HL Deb 01 April 1996 vol 571 cc72-87

7.10 p.m.

Read a third time.

Baroness Farrington of Ribbleton moved Amendment No. 1: After Clause 1, insert the following new clause— REFUSAL OF STUDENT LOAN NOT REFUSAL OF CREDIT (". A refusal to an eligible student of a private sector student loan shall not be regarded as a refusal of credit for any purpose and may not be required to be declared in any other application for credit.").

The noble Baroness said: My Lords, the Minister has said on many occasions during the passage of the Bill that the private sector must be free to pick and choose which students to lend money to. Surely it is the case that, unlike other forms of applications for loans from the private sector, the institutions envisaged under the Bill will be receiving public subsidy. Unlike an application for a loan for a car or for a personal loan, an application in this case may be turned down because of the institution the student wishes to attend or the course he wishes to follow.

I do not intend to raise all the issues mentioned during previous debates. Suffice it to say, this amendment does not seek to challenge the right of the private sector to refuse to give loans. However, the amendment would at least guarantee student applicants protection from possible future discrimination in their work or private finance. I beg to move.

Lord Addington

My Lords, the amendment says only that if someone is refused a subsidised loan for his education from a privately owned company, the company involved will have to say why. It is not that onerous a statement. A refusal of credit may follow someone for the rest of his life. The student has not created the situation—it is the course he or she has chosen to follow. An institution may decide that graduates in English are not a good credit risk. However, someone who passes the examinations for a degree in English well and who acquires a good job may become a good credit risk whereas someone who takes a law course, passes very badly and becomes a very bad lawyer may become a bad credit risk. Surely, when one is taking account of variables and parental income, that should not be held against the student.

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

My Lords, we return to an amendment we discussed at earlier stages. I resisted those similar, if not identical, amendments for good reasons. I am still not persuaded of the need for such an amendment.

The amendment, if agreed, would have consequences which go far beyond the business of student loans. I simply do not think it would be practical. It is another over-regulatory amendment. It would not only regulate the private lenders of student loans but private lenders of all kinds. That is clear from the first part of the amendment which says: A refusal … of a private sector student loan shall not be regarded as a refusal of credit for any purpose". That would affect private lenders of any kind.

Financial institutions, when considering applications for credit of any kind, must be allowed the freedom to make reasonable, commercially sound decisions. We could not expect them to make special provision for students on the basis of an earlier application for credit, perhaps dating back many years, which probably involved a different financial institution.

We do not lay down rules on what banks and building societies can and cannot do when considering applications for current accounts and overdrafts. We do not lay down rules on whether or not information about those applications, which are not always successful, should be disclosed when the student applies for credit in the future. There is simply no precedent for the provisions which the amendment demands.

The noble Baroness again puts forward the argument, with which I believe I dealt at an earlier stage, that public subsidy is involved in the loans and therefore different treatment applies. I accept that there is public subsidy but it is only a small part of what we are talking about. The major part of the risk is still with the private sector institutions and that is one of the main purposes behind the Bill. It is the banks themselves which have to bear that risk. It is right that they should be able to make their own decisions accordingly.

The noble Lord, Lord Addington, said that the information will follow the student for the rest of his or her working life. It is wrong to assume that information about past applications—perhaps many years in the past—will necessarily be of any use or interest to future prospective lenders. The economic climate is always changing and as it does lenders' propensity to lend will change. The applicant's own circumstances may change. He may go from being a not terribly well off student reading English, as I think the noble Lord put it, to being a high flying merchant banker, or even, dare I say it, a lawyer. It is simply naïve to imagine that a mortgage application from a creditworthy young professional will be turned down because he or she was refused a student loan years earlier.

The financial institutions choose their methods of assessing applications and their own lending policies. Those methods and policies may change and will certainly differ between institutions. They know how much their policies vary and that is part of the financial market. Nevertheless, if any financial institution wishes to have a complete credit history before extending credit we believe that it should be able to have it. To refuse that would be unfair and, as I said earlier, over-regulatory. For that reason I hope I can persuade the noble Baroness that the amendment is unnecessary. I trust that she will not feel it necessary to press it this evening.

Baroness Farrington of Ribbleton

My Lords, in this Bill we are dealing with an unusual set of circumstances. As the noble Lord, Lord Beloff, said, we are dealing with a situation of paying fishmongers to sell fish. Subsidised loans are not in the same category as private sector loans. The Government believe that there will not necessarily be any connection between a refusal of an application for credit and what will happen in the future. We remain highly dissatisfied with the Government's position. The Minister leaves me no alternative but to divide the House.

7.18 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 59; Not-Contents, 74.

Division No. 2
CONTENTS
Addington, L. [Teller.] Lawrence, L.
Berkeley, L. Lockwood, B.
Blackstone, B. Lovell-Davis, L.
Blyth, L. McIntosh of Haringey, L.
Borrie, L. Mackie of Benshie, L.
Cocks of Hartcliffe, L. McNally, L.
Craigavon, V. Masham of Ilton, B.
David, B. Merlyn-Rees, L.
Dean of Thornton-le-Fylde, B. Meston, L.
Desai, L. Nicol, B.
Donoughue, L. Palmer, L.
Dormand of Easington, L. Ponsonby of Shulbrede, L.
Dubs, L. Prys-Davies, L.
Ezra, L. Rea, L.
Falkland, V. Richard, L.
Farrington of Ribbleton, B. Rodgers of Quarry Bank, L.
Geraint, L. Russell, E.
Graham of Edmonton, L. Seear, B.
Grenfell, L. Sefton of Garston, L.
Hamwee, B. Stoddart of Swindon, L.
Harris of Greenwich, L. Taylor of Blackburn, L.
Haskel, L. [Teller.] Taylor of Gryfe, L.
Hilton of Eggardon, B. Tonypandy, V.
Howie of Troon, L. Tordoff, L.
Jay of Paddington, B. White, B.
Jenkins of Putney, L. Williams of Crosby, B.
Judd, L. Williams of Elvel, L.
Kennet, L. Williams of Mostyn, L.
Kilbracken, L. Winchilsea and Nottingham, E
NOT-CONTENTS
Abinger, L. Hogg, B.
Addison, V. HolmPatrick, L.
Aldington, L. Hothfield, L.
Alexander of Tunis, E Howe, E
Blaker, L. Inglewood, L.
Blatch, B. Jenkin of Roding, L.
Bowness, L. Kimball, L.
Brougham and Vaux, L. Kitchener, E.
Burnham, L. Leigh, L.
Caithness, E. Long, V.
Carnegy of Lour, B. Lucas, L.
Chalker of Wallasey, B. Lucas of Chilworth, L.
Chesham, L. [Teller.] Lyell, L.
Cochrane of Cults, L. McColl of Dulwich, L.
Courtown, E Mackay of Ardbrecknish, L.
Cranborne, V. [Lord Privy Seal] Massereene and Ferrard, V.
Cumberlege, B. Mountevans, L.
Davidson, V. Napier and Ettrick, L.
Dean of Harptree, L. Norfolk, D.
Denham, L. O'Cathain, B.
Downshire, M. Prior, L.
Dundonald, E. Rawlings, B.
Eden of Winton, L. Rennell, L.
Elton, L. Renton, L.
Ferrers, E. St. Davies, V.
Fraser of Carmyllie, L. Saltoun of Abernethy, Ly.
Garder of Parkes, B. Savile, L.
Gisborough, L. Seccombe, B.
Glenarthur, L. Strange, B.
Goschen, V. Strathclyde, L.[Teller]
Harlech, L. Swinfen, L.
Harmar-Nicholls, L. Thomas of Gwydir, L.
Harmsworth, L. Trumpington, B.
Hemphill, L. Ullswater, V.
Henley, L. Wade of Chorlton, L.
Hertford, M. Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

7.27 p.m.

Lord Addington moved Amendment No. 2: After Clause 1, insert the following new clause— STATEMENT OF REASONS (". The Secretary of State shall require any person to whom subsidy is to be paid who refuses to make a private sector student loan to an eligible student to provide the student with a statement of reasons for the refusal.").

The noble Lord said: My Lords, there is a very straightforward reason for this amendment. It is that if anybody is refused a loan they should be able to find out the reason why. This follows directly from our last debate and this amendment is something of a fall-back position from it. If a student is refused a loan, surely it makes sense to let him or her know why. As the noble Lord said, having been refused a loan at the start of their adult careers they should be informed as to why they have been refused. That is a very reasonable step to be taken by those giving the new loans, which are government subsidised, if only to a small extent. This is a matter which the Government can quite easily agree to without damaging their own objectives for the Bill. It will also preserve the position for students applying for loans as they start out on their adult careers. I beg to move.

Baroness Farrington of Ribbleton

My Lords, there are many arguments in support of this amendment because of the vulnerability of students. The Minister's reply that it is possible for students to establish a sort of pattern of refusals by looking at other people's refusals, misses the point. There is anxiety. I shall be grateful if the Minister can answer the anxieties in particular of the National Bureau for Students with Disabilities (SKILL), which is concerned because, on 12th March, in a discussion about Amendment No. 10 as regards discrimination on grounds of race, sex or disability, the noble Lord, Lord Henley, confirmed that private lenders would be required to conform to the Disability Discrimination Act 1995. However, it is possible that that Act will still allow private lenders to discriminate against potential borrowers with disabilities. At present a borrower cannot be turned down by the Student Loans Company on the basis that he or she has a disability nor on the basis that he or she may be unable to pay back the loan. Borrowers from the Student Loans Company do not start to pay back their debt until their income passes a certain level and, if their income does not reach that level before the age of 50, the debt is written off.

The loans are covered by the Disability Discrimination Act, Part III of which relates to goods, facilities and services. Those provisions outlaw discrimination in general, but list exceptions where discrimination is lawful. One of those (Section 20(4)(c)) allows providers to offer less favourable terms to a disabled person if additional costs are involved. Statistics show that the disabled are less likely to gain employment than other people and that they are less likely to gain well paid employment. Therefore, they constitute a greater risk to a private lender and, as a group, will inevitably cause the lender to incur extra costs. Private lenders would therefore be legally justified in offering less favourable terms to borrowers with disabilities and possibly in refusing credit altogether. Surely it is important as a minimum protection for students in general, and in particular for students with disabilities, that they should be given a reason for any refusal to grant them a loan.

Baroness Park of Monmouth

My Lords, I should like to take the opportunity of this last chance of the Third Reading debate to indicate to my noble friend the Minister that the principle raised in my interventions and in those of my noble friend Lord Peyton, who unfortunately cannot be here tonight—that is, the right of Parliament to scrutinise—has not gone away; nor shall we allow it to do so.

My view is reinforced, if that were necessary, by the report of the Public Accounts Committee, published on 21st March. Its proceedings demonstrate all too clearly that we were right to press the Government to give a firm commitment that once the negotiations with the private sector—if, indeed, they take place—are signed and sealed, proper provision will be made for Parliament to scrutinise on the basis of an adequate amount of detail the arrangements concluded.

The serious breakdown in the operations of the Student Loans Company in the autumn of 1994-95, which left 35,000 students without money for a whole university term, can largely be attributed, on the evidence given to the Public Accounts Committee, to a series of failures to consult either the students or the universities; to secure expert advice on the design of the pro forma; or to make adequate contingency plans. All those mistakes could, and probably will, be repeated in the new scheme, should it ever be implemented.

Another major cause of trouble in the system was undoubtedly the failure to define clearly the responsibilities of the Student Loans Company and of the Department for Education and Employment respectively. As paragraph 25 of the report states: We note that proposals currently being developed for the Department for a twin-track public/private loans scheme will have an impact on the Company's operations. We observe that Sir Eric Ash's successor as Chief Executive will have to oversee a period of significant change. While we accept that there is an arm's length relationship between the Department and the Company, we emphasise the importance of departmental oversight in this period of change and look to the Department to ensure that proper arrangements are in place". It is hardly reassuring—indeed, it is deeply disturbing—that in paragraph 43 of the conclusions of the report we read: We asked the Company how they expected their business activities to be affected by the proposals, recently introduced by the government, for a twin-track public/private loans scheme … The Company told us that the subject was of 'burning interest' to them but that they did not have enough facts to make detailed plans … the Company agreed that the process of planning the Company's operations was fraught with uncertainty and this would be a very considerable further complication". Does the Student Loans Company have those facts now? Perhaps my noble friend the Minister will tell us, particularly as we are also told in the report that, in projecting staff levels, the company was not able to plan more than a few months ahead.

The report continues: We asked what proportion of student loans might still be in the hands of the Company at the end of their three-year planning period. The Department told us that, for planning purposes, they had assumed that by the third year of a twin-track system, 25 per cent. of student loans would be provided by the private sector. However, the Government hoped that take-up by the private sector would be considerably greater than that. The Company told us that this would affect the scale of the work they did". So, we have three players, the department, the Government and the company—and we learn from paragraph 92 of the evidence in the committee's report that the Minister's stated policy—stated in the other place—is, to hope that all student loans will be done by the private sector in the future". I think that my noble friend the Minister will agree that, if that is the Government's hope and intention, Parliament has strong grounds for scrutiny of the scheme once the commercial arrangements are in place.

We are entitled to feel concern at the ambiguous and ill-defined arm's length relationship between the department and the company and at the detachment displayed by the department. I cite the Permanent Secretary's reply when asked by the committee what the department did to help to put matters right when they went badly wrong or even to press the company to put things right. I quote: There is no doubt in my mind at all that this project was poorly planned and poorly implemented but it was an operational matter for the Company". Where have we heard those words before? If, as the report says, consideration is being given to the company being designated as a non-departmental public body, I should like to know the implications for the future.

In its summary, the PAC echoed the concern that we are entitled to feel, and to which I shall return on future occasions. It states: we accept that there is an arm's length relationship between the Department and the Company, we emphasise the importance of departmental oversight in this period of change and look to the Department to ensure that proper arrangements are in place". I end with one last quotation from paragraph 49: Given the level of uncertainty associated with the Department's proposals, we recommend that they pay particular attention to the potential impact of these proposals on the operations of the Company". As Sir Eric Ash observed, the devil is in the detail. We have a right to be able to judge the scheme once it is in place in detail.

Lord Desai

My Lords, I rise briefly to say that I know the Minister will say that this matter should be left to the private sector and that it is a matter of choice. I have nothing against such a statement, but let us recall what happened with pensions when we moved from SERPS to asking people to take out personal pensions. The final result was tears, with one-seventh of those people being oversold a pension. We later had to amend that legislation with another piece of legislation.

Of course, there is not a strict parallel here, but we could end up with many people being refused credit without a proper reason being given. Six months or even two or three years later, we shall have to amend the legislation because the volume of consumer complaints will be too great. Therefore, I think that the amendment is making a perfectly reasonable request, especially when we remember that the student loan application will be the first loan application that many people make. No matter what the Minister says, if they are not given a proper reply, their copybook will be blotted. We must remember that credit companies share information and that, once somebody has been refused credit, they do not get it thereafter. That is a fact. People become red-lined, just as happens with certain housing areas. That is what will happen. I wish that the Minister would agree that disclosure of such information is not in conflict with freedom of choice.

Lord Ponsonby of Shulbrede

My Lords, as we have heard, the Minister's argument time and again has been that a student loan should be treated like any other commercially available loan. We have heard the argument advanced that because there is a public element to the loan, it should be treated with a greater degree of transparency. We heard a second argument from the noble Lord, Lord Addington, that a student has no choice but to take out a loan. Surely we do not want a young person to exercise his or her choice not to be a student.

The third argument, which I believe we should revisit and which has not yet been mentioned tonight, relates to the ombudsman. The Minister said that a student would be free to go to the ombudsman without a written statement of the reasons for refusal. I think it is extremely unlikely that a young student, busy with his or her studies, could be bothered to make a frivolous complaint about a rude bank manager unless he or she had a piece of paper to back up that complaint. I find that a difficult scenario to envisage.

In Committee, the noble Lord, Lord Henley, several times used the phrase "working with the grain" of the private sector. While I understand the sentiment, I remind him that the state is the client and the banks are the contractors. I believe that it is for the banks to work with the grain of the state in providing a proper degree of transparency and accountability for the Government to ensure that they are doing their work properly.

Lord Henley

My Lords, I do not intend to follow my noble friend Lady Park because I do not believe that what she had to say was strictly relevant to this particular amendment. However, I intended to pick up one or two points when we come to Bill do now pass, which might be a more appropriate time to address her anxieties relating to parliamentary scrutiny.

I return to the amendment itself. It is a matter that has been addressed both at Committee and Report stages. I have a sneaking suspicion that the noble Lord, Lord Ponsonby, was not here at Report stage. I apologise if he was here. At that time I addressed the very point about the ombudsman. It is our understanding that the ombudsman does not need specific written evidence to take action to deal with the anxieties raised on earlier occasions. We have made it quite clear that what is required is evidence of any kind.

Lord Ponsonby of Shulbrede

My Lords, I thank the noble Lord for what he has just said. Unfortunately, I was abroad and was not here for the Report stage. I read the report of those proceedings in Hansard. I raise the issue again because I found his response inadequate. It is very difficult to imagine a young busy student pursuing a complaint without any paper to back it up on the basis that he or she feels hard done by.

Lord Henley

My Lords, I made clear that there was no need for the evidence to be written. I expanded on the subject of what kind of evidence might be required in a letter that I sent to the noble Lord, Lord Tope. I am sorry that he is not able to be here. Similarly, a letter was sent to the noble Lord, Lord Morris of Castle Morris. I well understand why he cannot be here. I copied those letters to a number of noble Lords—I even copied my letter to the noble Lord, Lord Morris (but that is neither here nor there) setting out the kind of evidence that could be put forward in making use of the banking ombudsman. I believe that the banking ombudsman has himself made clear, as I made clear at Report stage, that he feels perfectly free to intervene in these matters.

We are not opposed to students being given the information that the amendment of the noble Lord, Lord Addington, sets out. We very much hope that private lenders will do so willingly, particularly as most, if not all, of the applicants will be existing or potential current account customers. This must be a matter for them. They are lending and risking in the main their own money. They must be free to reject applications and decide what to tell such applicants. We want a normal lending arrangement between lender and borrower rather than the extensive regulation that this amendment seems to imply.

I take issue with the noble Lord, Lord Ponsonby, when he says that students have to take out loans. Students are not forced to take out loans; nor do they have to take them out with the private sector. Students are free not to apply for private loans or indeed any loans. If economic circumstances force a student to take out a loan, he or she is always free to apply to the Student Loans Company. All eligible students will continue to have a right to a loan from that company and a right to know the reasons for any refusal. But no student will have a legal right to a subsidised private sector student loan. It follows that the normal lender/borrower relationship, in which there is no legal right to reasons for refusal, will apply.

The noble Baroness, Lady Farrington, raised the particular worries of disabled students. As this is Third Reading, it will not be a matter of particular concern if I say that I shall look at some of the points that SKILL has raised with the noble Baroness. We shall make sure that the contracts with the lenders require exactly the same terms for all borrowers, whether disabled or not. We will not allow them to discriminate under this Act against individual students on the grounds of their disability. The contracts will prevent that.

The noble Baroness will recall that at an earlier stage I resisted an amendment which tried to write that into the Bill. Thereafter, the usual provisions of the Disability Discrimination Act and the service provisions will apply and the student will have the appropriate protection of that Act. I prefer to write to the noble Baroness about it because I cannot remember the precise details as to when those provisions will come into effect, what they are and what protection they will give. I was not aware that she was going to raise the issue of disabled students. I am sure the noble Baroness will accept that that Act brought in considerable further protection for disabled people in employment, service provision and other matters, and that it is a matter for another day. However, it is a matter on which I hope to write to the noble Baroness.

For the reasons I gave earlier, I hope that the noble Lord, Lord Addington, does not feel it necessary to press this amendment tonight.

Lord Addington

My Lords, the noble Baroness, Lady Farrington, raised a very important point when referring to disabled students. The Minister's reply was reassuring in so far as it went without giving a reason. I believe that this amendment justifies itself, certainly on the ground of getting the Minister's reply into Hansard. I had assumed that the Disability Discrimination Act covered this to an extent. However, as the noble Baroness spoke, I thought that possibly I was wrong. I have been placated by what the noble Lord has said as to that matter.

As a matter of principle, the idea that this is a normal credit arrangement is not one that holds water. It is a fairly open secret that the Government would like to have loans provided mainly by the private sector. When the initial loans scheme came out, they wished it to be provided by the private sector. It was very open, but none of the private sector wished to take it up. In this case, the loans will account for a high percentage of people's income, especially those in the lower income bracket given the parental background. That is why the amendment is called for.

In those circumstances, it seems appropriate that a reason is given. The Minister says it is hoped that a reason is given. Surely, to require that a one paragraph letter is provided saying under what criteria the loan has been refused is not asking too much. I do not believe that at this stage my case will be helped by pressing the amendment. However, I believe that important points have been raised which will hang over the whole issue. With those comments, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Schedule [Consequential Amendments]:

Baroness Farrington of Ribbleton moved Amendment No. 3: Page 3, line 21, after ("student",") insert— ("(aa) after sub-paragraph (1)(c) insert— (d) make provision for the level of sums paid by the person borrowing in respect of repayment of any loan to be linked to the income of the person borrowing",").

The noble Baroness said: My Lords, at no stage have the Government answered satisfactorily the question put to them by many noble Lords in this House and, most importantly, by the CVCP, regarding the need for a proper income-contingent loan scheme with collection of repayments through the tax or national insurance system. Why do the Government seek to subsidise the administrative costs of setting up a private sector loan scheme based on a system of repayment that is fundamentally flawed? Why would any private sector institution want to participate in a scheme that so many wish to see radically altered? Even the Conservative Party's own national policy group on higher education want to scrap the current system. How can the Minister justify bringing in this extension within such a widely discredited method of repayment?

The widely welcomed national committee of inquiry into higher education will report just as the proposed private sector loan scheme comes into effect. Any objective observer can see that the current scheme has no friends, and will be scrapped. Surely now is the time for the Government to recognise that it cannot be everyone who has spoken, other than the Government, who is out of step. On this occasion the Government are out of step. They should respond to the widespread concerns which have been raised. I beg to move.

Lord Addington

My Lords, I have made two criticisms of the scheme. The first was that we do not give students enough to live on. I do not suppose that we can change that. The second was that it was something of a blunt instrument when it came to gathering in the money afterwards. If we allow the private sector to change the way repayment is made, many of the objections will disappear. The amendment is to: make provision for the level of sums paid by the person borrowing in respect of repayment of any loan to be linked to the income of the person borrowing". That means making individual arrangements for the individual in the scheme. Surely that is sensible. It would be responding to market forces, purchasing power, and so forth. Everything is there. We are referring repayments to the student's income. If it is a loan and the lender will get back the money, surely that makes sense. This is probably the last chance saloon for the Government to remove one of the major problems relating not just to this Bill but to the original Act. I fully support the amendment.

Baroness David

My Lords, I should like to support the amendment. I think that my noble friend Lord Borrie and I both made the point on Second Reading that the 85 per cent. of average earnings was a strict method of arranging repayments. It is hard on a number of students. Although it may have been £18 at the beginning, now that the loan is much greater with the grant being less, the figure becomes much greater. I do not understand the argument put forward by the Minister on Report when he said: But it could be time-consuming and labour intensive to check the income of all borrowers. It would also be costly".—[Official Report, 25/3/96; col. 1528.] I do not understand that, because surely if you are checking whether they have 85 per cent. of average earnings, their income has to be checked. I wonder whether the Minister could explain that. In the meantime, I support a more flexible repayment method which would, I hope, lead to rather fewer defaulters.

Lord Henley

My Lords, I rather resent the suggestion made by the noble Baroness, Lady Farrington, that I have not addressed the issue of income-contingent loans and whether they could be repaid through tax and national insurance contributions. I thought that I had made it clear that that is something that Dearing can no doubt look at. It is something that we have looked at in the past. I believe that such schemes are more complicated and more expensive to run than the current scheme which, whatever the criticisms made, has the advantage of being relatively simple and straightforward with, at the moment, a relatively good repayment recovery rate and low administrative costs.

The noble Baroness, Lady David, said that our scheme is surely already income-contingent. She admits that. It works on 85 per cent. She said we have to look at their incomes to decide that and so why cannot we look at other schemes. With the other schemes she suggests, I presume that there would be different repayment levels for different levels of income. That would mean that we would have to look finely at everyone's income rather than use a broad brush approach as to whether they are over or not over 85 per cent. It would be a more complicated scheme and therefore necessarily more expensive.

Perhaps I may repeat that the current scheme is, to some extent, income contingent. It is set, as the noble Baroness said, at 85 per cent. of average earnings. That figure, the repayment period of five years, and a whole host of other figures can be adjusted by means of the regulations that exist under the 1990 Act. The Bill does not change those matters at all.

We could move to a scheme which is yet more income contingent than the current scheme, although the current scheme is already income-contingent. If we did that there may be a greater degree of complexity. One would have to look at the division of costs. If the former student had a more favourable repayment period, one would have to accept that the whole system would be more expensive. These things have to balance. I accept that at the moment students are repaying a relatively low figure. I accept that that figure will increase over the years. That is why each year we have a new set of regulations which allows us to look at what should be the appropriate repayment figure, how long the period should be, and what the 85 per cent. figure should be.

Baroness David

My Lords, perhaps I may ask a question. If the figure was average earnings rather than 85 per cent. would it be possible to change to that in the regulations?

Lord Henley

My Lords, it would be possible, yes, because one can shift that percentage up or down. It could up to 100 per cent.; it could go down to whatever. We could do it with some figure other than average earnings. There is a whole host of things that we can do by means of regulations. But, having set up the Dearing review, and having asked Sir Ron to look at these issues in great detail, we feel that there is no point in making a major change at the moment other than the changes that we could make by means of the regulations. For that reason, it would not be wise or sensible for the House to pursue the amendment. I hope therefore that on this occasion the noble Baroness will feel able to withdraw it.

Lastly, the noble Baroness yet again, as did her noble friend Lord Morris, threw in my face the reports and views of some Conservative think tank. That think tank does not make Conservative policy. Policy is developed by Ministers, as is right and proper. I, on a previous occasion, threw back at the noble Baroness a supporter of one of our schemes—a friend of the noble Baroness, Mr. Frank Field, a Member of another place. I did that just once. It was unnecessary for the noble Baroness to come back yet a third time and mention some Conservative think tank whose views are different from those of the Government. As I said, I believe that these are matters that can and should be addressed by Sir Ron. I hope therefore that the noble Baroness will feel able to withdraw the amendment.

Baroness Farrington of Ribbleton

My Lords, I am amazed that if there is only a slight difference between the Government and a Conservative think tank, the Government, who claim to be so flexible, are not prepared to make that slight movement tonight. This is a major change in advance of the committee of inquiry reporting. It is the setting up of a whole new parallel structure which will come into effect just as the committee of inquiry reports.

Secondly, why on earth are the Government so rigid in the way that they want to regulate the private sector? The Minister has said on many occasions that the financial institutions will carry the burden of any failure to repay. Surely we can have confidence in the financial institutions which choose to bear, together with government public subsidy, the enormous cost of setting up a new scheme at the same time as the committee of inquiry is due to report on the change.

Why are the Government so concerned with rigid control and regulation in this instance? Why are the Government not prepared to take the view that if the private sector institutions are risking their money they should be able to make their own choices?

Finally, the Minister said that no one needs to take out a loan. It is not necessary for those with private financial means or family income to take out a loan, but for many students it is the only means of survival. I remain convinced, but can see little chance of convincing the Minister of his mistake. Therefore, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8 p.m.

Lord Henley

My Lords, I beg to move that the Bill do now pass. We have completed what is a relatively simple Bill, bar seeking the agreement of another place for the two amendments that I brought forward in Committee. The first was to implement fully our policy that students may take out only one loan per year, public or private. The second was to address the concern that higher education institutes might not obtain a fee for certifying eligibility for a private loan.

It is a relatively simple Bill which is designed to change the current scheme for student loans from a position where there is only one lender—the state in the form of the Student Loans Company—to one where there is the possibility of a plurality of lenders in the private sector while also retaining the Student Loans Company.

As I explained on Second Reading and at other stages, this will bring to the student the benefits of choice and it will bring to the taxpayer the advantages of shifting some of the risk of lending to the private sector. I hope also that it will bring benefits to the lenders themselves and that they will see the attractions and advantages of involvement in the scheme. The perfect deal or contract is, after all, one which leaves all sides of the agreement happy. This will, I trust, leave individual students, the taxpayers and all the financial institutions content.

For a relatively minor Bill, I feared that some if not all the concerns might go somewhat wider than this small part of the student loan scheme. Those concerns were heightened by many of the speeches made on Second Reading, the day on which we announced the forthcoming review of higher education by Sir Ron Dearing. I understand, as does the party opposite, why there are concerns about the funding and the future of higher education, in particular as we have seen a number of developments during the past 15 or 20 years. That is why, with the support of the party opposite, we set up the Dearing Committee.

Having done that, and having said that on Second Reading I noticed concerns which went somewhat wide of the Bill, I am grateful that during subsequent stages the debate has been largely devoted to the Bill itself. It has been constructive and largely conducted in an unacrimonious style for which I expressed gratitude. Perhaps I may thank my Whip who assisted me in these matters, my noble friend Lady Miller, and today my noble friend Lady Trumpington. I also thank my noble friends Lord Peyton and Lady Park for their interventions, even though I did not always fully agree with them. I thank them for their support in the Division Lobby on occasions when they felt they could support me.

I appreciate the concerns of my noble friend Lady Park about the parliamentary scrutiny of the proposed contracts with the financial institutions. Indeed, she repeated them today. After debating the matter in Committee and on Report, and after dividing on those issues, I am sure that my noble friends will appreciate that we cannot have parliamentary scrutiny before the contracts are signed or even that the contracts are conditional on parliamentary approval. I made that clear to my noble friend on previous occasions and I know that my noble friend Lord Peyton appreciates that fact.

Nevertheless, I hope that they will accept that I went some considerable way down the road to reassuring them and offering them appropriate assurance. I reassure my noble friend that I am still considering what would be the appropriate form of the statement that I mentioned on Report when we talked about parliamentary scrutiny (cols. 1478 to 1479). I believe it is right that we should announce that to the House in the proper way and I hope that thereafter my noble friend will find ways and means of debating those matters in the usual manner.

I also offer my thanks to noble Lords opposite, especially those on the Front Bench, for their constructive approach. The noble Lord, Lord Morris of Castle Morris, unlike some of us, has had the advantage of being able to start his holidays somewhat earlier. I thank the noble Baroness, Lady Farrington, and the noble Lord, Lord Williams of Mostyn, even if there were occasions when all three on the Front Bench spoke from the Dispatch Box on the same amendment. I dare say that that was designed to give some idea of numbers. Finally, I extend my thanks to noble Lords who contributed from the Liberal Democrat Benches, in particular the noble Lords, Lord Addington and Lord Tope. I thank them for their constructive approach and their helpful manner. I commend the Bill to the House.

Moved, That the Bill do now pass.—(Lord Henley.)

Baroness Farrington of Ribbleton

My Lords, as the Minister said, there has been universal support for the Government's parallel activity of setting up the national committee of inquiry. In that context, the Bill has been described as unnecessary and ill-timed. It does nothing to address the immediate crisis facing our universities and colleges and this coming year's Budget means that by 1998–99 £550 million will have been removed from the higher education sector. Further education faces a cut of almost two-thirds in its capital budget during the next three years and 5 per cent. per annum in terms of current expenditure.

Even in the context of the Bill, Ministers cannot ignore the problems and wait for the report of the committee of inquiry. The Government should be addressing these problems now in addition to the concerns expressed by Members on all sides of your Lordships' House about the acute problems faced by staff and students. In that context the Bill is not relevant.

However, I wish to thank the Committee of Vice-Chancellors and Principals, SKILL and the National Union of Students for their helpful briefings. I wish to place on record our thanks to Clare Cozens for her indefatigable work on behalf of us on these Benches.

We welcome the progress that has been made in the course of debates. Progress has been highlighted and welcomed by the Committee of Vice-Chancellors and Principals as regards payment for the administration of loans by universities. The Government amended the Bill in response to the universities' concerns regarding payment for their work in administering the new private loans. That is welcome but the universities will wish to be consulted about the detailed arrangements of the scheme once they have been agreed with the financial institutions.

In relation to parliamentary scrutiny of the detailed arrangements for the Bill, the Minister announced at the Report stage that he envisaged a Statement to the House as the best way of outlining those detailed arrangements. He referred to that again tonight. We on these Benches share the views of the CVCP that both Houses of Parliament should be provided with an opportunity to discuss them. Like the CVCP we too believe that before next year's student loan regulations there should be consultation on the vexed problems facing medical, dental and veterinary students.

The Minister has been courteous and as helpful as he has been able during the passage of the Bill. I thank him on behalf of those on these Benches, especially on behalf of my noble friend Lord Morris of Castle Morris who, unfortunately, is unable to be present today. I know that the custom is that at this stage we wish the Bill success. However, in the light of the criticism received from all sides of the House as regards paying financial institutions to set up an entirely new administrative system based on the mortgage method of repayment with no support, that is asking too much. Higher education is too important to individual students and to the economy to be treated in this way.

However, on behalf of my noble friend Lord Morris of Castle Morris, I thank all noble Lords who have contributed to the points of great concern raised and supported from these Benches. I thank in particular the noble Baroness, Lady Park of Monmouth and the noble Lord, Lord Peyton of Yeovil. I thank also the noble Lords, Lord Tope and Lord Addington. Last but by no means least, I thank my noble friends for their support at all stages during the passage of the Bill. Their help and support has been invaluable, in particular to me this evening.

Lord Addington

My Lords, it falls to me to make the final comments on the Bill. The Bill is a missed opportunity. However, I believe that that is combined uniquely with it being something which will probably never come to pass. I say "probably" because there is a vague chance that it may come to pass. But to do so it must survive a general election and a review. One or other of those occurrences may well do this Bill down.

The scheme was originally rejected by the private sector and I suspect that a similar fate may well await the Bill now, even if it overcomes those other hurdles. We did not manage to improve the Bill fundamentally. The amendment on which we divided sought to improve it in relation to the individual status of students and we failed. That sums up the whole Bill.

Having said that, the noble Lord, Lord Henley, was his usual courteous and charming self while disagreeing with most of what we said. The noble Baroness, Lady Park, and the noble Lord, Lord Peyton, provided interesting and stimulating comment for the whole debate, as did other noble Lords. I should mention in particular the noble Lord, Lord Desai, who often stirs things up to a very interesting pitch. The noble Baroness, Lady Farrington, and the entire Opposition Front Bench team made extremely interesting contributions, as did my noble friend Lord Tope. On these Benches, we have not so much had a team as a relay effort. I could not be here for the Committee stage and my noble friend Lord Tope is unable to be here this evening.

If the Bill ever reaches the statute book, I hope that it proves to be vastly more successful than I can foresee it being at present. I hope that it is not merely a continuation of the current loan scheme about which we can all stand up and say rightly, "I told you so".

On Question, Bill passed, and returned to the Commons with amendments.