HL Deb 04 December 1995 vol 567 cc816-9

2.42 p.m.

Lord Morris of Castle Morris asked Her Majesty's Government:

Whether they are satisfied with the performance of the Student Loans Company.

The Minister of State, Department for Education and Employment (Lord Henley)

My Lords, yes.

The National Audit Office report published on 24th November this year showed that, following certain difficulties last year, the company is now operating well.

Lord Castle of Castle Morris

My Lords, I am obliged to the Minister for that brief Answer. Is he aware that Sir Eric Ash, to whom most of the credit for rescuing the Student Loans Company must go, believes, and has stated, that the biggest problem with student loans is their repayment mechanism? That is also the opinion of the Committee of Vice-Chancellors and Principals, the Higher Education Careers Service Unit and the students. Why, then, do the Government do nothing about repayment but bring forward a Bill to extend nothing but choice, which nobody wants?

Lord Henley

My Lords, the Bill that we shall be bringing forward is another matter, but that will extend choice, diversity and competition and bring gains for the students accordingly. I reject the noble Lord's accusation that we do nothing about repayments. The Student Loans Company has collected some 95 per cent. of all the moneys due, and I believe that is a very creditable performance.

Lord Beloff

My Lords, does my noble friend recollect that when the student loans scheme first came before your Lordships' House in 1988, those of us with close connections with universities urged the Government to replace it by a scheme in which repayment would come through taxation, as in Australia? That scheme works. This scheme clearly causes hardship. When we have a Commonwealth, why do we not take advantage of the experience of countries in the Commonwealth which make experiments we might well follow?

Lord Henley

My Lords, I do not accept my noble friend's accusation that the scheme is not working. It would be possible to look at alternative schemes and, as my noble friend suggests, one could look at schemes which use either the tax or national insurance system. However, I have to say to my noble friend that I believe that would impose extra and unnecessary burdens on employers and would introduce unnecessary complication. It also possibly goes against the general principle that the tax and national insurance systems should not be used for debt collecting.

Baroness David

My Lords, in its report of 24th November the National Audit Office says that one in eight students with a government loan is unlikely ever to repay it, and that £1.3 billion is now outstanding. Why is that so, and what steps do the Government propose to take to recover the £142 million which the National Audit Office says will not be repaid? We were told when the 1990 Bill was before us that we would see the start of savings in the year 2015. Is that in any way a realistic date since, as of last March, 45 per cent. of all borrowers had had their grants deferred?

Lord Henley

My Lords, it was never the Government's intention that we should recover every last penny of money paid out in loans. It was our intention that the money should be recovered only from those whose incomes reached at least 85 per cent. of national average income. There will always be some who do not reach that figure or who die before the 25 years expire. We shall continue to try to reclaim those moneys which are due to us. As I made clear in my original Answer, we believe that the performance of the Student Loans Company so far has been very creditable. It has reclaimed some 95 per cent. of the moneys that are now due to it.

Baroness Perry of Southwark

My Lords, is my noble friend aware that, after its initial difficulties, the loan scheme is now deeply appreciated by responsible students, who have every intention of repaying their loans? Is he also aware that students from other countries who see the service we offer to students here in the United Kingdom regard it as a Rolls-Royce opportunity and are deeply envious of the opportunities that we give?

Lord Henley

My Lords, I am most grateful for my noble friend's comments. My noble friend is quite right to underline the success of the scheme. The success of the scheme is one of the factors which has allowed us to expand higher education to its highest ever level. Now one in three of all students go on to higher education. Those who oppose the scheme or other such schemes have to address the question of just how higher education is to be funded. We believe it is right that those who are the direct and principal beneficiaries of higher education should also make some contribution to it.

Lord Morris of Castle Morris

My Lords, if the Student Loans Company is now so efficient, why are the Government coercing unwilling banks and building societies into providing competitive schemes when there is no evidence whatever that students want competitive schemes?

Lord Henley

My Lords, we are not coercing banks and building societies into the new scheme. We shall invite expressions of interest from all banks, and I am sure that they will come forward. As I tried to make clear to the noble Lord earlier, and as I made clear on another occasion when I spoke in the debate on the Queen's Speech, we believe that it is important to extend choice and diversity in the loan scheme to all students. We think that all students will benefit. I believe that financial institutions themselves will be able to put forward packages which will be of interest to those students.

Lord Walton of Detchant

My Lords, is the Minister aware that the National Commission on Education and the Committee of Vice-Chancellors and Principals have suggested a mechanism of repayment through the tax or national insurance system different in some respects from the Australian graduate tax, which is more of a lifetime tax? The proposals they have made relate to actual repayment of the sum borrowed once the individual has reached a certain level of income. Will the Government examine those proposals carefully?

Lord Henley

My Lords, I believe that I addressed that question in answering my noble friend Lord Beloff. I do not believe that the tax and national insurance systems are suitable vehicles for debt collection.

Baroness David

My Lords, is it not a fact that the reason so much money is owing and is likely to continue to be owed is the Treasury's objection to the PSBR being increased? Is that not why the scheme is being introduced?

Lord Henley

My Lords, I do not believe that excessive amounts are still owed. As I made clear, I believe that the Student Loans Company is performing well. I made it clear that of moneys due to be repaid, some 95 per cent. are being collected at the moment.

Lord Annan

My Lords, the noble Baroness may have said that there is great satisfaction among students; it is a very different view from that of vice-chancellors and principals. Will the noble Lord put his weight behind having a discussion with the committee? The committee has been trying to encourage the Government to discuss the matter for some time. The Government refuse to do so. Surely the time has come when there might be some exchange of views.

Lord Henley

My Lords, either I or my right honourable friend might be prepared to consider such applications for further discussions. However, I do not believe that now is the moment drastically to change the scheme. We shall still have the Student Loans Company. We shall also have the availability of private sector banks offering loans. I do not believe that there is a case at present either to extend the scheme or for trying to make use either of a tax or the national insurance system for the reasons that I set out earlier.