlement to social security benefit from a category of people as a category. I should like to ask the Minister whether there are any precedents for doing this.

I know about the 1986 Act. We have debated at some length the effects of the reduced rates for people under the age of 26. But although the principle is similar, that was only a reduced rate. When has anybody been deprived of entitlement to social security benefit simply for belonging to a named category of people? I cannot think of a case. I can imagine the reaction in this House if social security benefits were to be withdrawn, for example, from women, or from racial minorities, because they belonged to a particular category. I do not see why students are different. This is a dangerous precedent to set, and I deplore it.

I also want to speak to Amendment No. 33, which is grouped with this one. That is about the withdrawal of housing benefit from postgraduates. Here I do not merely think that the Government are wrong. I do not merely think that their sums are wrong. I simply fail to follow their logic even within their own terms of reference. The logic of the Government's argument is that since students are getting this glorious loan, now they do not need social security benefits. But postgraduates are not getting the loan, so the reason we are given for the withdrawal of the benefits simply does not apply.

I completely fail to understand the logic of why postgraduates are being taken out of the social security system. I cannot understand it at all. It makes me wonder whether there is some reason, some assumption maybe unstated even in the Government's own mind, behind this proposal that we have not yet found and while I cannot understand it, I feel bound to oppose it.

Baroness Young

My Lords, this is obviously an important subject to debate, and we have raised it both at Second Reading and on the Committee stage. Although I do not in any way wish to follow the noble Lord, Lord Peston, in all his academic discourse on whether or not social security benefits were intended for students, I must say that it is some while since I read my copy of the Beveridge Report. I suspect that social security benefits came to be given to students because they started off with allowing unemployment benefit in the long vacation on a kind of assumption that a student was unemployed.

That is my supposition. I do not think that was a correct analysis; but I suspect that that was how it came about, and I suspect that housing benefits were added to it. I have always said in your Lordships' House that I do not believe that the social security system is the right way of helping students in this particular way. I stand by that.

What we need to get clear— and I think my noble friend made this clear when we discussed this matter before— is whether or not students are actually going to lose cash in hand. One of the criticisms of this Bill made by my noble friend Lord Boyd-Carpenter was that it was not going to save money for a long time to come. Then, on the other hand, one gets the criticism that it is going to save money. As I understand it, the amount of money that is going to be given by way of loans will far exceed what is currently being given by way of housing benefit. Students coming up to the university next October, with the increased grant topped up by the student loan for maintenance only, will be better off in cash terms than they are now.

I recognise the important distinction that a loan is not a benefit. That is the difference. Nevertheless, the student is not left without money, which is an important consideration. Therefore, to say that students will have less cash seems to be simply not true. I hope that my noble friend will confirm that point. It has been stated at earlier stages— indeed, it is stated in the financial memorandum to the Bill— that considerable sums of extra money will go into the student loans scheme.

As I understand it, the noble Earl, Lord Russell, asked whether any group would lose benefits. In that sense, students will not receive housing benefit, but they will have a student loan, so, strictly speaking, it is not true to say that they do not have the money, although I recognise that it comes in a different form. It is important that we should make that distinction.

I therefore hope that the Government will not accept the amendment which I believe cuts across an important part of the Bill. I believe that my noble friend will be able to reassure the House that more money will be available to students through the loans system than is currently available through housing benefit.

9 p.m.

Baroness Seear

My Lords, what the noble Baroness says in no way deals with the problem of the postgraduate student referred to in Amendment No. 33 who will not receive a loan. I want to speak strongly in favour of the retention of housing benefit for those postgraduate students who are without loans. They are the cream of the graduate population. They are the people by whom the creative and academic roles and a variety of leadership roles will be filled. If they are to be starved out of doing graduate work because they have neither loan nor housing benefit, then the nation, quite apart from the individual graduate, will be very much the poorer. I strongly hope that the Government will reconsider the case for the graduate student as put forward in Amendment No. 33.

Baroness Elles

My Lords, I wish to take up a point made by the noble Earl, Lord Russell, when he asked why any category of people should be taken out of part of the social security system just because they happen to be students. Many thousands of people receive housing benefit and other forms of social security, but they do not have the possibility of receiving a maintenance grant from their local authority in order to study, nor will they have the opportunity of a top-up loan.

There is a perfectly valid reason for taking students out of that category. I do not say that they will be better or worse off, but simply that there is a perfectly respectable argument as to why students should be regarded in a separate category, because of moneys that they receive from other sources, from those who are in a disadvantaged position and definitely need housing benefit and other forms of social security.

I have one or two questions which I should like to put to my noble friend Lord Caithness and which I hope will clarify the position. First, I am sure that there is no one in the House who wants to see anyone materially disadvantaged by the top-up loans scheme. Surely we all agree on that point. I should therefore like to ask my noble friend whether there will still be categories of students who will be eligible for housing benefit and other social security assistance such as single students with children and disabled students. Perhaps my noble friend will give us some information on that matter.

Secondly— I raised this point on Second Reading— we hope that universities and other institutions will ensure that, where students are in accommodation which comes under some measure of control of those institutions, the sums which are at present paid by students will be reduced because there was a rateable element in the amount that they had to pay. The institutions should take that point on board.

Finally, I should like to ask my noble friend how in the case of disadvantaged students— we can all imagine categories of students who will for one reason or another be disadvantaged by the removal of housing benefit— the access funds will be allocated. Presumably, the access funds will come into play in the case of a student who is disadvantaged financially and cannot manage to pay his or her rent, even with a top-up loan. He or she will be able to go to the fund for an extra increment. It would be helpful to know how that system will work, who will run it, how students will apply and whether it will be conducted on a discretionary basis as per institution or by some independent body. No doubt my noble friend has already set out certain rules, but it would be helpful for the House to know exactly how the access funds will be used to help those students who will be disadvantaged by the withdrawal of housing benefit.

Lord Adrian

My Lords, for me the difficulty about the Bill is that, on the face of it, it does good by providing more resource for all students, but, not on the face of the Bill— indeed, at the behest of a department other than the Department of Education and Science— about half that resource is to be removed from a group of students who are in substantial need because of high housing costs. Access funds will go some way to meet that difficulty, but I suspect that the sums of money are such that access funds, even when increased as I understand they are to be, will prove inadequate to cover that group of students and their housing costs. The amendment seems to go some way to removing that great difficulty and I support it wholeheartedly.

Lord Beloff

My Lords, I should like to support the point made by the noble Baroness, Lady Seear. I happen to agree strongly with the noble Baroness, Lady Young, that, if one were to start again with a system of student support, one would not bring in social security. One disadvantage of the fact that the social security system is involved is that we have no opportunity, and have had no opportunity even during our lengthy discussions, to look at the situation of students as a whole, particularly the situation of postgraduate students.

It seems to me that there has been an underestimation of the almost catastrophic degree to which British postgraduate students are disadvantaged. The removal of housing benefit will be a further disadvantage. No doubt we can continue to have a position in which postgraduate courses are largely studied by overseas students whose governments and paymasters appreciate what is on offer in this country. But if we are to look at the progress of science and learning, we have to have native postgraduate students.

It has already been pointed out that the next stage of research, when presumably people will be expected to begin to pay back their undergraduate loans, is also a very difficult period. Anyone who knows anything about the current situation in many laboratories and departments knows that. Therefore it seems to me that, although one can argue about the position of undergraduates— whether and by how much they are worse off— there is no question but that postgraduates will be worse off.

I should be much happier if postgraduate grants were increased to something like a reasonable level and housing benefit were not required. But until that is done the country is at grave risk of not having, as I think the noble Lord, Lord Adrian, said, the seedcorn for the next generation.

The Earl of Caithness

My Lords, I was very surprised to see this amendment on the Marshalled List. After the noble Lord, Lord Peston, said that he was very keen to follow the procedures of the House and not to break the traditions or orders under which we operate, I have to say that I was even more surprised when he moved the amendment. The amendment that we are discussing at the moment is based on exactly the same principle as one on which we voted last week. That amendment, Amendment No. 42K, which was moved by the noble Baroness, Lady David, who now sits in her place, was lost by 51 to 19 votes, I am therefore more than a little surprised that the noble Lord again raises exactly the same principle today.

For the reason that this principle has already been discussed and voted upon, this amendment deserves short shrift. However, in view of the concerns that have been expressed around the Chamber I shall once again go into a little detail. It was admittedly late at night when I last did so but I re-emphasise that the amendment in question was put to the vote. I shall take a little time to deal with the matter. The only difference between the amendment on which we voted at the last stage of the Bill and this amendment is that we are now dealing solely with housing benefit and are concerned with both postgraduates on research degrees and all students in the scope of the loans scheme. Otherwise the principle is exactly the same.

Baroness Seear

My Lords, is the noble Earl saying that this is not in fact a different amendment from the one we had last week.

The Earl of Caithness

My Lords, I said that the principle is exactly the same and I know that the noble Baroness would agree with that.

The Government believe that financial support for students should be provided through the education system according to educational criteria. We oppose the use of social security to direct support to students, because the benefit system, which exists to help those in involuntary financial difficulty, was never intended for the support of students. Morever, the short-term cyclical nature of students' benefit claims causes administrative problems and generates costs out of all proportion to the amounts claimed.

Our proposals mean that the great majority will have more in loans than they could have claimed in benefits, which is a point well made by my noble friend Lady Young. We estimate that among those undergraduate students who might have received benefits in 1990–91 the average claim would have been £ 315, significantly less than the value of the loan. Furthermore, a large minority would not have claimed and for them the entire loan is an additional resource. The difference between overall gains through loans plus the access funds and losses from the withdrawal of benefits is in excess of £ 100 million in students' favour.

Nevertheless, we accept that there will be some students whose benefit entitlement would have exceeded the loan facility. If in financial difficulty, such students will be good candidates for assistance from the access funds. The same is also true for those postgraduate students who have hitherto claimed benefits and find themselves in financial difficulty because their entitlement has been withdrawn. As I said last week, my right honourable friend the Secretary of State has been considering the size of the access funds in the light of representations received and earlier today I confirmed that he announced in another place that the Government are to increase the size of the access funds to be set up to assist students in higher education who face financial difficulties from £ 10 million to £ 20 million. That is a doubling.

The additional £ 10 million will double the total funds available for postgraduates and undergraduates. That will give the higher education institutions greater scope for extending discretionary assistance on a flexible basis to their students, notably those facing relatively high accommodation costs.

We intend that most of the extra money will be targeted on undergraduates, of whom there are about 10 times more than postgraduates. The access fund for further education students, very many of whom live at the parental home, will remain at £ 5 million. In total therefore there will then be £ 25 million rather than £ 15 million in the three funds. I know that the noble Lord, Lord Peston, says that that is only a drop in the ocean, but I put it to noble Lords that it is not a drop in the ocean. It is a significant increase that has taken account of the anxieties that have been expressed by many of your Lordships.

Let me re-emphasise this. It was a point raised by my noble friend Lady Young. The students who are claiming housing benefit at the moment will claim about £ 68 million a year. The value of the loans, if I remember correctly, is about £ 178 million. That is over £ 110 million in excess going to the students— a real increase for students. On top of that, there are the access funds which for those in higher education have today been doubled precisely to take account of the concern that your Lordships have enunciated again this evening. I believe that the Government have gone a very long way indeed to meet the anxieties of noble Lords.

The Government's policies are clearly more than generous to students. But I am sure that this House recognises that we must also be fair to the taxpayer. This amendment would deprive the taxpayer of the resources saved by removing students from the housing benefit system. We are already making more resources available to students. I put it to your Lordships that it would be an unnecessary and inappropriate burden on public expenditure if they were to retain access to the benefit system as well. As I said at an earlier stage, it is very much part of one equation. If your Lordships seek to remove one part of the equation then undoubtedly the remainder of the equation must be put in jeopardy.

The noble Earl, Lord Russell, and the noble Baroness, Lady Seear, talked at length about their concern for the postgraduate students. I repeat that our view is that student support should come from educational resources. That applies to all students. For undergraduates, loan plus grant plus access fund more than compensates. For postgraduates, the separate postgraduate fund provides an alternative source of income for postgraduates to social security. It can be targeted by the education institutions.

Let me give this reassurance to the noble Earl. In proportion to student numbers the postgraduate access fund is larger than that for undergraduates. That is in recognition of the fact that postgraduates do not have the benefit of the loan.

The noble Earl also asked what precedents there were for removing entitlement to benefits. Students are already excluded from income support during the period of study, including the short vacations. Also neither students living in university accommodation nor foreign students are entitled to housing benefit. The Government's current policy on social security for students takes these measures a step further at a time when new and additional forms of student support are being made available. This policy fulfils a commitment that has been restated over a number of years.

Again, the noble Earl raised the important point that social security benefits are targeted to student needs whereas the loans will not be. Benefit targeting in relation to student claims is not very effective because no account is taken of the student's family circumstances and parents who could pay more towards their children's support are not asked to do so. Moreover, when calculating entitlement to means tested benefits, it is assumed that students receive any assessed parental contribution to the grant. Yet we know that about 40 per cent. of students assessed to receive a contribution do not receive the full amount. For housing benefit, all students are assumed to have the weekly rent element in the grant even if they are not eligible for an award from their LEA.

In contrast, under the new system, students will be able to draw as much or as little of their top-up loan entitlement as is appropriate to their personal circumstances, without the need for a vast administrative machinery for assessing individual entitlements.

My noble friend Lady Elles raised an important point about which students retain benefit entitlement. That needs clarification. As noble Lords know, not all students will lose benefit entitlement. Students who are single parents or disabled will retain entitlements to benefit, as will students' families. In addition, students who currently qualify will retain entitlement to all benefits— other than income support, unemployment benefit and housing benefit— including family credit, one parent benefit, child benefit, free dental care and prescriptions and disability benefits including mobility and attendance allowances.

I hope that I have covered the matter very fully and met the concerns of your Lordships. I understand those concerns. That is why we have taken such trouble to get the scheme right. It is worth repeating and making it absolutely clear for the record that social security uptake at the moment equates to £ 68 million. The value of the loan considerably exceeds that amount— by £ 100 million and more. On top of that there are the access funds for those in higher education which have been doubled today.

We have taken immense care to see that the people we seek to exclude from housing benefit are catered for in other ways. That is indeed taken care of. I hope that in view of the fact that we have already divided on the principle of the amendment the noble Lord, Lord Peston, will now seek to withdraw it.

Lord Peston

My Lords, I thank the noble Earl and all noble Lords who have contributed to the debate on this important matter. The debate enables us to clarify one difference between us as to the net benefit of the scheme. The noble Earl will recall that I argued that the money which brought the grant for the average student back to its level in real terms in 1979 was money that was owed to the student and any net new money would have to be over and above that amount. Therefore my calculations as to what is net are very different from the Government's calculations.

I do not want to be accused of rehearsing a Marx Brothers' script, but I am surprised that the noble Earl is surprised at my putting down the amendments. I understood that the amendments were perfectly acceptable within the rules and they raise important matters. I understood that noble Lords wished to have an opportunity to express their views, first, on housing benefit in particular and, secondly, on the position of postgraduate students. The reason for putting down the amendment is that the earlier amendments were much broader. Some noble Lords had told me that they had difficulty with those amendments but they would not have difficulty with an amendment in this form. That is what lies behind the amendment.

Therefore, I am not abashed by the noble Earl although I listen very carefully when he admonishes me on any matter. I feel that this is the last opportunity for noble Lords to place their views on record on this matter. I must therefore test the opinion of your Lordships' House.

9.22 p.m.

On Question, Whether the said amendment (No. 27) shall be agreed to?

Their Lordships divided: Contents, 98; Not-Contents, 51.

DIVISION NO. 5
CONTENTS
Addington, L. Beloff, L.
Adrian, L. Birk, B.
Airedale, L. Blackstone, B.
Alport, L. Blease, L.
Ardwick, L. Boston of Faversham, L.
Avebury, L. Briginshaw, L.
Brooks of Tremorfa, L. Llewelyn-Davies of Hastoe, B.
Bruce of Donington, L. Lockwood, B.
Callaghan of Cardiff, L. Lovell-Davis, L.
Carmichael of Kelvingrove, L. Macaulay of Bragar, L.
McIntosh of Haringey, L.
Cledwyn of Penrhos, L. Mackie of Benshie, L.
Cobbold, L. Mason of Barnsley, L.
Cocks of Hartcliffe, L. Mayhew, L.
David, B. Milner of Leeds, L.
Davies of Penrhys, L. Molloy, L.
Dean of Beswick, L. Monkswell, L.
Donoughue, L. Nicol, B.
Dorm and of Easington, L. Northfield, L.
Ewart-Biggs, B. Ogmore, L.
Falkender, B. Oram, L.
Falkland, V. Peston, L.
Flowers, L. Pitt of Hampstead, L.
Foot, L. Ponsonby of Shulbrede, L. [Teller.]
Gallacher, L.
Galpern, L. Prys-Davies, L.
Gladwyn, L. Rea, L.
Graham of Edmonton, L. Robson of Kiddington, B.
Grantchester, L. Russell, E.
Gregson, L. Seear, B.
Grey, E. Sefton of Garston, L.
Grimond, L. Serota, B.
Hamp: on, L. Shackleton, L.
Harris of Greenwich, L. Sherfield, L.
Hatch of Lusby, L. Stallard, L.
Henderson of Brompton, L. Stoddart of Swindon, L.
Hirshfield, L. Strabolgi, L.
Hooson, L. Taylor of Blackburn, L.
Houghton of Sowerby, L. Thurlow, L.
Howie of Troon, L. Tordoff, L. [Teller.]
Hughes, L. Turner of Camden, B.
Irving of Lairg, L. Underhill, L.
Jay, L, Walston, L.
Jenkins of Hillhead, L. Warnock, B.
John-Mackie, L. Wedderburn of Charlton, L.
Kennet, L. White, B.
Kilbracken, L. Williams of Elvel, L.
Kirkhill, L. Wilson of Rievaulx, L.
Kirkwood, L. Winstanley, L.
Listowel, E. Young of Dartington, L.
NOT-CONTENTS
Astor of Hever, L. Hooper, B.
Balfour, E. Johnston of Rockport, L.
Belstead, L. Kimball, L.
Boardman, L. Lindsey and Abingdon, E.
Borthwick, L. Long, V.
Brougham and Vaux, L. Lyell, L.
Butterworth, L. McColl of Dulwich, L.
Caithness, E. Mackay of Clashfern, L.
Carnegy of Lour, B. Massereene and Ferrard, V.
Carnock, L. Mersey, V.
Clanwilliam, E. Mountevans, L.
Colnbrook, L. Rankeillour, L.
Craigavon, V. Reay, L.
Davidson, V. [Teller.] Sanderson of Bowden, L.
Denham, L. [Teller.] Skelmersdale, L.
Downshire, M. Strange, B.
Eccles, V. Strathclyde, L.
Elles, B. Strathmore and Kinghorne, E.
Elliot of Harwood, B.
Elliott of Morpeth, L. Swinton, E.
Fraser of Carmyllie, L. Trefgarne, L.
Glenarthur, L. Ullswater, V.
Goold, L. Whitelaw, V.
Henley, L. Wise, L.
Hesketh, L. Wynford, L.
Hives, L. Young, B.

Resolved in the affirmative, and amendment agreed to accordingly.

9.30 p.m.

Lord Peston moved Amendment No. 28:

Page 3, line 40, at end insert: (" (1A) The Secretary of State shall by regulations made under sub-paragraph (1) (c) above provide for deferment of liability in respect of any person whose annual earnings do not exceed 85 per cent. of the average earnings in any year having taken into account the disregards under Schedule 3, Part 1.1 and Schedule 3, Part 2.6 (calculation of students and parents income) of the Education (Mandatory Awards) Regulations 1989.").

The noble Lord said: My Lords, the amendment concerns a matter raised by many noble Lords and enables the Government and the Opposition to place on record what they feel about the matter.

Essentially the Government argued that the criterion for deferment of liability should be a fraction of average earnings. We had an opportunity to look at fractions and also ask ourselves about average earnings and what they mean. However, the Government particularly set their heart against some of us in not being willing to modify the average earnings criterion in ways which are not unusual when we consider student support and matters of that kind. As I understand it— and I am always probing— they are not willing to accept any concept of disregards or what might be called normalisation.

That is a slight exaggeration. There are certain categories of students which the Government look at slightly differently— a subject which arose when we discussed social security. However, I argued that students, when they graduate, may have this or that kind of responsibility, which means that merely looking at average earnings is not satisfactory. I have particularly drawn the attention of noble Lords— I am not the only one— to the responsibility that married students acquire soon after graduation. It seemed to me that students could exceed 85 per cent. of average earnings— they could exceed average earnings— and still not be well off; they could still be in financial difficulties.

The purpose of Amendment No. 28, tabled in my name and the name of the noble Baroness, Lady Seear, is to say how surprising it is that the Government, in setting up the loans scheme, did not automatically introduce a whole series of disregards, with which they have some experience. A possible answer is that it might complicate the scheme. However, referring to remarks I made on Second Reading— remarks which I stick to— I fully accept that a proper system of student support must be complicated. If one takes the line that the whole thing must be incredibly simple, one will end up with a ludicrous scheme, which is what this is.

I table this amendment yet again as a last attempt to persuade the Government to consider the Tightness of some of their critics. These are not criticisms of the loans scheme per se, or even this loans scheme in a general way; it is a very strong criticism of a specific aspect of the scheme in which it is deficient.

Baroness Blatch

My Lords, the sections of the mandatory awards regulations to which this amendment refers have been established solely in order to assess income for the purposes of providing students with mandatory awards. They are wholly inappropriate for the purpose of assessing eligibility to repay a loan.

In establishing the loans scheme we shall introduce in regulations the definition of gross income that a graduate will be required to declare. Your Lordships will be able to debate that definition when the regulations come before this House under the affirmative resolution procedure.

We shall be assessing gross income for a very good reason: we already have a system that takes account of individual circumstances— that is, the income tax system. It would be inappropriate for the loans scheme also to provide for individual circumstances as that would be to double count those circumstances. Why, for example, should a graduate with a mortgage be given two forms of relief— in respect of income tax and loan repayments— when a non-graduate with a mortgage has only one?

We have already announced that special provision will be made for disabled graduates. Any disability-related benefits will be ignored when assessing income for deferment purposes. That shows the flexibility that the Bill allows.

As I have repeatedly assured your Lordships, we shall be monitoring the scheme closely. If we find that special provision is needed in respect of graduates' income assessment, we shall be able to introduce this in regulations. However, we should not fix on the face of the Bill this link to income assessment for mandatory awards purposes.

In the light of that answer, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Peston

My Lords, in responding to my amendment, the noble Baroness asked what I thought was a very important question. I do not want to delay the House, but I believe that she has put her finger on the point.

I can remember when I was only a graduate and newly married— for all I know I was being paid average earnings— I had a mortgage and I felt indescribably poor. My view is that graduates in exactly the position outlined by the noble Baroness will feel very poor indeed. Your Lordships must not forget that we are not discussing other amendments removing liability for loan, but the criteria for postponement of repayments.

I should be interested to hear the noble Baroness argue her case to young people because they are, more or less, under great financial pressure when newly graduated. They take out mortgages. My whole point is that to add the need to repay loans is precisely the type of pressure that the Government should not be putting on them.

I reiterate that I am not on this occasion suggesting that we should forget the loan element or cancel it. I am simply saying that in this case a sensible government would be willing to postpone it. The noble Baroness has made my point for me; but this is the Government's Bill. They have to live with it and persuade people that what they are doing is right and fair. In answering my amendment, the noble Baroness has brought out how wrong and unfair the Bill is. However, having made that point, which was exactly my purpose, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Blackstone moved Amendment No. 29:

Page 3, line 40, at end insert— (" (1A) The Secretary of State shall by regulations make provision to cancel the liabilities of student nurses as may be designated by the Secretary of State from time to time in consultation with relevant bodies.").

The noble Baroness said: This amendment is directed towards endeavouring to make sure that we retain an adequate number of graduate nurses in the profession. There is little doubt that historical trends coupled with demographic trends in the population of the United Kingdom, especially the dramatic increase in the number of elderly people, mean that we will need more qualified nursing posts, and that the number of such posts will be rising in the NHS over the next decade.

This increase in posts will occur over the same period as the DES predicts that there will be 26 per cent. fewer young people in the qualification group for entry to nurse training who are leaving school during the next five years or so. To put this another way, we now have the well known problem of the demographic time bomb— a phrase which first surfaced in the health care sector to describe some of the current difficulties of recruitment and retention faced by the NHS, especially in the area of nursing.

The statutory body governing the nursing profession, the United Kingdom Central Council for Nursing Midwifery and Health Visiting, has attempted to square this circle by developing Project 2000, which is a three-year college-based system which the Government have agreed should eventually replace the current National Health Service waged apprenticeship model of nurse training leading to registered general nurse status. Project 2000 has received government support and its implementation began last year.

As regards recruitment into nursing, Project 2000 aims to increase the proportion of traditionally-qualified female school-leavers entering nursing as well as trying to increase the participation for mature students and returners to nursing. The Government have also agreed a very sensible and coherent set of educational developments which are needed to underpin this strategy. These entail college-based teaching methods, student financial support through Department of Health bursaries and the progression slowly towards an all-graduate teacher education workforce for nursing through an increase in the number of undergraduate nursing degrees.

It is at this point that the introduction of student loans may jeopardise the Government's sensible strategy to try to ensure that we have an adequate level of entry to the nursing profession. There will be very little incentive within the target group of school-leavers to opt for a degree course burdened with a loan if nursing qualifications can be gained via a bursary-supported Project 2000 course. In addition, newly qualified graduate registered general nurses earn less than the national average graduate salary and they are unable to bid up their salaries within the NHS as they are not considered part of the current clinical grading structure.

The Secretary of State for Health supports an expansion in degree opportunities for nurses, midwives and health visitors. He has agreed to a 50 per cent. expansion of undergraduate nursing degree places: that has been agreed with the Universities Funding Council. He has also agreed to priority being given to this form of provision within the Polytechnics and Colleges Funding Council. Nursing student maintenance will be by a non-means-tested bursary controlled by the Department of Health. The levels were announced by the Secretary of State for Health last June. Those under 26 years of age in London will receive £ 4,700 a year and those outside London, £ 4,000 a year. Current student nurses' salaries start rather higher at £ 5,950 in London and £ 5,150 outside.

Project 2000 nursing students will get seven weeks' holiday; they will not be liable for income tax, national insurance or superannuation contributions and they will pay only 20 per cent. poll tax. The introduction of student loans for nursing undergraduates will surely destabilise the inter-connected strategy that has been rather carefully put together. Pushing undergraduate nurses into the loan scheme will act as a disincentive because potential nursing undergraduates will either opt for the bursary-supported Project 2000 course which I have just described or they will choose another degree-based caring profession altogether.

Research has also shown that graduate nurses have a lower drop-out rate compared to traditional nursing entrants. Once qualified they stay in clinical areas of work. If we are to finish up with fewer graduate nurses than was intended, in the long term that can only harm the development of good patient care. It will also mean that university and polytechnic departments will become smaller as fewer candidates opt for nursing degrees. That means that the important research that now takes place into nursing in universities and to some extent in the polytechnics will be threatened.

The very carefully built-up links between schools of nursing and the higher education sector will also be jeopardised. If this professionally essential extension into nursing theory and research to meet the health care challenges of the late 1990s and beyond is not developed or is going to wither within the higher education sector, it will not then be passed on into the generality of Project 2000 nurse education, thereby defeating the whole objective of the Project 2000 scheme.

I conclude by mentioning a study undertaken by the Royal College of Nursing. Of the two-thirds of United Kingdom professors of nursing who responded to the survey none supported the student loans scheme. They felt that it would push students away from nursing degrees and towards the Project 2000 courses which carry bursaries with them. If our sick, our injured and our very old are to be cared for properly we must recruit more nurses with graduate qualifications who can act as leaders of the profession. Many of the experts believe that loans will prevent this. Nurses need to be treated as a special case and should be excluded from the repayment of loans. I hope that the Government are able to accept this special case. I beg to move.

9.45 p.m.

Baroness Blatch

My Lords, we are well aware of the fears that prompt this amendment. There is concern that graduates will not wish to enter low paid professions if they have loans to repay. But noble Lords are aware that there will be a generous income threshold of 85 per cent. of national average income— or some £ 11,500 a year in today's circumstances— below which graduates will be able to defer repayments.

Noble Lords are also aware that the size of annual repayments will be about £ 400 a year. We have announced today that the repayment period will initially be seven years for graduates who borrow for more than four years. For other graduates the repayment period will initially be five years. As the maximum loan increases in real terms the repayment period will be extended so that repayments remain manageable. We have emphasised this point over and over again in debates. The repayment conditions will protect those on low incomes.

The repayment provisions will be set in regulations. Your Lordships will be able to debate those regulations which establish the scheme under affirmative resolution. We do not think it right to make exceptions in the Bill to this repayment regime for particular occupational groups. We are in no position to know that exceptions are needed; or even, if they are, which groups should benefit, or what form this exception should take. The only way to make responsible provision is through regulations, and after careful monitoring of the effect of the scheme. I repeat once more the assurance that the scheme will be closely monitored, and that if the concerns expressed by this amendment are borne out, we shall be able through regulation to act swiftly and effectively.

The noble Baroness referred specifically to nurses. Undergraduate nurses will be eligible for loans like other students in full-time higher education. Future arrangements for the support of all nursing students need to be considered in the light of the Department of Health White Paper Working for Patients and Working Paper 10 which was published in October 1989, and covers the education and training implications of reforms. The Government are currently considering responses received.

As I made clear in the debate in Committee, nurses taking Project 2000 courses are supported by a bursary from the Department of Health and do not receive student support from the education system. These bursaries will be paid at a higher rate than student grants. That is an important point to make in the context of this amendment. People following this training will not be eligible for the student loan any more than they are for the grant.

Trainee nurses follow a similar pattern of training to apprentices and other industrial trainees. It would be anomalous to award trainee nurses the student relief and not to treat other trainees in the same way. The cost of giving student relief to all these groups would be great, increasing the community charge payments for everyone else. It is difficult to single out student nurses when in financial terms large numbers of young people are in a similar position. I understand the feelings behind the amendment but I hope that in the light of my answer the noble Baroness will feel able to withdraw the amendment.

Baroness Blackstone

My Lords, I am grateful to the noble Baroness for her reply. She made a good deal of the issue of deferment as she has done throughout our debates. But that is not the point. I am fully aware that nurses who are below the threshold for the purposes of the Bill will not have to repay their loans immediately.

However, the point which lies behind the amendment is that in the case of the nursing profession there are various routes towards becoming qualified and trained. One route is to become a graduate. That is a route which is now regarded as one which we should encourage some young men and women to take, otherwise we shall not have the high quality and highly trained people that we need to lead the profession.

The noble Baroness also concentrated a good deal on the point about bursaries being paid at a higher rate. That is exactly the issue to which I am trying to draw attention. It is because bursaries are to be paid at a higher rate than student maintenance grants plus loans that we have a disincentive to young people who decide to enter the nursing profession as regards following the degree route. That is the problem. However, I am glad to hear the assurance that this problem will be monitored and that there is some understanding of the anxieties that lie behind the proposal. I look forward to seeing what the Government bring forward when we debate the regulations on such matters. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 30 not moved.]

Lord Addington moved Amendment No. 31:

Page 4, line 3, leave out ("day to day") and insert ("six months after completion of the relevant course or courses").

The noble Lord said: My Lords, I should like to move this amendment, which stands in my name and that of the noble Lord, Lord Peston. It is a simple amendment which is basically designed to take into account the period when someone graduates. At such a time a person finds that he has to change his entire lifestyle. That can involve moving into a work situation and moving away from being based for at least part of the time in the parental home. The situation invariably leads to additional costs which certainly in the case of a male graduate who takes an average senior job will mean a change of clothing— for example, two new suits— and perhaps the purchase of a motor car. The result will be that his expenditure rises, despite the fact that he starts on what is not normally a high salary. In such a situation he finds himself in a financial squeeze. Moreover, he may also have incurred additional debts— usually from a bank— which he must also settle during this period. All this additional expenditure will arise during the first two months of his working life. Therefore, I think that the breathing space suggested in the amendment would be highly desirable.

It must be remembered that, even with the provision of this current loan and the grant increase, the grant increase will have already been swallowed up by inflation. Therefore there is not a great increase in the amount of funds available. Such a person will still be facing more expenditure in these few months in proportion to his income and he will probably continue to do so for several years until he purchases a house. I beg to move.

Baroness Blatch

My Lords, this amendment seeks to provide interest free loans during a student's period of study; or put another way, it is a loan with a negative rate of interest. At the end of the period of study, the amount left owing would in fact be less than the value of the amount borrowed at the beginning.

I explained in Committee how we intend to index loans and why we intend to do this. It is purely a matter of equity. We shall index the loans so that what is paid back to the taxpayer is equal in real terms to what was originally lent to the student. This will be achieved by adjusting any outstanding liability in line with prices generally. However, we shall not charge any positive interest over and above this.

If we were not to index the loan in this way during a student's period of study, the taxpayer would lose out as the value of the loan decreased in real terms. Thus the student would borrow more in real terms than he paid back.

There is no need to seek to provide special protection in this way for students. We shall not require a borrower to repay his loan until nine months after he has left his course. Then, if his income is low for any reason, he can defer repayment. So we will not require students to repay anything while they continue to study.

Also, this amendment would discriminate between students on courses of different length. Students on longer courses would find that the loans taken out in their first three years were free of interest, while the same loans taken out by their peers who had graduated from shorter courses would start to be indexed.

Under our proposal to index the loans in line with inflation from day one, everyone will be treated equally. The taxpayer would receive in real terms the same sum as he had paid out. The borrower would pay back the same sum that he had borrowed in real terms. The liabilities of students on courses of different length would not be treated in different ways.

The indexation provisions will be settled in the regulations. They can be debated then. It is not appropriate to set the terms of the loan in primary legislation. The indexation that we are proposaing is the only fair way to proceed. I hope that, in the light of that explanation, the noble Lord will feel able to withdraw his amendment.

Lord Addington

My Lords, I am not totally happy with what the noble Baroness said, but she would not expect me to be. My main concern is about the initial period. I felt that after six months there would be a problem about people studying not paying interest on the amount of money they had borrowed.

Surely we are trying to give people a start to allow them to pay back from a base before they acquire any greater burden of debt than is necessary. Having listened to what the noble Baroness said, I beg to withdraw the amendement.

Amendment, by leave, withdrawn.

Lord Addington moved Amendment No. 32:

Page 4, line 6, at end insert: (" (2A) For the purposes of sub-paragraph (2) (a) above, the Secretary of State shall specify such different amounts as appear to him to be appropriate having regard to regional variations in the housing costs of students.").

The noble Lord said: My Lords, this amendment brings us back to a subject on which we had quite a lively discussion in Committee. It is about the regional variations in costs. The reason why I linked housing costs to the original amendment was that they are subject to the greatest variation that a student faces. However it should be recognised that there are considerable variations by region in other items, such as groceries, transport and so on, and even entertainment. Thus even if the Government accept that, under the amendment which has just been agreed to, housing benefit should be retained, there will still be great variations in costs. During the years when I was at Aberdeen University a strong case was made that it was much more expensive to live in an oil boom town such as Aberdeen was at that time than in other parts of the country.

I shall be able to withdraw the amendment if the noble Earl agrees that the previous amendment on housing benefit will be accepted by the Government and incorporated into the Bill. That will mean that much of what I suggest has already been accepted by the Government. Thus I wait with great interest to hear what the noble Earl will say. Unless the previous amendment is accepted we must look for some other way of making up for the regional variation. On Committee I pointed out that anybody who paid over £ 35 per week in rent would lose in cash terms under the proposed system. I beg to move.

Lord Flowers

My Lords, I supported the noble Lord, Lord Addington, at the Committee stage. I still do so today, at least to the extent that, if a provision such as that in Amendment No. 27 does not go into the Bill, there must be some allowance for regional costs. I therefore wholeheartedly support the noble Lord, Lord Addington.

The Earl of Caithness

My Lords, it is difficult to answer the noble Lords, Lord Addington and Lord Flowers. The House decided to agree to one amendment which effectively nullifies this amendment. The cost to the taxpayer will be at least another £ 68 million. We shall have to look at the matter in the cold light of day and assess it. Taxpayers have today had another £ 68 million charged to their account, in addition to the increase in the access funds. It is all part of one equation which we shall need to examine.

10 p.m.

Lord Addington

My Lords, I suppose I should have expected that answer. We made a decision before that took into account the fact that housing benefit was the great equaliser throughout the system. However, I am rather disappointed that the noble Earl did not say that he had another scheme to put forward. I was under the impression that the access funds had already been rather eaten up when I spoke to an earlier amendment about four-year courses. I wonder how much would be left of the access funds after they had been used to meet those courses where any extra hardship was incurred. However, in view of what the Minister has said and the situation in which I find myself of not wanting to contradict an earlier decision of the House, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Peston moved Amendment No. 33:

Page 4, line 10, at end insert: (" (4) No student attending a course of supervision in connection with a postgraduate degree who is for any period of such study not in receipt of a loan payable in accordance with regulations made under sub-paragraph (I) above shall be ineligible for Housing Benefit during that period whether as a consequence of such regulations or of the provisions of or regulations made under this or any other enactment.").

The noble Lord said: My Lords, this amendment has already been spoken to. It was grouped with Amendment No. 27 which was carried. I beg to move.

The Deputy Speaker (Lord Alport)

My Lords, the Question is that this amendment be agreed to.

The Earl of Caithness

My Lords, this amendment was spoken to with Amendment No. 27. It is not consequential on Amendment No. 27.

Lord Peston

My Lords, I do not understand what the noble Earl has just said. The amendments are grouped together.

Noble Lords

They are not consequential!

Lord Peston

My Lords, I nevertheless beg to move the amendment.

10.1 p.m.

The Deputy Speaker

My Lords, the Question is that Amendment No. 33 be agreed to. As many as are of that opinion say "Content". To the contrary "Not-Content". I think the "Contents" have it. Clear the Bar.

The Lord Chancellor (Lord Mackay of Clashfern)

My Lords, Amendment No. 33: Tellers for the Not-Contents have not been appointed pursuant to Standing Order No. 51. A Division therefore cannot take place, and I declare that the Contents have it.

On Question, amendment agreed to.

Lord Henderson of Brompton moved Amendment No. 34:

Page 4, line 10, at end insert: (" (4) Regulations made under this paragraph shall allow special conditions to be set in respect of repayment of loans for disabled students or graduates in comparison with loans to other students.").

The noble Lord said: My Lords, I have to start with two apologies in moving this amendment. The first is on behalf of the noble Baroness, Lady Faithfull, whose name is down to the amendment. She is sorry that she cannot be here this evening. The second is on my own account in that I inadvertently handed in the name of the noble Viscount, Lord Addison, instead of the noble Lord, Lord Addington. I owe the noble Lord an apology for my sin of omission and the noble Viscount an apology for a sin of commission.

In Committee the noble Earl, Lord Caithness, made a statement on disabled people which was welcomed by the noble Baroness, Lady Darcy (de Knayth), but with some reservations, and also by myself. It was a distinctly good package and I may say that it is welcomed by the disability organisations. The noble Earl was good enough to see the noble Baroness, Lady Darcy (de Knayth), and myself in between the Committee stage and the Report stage and to listen to our reservations. Perhaps the most appropriate time for us to question him on those parts of our representations which do not require an amendment is on the Third Reading. They of course all relate to the Bill but they do not necessarily require amendment.

Just to remind the noble Earl and the House of those points, they refer to the need to dispense with the means test in respect of severely disabled people; the need for a specially dedicated access fund for disabled people, or something along those lines; and also lesser points about the disabled students' allowance, non-medical personal costs and the costs of technical equipment.

The amendment is necessary. Its purpose can be achieved only by amendment to the Bill. It seeks to empower the Government to determine a lower interest rate for the loan debts of disabled students, thereby rendering the sum that they will have to repay rather less than it would be otherwise.

Perhaps I may give the reasons for asking for that concession. First, disabled students will build up a greater initial loan than non-disabled students because they may, and frequently do, have to take four years over their degree course instead of three. Equally important, they cannot obtain part-time work or vacation work like their peers who are not disabled. So the initial loan which must be repaid is, for both those reasons, likely to be greater.

Secondly, disabled graduates are unfortunately more likely to receive a lesser wage than those who are able-bodied. That is due to a number of matters, but, first, to the fact— this is borne out by the OPCS surveys— that disabled people are not as a general rule able to command the same market price for their labours as able-bodied people. Secondly, disabled people's costs of living are higher than those of able-bodied people. That is true even of those who are in receipt of mobility and attendance allowances. I can put the case succinctly by referring to the recent disabled income groups survey for 1990 which found that the extra expenditure incurred by severely disabled people is often as high as £ 86 per week.

The Parliamentary Under-Secretary of State for higher education said on Report in another place: We are looking carefully at the evidence submitted to us supporting the interests of those with disabilities to see whether a case can be made for alternative provision for the repayment of loans". The time has come for the Parliamentary Under-Secretary of State for higher education to speak the results of his deliberations through the mouth of the noble Earl, Lord Caithness.

Perhaps I may summarise what I consider to be an unanswerable case. The disabled student who later becomes the disabled graduate will need preferential treatment for the repayment of loans on three simple grounds: first, that he incurs a higher loan debt; secondly, that he has increased costs in later life due to his disability; and, thirdly, that he is most likely to have a lower income than the average graduate in later life. Those three factors make a compelling case for a special repayment loan scheme for disabled students. That is what the amendment provides for. The number of students concerned is not great and the costs would be quite small. I beg to move.

10.15 p.m.

Baroness Young

My Lords, before my noble friend rises to respond, I should like to clarify various points because we all have very great sympathy with the disabled. My understanding of the Bill is that disabled students will be in a very special category. As we have had explained on an earlier amendment, the social security benefits will apply to them including the special disability allowance, attendance allowance and housing benefit. All those other benefits will continue to apply to them, unlike other students.

When my noble friend comes to respond, it would be very helpful to be clear about the difference in help for the disabled— which is very important— and the basic student loan arrangements for those students who are fortunate enough not to have any disabilities at all.

Baroness David

My Lords, I should like to make one point, which I do not think was made by the noble Lord, Lord Henderson. I apologise if I did not hear him but there was rather a buzz of conversation at the beginning of his remarks. During the Committee stage of the Bill on 19th March the noble Earl, Lord Caithness, announced that income from disability benefits— that is, mobility and attendance allowances— would be disregarded for the purposes of assessing an individual's eligibility for deferment. But since those benefits had always previously been disregarded for tax purposes or for assessing other means tested benefits, that announcement did not constitute a concession. Nor did it address the problem of the lower disposable incomes and the higher likely loan debts of disabled students. I hope that that point will be taken into consideration.

I should like to support this amendment. I have put my name to it and I give it my wholehearted support.

Baroness Darcy (de Knayth)

My Lords, although my name is not on the amendment, I too wholeheartedly support it. I should like to endorse what my noble friend Lord Henderson of Brompton said by way of thanks to the Minister for meeting us so speedily and for being so willing to listen and discuss this matter with us earlier this week. On Third Reading I hope that he will be able to say something about monitoring the means tested disabled students' allowance and the state of play on the possibility of the fourth access fund.

Unfortunately, I agree with my noble friend Lord Henderson and the noble Baroness, Lady David, that the package that was announced in response to my noble friend's amendment, which was to offset the extra costs faced by disabled students for repayments of loans, was less satisfactory than his reply to my amendment. I agree with the noble Baroness, Lady David, that in fact mobility and attendance allowances never had been taken into account in assessing for tax purposes or for other means tested benefits.

I should like to make a few quick points about the extra costs of disabled life. Many disabled people do not receive mobility and attendance allowances but they still have very heavy extra costs. Those who receive those allowances still have extra heavy costs which are not covered by those benefits— costs such as heating, diet, clothes wearing out, and so on.

While mobility and attendance allowances are extremely useful, they do not fully cover many people's costs of mobility and care. A small example is that on the 1st April the higher rate of attendance allowance will be going up to £ 37–55 which will pay for about 10 hours of care each week. If it takes an hour to put a disabled person to bed and an hour to get him up, it means that he may get up seven days a week but can then be put to bed for only three days each week.

I feel that this question of extra costs for disabled life is crucial. My noble friend explained clearly the likelihood that the disabled person would have a higher loan and lower income from which to pay back that loan. But most crucial are the extra costs of disabled life. Even when a disabled person receives the same wage as his able-bodied counterpart, there is still less disposable income from which to repay the loan. I hope that the Minister will listen, reconsider this proposal and have second thoughts about it. It may be that he already has done so and he has something up his sleeve. We need some more positive response to this amendment, which I warmly support.

Lord Addington

My Lords, I should briefly like to support these amendments. It is very important that we set out that disabled students should not in any way be held back by disability. All help should be given to them so that they have as good a chance as their fully able-bodied companions. Their chances of passing the courses should be exactly the same and only their academic ability should restrict them.

I am quite prepared to forgive the noble Lord, Lord Henderson, for misspelling my name on the Marshalled List. I thank him for promoting me.

The Earl of Caithness

My Lords, we announced last week a very generous package of assistance for disabled people. The disabled students' allowance will be enhanced significantly, and we shall disregard disability-related benefits when assessing income for the purpose of deferment. This amendment places a reference to special repayment provisions on the face of the Bill, but it does not require regulations to be made on the subject: it merely provides that the regulations shall allow special conditions to be set.

I can assure the House that the provision we announced will be included in regulations. But I do not think it would be right to insert a statutory requirement to the effect that those conditions could not be extended to any other borrowers. The amendment provides that the conditions enjoyed by disabled people must be special in comparison with those available to other borrowers. Surely the benefit to disabled people is not diminished if it is extended to other deserving cases. And surely it is a little selfish to attempt to preserve certain special repayment conditions only for disabled people.

I have to say therefore that the amendment appears to me to be excessive. There are noble Lords present who have argued in favour of special provision in respect of child care costs. The noble Baroness, Lady Blackstone, did so. Are they prepared to have the possibility of a disregard denied to recipients of child benefit? I do not mean to indicate that we are minded to make such provision at the moment. But if monitoring reveals a need, that will be one of the alternatives open to us.

To summarise, I repeat the package announced last week. We shall increase the general level of the disabled students' allowance by 30 per cent. In addition, we shall introduce additional allowances: £ 3,000 for specialist equipment during a course, and £ 4,000 for non-medical helpers. To meet the point made again tonight by the noble Lord, Lord Henderson of Brompton, to help disabled people with loan repayments, we shall disregard disability-related benefits in assessing the 85 per cent. threshold for deferment.

The noble Baronesses, Lady David and Lady Darcy (de Knayth), said that it is not assessed for tax benefit or means-tested allowance. We are talking about a loan which is neither means tested nor is it a tax. I therefore confirm that what we announced last week is a major concession. I hope that on reflection your Lordships will welcome wholeheartedly these measures as being a very major step forward for disabled people.

There was one benefit that I could not announce last week. It was the benefit that was announced on Tuesday, which was to increase the personal tax allowance for blind people by 100 per cent. from £ 540 to £ 1,080 with effect from 6th April. That is the fourth of the announcements for disabled people which I hope again will be welcomed.

The noble Baroness, Lady Darcy (de Knayth), asked about access funds. Following what was said at an earlier stage in the meeting that I had with the noble Baroness and the noble Lord, Lord Henderson of Brompton, we have given yet again further careful consideration to representations supporting a separate access fund for disabled people or a requirement that further and higher education institutions should earmark for disabled students part of their allocations from the existing funds. Despite that careful consideration, we remain unconvinced that either would be appropriate.

The institutions are best placed to determine how the access fund should be allocated to their students, and it would be wrong, as well as unnecessary, to fetter their discretion. I understand that no more than a few dozen students nationally might be expected to claim from a separate access fund for the disabled if one existed. It would be clear to institutions that such students are eligible for access fund assistance, even though they retain entitlement to certain social security benefits. I understand that my right honourable friend would be willing to draw attention to this point in giving guidance to the administrators of the three proposed funds if that would be helpful.

For that reason we are not persuaded that there is a need for separate or earmarked access fund provision in the foreseeable future. However, if monitoring of the access fund reveals a problem at some later stage action may be taken to resolve it. The White Paper made it clear that the purpose and operation of the funds will be reviewed after three years. I hope that that meets the concerns of the noble Baroness, Lady Darcy (de Knayth), who wanted me to say a word about monitoring. I hope that I have also covered that.

Lord Henderson of Brompton

My Lords, there are at least two things for which I can thank the noble Earl. They came at the end of his speech. First, he said that he would consider issuing guidance to those who administer the funds so that they would give special regard to disabled people. That was a suggestion that the noble Baroness and I put to the noble Earl when we met. I am very glad that he has accepted it. I believe that it will be a help and I hope that he will see that such guidance is issued.

Secondly, I thank the noble Earl for his promise to monitor the operation of the various provisions which he announced in his package. That again is helpful.

On the other hand the noble Earl, who is usually felicitous in his use of language, was singularly inept when he described the amendment as selfish. It is no such thing. It may be that it is not very well worded and it would have been better not to have used the words: in comparison with loans to other students". However, there is nothing selfish about the amendment whatever. It is not intended to give, nor would it have the effect of giving, any preference to disabled people over their peers. Quite the contrary. It would merely enable them to have the same status as their peers. They need the lesser amount to repay because they incur higher costs, as were detailed by the noble Baroness, because their incomes are lower.

I ask the noble Earl to talk to disabled people themselves. Perhaps he might talk to somebody who knows about academic life, like Dr. Stephen Hawkins. He was not disabled when he was a student but he is now, and he could tell the noble Earl what those increased costs are. To describe an amendment designed to help such people as selfish is at the very least inept and inappropriate. It will be resented by the organisations representing the disabled which have helped to put the amendment forward. I hope that the noble Earl will retract that description or at least repent of it.

I shall not ask the House to divide on the amendment now. Perhaps, however, we could return to it at Third Reading. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Caithness moved Amendment No. 35:

Page 4, line 13, leave out from first ("to") to ("loans") in line 15 and insert ("take such steps (whether by the issue of certificates or otherwise) as may be prescribed by the regulations for the purposes of, or in connection with, applications by those students for").

The noble Earl said: My Lords, in moving Amendment No. 35 I should like, with the leave of the House, to speak to Amendment Nos. 36, 44, 47, 48 and 54. The amendments deal with important matters. They relate to the role of the academic institutions in the student loans scheme. Amendment No. 35 gives my right honourable friend the power to require, by regulations, the academic institutions to assist in the certification and application process. Amendment No. 36 provides that the Secretary of State may require— again by regulations— the institutions to inform the Student Loans Company when a student ceases to be eligible for a loan. Your Lordships have already decided today that the regulations under those provisions should be subject to the affirmative procedure when first made. Amendment No. 54 is consequential and applies those requirements to institutions in Northern Ireland, so that they can certify the eligibility of students from Great Britain studying in Northern Ireland and receiving support under the scheme.

The final three amendments in the group are largely technical. They serve to clarify paragraph 3 of Schedule 2, but they have an important effect in placing limits on the role of the academic institutions in relation to the student loans scheme.

The two substantive amendments in the group are, at first sight, rather general. However, the power they give the Secretary of State is limited to the certification and application process, to the tasks associated with ensuring that students are able to obtain the additional resources to which they will be entitled. Moreover, it is the Government's firm intention that in practice the role of the academic institutions will be strictly limited. The document made available to Parliament last Thursday summarised that role. I should like to describe it in greater detail now.

Our aim is to ensure that loans reach eligible students with maximum speed and efficiency. We also seek to strike a balance between the work involved for the academic institutions, the responsibilities which will rightly fall to the individual student and proper protection for the very large sums of public money involved. I believe that the certification and application process which I shall describe meets those important objectives.

The role of the academic institution will be to identify students, certify students' eligibility for loans, certify the level of loan to which a student is entitled and to hand forms to the student. Institutions will keep copies of documents for audit purposes and will inform the Student Loans Company if a student leaves a course prematurely. But the institutions will play no part in the application process. The student will apply for a loan through the post directly to the Student Loans Company. All further communication will be between the student and the company.

I shall go through the process step by step so that your Lordships may be clear exactly what is involved. First, the Student Loans Company will arrange for packs of eligibility and application forms to be sent to the academic institution. Those forms will be security printed and carbon copied so that the same details can be reproduced on different sections.

A student will approach his college office for certification of eligibility. The student will bring with him his birth certificate to establish his identity, his mandatory award letter, which in nearly all cases will establish his eligibility, and his bank account number to ensure that the loan will be paid into his account and no other.

The college office will check those details. The student will also provide other information to establish whether he is eligible for a loan and which rates applies. If all is present and correct, the college official will sign and stamp the eligibility form.

This is where the carbon-copying is important. The identity, eligibility and entitlement details will be reproduced on each copy of the block of forms. The next step is for the college to dismantle that block, keeping one copy of the details for audit purposes; sending one copy of the details to the company, and handing two copies, together with the application form, to the student. Other than informing the company if the student later leaves the course prematurely, the academic institution's role then ceases.

It is then for the student to fill in the application form and to send it, together with the eligibility details, to the Student Loans Company. It is for the Student Loans Company to match the details coming from the student with those coming from the academic institution and, if all is correct, to draw up a formal loan agreement.

That agreement is sent to the student, who signs it and returns it to the company. The company endorses the agreement and arranges for the loan to be paid to the student by the bankers automated clearing system.

This is, I believe, a sensible, cost-effective system. It limits the role of the academic institution to ensuring that those of its students who are eligible are in a position to apply for loans and that the loan will be paid into those students' bank accounts. By introducing a direct application process it places a proper responsibility on the student: the academic institution will not be involved. And by ensuring that details are checked when they reach the company from separate sources, the system guards against fraud and protects public money.

The education departments will be discussing the certification and application process with the representatives of the higher education institutions. A meeting will take place shortly. The question of payment to the academic institutions to defray the costs of the work involved in the certification process will be on the agenda for that meeting.

During the summer term the Student Loans Company and the education departments will be organising a major information programme for the academic institutions. We shall work closely with the institutions at all stages. It is in our joint interests to ensure that students have swift and efficient access to additional resources this autumn.

Let me say a brief word about the final amendments in this group. They are to a large extent technical and their purpose is clarificatory. Paragraph 3 (1) refers to three procedures: the making of loans; the recovery of loans; and, thirdly, the discharging of other functions in relation to loans.

The provisions in paragraph 3 (2), 3 (5) and 3 (6) as presently drafted apply both to the body which makes and recovers loans and to the body or bodies which discharge other functions. Hence they could be interpreted as applying to the academic institutions. Those paragraphs deal with the provision of funds for the making of loans; the scrutiny of an independent person to resolve disputes; and the obligation to make periodical reports. We do not intend that the academic institution should make loans, be subject to the scrutiny of the independent person or make periodical reports to the Secretary of State. These amendments will ensure that the academic institutions are not subject to the provisions of those paragraphs. The amendments therefore have the effect of placing limits on the role of the academic institutions under the Bill.

These amendments bear upon the academic institutions; on the Student Loans Company and its relations with those institutions; and upon students and their access to loans. In designing the certification and application process, the objective has been to ensure that students' access to loans is as ready and efficient as is consistent with a limited role for the academic institutions and the proper protection of public money. We shall work very closely with the academic institutions in developing the details of the process in the coming months. The Student Loans Company and the academic institutions have a strong mutual interest in developing an effective working relationship which will be to the benefit of both students and the taxpayer. The amendments we have introduced today and the process I have described will lay the basis of that relationship. I invite your Lordships to accept the amendment and I beg to move.

Lord Adrian

My Lords, I spoke perhaps pre-emptively at Committee to an amendment which anticipated the amendments moved by the noble Earl. I said then that I hoped that the Secretary of State would consult with those whom he proposed to require to carry out the steps and the process of applications for loans before he promulgated the regulations mentioned in this amendment. I am therefore extremely grateful to the noble Earl for what he said, in that he outlined that there will be meetings between officials of the Department of Education and Science and the universities. This was a point also asked for by my noble friend Lord Flowers.

Perhaps I may also hope that the Secretary of State will consider providing for the administrative costs involved, or at least making some contribution towards them. The Secretary of State will know how hard pressed financially universities are, and administration is not costless. If more is required of universities they will have to reduce expenditure on their other main activities— namely, teaching and research.

I speak with some feeling on this subject, having seen the administrative burden that the poll tax registration imposed on the Cambridge college of which at the moment I have the privilege to be Master and which, in the nature of the arrangements at Cambridge, will probably be one of the institutions required by the Secretary of State to take such steps as may be prescribed by the regulations which we anticipate.

Earl Russell

My Lords, I have no comments to make on the last four amendments in this group. However, I wonder whether Amendment No. 35 is necessary. I have looked again at the Bill, Schedule 2, paragraph 2(1), which states: The Secretary of State may by regulations require the governing bodies of institutions at which eligible students are attending courses to issue to them on request such certificates … I was always puzzled by the advance publicity in the press attached to this amendment. Having looked at the amendment and the Bill, I am still puzzled. On the other hand, I am extremely grateful to the noble Earl first for what he said about consultation and secondly for what he said on the question of consultation about payment. On both those subjects I agree with everything said by the noble Lord, Lord Adrian.

I am aware that the point has been made in another place that in 1962 local authorities were not paid for the work they did under the grants Act. On the other hand, 1962 in many ways, and particularly financially, was a different world. It was a world in which local authorities enjoyed an autonomous and unfettered power to raise revenue up to the limits which the electorate would take. In those circumstances it was perfectly reasonable not to pay the local authorities and if the universities had been asked to take on this type of job I do not consider that they would have asked for payment. It would not have been necessary.

We are now in a world in which money is very much tighter in all publicly-financed institutions than it was in 1962. We are in a world where a very small extra expenditure now cuts to the bone in a way that it did not then. Moreover, we have been constantly exhorted by this Government to take a more commercial attitude and absorb the lessons of the enterprise culture. Occasionally, if one is told such things over and over again, it comes back in forms which the original exhorters might not like. That has perhaps happened in this instance.

I am also deeply concerned— I hope this will be taken into account during the consultation which I am glad to note is to take place— that it may be too late for certification to be conducted for this academic year beginning in October. There is a great deal of force in the point made on Second Reading by the noble Baroness, Lady Blackstone, that that time of the year is a bottleneck in university registering. If there is one time in the academic year when there are no spare staff to redeploy it is the first week of the first term of the academic year when about 30 per cent. of the people are new, when everybody is lost and when everything needs to be sorted out from scratch. Additional staff will need to be taken on. Even so, there will be a great rush to get it done in time.

I ask the noble Earl for an assurance that, if it should emerge in the process of consultation that this work simply cannot be done in the time, the Government will consider whether their deadline is manageable. I had considered dividing the House on this amendment but having heard what has been said about consultation and about money I shall not do so. I am glad to hear about consultation and I look forward to its results.

Lord Beloff

My Lords, I briefly emphasise the points made by the noble Lord, Lord Adrian. Governments of all persuasions tend to underestimate the administrative costs of the policies they adopt. This is possible either when those who have to carry them out, as the noble Earl, Lord Russell, said, have the means of raising funds to do so, or when they apply to institutions which themselves are in an expansive mode; as was true of the academic world in the 1960s.

However, when we come to the present we must ask my noble friend the Minister whether, when he refers to arrangements with the universities— one is glad to know these consultations are to take place— he will take fully into account the fact that there is no spare cash and that an administrative burden will fall upon them. Of course, the access funds are an administrative burden and, as the noble Lord, Lord Adrian, said, the poll tax registration is an administrative burden. The present arrangements might be a considerable burden although I congratulate the noble Earl on producing what is probably the most suitable set of steps towards certification.

Let us suppose that the amount of money that the universities, polytechnics and colleges receive is less than the bare cost of administering these certifications, which would not only have to be processed accurately in the way described but would also, as the noble Earl, Lord Russell, pointed out, have to be prepared at great speed and at a difficult time. If the money is not available some other aspect of educational activity will have to be limited: for example, one certificator instead of one professor of chemistry. Therefore, I urge on my noble friend that the cost of administering the scheme is given full prominence in the Government's mind when these consultations take place.

10.45 p.m.

Lord Peston

My Lords, I join with those who have thanked the noble Earl for adding some reality to the scheme, which has looked rather theoretical until now. The noble Lord, Lord Beloff, may be right in suggesting that what is proposed is the simplest way of carrying out what is required, but from the description of it, it certainly sounds bureaucratic. There was a description given of pulling off the different bits of paper. I cannot remember how many there were on the carbon blocks.

I am not at all certain that the method proposed will be simple even if it is the simplest. I must not be too grudging, but I would have preferred that the consultation and the payment had been agreed to before the amendments were tabled. I understood the noble Earl to be saying that all these matters will be dealt with in a good and sympathetic spirit. I am willing to live with that for the time being.

I have one or two other questions. I thought that the business with loan applications would take place, particularly for a new student, before he got to university. I think the noble Earl was telling us that essentially it will take place after he has reached university. The student would arrive clutching various pieces of paper, the award letter and so forth, and he would go to someone in the registry and say "I have got my loan form. I need other things to go with it. I shall then make my application to the loan company". Am I right to think that I have completely misunderstood the point? I thought that students would be applying for loans when the Bill was passed. It now looks as though no one will be applying for a loan before October. I may simply have misunderstood what the noble Earl was telling us. I wish to know about that.

What are we to assume that the words "or otherwise" mean? I had assumed that the original role of the institution was simply to say, "This is a student who has been accepted here and he is now eligible to apply for a loan". At the time it seemed rather simple to me. Now I have seen those words, do they entail any kind of slippery slope? What are those words there for?

The noble Earl referred to Amendment No. 36 as essentially applying to students who leave prematurely. Even if these amendments do not say so, is it not the case that the academic institutions would also be obliged to issue a statement at the end to the effect that the students have completed their courses? Alternatively, will it be the individual student who has that obligation? Will he have to inform the loan company that he has changed status from being someone who has borrowed money to someone who is about to be in the position of having to repay it? I should like to have some clarification on, ceases to be an eligible student". I had assumed that it meant partly what the noble Earl had said— that the student had left early. I had also assumed that it meant that the student had graduated. Can the noble Earl tell us about that? The last point has been made before. I appreciate that once the Government go down this line they cannot backtrack upon it.

These are thin-end-of-the-wedge amendments. I pointed out at Second Reading that these amendments tell academic institutions what they have to do, whether they like it or not. This is undoubtedly an infringement of academic independence. I add the point, as the question was raised about local authorities not originally being paid for mandatory grants, that there is a slight difference. I imagine that when mandatory grants were introduced local authorities were on the whole in favour of them. The whole point about the loans scheme is that we still cannot find anyone who is in ! favour of them. No academic institution is in favour of them and therefore academic institutions will be doing this with the heaviest of heavy hearts.

As a firm believer in the law I have to say that if the amendments are passed I hope that my academic colleagues will go ahead and do the best they can in the circumstances. But the Government should realise— and this follows in the spirit of what the noble Lords, Lord Beloff and Lord Adrian, have said— that the institutions are being obliged to administer a scheme which they do not like and in which they will take part only because they are made to do it under protest. If the Government had thought about this before they started perhaps they would not have gone this far. But those are comments. My main purpose is to obtain answers to the questions I have raised because that would help not only noble Lords to understand the scheme but institutions outside to know what they are letting themselves in for.

The Earl of Caithness

My Lords, I am grateful for the welcome given to what I have said, albeit that the welcome of the noble Lord, Lord Peston, was grudging. I hope that it was helpful all the same. To have even grudging thanks from the noble Lord is something.

The noble Lord, Lord Adrian, and the noble Earl, Lord Russell, were particularly concerned about the costs which academic institutions will incur in the certification process. I have said that their role is limited but I have also acknowledged its importance. That is why, among other things, officials of the education departments will be meeting representatives of the academic institutions very shortly. They will discuss the certification process in detail. The meeting will be the start of a concerted campaign to provide information to the students. The question of payments will most certainly be on the agenda. We intend to work very closely indeed with the academic institutions. We have common interests— ensuring that students have access to the additional resources to which they are entitled.

The noble Earl, Lord Russell, asked about the need for Amendment No. 35. Perhaps I may clarify that for the noble Earl. Paragraph 2 of Schedule 2 refers to certificates only relating to eligibility. The system I have described involves the use of a form that is more than a certificate of eligibility. It doubles as an application form which is handed to the student by the college, and is not completed by the college. The Bill as drafted may cover that but for the avoidance of doubt the amendments cover the combined eligibility and application form. It is for exactly that reason that the words "or otherwise" which concern the noble Lord, Lord Peston, are used.

With regard to the date on which loans become payable, the application must come after the student starts at college, before registration at the beginning of term. They are not yet students so they will have to get in there and be on a course before they are eligible for a loan. The noble Lord referred to the student who leaves in the middle of a course. He then asked about the student at the end of the course. That will be taken care of in the application form. When the student fills in the application form the length of the course will be on that application form. It will be automatically assumed that he will leave unless the Student Loans Company hears differently.

The point was made that this will cause a good deal of extra work for institutions. It is worthwhile reiterating one point which may have been lost sight of. We are offering a new amount of money. Students will have the grant as before. That grant is being uprated this year. The loan is on top. Therefore, we are not introducing a completely new scheme like the community charge in exchange for rates which a student has probably been paying; we are complementing an existing scheme. Thus I think that the extra work about which some of your Lordships are concerned is not so great as feared if looked at in that light.

Baroness David

My Lords, before the noble Earl sits down, perhaps I may put one or two questions to him. He said that what is proposed is not an entirely new idea, but of course the grants are being dealt with by the local authorities. Therefore the loans scheme is new to the institutions. I was also rather alarmed when he said that a student would be able to apply for a loan when he got to his college or university. When will he actually receive the money?

The Earl of Caithness

My Lords, the student will receive the money as soon as the process is completed. In this respect I was grateful for the words of my noble friend Lord Beloff. The simplest and best scheme is to ensure that the student receives the money as soon as possible. However, it is only right— and we are talking about taxpayers' money— that the student should be on a registered course and that he should be an eligible student in the eyes of the university or the college. The process can then go forward fairly speedily.

Lord Flowers

My Lords, before the noble Earl finally sits down perhaps I may ask him to clarify a point that he made which I did not understand. He said that the top-up scheme is only an addition to what the student already receives and that therefore the cost of administration will not be very great. The cost of administration is exactly the same whether the students receive £ 400, £ 4,000 or £ 40,000. Surely the amount of administration involved is the same.

The Earl of Caithness

My Lords, I am sorry if I did not make myself clear on that point. If I understood the debate correctly, a comparison was being made with the community charge. I said that because the grant scheme is up and running and will be uprated this year, the loan is in fact a top-up loan— certainly to begin with— for students. I admit to the noble Lord, Lord Flowers, that there is extra administration involved. That is exactly what we have sought to limit to a reasonable level for the institutions. Exactly how it will work and what it will cost are matters that we shall be seeking to discuss with the institutions.

Baroness Seear

My Lords, no one wishes to extend the debate too long, but the noble Baroness, Lady David, has raised a very practical point. I ask the noble Earl to look at the matter very carefully. At present as soon as students know their A-level results the local authorities are informed. But that is in the middle of August. Even then the students do not receive their money until six weeks into term. That can be jolly awkward for a student studying for the first year at a university away from home and so on.

If the company is not going to hear from all these students until they have started their courses, I do not see how it has a hope of getting the money to them until the first term is very nearly over. It is awfully difficult for students to manage for as long as that without any money coming through. It is not a political point; it is an administrative point. I know from experience that it is awful for students because local authorities can be very bad at getting the money through. It is very difficult for students who do not have any resources behind them. Can the Government look into the matter to see what the timing will be in this respect?

The Earl of Caithness

My Lords, of course I shall look into the matter. The noble Baroness is talking about two different aspects: one is the grant and the other is the loan. I would hope that the Student Loan Company, being a commercially orientated company, would seek to get the loan dealt with as soon as possible.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 36:

Page 4, line 15, at end insert— ("including the provision of information when a person ceases to be an eligible student.").

On Question, amendment agreed to.

The Deputy Speaker (Lord Ampthill)

My Lords, before calling Amendment No. 37, I should remind the House that, if it is agreed to, I cannot call Amendment No. 38.

Baroness David moved Amendment No. 37:

Page 4, line 24, leave out ("arrangements may") and insert ("Student Loans Company Ltd. shall").

The noble Baroness said: My Lords, the purpose of this amendment is to insert the Student Loans Company on to the face of the Bill. At present the Bill makes no reference to the company despite the fact that the Government have said that it is their intention that the SLC should administer the student loans scheme. Until today we have received very little knowledge about the company and how it is going to work. I thank the noble Earl for his letter, which I received just as I came into the Chamber today and which tells us a little more about the company. It seems to me that we now know that the current chairman is Mr. John Vereker, deputy secretary at the DES, with Mr. Tom Jeffery, assistant secretary at the DES, becoming a director, as has Mr. Alistair Weatherston of the Scottish Education Department. Mr. Ronald Harrison has been appointed managing director at a salary of £ 55,000. I think he has a car too. I am not sure what he needs that for.

So far very few details on the running of the company have emerged. It has leased premises in Glasgow which are still apparently empty and it has been negotiating contracts for the provision of computer equipment. Much of the detail of the preparatory work is only now emerging. What is clear is that there will be a huge rush for the company to be on schedule to deliver arrangements for the first loan cheques to go out in September. We now know that they will not go out in September. They are more likely to go out in October, or maybe even later.

The Price Waterhouse report set out a series of timings for arrangements to be in place and most of them have been exceeded. The key one is that the loans administration should have had premises, staff and computer systems up and running by now. At present the company seems to have only five staff out of the 130 that it has stated it needs. The recent announcement last Thursday on the details of the application and certification process shows the difficulties that remain to be overcome in getting the loans scheme up and running for the September start.

I have tables based on the Parliamentary Answer by Mr John MacGregor given on 22nd March. On the loan application process, the institution will have to go through 12 processes from when it receives the application form to when it monitors the student throughout the year. There are nine processes for the student to go through, from collecting all the details of eligibility to finally returning the agreement to the SLC. Then there are eight processes for the Student Loans Company to go through between issuing the forms and authorising the payment.

Assuming that to interview a student, check his details and pass on the form will take approximately 15 minutes per applicant, and given that a college with 8,000 students applies for loans, one staff member working a seven-hour day will take 286 days to process all the applications. If all the applications are processed in the first month of term, which is desirable, 20 working days are available; 14 staff working full-time for a month would be required to process applications in an institution with 8,000 eligible students. The matter of administration, which was raised by various noble Lords, seems to be of some importance. I very much hope that the noble Baroness can give a little further enlightenment and explanation of how this will work. I beg to move.

11 p.m.

Baroness Blatch

My Lords, Amendments Nos. 37, 40, 43 and 46 were debated and subsequently withdrawn by the noble Baroness, Lady David, at Committee stage. Amendment No. 41 was tabled but not subsequently moved at Committee stage by the noble Lords, Lord Peston and Lord Addington. The effect of the amendment of the noble Baroness, Lady David, would be to confine the administration of the student loans scheme to a body called the Student Loans Company while removing any element of administrative discretion which the company might enjoy. The effect of the amendment of the noble Lord, Lord Peston, would be to ensure that the Government will always retain ownership of and control over the person or body having responsibility for the administration of the loans scheme.

Baroness David

My Lords, perhaps I may intervene for a moment. We said that we did not want Amendment No. 41 to be grouped with these amendments; it does not go with them. Perhaps it would be better if it were dealt with separately.

Baroness Blatch

My Lords, I thank the noble Baroness for that point. I shall disregard Amendment No. 41.

I do not believe that the amendments of the noble Baroness would be an appropriate measure. If I may say so, I do not believe that they would achieve the effect that the noble Baroness intends. It is the Government's intention that, subject to the passage of this Bill, the scheme will be administered by a body known as the Student Loans Company. It is the Government's intention that the company should observe the best commercial practice and operate with the maximum efficiency and cost-effectiveness. The Government will monitor the company's performance very closely.

It is not however appropriate that the name of the organisation which administers the scheme should appear on the face of the Bill. Should the Government conclude that the scheme could be administered more efficiently by other means, by an organisation bearing another name, the Government should be able to take the appropriate steps without resort to primary legislation. They would take those steps in the interest of students and the taxpayer. It would not be right for the Government to have to wait until legislation could be enacted to effect the change. Moreover, the amendments would not, as I believe the noble Baroness intends, prevent a change in ownership of the Student Loans Company. They would prevent only a change of name.

The Government's priority, and the Student Loans Company's priority, is to ensure that additional resources are available to students this autumn. The Government's objective, and the Student Loans Company's objective, is to establish a cost-effective, efficient student loans scheme. Later, a change of ownership may be appropriate. The critical criteria will be value for money for the taxpayer and, more significantly, benefit for the student. The amendments before us would not prevent such a change of ownership.

I do not think it would be right either to ensure that the student loans scheme should be administered in perpetuity by a body known as the Student Loans Company— that is the effect of the amendments— or to insist that such a company should always remain in Government ownership, which is, I believe, the intension of the amendments. At present all the shares in the Student Loans Company are owned by the Government. The company is making excellent progress on preparatory work towards the launch of the loans scheme this autumn.

It would be quite wrong to provide in primary legislation that the arrangements which will secure immediate objectives should be those that operate for all time. The Government have an open mind as to the long-term future of the Student Loans Company. As a Companies Act company and one which is in Government ownership, it will follow the best commercial practice. Its staff are not civil servants: they have been recruited on the basis of commercial and administrative experience. There is no reason in principle why the Government should retain a majority shareholding in perpetuity: this Government are interested in creating opportunities, not in closing doors.

The Government will monitor closely every aspect of the student loans scheme. They will monitor particularly carefully the efficiency of the Student Loans Company. The objective is now, and always will be, to ensure that support is available to students at a reasonable cost to the taxpayer. I am confident that the Government-owned Student Loans Company will secure that objective this autumn. But I cannot predict— no one can predict— how those objectives will best be secured as the loans scheme matures. In the future other means may be preferable. We should keep options open.

The noble Baroness, Lady David, listed in some considerable detail a speculative assessment of how, or whether, the Student Loans Company will meet the challenge of the requests that will flood in in the autumn. All I can say to that is that we have every confidence that the Student Loans Company will rise to that challenge. We shall have to wait to see what happens. I hope that we shall be proved right. In the light of that explanation, I hope that the noble Baroness will feel able to withdraw her amendments.

Baroness David

My Lords, I thank the noble Baroness for replying to the amendment. However, it seems to me odd, if the Government really have confidence that the company will work, that they cannot accept putting its name on the face of the Bill. It is odd that such an integral part of the whole scheme should not appear in the Bill at all. However, I shall read what the noble Baroness said and consider whether I shall need to return to this matter at the next and final stage of the Bill. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 38 not moved.]

Baroness David moved Amendment No. 39:

Page 4, line 24, after ("may") insert ("subject to sub-paragraph (1A) below").

The noble Baroness said: My Lords, This amendment is grouped with Amendment No. 42. Its purpose is to draw out past spending on the Student Loans Company, its future budget and the public spending implications. The Student Loans Company is a private company, although wholly owned by the Government. This amendment brings the Student Loans Company into line with other nationalised industries and requires financial reporting to Parliament.

The requirement to provide financial information would enable value-for-money judgments to be made. On 19th June 1989 Mr. Kenneth Baker announced that government funding would be provided for the company. The budget for the company was agreed by Parliament in a Treasury supplementary estimate in June. The sum agreed was £ 7–5 million.

Since then two DES senior civil servants, a deputy secretary and an assistant secretary, have become directors, and the third is to be appointed from the Scottish Department. Four more senior staff are being appointed; a business manager for the administration department, salary £ 27,000 to £ 32,000 a year; a central operations manager, salary £ 20,000 to £ 25,000; a communications manager, salary £ 15,000 to £ 20,000; and a liaison officer, salary £ 15,000 to £ 19,000. The post of managing director, £ 55,000 and a car.

The intention of this amendment is to ensure that Parliament receives a report setting out the expenditure which has already been made by the SLC up to the date on which the Bill receives Royal Assent; the expected budget of the company; and estimates of the total public expenditure to be incurred by the company as well as an estimate of when the Exchequer will expect to make a net saving from the introduction of student loans. I beg to move.

Earl Russell

My Lords, I should like to support these amendments. I shall not elaborate on the points that the noble Baroness made about the money that has already been spent. I agree with them. I will add only one small question to that about the managing director of the Student Loans Company. It struck me as curious that that post was advertised only in the Sunday Times and not in the Sunday Telegraph, the Observer, or the Sunday Correspondent. I wonder whether there is any reason for that?

My main concern about this is the question of the likely public expenditure effect of these proposals. As I think your Lordships know, I have some misgivings about that. It is vital to the logic of the justification of the scheme that it should in the end result in a saving of public money. But there is a large element of conjecture about when that end might be. One of the main purposes of a review, at least in my eyes, would be to try to bring the most accurate information possible to bear on those conjectures as soon as possible.

It is of course a scheme at a zero real rate of interest, which means that the amount of subsidy going into it will be equivalent to the inflation rate. The financial projections that we have been given for this scheme are at an inflation rate of 3 per cent. That at present looks a little optimistic. If it were to remain optimistic I think the expense of the scheme is likely to be very much greater than was originally envisaged, and correspondingly the break-even point a great deal further off into the next century.

The other major conjecture on which the success of this scheme depends in public expenditure terms is the rate of recovery of loans. I am not going into all that again. We have debated it a good deal. However, it is important to say that the success or failure of the scheme in these terms will not become apparent for quite a long time. It will be some while before any substantial sum comes back into the Treasury.

Also there is another major point about the public expenditure projections. So far they have only been put before us in a form going up to 1995, and the administrative costs of the scheme were only discussed by Price Waterhouse up to that date. Of course as more repayments have to be collected more and more administrative work will have to go into the process of repayment. Therefore the cost of securing the repayment is likely to increase. I think the administrative costs of the scheme are likely to be a good deal greater in 2005 than in 1995. That is a question that I hope the review will address.

This is not just a question of niggling. We on the Liberal Democrat Benches are concerned about the responsible use of public money. We are also concerned about the ultimate justification of the scheme. So much of the justification has rested on the argument that we need an expansion; we cannot afford to pay for it, therefore we shall use a cheaper method. If it were to turn out to be an unjustified assumption that this is a cheaper method, the logic of the scheme would be undercut and a strong case for withdrawing it would begin to emerge.

I know from reviewing my own work that it is a painful process. One likes to think that one is right, so a review in which there was some assistance in coming to terms with such an unpalatable finding as this could be very much in the public interest.

11.15 p.m.

The Earl of Caithness

My Lords, Parliament is rightly interested both in the amount of money that will need to be made available to students each year and in the administrative costs of the Student Loans Company. We have already provided a great deal of information and a great many statistics relating to the scheme. Many of those have taken the form of estimates of costs. Much of the information sought by the noble Baroness and the noble Earl is already in the public domain.

I refer your Lordships in particular to a detailed written answer given on 18th December 1989 in another place (Commons Hansard cols. 36–40). It gave tables setting out the estimated loan outlay, loan repayments and PSBR effect to the nearest million pounds for the years 1990 to 2027 on a variety of assumptions about rate of take-up and inflation. From those tables such questions as the total cost of the loan facility up to a given year and the date by which there are current year or cumulative savings to the Exchequer can be answered. We have not sought in any way to conceal the costs of making the loan facility available to students.

We have estimated the annual adminstrative costs of the Student Loans Company at £ 10 million to £ 20 million. I accept that some of your Lordships would have liked a more precise estimate earlier. We believe that we have been right to wait until we have a figure which we are sure will be accurate. My right honourable friend expects to announce more detailed figures shortly, once discussions have taken place with the representative bodies of higher education about, among other things, possible payments to the institutions to reflect their role in the scheme.

We have at all stages been open about the costs of the loans scheme. We have rightly avoided giving premature estimates of which we were uncertain. The figures that we have published are figures in which Parliament can be confident. We shall continue to publish details of estimated costs as they become available.

The noble Earl, Lord Russell, asked about the advertisement in the Sunday Times. I can assure him that the use of the Sunday Times is a matter of commercial judgment by the professional recruitment agency responsible for finding an appropriate field of candidates.

Baroness David

My Lords, I thank the noble Earl for his answer, but I am sorry that he will not agree to the statement in the way that we want it. I see what will happen: there will be a great many Written Questions teasing out the information bit by bit. It would have been much simpler if we could have had it as the amendment asks. However, I shall read Commons Hansard of 18th December and the noble Earl's comments and then consider whether there should be further action. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 40 to 43 not moved.]

The Earl of Caithness moved Amendment No. 44:

Page 4, line 28, leave out ("discharging functions") and insert ("having the function of making loans").

On Question, amendment agreed to.

[Amendments Nos. 45 and 46 not moved.]

The Earl of Caithness moved Amendments Nos. 47 and 48:

Page 4, line 43, leave out ("discharging functions") and insert ("having the function of making loans").

Page 4, line 45, leave out ("functions in relation to") and insert ("the function of making").

On Question, amendments agreed to.

The Earl of Caithness moved Amendment No. 49:

Page 4, line 51, at end insert— (" (8) No document sent in connection with loans under the arrangements by any such person or body as is mentioned in sub-paragraph (1) above shall be regarded as sent with a view to financial gain within the meaning of section 50 of the Consumer Credit Act 1974 (circulars to minors).")

The noble Earl said: My Lords, this is essentially a technical amendment, introduced for the avoidance of doubt. It has always been intended that minors will be eligible to receive student loans, provided that they satisfy the residence and course requirements that will apply to all students. It is also our intention that the student loans scheme should meet the requirements of the Consumer Credit Act.

An important aspect of the scheme will be the provision of full information to students and potential students. During the passage of the Bill in another place, great concern was expressed that students and potential students should know about the scheme when making decisions about their future. The provision of such information is clearly essential.

Section 50 of the Consumer Credit Act is an untested piece of law and is susceptible to a variety of interpretations. It prohibits the sending, with a view to financial gain— I stress, with a view to financial gain— of documents to minors inviting them to borrow money or to apply for information or advice on borrowing money. It could therefore affect the dissemination of information about the student loans scheme.

The words "with a view to financial gain", which I stressed a moment ago, are important. We do not believe that they should apply here. The Student Loans Company will not be operating "with a view to financial gain" out of the loans. Although it will recover money from borrowers in the form of repayments, this money will be returned to the Government on the same day that it is recovered. The Government will reimburse the company's administrative costs, but that is all.

The commonsense view is that the Student Loans Company will not, in sending out publicity material or loan agreement forms, be acting with a view to financial gain. However, in construing the term financial gain, the courts might look only at the relationship between the borrower and the company. If one does that, it is true that, in times of inflation, the company will be recovering in cash terms more than it has paid out, although in real terms (and I emphasise this point) graduates will repay only what they borrowed.

We considered the possibility of making loans to minors unindexed, but concluded that this was not the right way forward. The company might still be construed as acting with a view to financial gain if it sent information about the scheme to minors. This is because it would be giving the minor information about a scheme of support that would apply throughout his period of higher education. Although some students might qualify for an unindexed loan in their first year at college, a loan in their second year would be indexed, if by then they were aged 18. It could therefore be argued that the original information constituted an invitation to borrow money at interest.

Moreover, most students enter higher education at 18 or over, but will need information about student support and loans while still at school and before they reach 18. Their loans will be indexed, but they will have received the information when minors.

Furthermore, it would not be right in this context to treat a student under 18 significantly more favourably than one who is already 18. Both will benefit from the same educational opportunities and receive the same lifetime advantages: both should therefore be subject to the same support arrangements.

As I said, the interpretation of Section 50 is uncertain. It was certainly never intended to catch lenders who are not only recovering in real terms merely what they borrowed, but are also returning all that they recover immediately to the Government. For the avoidance of doubt we believe that it is right to make clear on the face of the Bill that the company will not be acting with a view to financial gain. I commend the amendment to your Lordships. I beg to move.

Lord Peston

My Lords, I thank the noble Earl for his contribution. I am bound to say that I am in great difficulty as to how to contribute to the discussion of the amendment. Perhaps I should start by saying that, in so far as I understand the amendment at all, I simply cannot accept that it is a mere technical amendment.

As I said earlier today, it seems to me that it is an amendment of absolutely fundamental significance. I believe that, if noble Lords had known at Second Reading, let alone later, that they were involving themselves with the Consumer Credit Act 1974 as it affected minors, the whole of the debate on this Bill would have been quite different in tone. I shall come back to that in a moment. However, I must remind noble Lords that the amendment has not been seen by the other place and, so far as I know, it was unaware of its significance. I certainly had no idea until the matter was signalled to me by the Government whips that there was a consumer credit aspect to the Bill, or that there were problems connected with minors.

With reference to our discussion earlier before the day's business began, I do not suggest for one moment that noble Lords opposite have not tried to do the best they can to keep me and others informed in the circumstances. I have to underline the words "in the circumstances". For me, Thursday last was the first inkling that I had of the matter. They have done their best between then and now. But in my view their best is not and never could be satisfactory.

I shall say a word on the amendment in a moment. My other problem is that we are operating under the procedures of Report stage of the Bill. Earlier the noble Lord the Leader of the House had to admonish me and others for not remembering the rules. One of the key rules is that I can speak only once. This is my chance. I am not able to do all the interrogation, with the toing and froing that any amendment of this importance requires.

Secondly— I should have made the point earlier but it slipped my mind— it concerns me that because of the position of the amendment in the Marshalled List we are debating it at half past eleven at night. That is not the time to debate anything as important as I consider this matter.

Thirdly, we have the problem which applies not only to me but to all noble Lords who are interested in this subject, that it simply has not been possible for us to be briefed. I have found it impossible to become fully acquainted with what I need to know on this part of the Bill, having worked hard on all other parts of the Bill. I have sat here, as have other noble Lords, from approximately 3 p.m. I have had no chance to go away. I have hardly had a chance to reflect on the important words that the noble Lord the Leader of the House expressed on the Government's attitude. I have tried to reflect what that could mean. Perhaps we shall learn something more on that.

In considering the amendment my main concern is the sudden realisation that we are involving ourselves with the extension of credit to minors. I know little of the 1974 Act. I understand that it was an Act which had no party political element. I am advised that the Act was introduced originally by the government led by the noble Earl's right honourable friend, the Prime Minister, Mr Heath. The Bill was lost in the dissolution of his government and was largely reintroduced during the subsequent government of my noble friend Lord Wilson of Rievaulx. It had no political element. But I understand that one very important part of it that exercised minds at that time was the question of the relationship between consumer credit and minors. Therefore, I have to insist that this issue is not technical; it is extremely serious and not something that can possibly go through on the nod.

Perhaps I may refer to what little briefing I have received. The main piece of advice that I have been given is rather similar to that of the noble Earl: that the Consumer Credit Act 1974 is complex and difficult to interpret, in particular in this area. When I asked how it affected the Education (Student Loans) Bill I was broadly advised that that is not something that anyone could answer without a great deal of deep thought. It is therefore impossible to say whether the government amendments do the job that the noble Earl wishes them to do. It is impossible to say what the ramifications of the matter are for the Consumer Credit Act and related matters. Another point that immediately springs to mind is whether any other legislation is affected by or affects the issue.

In due course there may be answers to those questions. However, I have not the slightest idea now what they are. I have had no chance to take advice on the matter. I accept that the noble Earl has done his best to explain the matter. I have taken it in as best I can; but although I am not nearly asleep, I am certainly not at my best. The least I need now is to go away, understand what the noble Earl said and appreciate its significance. That is the least that all noble Lords need in order to respond to these matters.

What are we to do? I understand that the Government are very keen to put the Bill on the statute book, and that is why I found it so difficult to speak. However, there is another responsibility: the responsibility of your Lordships' House in scrutinising any piece of legislation. I do not say this in a mean spirit, but the Government have to accept that they have only just come to appreciate the problem and have taken until Thursday to table the amendments. I do not impugn their honour. I fully accept that it has taken time to produce appropriate amendments. I understood the noble Earl to say that he is not entirely certain himself how the matter might develop.

In saying that, I must ask noble Lords opposite— and I address my remarks not only to the Earl but also to the noble Lord the Leader of the House— to be sympathetic to the problems of all noble Lords who wish to feel that they have made a proper contribution to the debates on the Bill.

My own view is that the Government must accept, first, that we need more time. We need time immediately to think about what the noble Earl has just said and whether we understand it and the consequences. Secondly, we need what I believe is called recommitment; namely, the opportunity to discuss the amendments in a rather less formal way than on Report. I do not see how that could be rushed so that it takes place by Thursday. As a consequence of introducing the amendments, the Government must accept that there will be some delay in the passage of the Bill through your Lordships' House. I do not say that with any happiness because I am as fed up with the Bill as anybody else.

The fact remains that this is not a trivial matter. The Government owes it to all of your Lordships to show some flexibility along the lines which the noble Lord the Leader of the House suggested. We need more time. We must not allow ourselves to be rushed.

Lord Jenkin of Roding

My Lords, I believe that the noble Lord, Lord Peston, is making very heavy weather of what is a relatively minor, technical amendment which has had to be put in ex abundanti cautelâ. Nobody for one moment could have dreamt that the words "for the purposes of gain" could have applied to the arrangements which this legislation embodies.

Perhaps the noble Lord will cast his mind back to the Consumer Credit Act and the very considerable body of new law which was brought in to protect consumers, and particularly to protect minors. He will know that the mischief that was aimed at was that of less than scrupulous traders of one kind or another— whether bankers, other lenders or retailers— seeking to take advantage of the inexperience of those under the age of 18 and landing them in debt which might cause them considerable hardship. It seems to me that this is a thousand miles from what we are discussing in this Bill. Quite frankly, I cannot understand why the noble Lord, Lord Peston, feels that this would have changed the entire character of the Second Reading and the whole attitude of your Lordships towards the conduct of debates on the Bill.

The one point of criticism which he and other noble Lords are perfectly entitled to make is that it is somewhat surprising that the officials in the Department of Trade and Industry who administered the consumer credit legislation did not draw this matter to the attention of Ministers at a substantially earlier stage. They have every right to be cross with officials who have let them down in this way.

Having said that, the point my noble friend made was that common sense says that this matter should not come within the provisions of the Consumer Credit Act and one might reasonably take the view that that would be the decision of a court if called upon to adjudicate.

However, when legislating one has a duty to seek to remove avoidable doubts. If the Government's legal advisers said that there could be some doubt on this because the precise nature of the transactions— and no one is going to make a profit out of this because it is not a commercial venture and nor does it involve the mischief aimed at by the Consumer Credit Act— it seems that Ministers would be acting in derogation of their duty if they did not bring the matter to the attention of the House as soon as it had been brought to their attention and table the necessary amendment.

This is a necessary technicality. I do not believe that it carries with it the portentous consequences which the noble Lord, Lord Peston, has tried to persuade the House are embodied in this; namely, that the amendment changes the whole character of the legislation. Frankly, that seems to me absurd. I hope that the House will see that this is a common sense matter and will pass the amendment quickly.

Earl Russell

My Lords, I should like to express my sympathy with the Government for the predicament in which they have found themselves at such a late stage of the Bill. I can see that it is thoroughly upsetting and disturbing. They have done their best to get out of the situation.

However, it illustrates the point which we have made since Second Reading— that this Bill has gone forward with rather more haste than is wise. It also illustrates the point made by the noble Lord, Lord Peston since Second Reading— that here we are dealing with an inexperienced and vulnerable body of people. The maxim volenti non fit injuria has been invoked rather more freely than was altogether wise.

Also I am entirely without a background in consumer credit. Although I knew of the tabling of this amendment I also have another job and have not had the time for preparation which I should have liked. In particular, I have not been able to take expert advice on the matter.

By way of trying to probe the nature of the problem in which we find ourselves, I ask what would be the effect on the Bill were we not to have this amendment. I tried to wrestle with that problem while the noble Earl was speaking. As far as I can see, the key words are: "for purposes of financial gain". It seems to me that so long as the Student Loans Company is a non-profit-making organisation, the Bill— I hope I shall be corrected if I am wrong— could go ahead without this amendment and would not be harmed by that. If that is true, it helps to clarify the situation. It means that the absence of this amendment would serve to put a stop on proposals, for example, to privatise the company, in which case it would have to become a non-profit-making organisation and, therefore, the Consumer Credit Act applies. It would put a stop to proposals to sell the mailing lists, but I understand that the noble Earl is to do that in any event by Amendment No. 51, to which I warmly look forward.

The specific problems that the Consumer Credit Act could bring to the Bill have mostly been avoided by government concession which was welcome. I wonder, therefore, why the Government need this amendment. If it is a non-profit-making company and wholly in the public sector, and I hope answerable to Parliament, could we not go ahead without the words, with a view to financial gain", without adding this amendment?

Another problem has been drawn to my attention. I am out of my area in this matter and would welcome help in dealing with it. It is my understanding that when a loan is made to a minor there are problems concerning its recovery; the debtor is under no legal liability to discharge the indebtedness. That, I understand, is normally dealt with by having an indemnity from a third party which is designed to secure the lender.

We discussed the problems with regard to indemnity. I think that is why some people were afraid that the Official Referee would be used as a guarantor. I am glad to say that the noble Earl has twice assured us that that is not the case. However, it raises a problem. If the Student Loans Company makes a loan to a minor and the minor chooses to blow it on a holiday in Majorca, who will recover the money and from whom? Those are the sort of questions on which I should like an answer. If I receive a satisfactory answer I am prepared to let the Bill go ahead without the amendment— which may be unnecessary— or let the amendment go through. But I should like to understand where we are a little better than I do.

Baroness Young

My Lords, I agree with the remarks of my noble friend Lord Jenkin that we need to keep the amendment in proportion.

I sympathise with my noble friend Lord Caithness, but it is not the first time that an amendment has arisen late in the day in your Lordships' House. It happened in the past and I have not the slightest doubt that it will happen in the future; it is not an unusual event. However, it is perfectly arguable that that is one of the functions of the House of Lords. We have an opportunity to continue to amend Bills as they proceed through Parliament, and particularly your Lordships' House, where even at this stage debate continues and we have ample opportunity to consider matters. When something like this happens it is wrong to criticise it when, after all, that is a function of the House.

Turning to the amendment, I particularly agree with my noble friend Lord Jenkin because this is a technical amendment. We must all have accepted in the course of the debate, both in Committee and on Report, that the Bill applied to minors. We have not said specifically that 17 year-olds would be involved, but even if members of our own family did not start university at 17 we all know that a number of students do. Clearly, from what has been said a larger proportion of 17 year-olds attend university in Scotland because of the school system and their four-year university course. This is not something new. We always knew that it would apply to minors. We also know that full information is to be given to students about the circumstances of the loan; we have just discussed that.

The noble Earl, Lord Russell, asked why the amendment was tabled and whether we need it at all. As I understand the point, the Consumer Credit Act makes it an offence to offer a loan to a minor with a view to financial gain. My noble friend Lord Jenkin explained the circumstances in which that could happen, and we can all imagine those circumstances. The whole point of the Student Loans Company is that it is not in that position. The circumstances are set out as to precisely what the loan is for. Nobody is touting for business and therefore enticing young people into an undesirable situation. If it is undesirable for them, it is undesirable also for older students. Clearly that is not the case.

The reason for bringing forward this amendment is to remove the element of doubt about the interpretation. That is important. I am not a lawyer but that is a point that constantly occurs and the amendment will remove that element of doubt in the Bill. It is right that it should be brought forward now.

Therefore, I support the amendment and it is right and proper that it should be included in the Bill. I can understand that my noble friends may feel irritated that it has come at this late stage, but that is not unknown and it is a function of this House to deal with such amendments. We should treat it as a technical amendment and deal with it in that sense.

11.45 p.m.

Lord Boardman

My Lords, I was involved in the principle of the Bill well before it came to the other place and this House. I strongly supported the principle of the benefits that it produces to students. I may not have agreed with all the practicalities that were suggested but I strongly supported the principle.

I believe passionately that it is right for the young to be given the additional opportunities provided by the Bill, so I believe it right that there should be no differentiation between those who are aged 17 and those who are aged 18. Therefore, not to accept the amendment could prejudice the increased opportunities for the young that I believe the Bill provides. I strongly support the amendment.

Lord Monkswell

My Lords, I should like to speak partly about the timing, partly about parliamentary procedure and partly about the text and implications of the amendment itself.

One of the problems facing us is the Government's apparent haste in pushing through this legislation. I have to admit that I took exception to the reference by the noble Lord, Lord Jenkin, to shoddy workmanship in the department. That is an unfortunate denigration of public servants. This afternoon and this evening I have been in consultation with the Clerk and his staff and I pay tribute to them for the information provided to me.

As I said, part of our problem is the short time that we have had to consider the amendment. I am sure that all sides of the House need more time to digest its implications and come forward with our considered views. However, one of the key problems is that because we are at the Report stage we cannot have an open debate. Specifically, no Member of the House can speak more than once. That is unfortunate. Dare I say that it is within the powers of the Government to have taken this amendment in Committee? I have been advised that that is possible. It is unfortunate that the Government have not seen fit to open out the debate.

Having said that, one of our problems since the amendment was tabled is that it is difficult to know what questions to ask and what the answers might produce in terms of further questions, and so on. Therefore, one of my pleas is that the Government should find some mechanism— they have the services of the Clerk and his staff as I have had— in which the Chamber can debate the amendment at a later time in the context of a Committee of the House rather than on Report or Third Reading. That would be very beneficial.

I hope that the noble Lord the Leader of the House will take that on board. It is important because of the role which your Lordships' House is seen to play in the parliamentary process, which is to give full parliamentary scrutiny through the various stages of the Bill. Effectively, we provide a service to the other place because, for procedural reasons, it seems incapable of scrutinising legislation as effectively as this House. We do no service to the wider institution of Parliament if we do not perform our task effectively in that respect.

I shall now touch on some of the implications of the amendment itself, bearing in mind that the first I heard of it was this afternoon. As an ordinary Back-Bench Member of your Lordships' House and like the vast majority of its Members, I have had only a few hours to consider the amendment, its implications, and what may result from considering it. There are three aspects. The first is the impact and the effect of the clause in Scotland. It is only in the past week or so that the Government have been subjected to a barrage of criticism because of their lack of consideration for the Scottish people.

Dare I say that this is yet another example of the unfortunate way in which the Government appear not to consider the situation in Scotland. It was quite reasonable for your Lordships' House, in prior deliberations on this Bill, to have thought that most students go to university at the age of 18, so credit for minors was not really a problem. In thinking that, which is the reality applicable to the majority of English and Welsh students, it does not apply in Scotland.

One of the interesting questions that we must pose to the Government is this: how many students in England, Wales and Scotland will be affected by the provision of offering credit to minors? The answer to that will be very salutary. No doubt Scottish Members of another place will be very interested in the answer to that question.

The second aspect that we need to consider is the economic problems that this country faces with the explosion of credit over the past year or two. Here we are effectively promoting the concept that more credit: to students is a good thing. I am not sure that is the right message that we should be sending to minors in the context of today's economic situation.

The third aspect that I wish to raise in the context of credit is the activities of loan sharks. One of the interesting aspects of the Government's attitude to this Bill is that they consider credit to be of benefit. I am sure that there is a large section of the population which would consider a loan, whether enforced or not, to be a liability rather than an asset. The amendment highlights the problem as it applies to minors.

We need to take very careful notice of the implications of the amendment. As I have said, one of the difficulties with the type of debate that we are having on what is in effect a new subject in relation to this Bill is that I cannot sit down, wait for the Government to reply to some of the questions I have raised, and then rise again at some later stage in the debate to ask further questions. I make this final plea to the Government to find some mechanism by which in a Committee of the Whole House this subject can be discussed with the justice it deserves.

Lord Butterworth

My Lords, I should like to remind the House of the words of the Consumer Credit Act 1974. Section 50 (1) states: A person commits an offence who, with a view to financial gain, sends to a minor any document inviting him to … borrow money". Under the Bill it is possible that in times of inflation the company may recover more in cash than it has lent, although in real terms graduates will repay only what they borrow. Many appeals have been made to us tonight to delay a decision on the matter in order that we may reflect and in order that we may achieve certainty. But this matter will ultimately be decided by the judges in the courts. No amount of reflection here will change that.

There is a problem and it is a technical one. When the Consumer Credit Act was passed in 1974 there were not the problems of the Bill that we have before us tonight. Therefore it is important that we should separate the two. We should make it quite clear, ex abundanti cautelâ, that what we are doing tonight does not and was never intended to fall within the words that I have quoted. Who can say that what we are producing in the Bill is a person, who, with a view to financial gain, sends to a minor any document"? These two points must be kept separate. If we delay taking a decision we shall be no nearer to getting to the essence of the problem. Ultimately, the decision will be taken by the courts. Therefore we must make it clear that the Bill should not fall within the terms of the Consumer Credit Act.

Baroness Llewelyn-Davies of Hastoe

My Lords, very briefly, I should like to support the point made by my noble friend Lord Peston about the other place. The Bill has been right through another place, but there has been no consideration of the important point raised by the noble Earl about the Consumer Credit Act. It is the duty of the Opposition to go into the matter not at short notice, but in detail.

We on these Benches, and I am sure noble Lords on the Liberal Democratic Benches, sympathise with the Government in their quite obvious difficulty on this point. But the Government should sympathise with the very great difficulty of the Opposition in dealing with the matter. We conceive it to be our duty to do exactly that. The noble Baroness, Lady Young, has always treated this House with great impartiality and fairness, but she rather glossed over how unusual it is that on a Bill of this kind a point of such importance should never have been considered by another place. We are quite justified in delaying it on an important new point if we can, though we probably cannot.

I should like to say— and noble Lords will understand this— that it is not up to the noble Lord, Lord Jenkin, to describe the serious points made by my noble friend Lord Peston as absurd. They were not absurd and it was his duty to make them.

12 midnight

Lord Renton

My Lords, I do not understand what has been said about the Bill being rushed through. It was brought from the House of Commons on 20th February— that is, nearly five weeks ago. It spent about the same amount of time in the other place. The point that we are now considering is really rather a narrow one to understand which does not require a great deal of study or research. As I see it, the issue is simply this. The reality of the situation is that the Bill will receive Royal Assent and there will be student loans. If there are to be student loans it would be unjust to deprive that very small minority of students who are under the age of 18 years of the advantages of the loans scheme.

However, they will be minors. In our law we have various provisions for the protection of minors. For example, in our bankruptcy law we have, very wisely, certain protection for minors. If noble Lords will be kind enough to bear with me for a moment, I need not even refer them to the provisions contained in Schedule 2 because it is clearly stated in the Explanatory and Financial Memorandum to the Bill that the schedule, among other things, modifies bankruptcy law by excluding sums advanced by way of loan and the corresponding debt from a student borrower's bankruptcy". That applies to minors and to those who are older. If we are making that provision to enable minors to benefit from the provisions of the Bill, it is surely only common sense and fair that we should equally make provision so that they are not deprived of the advantage by the terms of the Consumer Credit Act 1974 on the very narrow point which is covered by the amendment. It has been said that a noble Lord opposite made heavy weather of this point. I fear that that is what has been happening so far as concerns the opposition to this simple amendment.

Lord Belstead

My Lords, perhaps I may intervene to say a brief word before any other noble Lord rises to speak and before my noble friend Lord Caithness replies briefly to this exchange. I concede and accept that there is a point of criticism here; namely, the lateness with which Ministers brought forward this amendment at the Report stage of the Bill in yours Lordships' House. Indeed, in my capacity not only as Leader of the House but also as Leader on this side of the House, I apologise for the fact that this is so.

I echo what my noble friend Lord Jenkin of Roding said. It is an amendment which does not carry portentous consequences. My noble friend Lord Caithness said that it was a technical amendment for the avoidance of doubt. Once again, I must put it squarely to your Lordships that, complicated or no— and we have heard speeches in the past quarter of an hour stating that it is not as complicated as has been made out— my noble friend the Government Chief Whip and I made every effort to ensure that noble Lords opposite and those on the Liberal Democrat Benches knew immediately it was decided to put the amendment down that that was our intention. That was on Thursday of last week. Therefore there has been time for noble Lords to acquaint themselves with the contents of the amendment and to take advice.

The reason I have risen to my feet to speak is that after QuestionTime today when the noble Lord the Leader of the Opposition rose to intervene, I made two points. Despite the very strong representations which the noble Lord, Lord Cledwyn, made, I refused to agree to give any undertaking not to proceed with the amendment this evening unless there was a consensus that the House ought not to do so. I am sorry that there is no such consensus. That is quite clear.

The second thing that I said was that the Government would not attempt to bulldoze the amendment through. In other words, we would not seek to force through a vote in the teeth of a determined opposition. About two-and-a-half hours ago there were, as I know to my cost, 100 Labour Peers in your Lordships' House— I am sorry, 98 Opposition Peers, both Labour and Liberal Democrat, as well as the Cross-Benchers. There are at the moment two Labour Back-Benchers and no Back-Benchers on the Liberal Democrat Benches opposite. I have to say to the House that if that is what noble Lords opposite think about the amendment, if that is the importance that they attach to the amendment, then the moment has come to see what the House thinks of it.

Unless something new arises which any fair-minded person thinks ought to change the course of the debate, after noble Lords have had a final say and my noble friend Lord Caithness has replied, I intend to divide the House.

Lord Cledwyn of Penrhos

My Lords, I had not intended to intervene at this stage. However, in view of the remarks of the noble Lord, I have no alternative. I am both dismayed and disappointed by what he has said. How he, with all his experience, can say that he would expect a consensus in this House at five minutes past 12 on a matter of this importance is inconceivable. I am extremely disappointed by his reaction.

What has happened is that some noble Lords opposite have had the time to think about this and have decided that they will oppose our point of view and seek to minimise the importance of the entire matter. That was the objective of the noble Lords, Lord Jenkin of Roding and Lord Renton, as well as the noble Baroness, Lady Young.

The fact of the matter— and of this I am perfectly confident— is that the Government are guilty of a grave defect in producing … I should be extremely grateful to the Government Chief Whip if he could sit still for three minutes. It would be most helpful to this side of the House if he did so. The grave defect is that at the very last moment in the consideration of the Bill they have produced an amendment of considerable importance. The noble Lord, Lord Jenkin of Roding, sought to say that this was a trivial and technical amendment of no great importance. It affects as many as 100,000 students, most of them in Scotland. Is that trivial? Is that technical? The House knows perfectly well that that is not the case. The noble Lord, Lord Beloff, on the Government side, was an expert in these matters. He made his concern plain during his impressive speech earlier on, as did the noble Lord, Lord Nugent. Noble Lords must not think that they can get away with that even at this time of the night.

These questions were debated in Committee upstairs in another place. There was a good deal of discussion about Scottish students. But at that stage Ministers were not aware of the defect that existed in the Bill and the mistake that had been made. They are now saying that we should accept their view that this is of no importance, at nearly 10 minutes past 12 in the morning.

I think it is unworthy of Ministers opposite and of those who have argued along those lines that they should seek to dismiss the matter at this stage. It is the duty of the Opposition to scrutinise these matters, to draw deficiencies to the attention of the House and to seek clarification. Proper clarification we have not had. I shall explain to the House why not. I think that there are serious legal implications here that have not been adequately discussed or analysed. We have not had a legal opinion from the Government and I must warn Ministers that there could well be further difficulties of a legal character arising from the 1974 Act and affecting many students. I again plead with noble Lords opposite not to take a final view on the matter this evening. I make that plea in no party spirit at all but out of a sense of duty. If we are anything, we are a revising Chamber and it is our duty to ensure that Bills leave this House in as constructive and final a state as we can ensure. If we proceed on the grounds that this is an unimportant, technical and trivial matter and that it does not deserve further consideration, the responsibility will lie with noble Lords opposite.

The Earl of Caithness

My Lords, we have had a short, interesting and useful debate which has covered most of the points involved. I shall therefore deal with the matters of concern. I believe that the important point was encompassed by the question posed by the noble Earl, Lord Russell, who said that he was not clear what the effect of not having the amendment would be and that if he was clear on that he could decide whether to support the amendment.

Let me make it absolutely clear that the effect of not having the amendment could be that the scheme would be unworkable. The reason for that is that the courts might consider that the company was acting with a. view to financial gain out of the loans because in cash if not in real terms it would expect to recover more from the individual student than it lent. On the other hand, the courts might recognise that in the exceptional circumstances of the company and of these loans no question of a gain accruing to the company arose.

The noble Lord, Lord Peston, said, in what I thought was an unconvincing plea not only to defer the matter to another stage but also as a means to delay the Bill, that the position was uncertain. The noble Lord and the noble Earl have been looking for that opportunity for some time. However, there is no better reason for the amendment than the argument that the noble Lord, Lord Peston, advanced. That is why it is needed; its purpose is to avoid doubt.

The noble Lord, Lord Peston, also asked why we called this a technical amendment. It is a technical amendment in as much as it makes clear on the face of the Bill what most people would in any case believe to be the true position; namely, that the company will not be operating with a view to financial gain out of the loans. Most people would reach that conclusion by considering two questions: first, will the company recover in real terms more than it lent? The answer here is an unequivocal no. It is quite the reverse. Some borrowers will have their loans cancelled. Therefore in total the company will recover less in real terms than it has lent. Secondly, will the company retain for itself any of the money it recovers? Here again the answer is an unequivocal no. It will return all the money recovered to the government of the day. However, as my noble friend Lord Butterworth said, the matter will be for the courts to decide at the end of the day. That is; why we must make the position absolutely clear an this stage.

The noble Earl, Lord Russell, asked whether loans to minors were enforceable. Loans to minors in Scotland will probably be enforceable under Scottish law. Elsewhere the position is that such a loan will probably not be enforceable unless the minor ratifies it on reaching his majority, as it is not made for the purchase of necessaries. Where appropriate, we shall ask minors who have received loans to ratify them on reaching their majority. If they decline to do so, no action will be taken against them but they will not be entitled to receive any further loans under the scheme. That strikes an appropriate balance between the rights of the student and those of the taxpayer.

I had hoped that the noble Lord, Lord Monkswell, had read my words before he took his place in the Chamber. I was interested to note that he takes part in our proceedings now when he has had plenty of opportunity to do so before now. The noble Lord said that we were not taking account of what had happened in Scotland. That is utter rubbish. My right honourable friend the Secretary of State has had the benefit of a Scottish education, as has the noble Lord, Lord Addington. I would ask the noble Lord, Lord Addington, how many people at Aberdeen University were 17 year-olds. The noble Lord has been talking quite a lot about loans and he has been involved in all the stages of the Bill. He knows full well, as does anyone who has looked at this matter, that loans to 17 year-olds are very much on the cards. If the noble Lord had any doubts, he should have raised them at an earlier stage. The noble Lord, Lord Cledwyn of Penrhos, said 100,000 students are affected. How are they affected by this Bill?

Lord Cledwyn of Penrhos

My Lords, they are affected because they are minors.

12.15 a.m.

The Earl of Caithness

No, my Lords, not 100,000; it is 8,514. It is nowhere near 100,000. Of that figure, in universities in England there are 1,209. In Wales— the Kingdom of which the noble Lord is so proud, and rightly so— the number is 52; in Scotland it is 3,304. In polytechnics and colleges in England it is 710, in Wales it is eight, and in Scotland it is 3,231. In Scotland 6,535 students are minors. Is the noble Lord, Lord Addington, saying there was none at Aberdeen?

Lord Addington

My Lords, I was always aware that there were students who were minors at the universities in Scotland. The nature of the system is that there is a higher percentage of home students. I never assumed that the Government would have overlooked something like that.

The Earl of Caithness

My Lords, we have not overlooked it. The noble Lord has overlooked it. What we are seeking to do—

Baroness Seear

My Lords, it is slightly odd that the Minister should accuse my noble friend of having overlooked something when the whole point of this amendment, as I understand it, is an admission that the Government have overlooked it, otherwise why is this amendment here except to put right that the Government have overlooked it? The noble Earl may have some reason for complaint about this debate, but it certainly cannot be that.

We have considerable reason for complaint, for this matter has been delayed until now when we should have discussed it and dealt with it much earlier in the day when we raised it after Question Time. We have waited until the Government have been able to get a full House at last, with the result that we are debating it at a considerable disadvantage at a quarter past twelve.

The Earl of Caithness

My Lords, I rephrase what I said. The noble Lord, Lord Addington, appears to have overlooked it. He admits that there were 17 year-olds at Aberdeen University. If there was any doubt, if there had been anything that I said that would not mean that minors would be getting loans, I think that that would have been taken up by your Lordships. My noble friend the Leader of the House has more than fulfilled the obligations that he gave to the House this afternoon. I commend the amendment.

Earl Russell

My Lords, before the noble Earl sits down, can he help us a little further? Are there any other provisions concerning minors which may come up and ambush this Bill in the future? If it is necessary for 17 year-olds to ratify the loan on reaching their majority, can he tell us whether any procedure has yet been devised to make sure that they do so?

The Earl of Caithness

My Lords, as I understand it, a procedure has been devised. So far as concerns the first question, I am not aware of anything else.

On Question, amendment agreed to.

Earl Russell moved Amendment No. 50:

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: My Lords, this amendment deals with the status and obligations of referees as laid down under the Government's leaflet. I should like to thank the noble Earl for a letter that he sent to me today about this point. I found that letter distinctly helpful. What I hope to probe a little further is how helpful? The question of referees being used as an extra law enforcement agency— being used, in effect, to shop those who default on their loans— concerned a good many of us when this matter was discussed at an earlier stage of the Bill.

When we discussed the subject in Committee, the noble Earl was quite ready to defend that form of usage. He now tells me— I hope he will spell this out a little further to the House as he did in his letter to me— that what concerns him is simply the use of referees to provide addresses when the Student Loans Company has by sheer accident lost touch with the people with whom it has to make contact. That sounds very different. I am trying to find out whether that is a difference of substance or a case of the noble Earl having achieved better presentation and not having changed the substance all that much. That is what will determine whether those who act as referees will see the process as a breach of trust.

The point about trust is that the referee has the information which makes him useful to the Student Loans Company precisely because he is trusted by the borrower and therefore because the borrower, having that trust, will make the information available to him. If he should abuse that trust by acting against the borrower's interest, he would not expect to receive any further information. Thus, if referees are to be used in effect as a kind of extra law enforcement agency, they will find that, if the people concerned want to default, they will break contact with their referees.

If those referees are parents, for example, as the noble Earl suggested in Committee, that might be a cause of double grief. I do not quite see how one can draw a line by which the noble Earl's procedure for simply giving information, which is acceptable, crosses over a line and becomes a procedure for shopping, for getting into trouble and for law enforcement, which would be a breach of trust. I do not see how one separates one thing from another and I should be grateful for a little further explanation.

Baroness Blackstone

My Lords, like the noble Earl, Lord Russell, I have seen the letter that the noble Earl, Lord Caithness, sent to my noble friend Lord Peston, which I imagine is identical to the letter that he sent to the noble Earl. I am a little puzzled by one or two points in the letter, but I should like to say that I am grateful for the explanation that referees will not be asked to guarantee the loan in any way. That is a step forward.

However, I understand that it is now intended that referees should be used to check up on the addresses of students or ex-students who cannot be contacted directly by the Student Loans Company. For that purpose, I gather it is considered appropriate that one referee should be a relative, probably a parent, and that the second referee should be a good friend.

I am not utterly convinced that all parents will be willing to provide references. Many will, but some will not. Nor am I utterly convinced that all parents will be willing to let the Student Loans Company know where their children are after they have graduated, possibly abroad, particularly if they think that that could lead to the imposition of the various penalties that are set out in the rules and regulations about the operation of the scheme.

On the question of good friends, I had many good friends when I was 18 who, unfortunately and regrettably, were no longer good friends by the time I was 25, not because I had fallen out with them, but simply because one loses touch with friends that one has at the age of 18 as one moves on. I am sure that many other noble Lords will have had the same experience.

Moreover, it seems to me that a good friend, as opposed to a friend, might well feel that it is inappropriate to let the Student Loans Company know where his or her good friend is if the company is seeking to catch up with someone who is likely to default on a loan.

As a result, I cannot quite see the purpose of continuing with a system of referees of this kind now that we know that we shall not use them as guarantors. I should be grateful if the noble Baroness when speaking for the Government can elucidate a little further and say whether anything will be achieved by this amendment.

Baroness David

My Lords, perhaps I may ask one question. Will the under-18s have to have a guarantor? I understand that when under-18s borrow from banks they have to have a guarantor.

Baroness Blatch

My Lords, we had a full and illuminating debate on this amendment at Committee stage and I believe that it was explained to the Committee's satisfaction that there was no question of referees being asked to act as guarantors for a loan taken out by a student under the scheme. I think that that point has been taken by the noble Lords who have so far spoken in the debate.

Noble Lords were also concerned about the general principle guiding the use of referees within the administration of the loans scheme and we agreed to look at this matter again and bring noble Lords' concerns to the attention of my right honourable friend.

It is quite true that we intend that applicants for loans under the scheme should be required to provide the names, addresses and telephone numbers of two referees, one of whom will be related to the applicant. The reason for seeking that information is straightforward and entirely proper. It is that students generally leave their parents' home at the same time as they leave their college after completing their course. In certain cases, they may omit to inform the Student Loans Company of their new address. The company will therefore need to be able to trace those borrowers through their referees. It is in the interests of the borrower as well as those of the company and the scheme that this should happen. The company will ask referees to provide only borrowers' up-to-date addresses. It is important to keep on emphasising that referees will not be held liable for the loan.

If the company does not have the borrower's current address, it cannot send him his annual statement and it cannot contact him if he falls into default with repayments. In cases of default, it will be important to establish contact quickly. Delay will merely increase the size of the outstanding arrears and make the borrower's position more difficult. Asking for referees is therefore a safeguard for the student, for the company, and, crucially, for the taxpayer.

We shall ensure that it is made clear to students in the guidance notes provided with the application form that students must check with the persons whom they nominate as referees that they are content for their names to be given for the purposes proposed. I think that that was a point raised by the noble Earl, Lord Russell, at Committee stage.

The scheme provides top-up loans to students under very generous conditions. Not only will the borrower not be charged a real rate of interest on his loan, but there are also generous provisions entitling him in some circumstances to defer his repayments or to have his loan cancelled. The company should have all lawful options at its disposal when seeking to recover loans that are in default. Again, it is important to remember that default in payment places an unfair burden on the taxpayer and the cost of the scheme.

The noble Baroness, Lady David, asked a specific question about how this provision applies to the under-18s. I do not have that specific information to hand and perhaps I could write to her. I understand it to be the case that no guarantor would be required for under-18s.

I am not absolutely certain what is the fear behind the amendment. Liability is not afforded to the referees and the purpose of the referees is simply to gain addresses when young people move on from one address to another. That is the normal practice in all other forms of business transaction.

With the assurance that has been given in that reply, I hope that the noble Earl will feel able to withdraw his amendment.

Earl Russell

My Lords, I thank the noble Baroness for that reply. I must confess that I am still a little confused. I do not quite see how the institution of the referee as described adds to the fact that parents normally forward their children's post after they have left home. Simply conveying the information to the child, or telling the child that he or she ought to pay the loan, and putting pressure on him to do so, is something that one might reasonably expect from any parent.

I am not clear whether this issue will cross the line where the parent, referee, or whoever, becomes an agent of law enforcement. I am therefore still unhappy about the matter although not so unhappy as I was at Committee stage. However, I am glad to see some signs of new thinking. In the hope that there may be opportunity for further consultation later, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

12.30 a.m.

The Earl of Caithness moved Amendment No. 51:

Page 4, line 51, at end insert—

("Restriction on disclosure of information

3A.— (I) No person or body having by virtue of paragraph 3 above the function of making and recovering loans shall provide or make available to anyone else (whether for consideration or not) any information held for the purpose of discharging those functions if the information is to be used for soliciting custom for goods or services.

(2) As respects information constituting personal data for the purposes of the Data Protection Act 1984 sub-paragraph (1) above is without prejudice to the requirements of that Act but applies irrespective to any consent given for the purposes of that Act by the person to whom the information relates.").

The noble Lord said: My Lords, the Government have previously taken the view that it would not be appropriate to impose restrictions on the use of information by the Student Loans Company, additional to those imposed on other companies operating in the private sector. Our belief has been that the company should operate on a par with other companies and should be treated neither more nor less generously in legislation.

However, during the debate on data protection in the Committee stage of the Bill last Monday, strong opinions were expressed and convincing arguments made on both sides of your Lordships' House, for the company to do more than merely satisfy the minimum requirements of the Data Protection Act. I undertook to consider this question. The Government wish industry and commerce to be in no doubt about their commitment to the protection of personal information. We therefore now feel it is right to impose certain additional restrictions on the use of information by the company.

In the debate earlier this evening on Amendment No. 25, I informed the House that this amendment would prevent the company from providing or making available to a third party (whether for sale or otherwise) any information that it holds for the purpose of discharging its functions under the scheme, if the information is to be used for soliciting custom for goods or services. The amendment would apply in respect of both electronically and manually held information.

The amendment would not prevent the disclosure of information to third parties where the information will not be used for soliciting custom for goods or services. In particular, the company must be able to disclose information to credit reference agencies and debt collection agencies about a borrower who has defaulted on repayments. When taking out a loan, applicants will be told that the company reserves the right to disclose personal information in such circumstances. Such disclosure, in respect of electronically held data, would of course be subject to the provisions of the Data Protection Act.

The amendment represents a significant additional restriction on the use of information by the company, following the concern expressed by certain of your Lordships during Committee stage. I hope that your Lordships will therefore welcome it as evidence that the Government are fully committed to the protection of personal data and to the encouragement of good practice.

I commend this amendment to your Lordships. I beg to move.

Baroness Blackstone

My Lords, the Minister may be surprised but I welcome the amendment. I am very grateful to him for bringing it forward. There are a couple of questions that I should like to put to him.

First, I am not entirely clear whether the amendment would stop the Student Loans Company instituting its own mail order business and soliciting custom from graduates if it chose to do so. I should be grateful for a reply on that.

Secondly, I am not clear whether the Bill might benefit from a definition of "personal data" or whether the definition in the Data Protection Act would apply. It would be extremely helpful if the noble Earl could answer those questions.

Earl Russell

My Lords, I should like to thank the noble Earl very warmly for what he said in introducing the amendment. I also have to say to the House that, to my great regret, I shall not be able to be at Third Reading since I shall be in America. Under those circumstances I hope that the House will forgive me for saying a very few words of what I might have said on the Motion, That the Bill do now pass.

I should like to thank the noble Earl and the noble Baroness, Lady Blatch, for the way in which they have handled the Bill. We have had experience of the noble Earl before, and he increased his standing with his handling of the Local Government Finance Bill. Anyone who can do that deserves a very great deal of credit. It is the first time that I have had the privilege of debating opposite the noble Baroness. She seems to me to be very much of the same school. She and the noble Earl are good soldiers. They fight their cause hard. They fight it well, and my liking for them as well as my respect for them has increased during the progress of the Bill. I thank them very much.

I shall not enlarge, the noble Lord, Lord Denham, will doubtless be delighted to hear, on the Bill itself. I only say that I hope that it will work. I shall do my best in so far as it falls to me to try to make it work. However, I hope that the Government will not give us a Bill of quite this sort again.

The amendment seems to me to meet the point about the security of the mailing list of the Student Loans Company. In that way it represents a substantial concession and I am very pleased to welcome it.

The Earl of Caithness

My Lords, perhaps I may deal first with the remarks of the noble Earl, Lord Russell. We shall miss him at Third Reading. I am extremely grateful for his kind remarks, and particularly for the role that he will play in his institution if the Bill becomes an Act, which it has not done yet. I am sure that we all hope vehemently that it will do so as soon as possible. I know that the noble Earl will read with his usual diligence the Official Report of our proceedings at Third Reading. If he has any concerns between now and the time when he goes to America, my door is open and I am willing to talk to the noble Earl.

The noble Baroness, Lady Blackstone, raised two points. Regarding the giving of personal data, the definition of personal data is contained in the Data Protection Act and is covered by the amendment. I missed the other point, but perhaps I may look at that in the cold light of day and give her an answer.

On Question, amendment agreed to.

[Amendments Nos. 52 and 53 not moved.]

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

The Earl of Caithness moved Amendment No. 54:

Page 2, line 38, after ("2") insert ("and, as respects institutions in Northern Ireland, the power to make regulations under paragraph 2 of Schedule 2").

The noble Earl said: My Lords, Amendments No. 54 was spoken to with Amendment No. 35.

As this is the last amendment, I should like to thank all your Lordships for your great courtesy and help. I should also particularly like to thank the officials, since this is the third night on which we have kept them rather later than I had hoped. I beg to move.

On Question, amendment agreed to.