HL Deb 12 March 1996 vol 570 cc739-54

3.5 p.m.

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

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Henley.) On Question, Motion agreed to.

House in Committee accordingly.


Lord Morris of Castle Morris moved Amendment No. 1: Before Clause 1, insert the following new clause— LEVEL OF SUBSIDY (". No subsidy paid in respect of a private sector student loan to any person in pursuance of arrangements under this Act shall exceed 10 per cent. of the value of the individual loan to which the subsidy relates.").

The noble Lord said: As the great exit pilgrimage takes place, I rise to say that the purpose of the amendment is to initiate a discussion about what is, after all, the hidden heart of the whole of this small Bill—the subsidy. I say that it is the heart of the Bill because in the explanatory and financial memorandum we read: The Bill enables the payment of Government subsidies to private sector financial institutions which provide loans to students in higher education. Subsidies will be paid in accordance with arrangements made with the private sector institutions. The idea is"— the version I have omits the word "to", but it should read: The idea is to promote the availability of private sector loans as alternatives to the loans which are provided by the Student Loans Company out of voted money".

That is all very general, and necessarily imprecise. In Standing Committee B of another place on 12th December 1995, the Members of the Committee pressed the Minister to give some idea of the amount of subsidy being considered. They felt that that was something they wished to know. The Minister stated on that occasion: We are embarking on a process of negotiation whereby the extent to which financial institutions are prepared to participate in the envisaged loan scheme must he tested. There must be a reasonable balance between public subsidy, as is envisaged in the Bill, and a desirable outcome in terms of what will be available to students. That process is only in its early stages".—[Official Report, Commons Standing Committee B, 12/12/95; col. 16.]

The Committee may feel that that did not greatly advance the degree of clarity about the issue and the question that was being asked. But on Second Reading in this place we took a small but significant step forward. The Minister said: A number of points were made, I believe by the noble Lord, Lord Tope, and the noble Lord, Lord Williams, about how we would set out our negotiating position and the cost to the Government. Noble Lords will have to accept that it is quite wrong at this stage for me to say what the subsidy will be, although I certainly reject the figure being bandied about by the Opposition of some £1,500".—[Official Report, 19/2/96; col. 963.]

That I found distinctly helpful.

Ministers argue that giving Parliament even a general idea would advantage tenderers in negotiations. Yet Ministers are asking Parliament to give them what Members in both places have described as a blank cheque. The debate on this new clause will give them another chance to let Parliament in on their rough expectation of the likely level of subsidy. After all, it is not so arcane and secret a matter as to be hugged by the Government to their collective breast in such a way as not to divulge a single thing. Even local estate agents will go so far as to put at the bottom of the particulars for sale, after all the usual stuff about "desirable, detached res.", something to the effect of "offers around so-and-so", or "guide price thus". It is not as though at present the banks and the building societies are fiercely competing with one another in trying to get a good deal out of the Government. Far from it. The Government have also had a much longer period of negotiation with the financial institutions than was envisaged before the tendering process had to be delayed and revised. Therefore, the argument that giving Parliament some guide as to the figure would divulge the Government's hand carries much less weight.

Our anxiety arises from the Government's inflated expectations about the scheme. They believe that it will save approximately £1.8 billion. Therefore, they must have some idea of the subsidy that they expect to pay. I cannot understand why there should still be this degree of secrecy on a matter such as this. If the Government can believe that they can save that much money from the PSBR, and if they can guess how many students will yield to temptation, it is not difficult to put a figure on the subsidy. Our guess was that it would be somewhere around £1,500 per loan. The Minister has stated that it is not that figure. It might be £1,499 or £1,502 but we know that it is not £1,500. The banks will have made a similar calculation in which the, only variable is the number of student punters.

In proposing the amendment, my aim is to get the matter out into the open and hear for what amount the Government want Parliament to sign a cheque. I beg to move.

Lord Tope

My Lords, I support the amendment which was moved so well and ably by the noble Lord, Lord Morris. He said that the issue of subsidy is at the heart of the Bill, and that must be right. However, as he also pointed out, we had no idea until at least the Second Reading what level of subsidy we might we talking about.

No one expects the Government to reveal their negotiating hand while negotiations are taking place but we expect them to give us some idea of what we are considering. As the noble Lord pointed out, the Minister, inadvertently or otherwise, gave at least some indication on Second Reading when he said that the figure was not £1,500 per. student. He did not say whether it was more or less, but we all make the assumption that it must be less.

Lord Henley

Perhaps I may assist the noble Lord. I did not say that the figure was not £1,500; I simply rejected that as a figure. Whether the figure is right or not is another matter, but I do not believe that at this stage it is right for the Government to make an assumption. Therefore, I reject the assumptions behind the noble Lord's figure but I am not saying whether it was right or wrong, higher or lower.

Lord Tope

That was a tortuous argument and I believe that we have taken one big step backwards in trying to draw out from the Government what they have in mind in proposing the scheme.

Negotiations have been taking place for some time and we gather that they have not been terribly successful. However, surely the Government must be in a position to give us at least a broad indication of the level of subsidy that they have in mind or what the upper limit will be. The lack of interest from the financial institutions is well known. Indeed, only recently the National Westminster Bank announced that should the Bill be passed it would have nothing to do with the scheme.

I hope that it is not unworthy to believe that the Government, in their determination to press ahead with the matter, might feel the need to give some greater encouragement to the financial institutions to take up the scheme. If we have no indication of the kind of figures that the Government have in mind, as we said on Second Reading, that is the clearest indication that the Government in presenting the Bill to the House are asking us to give them a blank cheque. That is not acceptable.

3.15 p.m.

Lord Desai

I support the amendment. There are two issues which one ought to clarify. First, because the loans are relatively short-term there is the possibility that they will be bid for by the wrong kind of financial agencies. If the Government were properly proposing long-term loans, insurance companies and others which can make long-term actuarial calculations would be willing to participate in this business. But we have a short-term loan business which will take away from the banks a lucrative business in which they give overdrafts to students and receive a lot of interest.

The banks are fearful that the business will be taken away but at the same time they are waiting to see how much subsidy the Government will give. Obviously, they would like a high subsidy but I reiterate that there is no economic case for such a subsidy. That must be clearly established. As I said on Second Reading, this is piling market distortion upon market distortion. The rational way of providing the facility would be to provide a long-term loan which would be deductible from the national insurance surcharge. That is not been done and therefore we must have a subsidy.

I can see why the Government do not want to say how much the subsidy will be. Normally, when we on this side of the Chamber put forward suggestions the Government are quick to ask, "How much money is it going to cost and how are you going to find the money for it?". There is a general statement in the Bill that it will all depend on the arrangements that are made with the financial institutions. My noble friend's amendment makes the sensible suggestion that we should ascertain the rough size of the limit by putting a percentage on the value of the loan to which the subsidy attaches. If the Minister does not like 10 per cent. it could be up to the figure of the bank rate, say, and we could have a fluctuating subsidy. It is important that some principle is stated as regards the Government's view of the appropriate subsidy and how much that will cost.

Lord Renfrew of Kaimsthorn

My noble friend will know that there are Members on both sides of the Chamber who believe that other schemes such as income contingent schemes might be worthy of consideration. However, within the context of the Bill it makes sense to consider private support for student loans just as much as public support. Therefore, I rise to oppose the amendment. While I have some sympathy with the suggestion that it would be useful to have a hall-park figure, Members will be aware of the draft tender document in the Library. I have a great deal of sympathy with the Government's position that if one is inviting tenders one does not necessarily offer the tender figure oneself but waits for the tenders to come in.

I am not a banker but it seems to me that, given that the student will be undertaking studies for three or four years and that there will be a repayment period of several years, a 10 per cent. absolute figure—the amendment does not provide for 10 per cent. per annum, which would be a large sum—clearly represents about two years' interest on a loan at the current bank rate. That is a very small sum indeed. My reason for opposing the amendment is that to hamper the Government with a figure of 10 per cent. would probably make the system unviable.

Lord Henley

I am grateful for my noble friend's support, somewhat unexpected though it may have been on this occasion. I suspect that the noble Lord, Lord Morris, moved the amendment more by way of probing. He said that he wanted to get to the heart of the discussion on the Bill and I do not believe that he addressed the amendment itself. His noble friend Lord Desai came back to it, but I do not intend to follow the noble Lord in that. I believe that the amendment is to some extent economically illiterate—my noble friend Lord Renfrew put it somewhat more politely—and would not achieve the noble Lord's desired effect.

The noble Lord, Lord Morris, seeks to find out how much the subsidy is likely to be. He quoted me, and at least did so fairly, by saying that I rejected his figure of £1.5 billion. The noble Lord, Lord Tope, took the matter further and said that I did not use the word "rejected" but said that it was wrong. There is an important distinction. I rejected the figure because I am rejecting any suggestion as to precisely what the figure should be. The noble Lord, Lord Tope, will well understand that if I reject the figure of £1 .5 billion and he comes forward with others which I continue to reject, finally he will get the answer that he desires. We have no figure in mind and it would be wrong to make any prediction as to what the figure will be.

As I explained on Second Reading, we are determined to bring private sector capital and expertise into the provision of student loans. That is what is behind the Bill. There are distinct advantages in that process to the borrowers and, as I have explained on a number of occasions—and I believe that the noble Lord, Lord Desai, will accept this—there are advantages also to the taxpayer in our doing so. But it is pointless to bring in the private sector and nullify those advantages with an inflexible approach as set out in this amendment.

As I have explained on a number of occasions, the amendment would tie our hands in negotiations. Those negotiations will be extremely difficult. The noble Lord, Lord Morris, gave the example of estate agents, but we have been selling houses for a number of years. The privatisation of student loans is something new. The negotiations will be difficult and will involve some difficult concepts. If the private sector knows in advance the level of subsidy on offer, why should it accept less? I am sure that all Members of the Committee will accept that the Government cannot negotiate on that basis. The effect of an amendment of this sort would be to impose damaging inflexibility on our arrangements with the private sector.

Having said that, I understand the desire of Members of the Committee to ensure that public money is not wasted. I give a guarantee that we are not merely looking for a blank cheque. No doubt that is something which we can explore later. However, I assure the noble Lord and all those who have spoken that the question of whether public money is being wasted is a separate issue. I give an assurance that we shall not enter into any agreements with private lenders which do not achieve our objectives cost effectively. This Chamber and another place and all the usual bodies—for example, the NAO—will have an opportunity to scrutinise our spending in the normal way in the future. Having explained the Government's position and why I cannot accede to the demands made by the noble Lord, Lord Morris, that I should provide a precise figure, I hope that the noble Lord will feel able to withdraw the amendment.

Baroness Farrington of Ribbleton

Are we given to understand that the Treasury has not considered the maximum cost in terms of public expenditure in order to subsidise the private sector to take part in the scheme? What other examples is the Minister able to give of subsidies being provided to the private sector to behave in a private sector capacity?

Lord Henley

I am sure that the noble Baroness will not expect me or the officials of my department to go into the negotiating chamber having announced exactly what the subsidy is to be. That would not be right. The private sector would not expect that and might well think that there was something wrong if we did so.

Lord Morris of Castle Morris

I must confess to being disappointed by the Minister's reply. The amendment came first because we see the issue of subsidy as being absolutely at the heart of the Bill. Indeed, it is difficult to table any of the amendments without mentioning the word "subsidy" because you have to fight your way through the Long Title to make sure that everything that is said or suggested or disagreed with comes in some way under that heading.

My noble friend Lord Desai is a distinguished economist. I believe that most of us would agree with him when he says that there is no economic case for subsidy in any event for such an activity based on the Beloff principle with which we are now all becoming familiar; namely, that the fishmonger sells fish because that is his business. We have heard that once or twice before. I do not apologise for using it again because it has remained true and neither the Government nor anybody else has been able to refute it.

The Minister talked about the difficulties of selling something like this. I hesitate to remind the noble Lord, but the Government have a remarkably effective and long history of selling off state assets to the private sector for a number of years. There is nothing new about it. If they have not yet learnt how to do it, it is high time that they did or that they stopped.

This has not been a very satisfactory reply from the Minister about something which is at the absolute centre of the Bill. As he said, he did not address the amendment itself; he has told us nothing; he has given us nothing. I have no alternative but to ask the Committee to express an opinion on this matter.

3.24 p.m.

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

Their Lordships divided: Contents, 95; Not-Contents, 153.

Division No. 1
Addington, L. [Teller.] McIntosh of Haringey, L.
Allen of Abbeydale, L. Mackie of Benshie, L
Ashley of Stoke, L. McNair, L.
Avebury, L. Mar and Kellie, E.
Barnett,L. Mason of Barnsley, L.
Beaumont of Whitley, L. Mayhew, L.
Birk, B. Merlyn-Rees, L.
Blackstone, B. Milner of Leeds, L.
Blease, L. Molloy, L.
Borrie, L. Morris of Castle Morris, L
Bruce of Donington, L. Murray of Epping Forest, L.
Callaghan of Cardiff, L. Nicol, B.
Carter, L. Ogmore, L.
Castle of Blackburn, B. Peston, L.
Cledwyn of Penrhos, L. Phillips of Ellesmere, L.
David, B. Ponsonby of Shulbrede, L.
Dean of Beswick, L. Prys-Davies, L.
Desai, L. Rea, L.
Diamond, L. Redesdale, L.
Donaldson of Kingsbridge, L. Richard, L.
Ewing of Kirkford, L. Ritchie of Dundee, L.
Ezra, L. Robson of Kiddington, B.
Falkland, V. Rochester, L.
Farrington of Ribbleton, B. Sainsbury, L.
Gallacher, L. Samuel, V.
Glasgow, E. Seear, B.
Glenamara, L. Sefton of Garston, L.
Gould of Potternewton, B. Serota, B.
Graham of Edmonton, L. [Teller.]
Grey, E. Shannon, E.
Hanworth V. Shepherd, L.
Harris of Greenwich, L. Simon, V.
Hayman, B. Soper, L.
Hilton of Eggardon, B. Stallard, L.
Hollis of Heigham, B. Stoddart of Swindon, L
Holme of Cheltenham, L. Strabolgi, L.
Howell, L. Taverne, L.
Howie of Troon, L. Taylor of Blackburn, L.
Hughes, L. Thomas of Walliswood, B.
Hutchinson of Lullington, L. Thomson of Monifieth, L.
Jay of Paddington, B. Tope, L.
Jenkins of Hillhead, L. Tordoff, L
Jenkins of Putney, L. Whaddon, L.
Kirkhill, L. White, B.
Kirkwood, L. Williams of Crosby, B.
Lester of Herne Hill, L. Williams of Elvel, L.
Lockwood, B. Williams of Mostyn, L.
Longford, E. Winston, L.
Aberdare, L. Holderness, L.
Abinger, L HolmPatrick, L.
Acton, L Hooper, B.
Addison, V. Hothfield, L.
Ailsa, M. Howe, E.
Alexander of Tunis, E. Hylton-Foster, B.
Allenby of Megiddo, V. Ilchester, E.
Alport, L. Inglewood, L.
Ampthill, L Ironside, L.
Annan, L. Johnston of Rockport, L.
Archer of Weston-Super-Mare, L. Killearn, L.
Astor of Hever, L. Kintore, E.
Balfour of Burleigh, L Knollys, V.
Bathurst, E. Lane of Horsell, L.
Belhaven and Stenton, L. Leigh, L.
Blake, L. Lindsay, E.
Blaker, L. Liverpool, E.
Blatch, B. Lucas, L.
Boardman, L. Lyell, L.
Boyd-Carpenter, L. McConnell, L.
Brabazon of Tara, L. Mackay of Ardbrecknish, L.
Brookeborough, V. Mackay of Clashfern, L.[Lord Chancellor.]
Brookes, L.
Brougham and Vaux, L. Mackay of Drumadoon, L.
Butterfield, L. Marlesford, L.
Butterworth, L. Merrivale, L.
Cadman, L. Middleton, L.
Campbell of Alloway, L. Miller of Hendon, B.
Campbell of Croy, L. Milverton, L.
Carnegy of Lour, B. Monteagle of Brandon, L.
Carnock, L. Montgomery of Alamein, V.
Cayzer, L. Mottistone, L.
Chalker of Wallasey, B. Mountevans, L.
Charteris of Amisfield, L. Mowbray and Stourton, L.
Chelmsford, V. Munster, E
Chesham, L. [Teller.] Murton of Lindisfarne, L.
Clanwilliam, E Noel-Buxton, L.
Clark of Kempston, L. Norrie, L.
Cockfield, L. Northbourne, L.
Constantine of Stanmore, L. Northesk, E.
Cooke of Islandreagh, L. O'Cathain, B.
Courtown, E. Oliver of Aylmerton, L.
Cranborne, V. [Lord Privy Seed.] Oppenheim-Barnes, B.
Cuckney, L. Orkney, E
Cullen of Ashbourne, L. Orr-Ewing, L.
Davidson, V. Park of Monmouth, B.
Dean of Harptree, L. Pearson of Rannoch, L.
Dixon-Smith, L. Peyton of Yeovil, L.
Donegall, M. Pike, B.
Eden of Winton, L. Pilkington of Oxenford, L.
Elibank, L. Platt of Writtle, B.
Ellenborough, L. Pym, L.
Elliott of Morpeth, L. Quinton, L.
Elton, L. Rankeillour, L.
Fairhaven, L. Rawlings, B.
Fanshawe of Richmond, L. Reay, L.
Ferrers, E. Renfrew of Kaimsthorn, L.
Finsberg, L. Renton, L.
Flather, B. Renwick, L.
Fraser of Kilmorack, L. Roskill, L.
Gainford, L. St Davids, V.
Geddes, L. Sanderson of Bowden, L.
Gisborough, L. Seccombe, B.
Goschen, V. Sharples, B.
Gray of Contin, L Shaw of Northstead, L.
Hailsham of Saint Marylebone, L. Shrewsbury, E.
Hampden, V. Soulsby of Swaffham Prior, L
Hardinge of Penshurst, L. Strange, B.
Harlech, L. Strathclyde, L.[Teller.]
Harvington, L. Strathcona and Mount Royal, L.
Hayhoe, L. Swinfen, L.
Hayter, L. Terrington, L.
Henderson of Brompton, L. Teviot, L.
Henley, L. Thomas of Gwydir, L.
Trumpington, B. Westbury, L.
Vivian, L. Wilcox, B.
Wade of Chorlton, L. Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

3.30 p.m.

Lord Addington moved Amendment No. 2: Before Clause 1, insert the following new clause— IMPLEMENTATION (". The Secretary of State shall not put in place any arrangements under this Act to implement the making of private sector student loans until he has demonstrated that more than one person by whom private sector student loans would be made is committed to making such loans and is so committed for a period of at least two years.").

The noble Lord said: The amendment is very straightforward in its construction. Basically, it says that the whole scheme—that is, the Bill—should not effectively be enacted until the Government have an institution to guarantee that it will take on the scheme. We have a scheme here which does not have any great burden of support from the financial institutions or from the people who are supposed to be providing support for it. We believe that the Government should be able to find at least one institution which is prepared to guarantee for a nominal period of time, at least two years, that it will back the scheme and become involved in it before it comes into being.

Our proposition is very simple. Unless there is that degree of support from the banks or institutions, there is absolutely no point in having the scheme. If the scheme cannot provide that degree of support, there is absolutely no point in it being there. In effect, the legislation is a dead duck anyway. Surely having such a provision in the Bill will guarantee that we will not be bothered with the scheme unless it has the support from those institutions right from the beginning. I beg to move.

Lord Morris of Castle Morris

The lack of interest being shown in the scheme by financial institutions comes as no very great surprise to those of us who oppose the Bill. Without wishing in any way to say, "We told you so", we told you so. One of the poet Wordsworth's later sonnets—perhaps not in the National Curriculum English Studies, but none the worse for it—begins with the immortal line: Another year, another dreadful blow". The Government must have felt rather like that when on 4th March the NatWest Bank announced its decision. In the National Union of Students' press release there is, perhaps, a note of grim satisfaction when it says: NatWest bank has today confirmed to NUS that it has told the government that it will not tender to provide private student loans even if the Education (Student Loans) Bill becomes law, despite the small concessions made in the government's revised tender document". Perhaps I may remind Members of the Committee who may not have recently looked again at the tender document, which is available for all to inspect in the Library of the House, that the second version of the tender (which all banks, building societies or financial houses would have to peruse carefully and fill in and return before their bid would be accepted) weighs 471 grammes. I weighed it after I read it in the Library. For those Members of the Committee who have not yet caught up with the European Union, 471 grammes is just over one pound, one ounce. Either way, it was as I believe George III said to Gibbon: Another damned, thick, square book"—

Lord Henley

Perhaps I may assist the noble Lord, it was his son!

Lord Morris of Castle Morris

I am grateful to the Minister for that correction. That quote was not in my script. I used it straight off the top of my head and got it wrong.

The president of the National Union of Students, Jim Murphy, said in the course of considering that rejection: First, the Midland, the Co-op Bank and the Woolwich turned them down, then Lloyds expressed 'serious misgivings', then they were forced to delay the plan's implementation for a year, and now NatWest has put the exclamation mark on the writing on the wall". Was it not the Royal doctor of his day—and I shall be careful with this one—who coined the historic phrase: The King's life is moving peacefully towards its close"? So, it seems, is the life of this sad Bill as one bank after another creeps silently out of the sick room.

However, the Bill presents a danger even though it does not get any success. There is a danger that the Government may be forced now into some sort of "sweetheart deal" with one loan provider. It seems perfectly possible that one bank or building society might be induced—I use the word "induced" carefully; I shall not say "bribed"—to come aboard the Government's scheme. That seems to me a dangerous situation in which we all, as a nation, might find ourselves.

Let us consider the next two or three moves in a situation like that, if there were only one lender. Such a deal would almost certainly involve a much higher level of subsidy than that originally envisaged by Ministers—whatever that might have been—for two reasons. First, the lender would, of course, have the whip hand over a Government who would be desperate to get the egg off their face. Secondly, the lender would face a student boycott of its student loan business and other business, organised by the National Union of Students. That, I have taken care to find out, is a real, practical possibility which the National Union of Students is willing to consider. Not only is it a real possibility; it is a real and a potent threat to this Bill and to the Government's plan for privatising student loans as far as they can.

Let us play the next couple of moves. If only one lender took part in the scheme it would be possible for that lender to offer preferential deals until the Student Loans Company attracted so few applicants that it would have to be wound up, at which point the Government would have replaced a public monopoly with a private monopoly and the private lender could revert to the standard Student Loans Company terms because there was no one else in the field—it had seen them all off.

The requirement for a two-year contractual commitment would remove the possibility of one lender using the same loss-leading tactic to force out a weaker competitor in addition to the Student Loans Company.

I should have thought the Government would welcome this amendment because it will get them out of what could be three serious holes. We support the amendment. My noble friends—if I can call them that—on the Liberal Democrat Benches (they are for the moment anyway) propose it in a spirit almost of helpfulness, because we feel we are in a position to be reasonably helpful now that there does not seem to be much danger of this Bill ever coming to anything very much. Competition and choice—the Government's sacred watchwords in this as in every other activity—absolutely require that there shall be more than one private lender. It takes two to tango and it takes two to make competition, which is why we on these Benches wholly support this amendment.

3.45 p.m.

Lord Peyton of Yeovil

I was grateful to the noble Lord, Lord Morris of Castle Morris, for establishing as a fact what I had heard only as a suggestion; namely, that the NatWest Bank had turned down the invitation to tender. I wish to make the observation that the weight of the invitation to tender document is probably its chief virtue. Certainly I have examined it not all that closely; but such examination as I have made suggested to me that it was not a document which yielded up its meaning to the casual reader. Indeed, I was tempted to believe—I would feel better if this were the case because I find the document extremely difficult to understand—that the reason for NatWest's rejection of the invitation to tender was the difficulty of understanding the document. That would make me feel better because I would be happy to know that such intelligent people as bankers had found the document a little difficult to understand.

As to this amendment, for exactly the same reasons as those given by my noble friend Lord Renfrew when he refused to support the previous amendment, I do not support this amendment. I think it quite wrong to intervene at the negotiation stage. What I would much prefer to do—indeed what I propose in a later amendment—is that Parliament should be given a full opportunity to scrutinise the arrangements when they have been finalised. That would seem to me to be a proper course, and one which I hope that my noble friend will in due course accept. I do not think it right to press the course suggested in the amendment.

Lord Ponsonby of Shulbrede

Before the noble Lord, Lord Henley, replies to this amendment, will he indicate to the Committee whether the length of the contractual commitment is at least part of his negotiating arsenal? It seems to me that while the Government continually profess their belief in competition, banks will do almost anything to avoid competition. If they can be induced to accept reduced subsidies through the length of commitment which the Government will make, it seems to me that will be to the benefit of the Government, the students and the banks themselves.

Lord Henley

I start by thanking the noble Lord, Lord Morris of Castle Morris, for his interesting little literary tour, and particularly for choosing a great Cumbrian poet. I am sure that that was of considerable use to the education of my noble friend the Chief Whip. I remind the noble Lord of the full quotation from Gibbon that he used. I quote this for the noble Lord's own interest, Another damned, thick, square book! Always scribble, scribble, scribble! Eh! Mr. Gibbon? I believe that it is normally attributed to the late—now very late—Duke of Gloucester, son of the then King, King George III.

My noble friend Lord Peyton similarly complained that it was possibly unfair on the banks to have this "damned, thick, square book" and the noble Lord, Lord Morris, gave its weight both in metric form and in imperial units. I believe it weighed a little over one pound. I accept that for my noble friend Lord Peyton the document can have problems yielding its message—as I think my noble friend put it—to the casual reader. But I should say that it is obviously not designed for the casual reader. It is designed for the financial institutions and not—if I dare say so—for my noble friend. Nevertheless, we thought it would be of some use to noble Lords, in trying to indicate where we are going, to place copies of it in the Library. That is why we did so.

Although we obviously deeply regret the fact that the National Westminster Bank has withdrawn, I can give an assurance to the Committee that there are still a reasonable number of banks who are interested. We hope very much that they will consider the invitation to tender in detail and come forward with proposals that we can negotiate in due course. Our aim is that up to four private sector lenders would be chosen for each of England and Wales, Scotland and Northern Ireland. The invitation to tender documents make that quite clear. They also make quite clear our aim—this will deal with the points raised by the noble Lord, Lord Ponsonby—that the contracts should each last for five years.

For obvious reasons we cannot be more precise about the number of private lenders until the tenders have been received and we have been able to come to a view on them. But I can assure the noble Lord, Lord Addington, that if there is none, we shall obviously not go ahead. We do need a number of lenders. We shall consider the tenders carefully to ensure that the benefits of the private sector involvement are achieved cost-effectively for the taxpayer. We shall also look carefully at each tender to ensure that that institution is able to deliver the service standards that are an important element of private involvement. We shall also look carefully at the tendering process as a whole to judge whether our objectives of choice, competition and diversity will be met. I am not worried by those words, as the noble Lord, Lord Morris, is. He seems to reject choice, competition and diversity. I know his party rejects that in much of our educational programme. But obviously the number of high quality and potentially successful bids will be an important factor in that whole process.

Again, I give an assurance that we shall not sign contracts unless they provide effective choice and competition at the right price. But we have to take that decision on the merits of the tenders received. I think there is no case for putting quite such a general restriction on the face of the Bill. I therefore hope that the noble Lord, Lord Addington, will feel able to withdraw his amendment on this occasion.

Baroness Farrington of Ribbleton

Before the Minister sits down, in his reply, to which I listened carefully, he said that the Government hope that there will he interest from a minimum of four institutions in England, four in Scotland and four in Wales. That would be the Government's aspiration and not a fixed target. Surely it is reasonable to have a minimum of at least 50 per cent. of the Government's target and to say that at least two would be a reasonable minimum, given the assertion that four would be the ideal.

Lord Henley

I regret to say that the noble Baroness has misquoted me. I said that our aim is to have up to four private sector lenders in each of the three areas that I discussed. I did not talk about minimums.

What I rejected about this amendment was that it said that we had to have at least a plurality, that we had to have at least two. It is exceedingly unlikely in view of what I said about the need to have competition and choice that we would ever have fewer than two, but we might feel we could pilot some scheme in a limited number of areas and then later move on to a wider scheme, if necessary. That is not our intention at the moment.

The noble Baroness must remember that this is an enabling Bill. Our intention is to have at least up to four and to have the appropriate choice and diversity. I do not think it would be right to be limited in the way that the amendment limits us.

Lord Morris of Castle Morris

Before the noble Lord sits down again, may I get this quite clear because it is an important point that he has made? I was about to bound to my feet but was beaten off the starting blocks by my noble friend. At the end of the Minister's reply it seemed to me that he committed himself to a plurality. He stressed that there would be competition. I made the point that competition requires at least two people; you cannot compete with yourself. Is that what he is stating, and, if that is the case, why does he not accept the amendment?

Lord Henley

As I explained in my rejoinder to the noble Baroness, obviously we would want competition and that requires a plurality. I pointed out that this was merely an enabling Bill and that there could be an occasion, if there were only one institution interested, when we might be able to try out some pilot scheme that might allow us to build on those advantages and persuade other institutions that there were merits in involving themselves in this. The amendment itself would completely preclude that.

Having said that, what I make quite clear is that our intention was not to go down that line if at all possible but to seek a plurality of the different providers so that there was the necessary competition.

Baroness Farrington of Ribbleton

Is the Minister prepared to give the House an assurance that in the event of financial institutions choosing to submit tenders—for example, three institutions, one choosing Scotland, one choosing England and another choosing Wales—they would then be prepared to sign agreements with what could be seen by some as a sort of cartel?

Lord Henley

Again, I do not think the noble Baroness listened to my earlier remarks when I talked about up to four private sectors for each of the three different areas, England and Wales, Northern Ireland or Scotland. Quite obviously the situation she is talking about would be merely one provider in each of those areas, and I do not think that would allow us the appropriate choice, diversity—words I know that the noble Baroness and her party hate—and competition.

Lord Addington

Having heard the noble Lord's answer, at one point I thought he was giving us exactly what we wanted, guaranteeing that there must be a number of people involved in the scheme. We heard him say: "We hope for", "Hopefully there shall be", "It is almost impossible that there will not be", or, "Well, we might live with one if we haven't any other choice". This is exactly what this amendment is about. Unless you guarantee yourself a degree of choice you are placing an institution in a tremendously strong position. This amendment is like guaranteeing that you will have at least two people there for a set period of time.

The Minister said: we do not think it would be a very good idea to have one person there but we might have to if it is the only way to get the scheme off the ground so that we can show to other people—I think I am more or less paraphrasing his words—that this is a good scheme. That is unacceptable. This is not something which is interfering with negotiation; it is about something which is a result of negotiating. This is the final thing, the final product. If the noble Lord is not prepared to give us firmer guarantees, which I thought he was at first, we have absolutely no choice, on these Benches anyway, but to press this amendment, because without it this Bill would be fundamentally flawed.

3.55 p.m.

On Question, Whether the said amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 104; Not-Contents, 156.

Division No. 2
Acton, L Butterfield, L.
Addington, L. Callaghan of Cardiff, L.
Allen of Abbeydale, L. Carter, L.
Ashley of Stoke, L. Castle of Blackburn, B.
Avebury, L. Chorley, L.
Bancroft, L. Cledwyn of Penrhos, L.
Barnett, L. Dahrendorf, L.
Beaumont of Whitley, L. David, B.
Birk, B. Desai, L
Blackstone, B. Diamond, L.
Blease, L. Donaldson of Kingsbridge, L
Borrie, L. Durham, Bp.
Bridges, L. Ewing of Kirkford, L.
Bruce of Donington, L. Ezra, L.
Falkland, V. Morris of Castle Morris, L.
Farrington of Ribbleton, B. Nicol, B.
Gallacher, L. Ogmore, L.
Gladwin of Clee, L. Peston, L.
Glasgow, E. Ponsonby of Shulbrede, L.
Glenamara, L. Prys-Davies, L.
Gould of Potternewton, B. Rea, L.
Graham of Edmonton, L. [Teller] Redesdale, L.
Grey.E. Richard, L.
Harris of Greenwich, L. Ritchie of Dundee, L.
Hayman, B. Robson of Kiddington, B.
Henderson of Brompton, L. Rochester, L.
Hilton of Eggardon, B. Russell, E
Hollis of Heigham, B. Sainsbury, L.
Holme of Cheltenham, L. Seear, B.
Howie of Troon, L. Sefton of Garston, L.
Hughes, L. Serota, B.
Hutchinson of Lullington, L. Shannon, E
Jay of Paddington, B. Shepherd, L.
Jenkins of Hillhead, L. Simon, V.
Jenkins of Putney ,L Stallard, L.
Kintore, E. Stedman, B.
Kirkhill, L. Stoddart of Swindon, L.
Kirkhill, L. Strabolgi, L.
Lester of Herne Hill, L. Strafford, E.
Lockwood, B. Taverne, L.
McGregor of Durris, L. Taylor of Blackburn, L.
Mclntosh of Haringey, L. Tenby, V.
Mlackie of Benshie, L. Thomas of Walliswood, B
McNair, L. Thomson of Monifieth, L.
Mar and Kellie, E. Tope, L.[Teller.]
Masham of Ilton, B. Tordoff, L
Mason of Barnsley, L. Walton of Detchant, L.
Mayhew, L. Whaddon, L
Merlyn-Rees, L. White, B.
Milner of Leeds, L. Williams of Crosby, B.
Molloy, L. Williams of Elvel, L.
Monkswell, L. Williams of Mostyn, L.
Abinger, L. Cuckney, L.
Addison, V. Cullen of Ashbourne, L.
Airedale, L. Davidson, V.
Alexander of Tunis, E. Dean of Harptree, L.
Allenby of Megiddo, V. Dixon-Smith, L.
Alport, L Donegall, M.
Archer of Weston-Super-Mare, L. Drogheda, E
Astor of Hever, L. Elibank, L
Belhaven and Stenton, L. Ellenborough, L
Blake, L. Elles, B.
Blaker, L. Elliott of Morpeth, L.
Blatch, B. Elton, L.
Boardman, L. Fairhaven, L.
Boyd-Carpenter, L. Ferrers, E
Brabazon of Tara, L. Finsberg, L.
Brookeborough, V. Flather, B.
Brookes, L. Fraser of Kilmorack, L.
Brougham and Vaux, L. Gainfond, L.
Butterworth, L. Geddes, L.
Cadman, L. Gisborough, L.
Campbell of Alloway, L. Goschen, V.
Campbell of Croy, L. Hailsham of Saint Marylebone, L
Carnegy of Lour, B. Halsbury, E.
Carnock, L Hampden, V.
Chalker of Wallasey, B. Hanworth, V.
Charteris of Amisfield, L. Hardinge of Penshurst, L.
Chelmsford, V. Harlech, L.
Chesham, L .[Teller.] Harmar-Nicholls, L.
Clanwilliam, E. Harris of Peckham, L
Clark of Kempston, L Harvington, L.
Constantine of Stanmore, L. Hayhoe, L.
Courtown, E. Henley, L.
Craigavon, V. Holderness, L.
Cranborne, V. [Lord Privy Seal.] HolmPatrick, L.
Cross, V. Hooper, B.
Hothfield, L. Orkney, E.
Howe, E. Orr-Ewing, L.
Hylton-Foster, B. Park of Monmouth, B.
Ilchester, E. Pearson of Rannoch, L.
Inglewood, L. Peyton of Yeovil, L.
Ironside, L. Pike, B.
Johnston of Rockport, L. Pilkington of Oxenford, L.
Kimball, L Platt of Writtle, B.
Knollys, V. Plummer of St. Marylebone, L.
Lane of Horsell, L. Pym, L.
Lauderdale, E Quinton, L.
Leigh, L. Rankeillour, L.
Lindsay, E Rawlings, B.
Liverpool, E Reay, L.
Long, V. Renfrew of Kaimsthorn, L.
Lucas, L. Renwick, L.
Lyell, L. Romney, E.
McColl of Dulwich, L. Roskill, L.
McConnell, L. St. Davids, V.
Mackay of Ardbrecknish, L. Samuel, V.
Mackay of Clashfern, L. [Lord Chancellor.] Sanderson of Bowden, L.
Sandford, L.
Mackay of Drumadoon, L. Seccombe, B.
Marlesford, L. Sharples, B.
Shaw of Northstead, L.
Marsh, L. Simon of Glaisdale, L.
Merrivale, L. Slim, V.
Mersey, V. Soulsby of Swaffham Prior, L.
Middleton, L. Strange, B.
Miller of Hendon, B. Strathclyde, L. [Teller.]
Milverton, L. Strathcona and Mount Royal, L.
Montgomery of Alamein, V. Swansea, L.
Mottistone, L. Swinfen, L.
Mountevans, L. Terrington, L.
Mowbray and Stourton, L. Teviot, L.
Munster, E Thomas of Gwydir, L.
Murton of Lindisfarne, L. Trefgarne, L.
Nelson, E. Trumpington, B.
Norrie, L. Ullswater, V.
Northbourne, L. Vivian, L.
Northesk, E. Wade of Chorlton, L.
O'Cathain, B. Westbury, L.
Oliver of Aylmerton, L. Wilcox, B.
Oppenheim-Barnes, B. Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

Baroness Miller of Hendon

I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

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