HL Deb 12 March 1996 vol 570 cc768-808

House again in Committee.

Lord Morris of Castle Morris moved Amendment No. 3: Before Clause 1, insert the following new clause— SIMILARITY OF TERMS (". No subsidy shall be paid in pursuance of arrangements under this Act in respect of any private sector student loan whose interest rate or repayment period differs from that available in respect of a public sector student loan.").

The noble Lord said: We put this amendment forward in an attempt to establish some kind of—I pause before I use the phrase "level playing field"—between public and private loans. I dislike the idea of a level playing field, but it has now become such a cliché that we know what we are talking about. The level playing field, of course, in any sport that I have had anything to do with does not matter a toss because you change ends at half-time. When you are used to playing rugby as I was on a pitch that was on the top of a coal tip, and sloped viciously from one end to the other, and if you were 13 down at half-time, you reckoned that you were probably in with more than a fighting chance. The level playing field has become a cliché which we must all observe.

On looking at the way in which this Bill had gone through its various stages in another place, I found that there was a crucial moment in the debate when the Minister of State confirmed to my honourable friend Mr. Bryan Davies, MP—and I quote his exact words: If a lender wishes to offer different terms, including a shorter repayment period and lower interest rates, that is a matter between it and the borrower".—[Official Report, Commons, 4/12/95; WA col. 120.]

I would first like to establish from the Minister, if he can help us on this, exactly what the phrase means: If a lender wishes to offer different terms, including a shorter repayment period and lower interest rates".

Does that mean both together—namely, a shorter repayment period together with lower interest rates—or could it be that it means that the lender offers a lower interest rate alone? It is a grammatical or syntactical point. It is a question of whether, a shorter repayment period and lower interest rates", is a double object or a pair of alternatives. If I put it as a grammarian, does the word "and" there mean that or could it mean "or"?

In any case, such a deal would have to be agreed between the lender and the borrower at the start of the contract. Nearly all students in my 40 years of university teaching are unaware, even at the start of their final year, whether they are going to be employed at the end of their course—unless they are medical students or people in similar positions—nor do they know what salary they will be on. Such preferential terms, if that is what Mr. Eric Forth meant, would be a practical proposition only for those with a private income, or whose parents, or whose rich and ingenious friends, found the idea of a low interest loan, providing a principal to invest at high interest, to be an attractive one. I can well see why it might, but is that what it is for? In our view such a scheme is not an appropriate use of taxpayers' money.

Added to that is the fact that the choice of whether to offer preferential terms, or indeed any loan at all, would be solely up to the private lender. We have said again and again that the choice is not that of the students choosing their lenders but of lenders selecting their students in the private sector. There has never been any sense that a private sector lender would be obliged to offer a loan to a student regardless of that student's condition or acceptability.

Ministers may argue that it is not the state's business to interfere in commercial decisions. We have heard that defence put up more than once already today. It is surely, however, the state's duty to be even-handed. If the Government believe that all students require a certain level of financial support, which would seem to be the logic behind the diminution of the grant at the same time as we have an escalation of the loan facility, then it would be wrong to use taxpayers' money to give some a better financial deal than others at the direction of the private companies that can be induced into this scheme.

But if the attraction of private student loans to students is not to be a financial inducement or a longer term in which to repay, what other form of inducement can a bank or building society possibly offer—a leather wallet, a shiny key ring, a holiday in Tuscany at the bank's expense, the chance of a stake in a lottery where the prize is a big new motor car? We shall be most interested to learn why precisely a student, after being chosen by a bank, should choose that bank rather than the Student Loans Company. As far as I can see, that has never clearly emerged in any of our discussions so far.

This amendment then requires that the interest rate and the repayment period should be the same whether the loan is from the Student Loans Company or from the bank or banks which have read, marked, learned, inwardly digested and, what is more, signed up to the 471 grammes of tender. I beg to move.

Lord Tope

I support this amendment. The noble Lord, Lord Morris, has said much of what I would have said as the reasons for supporting it. He quoted from the Minister of State in another place, although I believe that it was in answer to a Parliamentary Question; but that is a detail. I shall not repeat the quote. But it leads us to look at what sort of student borrower might be taking advantage of this provision and be likely to qualify for these preferential rates, whether they be a shorter repayment period or low interest rates or both. It may be that the answer to the noble Lord, Lord Morris, is that the reference should be "and/or" in the quote.

In the Second Reading debate I puzzled as to who wanted to take advantage of the provisions in this Bill. I said: the only people who may have wanted this Bill are those better-off parents who can afford to invest a low-interest student loan to attract a much higher rate of interest".—[Official Report, 19/2/96; col. 922] I believe that that is exactly what this amendment is trying to address. Many of us know that this happens already under the present arrangements. What we are fearful of is that it is likely to become even more the practice if this amendment is not passed.

It may well be that the sorts of students who are likely to attract this preferential treatment from the bank will be not those who necessarily know what their employment is going to be that far out from the time when they leave university but those whose parents can afford to offer that security. One of the reasons why those parents may wish to offer that security is just that they can get a low interest loan through their offspring, of course, and can afford to invest it at a higher rate of interest. It is entirely a matter between the lender and the borrower—the parent and the child, if I may use that term; the parent and the student—and how they might divide the proceeds. That is a matter entirely for them. It is certainly not something for which we should be using taxpayers' money. That is a practice we are trying to address with this amendment, and that is the reason why we are supporting it.

Baroness Farrington of Ribbleton

So that we may understand fully the Government's position with regard to the proposals in the Bill, can the Minister say exactly what the Government intend? Do they intend that all students can choose between a loan from the Student Loans Company and a private sector loan? Do the Government intend that there should be no greater constraints on the loan options available through the Student Loans Company as opposed to the private sector scheme? Do the Government intend that the total cost—that is, the cost to the student and the subsidy to cover the administrative costs of the institutions—will be no greater under the private sector loan scheme than under the Student Loans Company scheme? Can the Minister assure us that the administrative costs will not be greater? Can the Minister confirm that the subsidy will cover only administrative costs and will not be a direct subsidy to the financial institutions? If the private sector lender wishes to offer longer repayment terms, is that merely a matter between the lender and the borrower? In those circumstances, and in the name of choice, would the same options be available to students if they took out their loan through the Student Loans Company?

Lord Desai

I support the amendment which was moved by my noble friend Lord Morris of Castle Morris and spoken to by the noble Lord, Lord Tope. Following what my noble friend said, I take it that it must be an "and/or" situation. Obviously, private sector lenders will want to offer a variety of "products", if I may use that word, and will try to segment the market as they offer them to students. It would not be desirable to restrict the kind of packages that may be offered. That is fine. Indeed, I would even go so far as to say that it would be fine if the lender wanted to offer a loan at a lower rate of interest to somebody who was thought to be a better risk.

However, the amendment seeks to point out that if lenders do that, it must be because they find it profitable. They cannot offer low interest loans but then complain that that is costing them more than the student will pay. The principle is that subsidies should not be paid when the loan-givers are cherry picking, as it were. That is a perfectly sound, free market principle. Indeed, I would even recommend it to the Minister because I am sure that his party believes in it. Firms which are cherry picking are operating in highly profitable areas and should not, therefore, be subsidised. However, subsidies should be available where the market may find it difficult to make a loan because the risks are too great or because those seeking loans may have uncertain career prospects.

I believe that what my noble friends are trying to say in the amendment is that subsidies should he paid only to deserving lenders in deserving cases, not right across the board. I have a genuine question on that for the Minister. Is a subsidy element to be calculated for each product which is offered or will the subsidy be given to a firm across all of its loans? Will a firm be able to offer a portfolio of loans—some good, some bad—and then say, "This is what we need in the way of a subsidy", or is the subsidy to be given only for specific hard cases where the market is thin? I should be grateful if the Minister could respond to those points.

5.15 p.m.

Lord Henley

Oh dear, the party opposite really does not change at all. Noble Lords opposite simply do not like choice. The amendment is designed further to restrict the choice that would he available to both institutions and students. The noble Lord, Lord Morris of Castle Morris, spoke long and eloquently about the level playing field, that cliché, and his experiences on the level playing field.

We have made it clear that private loans will be offered on similar terms to public ones. The invitation-to-tender documents, copies of which the noble Lord has seen and which are in the Library, make clear that private loan interest rates would he no higher than public ones. Neither would involve real interest rates. Similarly, private loan repayment periods would he no longer.

As the noble Lord knows from the 1990 Act, interest rates and repayment periods for public loans are set out in regulations. Our contracts with the private lenders will provide that any changes to these periods in the regulations will he reflected in similar changes to private loans.

As for the comments made by my honourable friend in another place in answer to a question—I refer to the comments which the noble Lord, Lord Morris, quotedx2014;we think that there is a case for some innovation. That is why the invitation-to-tender documents envisage that private loans might—I repeat "might"—charge lower interest rates in return for a shorter repayment period. I do not accept the noble Lord's point that that would be attractive only to the richer student with his own private means. It might be in the interests of a student, even if he does not know what his future will be, to pay out a larger proportion of his income so that he can get rid of the burden earlier. That would be a matter for him. It is something which the private sector institutions should continue.

I do not accept the point made by the noble Lord on this and other occasions that there is not much else that the financial institutions can offer. I accept that in the short term the terms will be broadly similar and that the emphasis will be very much on service enhancement and on providing a quicker service than that offered by the Student Loans Company. Obviously, a major financial institution can offer a much bigger network of offices which the student can use. Obviously, in the longer term, I would expect new products to emerge as the private institutions develop their thinking in this area.

I hope that the noble Baroness, Lady Farrington, will accept that in such arrangements the level of public subsidy will be exactly the same. There is the level playing field for which the noble Lord was looking.

That increase in product choice for the consumer, with no downside for either the taxpayer or other students—whatever the noble Lord, Lord Desai, might say about cherry picking—is just the sort of benefit that will flow from the involvement of the private sector. In the longer term, loan products will be increasingly tailored to the needs of individual borrowers. For that reason I hope that the noble Lord will feel prepared to withdraw his amendment which I think is unnecessarily restrictive. There is no case for building in such inflexibility.

Baroness Lockwood

If a student took out a loan at a lower rate of interest in order to repay it more quickly, and if that student's earnings were 85 per cent. of the national average, would those provisions apply? If so, surely there could be no certainty that, having taken out the loan at a lower rate of interest, it would be repaid more quickly.

Lord Henley

If I may say so, the noble Baroness shows a fundamental misunderstanding of the Bill. This is a very simple Bill which, in effect, simply changes the system of having one single lender, the Student Loans Company, to having a plurality of lenders. The Student Loans Company will still be able to offer the same terms and conditions, but we hope that a number of other financial institutions will sign up to the advantages that we are proposing for both them and students. Therefore, the same conditions, the same protections and the same income-contingent arrangements will apply. Indeed, it has been put to me several times that there are no income-contingent arrangements in the present system, but under the new system the individual student will be able to have such protection. The subsidy is designed to protect financial institutions from that.

Baroness Farrington of Ribbleton

The Minister said that there is room for innovation. He said that it was possible to amend the system of repayment to allow for lower rates over a shorter period through the private sector loans scheme. He did not say whether the same freedom and choice would be available through the private sector loan scheme to increase the interest rate and lengthen the period of time to whatever seemed an appropriate arrangement as between the borrower and the lender. He did not say whether the same choice would be available to students who, for whatever reason, chose to take up their loan arrangements through the Student Loans Company scheme.

I was pleased to hear the Minister say that we now have a ceiling on the cost of the subsidy to the private sector scheme, and that it will be no greater than the subsidy to the public sector scheme. I presume by that that he was referring not to the amount of money that the student borrows but the administrative and any other subsidy arrangement that applies at the moment to the Student Loans Company scheme, and that that would be the upper ceiling for the private sector scheme.

Lord Henley

If the noble Baroness is asking me to come back on that point, yes, I made it clear that in this sort of arrangement the level of public subsidy concerned would be the same. I am not seeking to say anything other than that. As regards the earlier points made by the noble Baroness, she will be aware that under the 1990 Act we have an ability under regulations to lengthen the repayment period and to make other such adjustments. That is something that will involve considerable cost, and is something that will have to be addressed in the light of the extra costs.

What we are saying about the private sector is that we see a case, if it wants it, for it to tailor the product in the right way and the manner appropriate for the individual student and, as I put it, to charge lower interest rates in return for shorter repayment periods. It is up to the banks themselves to develop such schemes. They will not receive extra subsidy for devising a scheme that might be of greater benefit to individual students, through a longer or shorter repayment period, or whatever. In that, there is a level playing field.

Baroness Farrington of Ribbleton

This is important. Will the Minister guarantee that in the interest of choice, to which we on these Benches are wedded, a student taking a Student Loans Company loan will be entitled to the same range of choices, whether or not as an individual the student chooses to make an application in that scheme or whether the student is forced into that scheme because the private sector turns down the student?

Lord Henley

First, I am fascinated by the declaration made by the noble Baroness that her party is wedded to choice. That is something I had not noticed in some of its more recent confused statements on the subject of education. No doubt we will discuss more of that later.

No, it is obviously for the financial institutions to develop their own packages and personalise them in the appropriate way. I imagine that we will see a number of them in due course. The Student Loans Company will continue to operate as it does at the moment, but, as I said, if we wanted to extend the repayment period that is a matter that can be addressed in regulations. It is obviously a matter that would have serious financial implications.

Lord Ponsonby of Shulbrede

Will the Minister confirm that he said that the administration subsidy will remain the same for whatever type of loan is made? However, if the loan is for a shorter period, surely that will reduce the administration costs for the bank concerned. So does it not follow that it will be in the interests of banks to minimise the period of the loan to maximise their profits?

Lord Henley

I can confirm that I said that the level of public subsidy will be the same in both cases, but it might be in the interests of individual institutions to charge a lower interest rate in return for a shorter repayment period. That is a matter for them and the individuals concerned.

Lord Ponsonby of Shulbrede

Will the Minister confirm that the private institutions will receive the same administration subsidy for a short-term loan as they would for a long-term loan?

Lord Henley

Obviously I am not going to speculate on how the negotiations will take place between us and the institutions concerned. We have set out roughly the design of that in the invitation to tender and in the draft contracts. Obviously there will be differences between one and another. That matter must be left to those negotiations.

Lord Morris of Castle Morris

I hope that the Minister will not think it in any way patronising if I say that I am grateful for that. I have not been terribly grateful for his previous answers, but he has given us some factual answers to this amendment, which are helpful and which have illuminated at least me. The playing field looks a little more level, but a bit of a mist has descended over the game.

We learn that private loans will be offered on—I wrote it down—very similar terms to those of the Student Loans Company; that interest rates and the repayment period will be the same unless the private lender decides that they will not be and offers a shorter repayment period and a lower interest rate. That may be and/or, but there is the possibility of offering a quicker service, benefits of a larger network, and other things of which the Minister has not yet thought. I can well see that there may he other fringe benefits which could be an inducement: greater protection, possibly; greater long-term benefits for being signed up with the particular bank over a particular period.

I do not want to pursue this matter any further tonight, because I want to take away what the Minister has said, read it tomorrow morning and think about it at much greater length. I think that he has offered us what we have asked for on this amendment. Because of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 [Subsidy in respect of private sector student loans]:

Lord Peyton of Yeovil moved Amendment No. 4: Page 1, line 13, at end insert— ("(1B) No subsidy may be paid by the Secretary of State under subsection (1A) unless the arrangements referred to in subsection (1A) have been laid before, and approved by resolution of, each House of Parliament."").

The noble Lord said: My noble friend has, on a number of occasions, reminded us that this is an enabling Bill. It enables the Government to do rather a lot. I am not all that fond of enabling Bills. When they exist in an almost total vacuum of information, I like them even less.

The Bill as it now is seeks authority on behalf of the Government to write cheques payable to unnamed persons, on dates unspecified, and for amounts unknown. On top of that, it makes absolutely no provision for scrutiny. It may be for the convenience of the Committee if I were to deal with Amendments Nos. 4, 9 and 21 which are in my name. It would save me, and relieve the Committee from enduring an unnecessary amount of tedious repetition by me.

By Amendment No. 4, my noble friend Lady Park of Monmouth and I seek to ensure not that we interfere in the course of negotiations with the private sector institutions, but that when those negotiations are completed the conclusion is submitted to an adequate form of parliamentary scrutiny. That does not seem much to ask.

It is the Government's wish to enlist the private sector institutions to take the risk—to use my noble friend's words on Second Reading—to he responsible for raising and lending much of the money (a total of £5 billion) and bearing most of the risk. The Committee should consider that on the previous occasion the private sector institutions showed no interest in participating, and so far as I am aware there has been no ugly rush on this occasion. Indeed, we are informed that the National Westminster Bank has declined the invitation to tender which was contained in that extraordinary document.

In passing, I venture to comment that we in this country appear to have developed a real taste for complexity. It is generally accepted that once one gets into matters of finance there is something indecent and naive in even attempting to express a point simply. I almost conclude that obfuscation is now considered to be the height of respectability instead of being denounced as it should be.

I suggest that since the necessary information is not available the Government have no alternative but to take the amendment away, if they cannot accept it tonight as drafted, and give it very serious consideration.

I turn to Amendment No. 9. In doing so I wish to lament at the outset the form in which the Bill now stands. A casual reader would soon reject any possibility of understanding the schedule as it stands. I seriously wonder why the legislature cannot have in front of it, in the form of, say, a schedule, a clear statement of the law as it would be if the Government's proposals in the Bill were accepted. Instead we have a terrible mixture of the 1990 Act and the present Bill pancaked together in a schedule which is totally comprehensible without a great deal of unnecessary labour. I have made that point on other occasions and I make no apology for repeating it today. I am happy to see my noble friend in an amenable mood nodding his head.

The Government's purpose is clear enough. They seek the power to subsidise private sector institutions and to amend the 1990 Act. Amendment No. 9 is a polite way—I should hate my noble friend to think that I am minded to be anything but polite where he is concerned—of asking the simple question: would it not be better to wait at least until sufficient of the private sector institutions have shown themselves willing to come to the party? It seems to me that in the meantime the Government would be well advised to apply their attention not to what may happen a long time ahead but to present needs. Perhaps I may use the words of the noble Lord, Lord Dainton, on Second Reading. He said that the Government's aim should be to ensure that, the loan scheme should be inexpensive to administer and should encourage, not deter, good but poor students from entering universities".—[Official Report, 19/2/96; col. 924.]

That is a simple purpose.

I wish to call in aid the words of my noble friend Lord Renfrew on the same day. He referred to a, crisis which may soon become a catastrophe".

He later said: Damage is being done now to the higher education system and the Bill does nothing to rectify it".—[Official Report, 19/2/96; col. 928.]

Those are serious words and they deal with the present situation. However, the Bill concerns itself only with an uncertain date in the future, and that while everything progresses as the Government would wish. I believe that the Government have every reason for putting the measure on one side and returning to the immediate perils with which higher education in this country is confronted.

I turn to Amendment No. 21. It is important that arrangements for repayment should, as far as possible, be simple, fair and realistic. There will be problems of default—indeed, there are already—and there will be increasing arrears. Perhaps I may remind my noble friend of the wise comment on the subject made by my noble friend Lady Park of Monmouth on Second Reading. She said that under the present arrangements it is virtually certain that arrears, which have already grown to an unacceptable level, will increase further.

Much the simplest way of achieving a fair and orderly repayment system would be to have it handled by the Inland Revenue. The Inland Revenue has the advantage of knowing the names, addresses, earnings and debts of all concerned. No other body has those advantages. It would be unnecessary to create a new organisation. Therefore, even if my noble friend does not leap to accept this sensible amendment tonight, I hope that he will indicate that he will take it away and look at it carefully. If he cannot accept the amendment I hope he will come forward with a form of repayment which takes account of current earnings. It is stupid and cruel for this House of Parliament to lay down that in the future students who have been given loans but who are not earning sufficient to have even the hope of repayment shall be required to do so. My noble friend and the Government must come to terms with that need.

I wish to make clear to my noble friend my discontents. I wish to make it clear to him that they are in no way related to him. He has been good enough to give me the opportunity of speaking to him and he listened patiently to what I said prior to the Committee stage. I am grateful to him for that. My complaint is that only too often the Government, that great big amorphous machine, find it easier to turn a deaf ear to representations to which a great deal of thought has been given and which we think are important. Coupled with that unwillingness to listen, there is a certain refusal to learn from experience. I find that intensely irritating. I can just, by a stretch of the imagination, entertain the idea that I am capable of being irritating to Ministers and their advisers. Indeed, I know that that is so. But I hope that Ministers, and in particular their advisers and superiors, will understand just how profoundly irritating they can be when they do not appear to listen and learn.

I make my position clear. My hope is that this evening the Minister has a discretion to move a little and that he will undertake to think again on behalf of the Government. Now that they have appointed Sir Ron Dearing, I hope that the Government will see that there is rather less point in focusing entirely on the long-term issues at the expense of the short-term immediate crisis. As my noble friend said in the words that I have quoted already, that crisis may turn into a catastrophe.

I shall listen with the greatest possible interest to every word and every nuance of my noble friend's reply. If he cannot as a minimum at least allow the possibility of some scrutiny following upon the conclusion of the arrangements which the Government hope to make, then I shall be obliged to take that very painful course and seek to divide the Committee. But I am sure that that will not be necessary on this occasion. I beg to move.

5.45 p.m.

Baroness Park of Monmouth

That is an extraordinarily difficult act to follow, but I must try. I strongly support all that my noble friend said. There has to be an opportunity for Parliament to scrutinise the arrangements referred to once the nature and cost of those arrangements is known. The market-testing to which the Minister referred on Second Reading has already required a new invitation to tender after the decision taken by the Government in this Bill not to implement the scheme for private lending until 1997 rather than 1996. Of course, the outcome of the negotiations cannot be known; that is, the Government will not know who has tendered and on what terms until at least after Easter. Nor, we understand, will the private institutions know until then what will be the cost of rejigging their computer technology and training their staff. Nor will the Government be able, until then, to cost the relationship between the universities, which must still do the paperwork, and two funding mechanisms rather than one.

Given all those unknowns, quite apart from the impenetrable language of the tender document, there is no clear set of proposals for us to legislate upon other than the simple propositions that commercial negotiations, of their nature, must be secret, with which I agree; and the Minister wants a blank cheque. Not only that, but, as my noble friend said, we are being asked to sign three blank cheques because we do not know the date, the amount or the payee. The Minister is asking for authority to sign all those three blank cheques. We know only his signature.

We argue that once those arrangements have been completed and only then can the proper powers of this House and another place be exercised. Therefore, we very much hope that the Minister can find a way to meet us on this point.

My second argument, which I believe is vital, is that, as my noble friend Lord Renfrew of Kaimsthorn said on Second Reading, and as we all argued then with varying degrees of urgency and anxiety, there is a crisis in student funding which cannot wait, as we were told that it must wait, until the whole question of student support is reviewed by the Dearing Committee.

The crisis is a double crisis. First, the shift from maintenance to loan has moved so quickly and is still moving so quickly that graduates going down from 1996–97, if they succeed in obtaining employment at £15,200 per annum and above, depending on whether they followed a three-year or four-year course, will be expected to repay in the region of not less than £90 to £100; and that figure will increase. That is a very sizeable slice of income. For those reading medicine, veterinary science and so on, it will be correspondingly much more. The longer the deferment, the more the interest will mount up.

That is not only a frightening prospect for graduates. I submit that it should also frighten the Treasury. I remind the Minister that in November of last year the National Audit Office reported that: As at 31st March 1995, 269,000 accounts were in repayment status. Of those deferment of repayment…had been approved on 122,600 (45 per cent.)". Payments were deferred because their earnings were less than the required £15,200. By July, according to the CVCP, 187,000 were granted deferment, and there were 9,000 in arrears and 35,000 in default.

The Minister may well see, quoting from a National Audit Office Report, that from 1991–92, to 1994–95, the Student Loans Company successfully collected 94.7 per cent. of the moneys due to be repaid. Only £1.9 million of £35.5 million was uncollected. But that was in the early days of a very small loan. The size of the loan has increased many times over since then.

It seems only too certain that the Treasury is looking at some very large losses. Our argument is that to replace the present inequitable and ineffective method of repayment by an income-contingent pay system would benefit not only students but also the taxpayer. But that must be done now. It cannot wait until 1998–99 which is the earliest date at which it seems to me any of the Dearing proposals would be likely to reach the stage of legislation.

In the context of proposals to extend eligibility, as we would certainly hope the Dearing Committee would propose, and proposals to extend repayment periods in the present system, the Minister said on Second Reading: There are powers already available under the 1990 Act … should we wish so to do".—[Official Report, 19/2/96; col. 963.] That is good. Therefore, let us first defer any further consideration of private sector loans until we have some facts; and secondly, I urge the Government to proceed at once to use the powers already afforded by the 1990 Act to change the method of repayment. If they can change the length of time over which the loan is repaid and a number of other matters, they can change that. Better still, as we have proposed, they should use the present Bill to do that. Such government action would receive widespread approval and the money would come in.

Lord Williams of Mostyn

I support Amendment No. 4. The noble Lord, Lord Peyton of Yeovil, mistook his title on his accession to your Lordships' House. I always think that he should be known as Lord Peyton of Stiletto since he wields the weapon with such grace and precision that it always finds its niche in the Minister's ribs with such satisfaction, at least to me.

Amendment No. 4 is the single most important amendment to this Bill because if the Government felt able to accept it, it would lay to rest a great many doubts and feelings, not of suspicion but of uncertainty. The blank-cheque syndrome has been referred to already. It is such an impertinent request that even the most extravagant promoter of the South Sea Bubble would have paused for a moment of silent shame—no payee, no amount, no date.

I should point out to the Committee that I am not speaking to the linked amendments; namely, Amendments Nos. 9 and 21. If this Chamber had an opportunity, were the spirit of the amendment to be accepted, to consider details of payment, repayment and terms—all those matters which are wholly accommodated by the bulk of the remaining amendments—that would he a proper way to legislate. This is an improper way to legislate. It is asking for the irresponsible, uncontrolled, unknowable and unknown abuse of taxpayers' money.

Lord Morris of Castle Morris

I shall be brief. I shall speak to Amendment No. 4 only, though I would love to speak to the others. The Bill provides for the Secretary of State to make arrangements—471 grammes of arrangements so far—with private sector financial institutions for the payment of subsidy in respect of private sector student loans. Those arrangements are not to be subject to any parliamentary scrutiny at all. The detailed handling of student loans is to be worked out in the "arrangements" which will also set out the amounts of subsidy payable to the private sector.

Once the Bill is enacted, Parliament will have no further influence over it. So far there is no reporting mechanism or accountability. Once again, all power is put in the hands of the Secretary of State. That is something which we on this side of the Chamber have been worried about in Bill after Bill during the past few years.

The Minister argued in Standing Committee B in another place that submitting the arrangements to the House prior to their agreement would be—and I quote him—a "novel" way of dealing with the negotiation of commercial contracts. We all understand the need for a degree of confidentiality during the negotiations. However, many of the details of the scheme, such as the universities' relationships with private lenders, will not become apparent until those final arrangements have been agreed.

Bringing those arrangements before Parliament would allow the detail of the scheme to be examined before implementation and would set to rest some of the universities' concerns about it. As public subsidies will be paid to the financial institutions, it is also important that the taxpayer is publicly satisfied that they are being well spent and will be properly accounted for. At present that simply is not the case. That is why we support the amendment most strongly.

Lord Addington

The amendment which was moved and the other two that were spoken to by the two Members of the Committee on the other side are most sensible. With the arrangements which will be made under the Bill, we are basically giving the Government a blank cheque. We are talking about commercial arrangements which will affect the future education of our entire population. Surely there should be some sort of scrutiny involved. We are basically asking for Parliament to be allowed to do its job.

The other arrangements refer to a repayment system. Amendment No. 21 refers to repayments being made through a system which would be "appropriate to current earnings". That is similar to the policy of my party. Therefore, the Committee will not be surprised to learn that we support that proposition. A provision which is fairer and which relates to the ability to pay is something which our entire system of financing higher education has needed for a long time.

Lord Henley

My noble friend has grouped Amendment No. 4 with Amendments Nos. 9 and 21. I commend him for doing so. In fact, I tried to do a large amount of grouping, as Ministers always do; but, as Oppositions always do, they ungrouped those that I suggested. I believe that all is fair in that respect. My noble friend wished to group the three amendments in his name and that of my noble friend Lady Park. That, too, is fair enough. However, the amendments are somewhat different in that they cover rather contradictory matters and cannot all be taken at once. I make those remarks only to tell my noble friend that if following what I say he felt it necessary to press Amendment No. 4 to a Division, I would not accept that as binding me on Amendments Nos. 9 or 21, especially as those matters were not addressed by the noble Lord, Lord Morris of Castle Morris, who said quite clearly that he was not speaking to Amendments Nos. 9 and 21. However, following Dearing, I hope that my noble friend will feel able to support what I have to say on those amendments in due course.

I shall deal first with the two latter amendments. As regards what my noble friend said about the schedule and about its incomprehensibility—for example, how difficult it was for a layman such as he to understand it—I quite accept his point. I can assure him that I shall try to ensure that he has a copy of what the schedule to the 1990 Act will look like as amended by this legislation before Report stage. That will also be available to other Members of the Committee who are having problems following the "legalese", if I may put it that way, of the schedule.

I do not think that I can go further than that; indeed, I am not sure that this would necessarily be a matter where the whole schedule ought to be amended in the form of a consolidation measure. That is probably something that would be better left for consolidation Bills in due course. However, if my noble friend will accept a copy of what it would look like, I am sure that he will find it somewhat easier to understand.

I should like to say a few words on Amendment No. 21. I appreciate that what both my noble friends are attempting to do is to change to a system whereby one uses the tax system for repayments. There might or might not be some merit in such a system. We have certainly argued, as I am sure my noble friends will be aware, against such systems in the past. Indeed, they do incur a certain amount of costs, they can impose a greater regulatory burden on individual employers and there are significant transitional costs. However, I do not think that it would be right or proper to argue the case as to what repayment method should be made available at present, other than to remind my noble friend Lady Park that obviously we have powers to extend the repayment period if the burden on individual students grows in due course. That is something which would certainly be borne in mind if, as my noble friend rightly put it, the burden on individual students increases. But having said that, if one extended the repayment period (as we can do under the 1990 Act), that would have significant cost implications for employers.

It is important for me to remind the Committee that it is only some three weeks ago that we announced the setting up of the committee of inquiry under Sir Ron Dearing. It would be somewhat odd if having announced that committee and having accepted the general idea that there should be such a committee of inquiry—a committee that was generally welcomed on most sides of the Chamber; indeed, I can certainly say that about the party opposite and my own Back-Bench colleagues, and the same was true in the other place—we then pre-empted a large part of Dearing and said, "Well, yes you can do this. You can look into the shape, funding, structure and so on of higher education, but here is one thing we are going to decide in advance and we would rather you didn't go down that track". That would be unnecessary. For that reason, I hope that my noble friend will not feel it necessary to press Amendment No. 21 when we reach that stage. I give way to my noble friend.

Baroness Park of Monmouth

I am much obliged to my noble friend the Minister. Does not the argument that it would be improper to pre-empt Dearing on the method of repayment hold equally good for the Bill that we are now considering?

Lord Henley

Absolutely not. The change that we are making now is, as I have explained, a very small one. It is a change from the singular—the individual Student Loans Company and an individual means of lending—to a plurality of institutions which could offer the loans. I do not believe that that changes the shape or structure. We made that quite clear—

6 p.m.

Lord Morris of Castle Morris

I cannot understand the logic of that. It surely pre-empts Dearing. Dearing may suggest something different. The Government have decided that before they consider the question of student loans, or student funding, this measure shall exist. That pre-empts Dearing.

Lord Henley I simply do not accept that. We have a Student Loans Company. We have a student loans system, operating as it does under the 1990 Act. We are making one small change. That does not pre-empt Dearing. The change proposed by my noble friend is actually a major change. It proposes a change from repayments to the Student Loans Company to a scheme—it was suggested at the time of the 1990 Act—using the tax system. There are other suggestions. Some people argue for using the national insurance structure; some prefer a different form of repayment covering longer periods. Those matters, quite rightly, can be addressed by Dearing. To go down my noble friend's route would pre-empt that. I do not think that continuation with the Bill—which is what the noble Lord is putting to me and which is a matter I have addressed in private with him—pre-empts Dearing.

I turn now to the principal and main amendment, Amendment No. 4, moved by my noble friend. I can obviously tell my noble friend that we shall in due course announce the names of the successful private sector lenders following the tendering exercise. But, as I think my noble friend would accept, the actual commercial negotiations have to remain confidential. There is nothing unusual or suspicious about that. It is standard government practice when one enters into commercial arrangements with the private sector. I see no compelling reason why we should make the substantial change of practice required by the amendment.

We expect shortly to be negotiating with the financial institutions which submit tenders. As I made clear, there are still a reasonable number of institutions interested. The process will be competitive and confidential. Out of it we hope to be able to choose a number—as I made clear earlier—of up to, say, four individual institutions in England, Wales, Scotland and Northern Ireland. I do not believe that it would be practical to submit the details of those negotiations to Parliament for approval, nor do I believe it necessary. Indeed I think that the involvement of Parliament in the negotiations would impede them and make them unwieldy. I think, again, my noble friend would accept that.

Obviously, I accept that there are the concerns—the concerns that lie behind the amendment—that taxpayers' money will be paid in subsidy to the private sector lenders. It is clearly right that there should be proper parliamentary scrutiny of that expenditure. There will be ample opportunity for that. First, I make it clear that while we are determined to realise the substantial benefits of private sector involvement in student loans, we shall only sign a contract with a private lender when we are convinced that the deal is the most effective one for the taxpayer.

Secondly, our contracts will safeguard the interests of the taxpayer and the student borrower. We have already made available in the Library a copy of the invitation to tender documents which have been sent to the financial institutions. They include a standard contract. I believe that together the documents provide considerable detail on how all the key elements of the scheme will operate. Points of detail in the final contracts may well differ but all the substantive issues are covered in documents already available.

Thirdly, the noble Lord, Lord Morris, said that Parliament would have no further control over these matters after the passage of the Bill. That is simply not so. Parliamentary scrutiny of the public spending on subsidy will be through the normal channels of the appropriation accounts, and detailed information will also be included in the department's annual report. We envisage that there will be details of the amount of the annual subsidy paid in order to ensure favourable terms for students; the number of subsidised loans made annually and the total sums involved; the level of public payments in respect of the Government's share of the risk; and, in total for private sector loans, the number of loans in deferment and default. From that information the overall impact in public expenditure terms will be clearly visible. Further, the department is audited annually by the National Audit Office and that would include spending on both public and private sector loans. The department will also be able to examine the private lenders' operation of subsidised student loans to ensure that the government subsidies are correctly applied. The NAO will also—

Lord Peyton of Yeovil

I hope my noble friend will forgive me for interrupting. I am sorry about that but I want to be careful on this point. I hope my noble friend will make it clear whether the information to which he is referring will be published, or whether it will be reported to Parliament. I do not put the two on the same level.

Lord Henley

I mentioned the detailed information that will be available in the department's annual report. That, as I understand it, is always published and made available to Parliament. Parliament has a chance to scrutinise that annual report and certainly can find time to do so. I am sure that my noble friend will be the first so to do if he thinks it is necessary.

I shall continue with what I was saying on the National Audit Office. I stress that it, too, will have a right of access to the private lenders' operation of subsidised private sector loans. I appreciate that that does not go quite as far as parliamentary involvement before the signing of contracts, which is what my noble friend seeks. However, I hope the assurance that there are considerable safeguards through parliamentary scrutiny will be sufficient to satisfy my noble friend that we are going far enough. If, of course, my noble friend would prefer to have further discussions between this and another stage, obviously my door is more than open. However, I do not think that it would be right for Parliament to be involved in quite the manner that he suggests before the contracts are signed.

Baroness Lockwood

I think the Committee is in rather a difficult situation following the Minister's reply. The noble Lord, Lord Peyton, and the noble Baroness, Lady Park of Monmouth, spoke to all three amendments. The Minister, in effect, has said that he is not going to accept the tradition of the Chamber in linking the three amendments together, should the noble Lord, Lord Peyton, wish to press his first amendment. If that is so, I would hope that the noble Lord, Lord Peyton, would insist upon dealing individually with the three amendments because I think all three amendments are important ones.

I wish to respond to some of the other remarks the Minister made in relation to both Amendment No. 4 and Amendment No. 9 on the availability of information. It is not just this Chamber that needs the information to be available, and available in a way which is easily followed and understood. It is the whole of the educational world which needs to implement the Bill and all the supporting information to which the Minister referred, and, of course, the students themselves and the parents of students. Therefore, I think the suggestion of the noble Lord, Lord Peyton, in his amendment, to leave out subsection (2) of Clause 1 and to rewrite the schedule would be far more helpful to people outside the Chamber who will not be able to see the information that the Minister has kindly said he will make available to us.

Lord Henley

On the second point the noble Baroness made about information being available outside the Chamber, I think Amendment No. 4 is directly related to parliamentary scrutiny. That is why I addressed my remarks to that subject. On the first point of the noble Baroness about my, in effect, ungrouping the three amendments, obviously if amendments which are grouped are consequential on the first amendment, it is the tradition that having accepted one in one form or another, one accepts the others. However, I think the noble Baroness will accept, if she looks at the three amendments, that they are contradictory. One amendment, for example, takes out the schedule; the next amends the schedule. So one cannot obviously accept all three at the same time. For that reason I was making it clear—I have every right to do so as the Minister responding—that I would obviously listen to the debate and would then make a decision on Amendment No. 4, but that does not bind me or the Chamber on the subsequent amendments which are not consequential on Amendment No. 4.

Lord Peyton of Yeovil

I really do complain when my noble friend says that the amendments are contradictory. They are nothing of the kind; they are just alternatives. The first suggestion I wanted to make was to bury the whole schedule. I did not expect the Government to accept that proposal with enthusiasm. Therefore I suggested as an alternative the very modest amendment about the methods of repayment. To say the amendments are contradictory is just nonsense and my noble friend should know that.

Lord Henley

If my noble friend says it is nonsense I take his point. But the noble Lord would accept that we cannot—as I think the noble Baroness seemed to be saying—accept the noble Lord's Amendment No. 4, and then take the other two. That would be a nonsense and everyone knows it. That is why I was making it clear that my position was that I did not feel bound by the decision of this Chamber on Amendment No. 4, nor should anyone else feel so bound. If the noble Baroness can find the usual paper that comes with the groupings, she will note that it states at the top, Although every effort is made to secure agreement to these groupings, they remain informal and not binding. It is therefore open to any Peer to speak to an amendment in its place in the Marshalled List", and so make such a decision.

Baroness Lockwood: I think it is in the interests of the Committee that important amendments such as these are discussed together if they are grouped. Clearly the Minister accepted the grouping in the first place, because I understand that the usual channels were involved.

Lord Henley

If the noble Baroness would give way, I accepted them at something like 1.20 p.m. so it was fairly late that they were put to me. I think in terms of the convenience of the House there is nothing wrong with discussing them together, but it was right that I made my position clear, and I suspect it is a position shared by the noble Baroness's friends on her Front Bench, that one cannot take all three together when it comes to making a decision.

Baroness Lockwood

I accept what the Minister is saying about these amendments. I reiterate that all three are very important amendments, but my main point is that the amendments have not been thoroughly aired individually and, therefore, I hope—and I expressed this hope in my earlier intervention—that the noble Lord, Lord Peyton, will exercise his right to bring them before the House again in due course as we reach them on the Marshalled List.

Lord Peyton of Yeovil

May I start on an agreeable note? First of all, I am very much obliged to my noble friend for his promise to make available in the next stage of the Bill a version of the schedule to the 1990 Act which will contain the amendments presently suggested by the Government, so that we will be able to understand with reasonable ease what the schedule was intended to mean in its new form. That would be helpful.

May I now address the points which were raised by the noble Baroness, Lady Lockwood? At the beginning of my remarks I did say, and I remind her now, that I thought it would be for the convenience of the Committee if I were to deal with all three amendments together. It would save me some breath and the Committee the weariness and tedium of listening to me repeating the same points three times, because, although they are clearly not intimately connected, at least they have some relationship to one another. Perhaps I may also make this clear. My present feeling, if my noble friend were to be gracious enough to go a bit further on Amendment No. 4, would be certainly not to move those amendments tonight. In fact, as they have come up at this hour I think it would be much more useful to move the subsequent amendments, or to put them down again for consideration on Report rather than now. My noble friend the Minister has said something about them and I would like to reflect upon them. I assure the noble Baroness that it is not my intention to drop them altogether.

Perhaps I may now return to the amendment to which I attached particular importance. I note all that my noble friend has said. There was a time when I began to be hopeful. But when he offered an alternative to a formal report to Parliament of the arrangements which they had made in pursuit of an authority conferred by Parliament, when he seemed to suggest that the information would be contained in a departmental annual report, not only did I feel it very inadequate but I felt it would come in a totally indigestible and boring form, and not for one moment would I regard it as satisfactory.

I do not want to use rough language to my noble friend, and I know the constrictions he is under from his advisers and his superiors. But let me beg him, because I do not wish to divide the House now, to say that between now and Report stage he will give this matter very serious consideration indeed and will ensure that those whose authority he is bound to acknowledge will lend an ear to what has been said; that they too will give some thought to this matter and will not go down the road that at least appears to suggest that they take the opinions of either House of Parliament lightly.

6.15 p.m.

Lord Henley

I always take the opinion of my noble friend "heavily", if I can put it that way.

Lord Peyton of Yeovil

I did not say "my noble friend"; I said "my noble friend's superiors".

Lord Henley

I will ensure that my colleagues in the department, my right honourable friend the Secretary of State, note what my noble friend has had to say. There is so far that I can go in terms of looking at things, and I certainly think there are further discussions my noble friend and I can have between this stage and Report stage. But I have to say to my noble friend that I do not think that parliamentary scrutiny before the signing of the contract is something I could offer as a realistic hope. Whether there might be some greater degree of scrutiny, something beyond a departmental report, that I can consider is another matter, although a departmental report is obviously a public document. Whether my noble friend will accept that and be prepared to consider on this occasion withdrawing his amendment is a matter for him. I leave it at that.

Baroness Park of Monmouth

Is it really impossible and unheard of for contracts to be negotiated and made conditional upon the approval of Parliament, which is going to pay?

Lord Henley

It would constitutionally be very, very unusual.

Lord Peyton of Yeovil

I accept what my noble friend has said. But please will he not even consider for one moment that enshrining the conclusions reached with the private sector institutions in something so pedestrian as a departmental report, which neither House of Parliament could think of devoting time to debate, would be inadequate? I hope he will dismiss that totally from his mind.

Lord Henley

I do not take quite the same view as my noble friend about departmental annual reports. I thought what I said earlier in response to his invitation to me to intervene would have been sufficient—that I would consider whether something a little more than a departmental annual report was sufficient.

Lord Peyton of Yeovil

The mere mention of a departmental annual report brings it down to a measure and a level which I find totally inadequate. Until my noble friend makes it quite clear he is not suggesting that something just marginally above the level of a departmental annual report would be sufficient, until he dismisses that idea, I must say I would be very unhappy indeed. His offer now really has to be that the Government will put before Parliament a full report of what they have done. I would accept that. But you cannot say we are going to sign this subject to Parliament's will. My minimum requirement is that there must be a special report to Parliament. It should have nothing to do with a departmental annual report. There should be a special report to Parliament setting out the precise terms and exactly what has happened. There will then be an opportunity for both Houses of Parliament to express their views as to whether what has been done is acceptable.

Lord Henley

I am not sure that I can go much further to help my noble friend. I make no promises from the Dispatch Box, but I made it clear that I would consider whether we could go further. My noble friend will have to decide whether he accepts my word that I and my right honourable friend will be prepared to consider whether we can go further. However, I can make no promise beyond that.

Lord Peyton of Yeovil

I am very sorry that that is the case. It is not a question of whether I accept my noble friend's word. I always accept it without difficulty. I am worried about the constraints under which he is acting. If he cannot now accept that Parliament must have a chance to review the conclusions which have been reached in its name after the signing of a contract (I do not say that that should be before the signing of a contract) then I do not see that I have any alternative but to take the opinion of the Committee.

6.21 p.m.

On Question, Whether the said amendment (No. 4) shall be agreed to?

Their Lordships divided: Contents, 81; Not-Contents, 109.

Division No. 3
Addington, L. Dean of Thornton-le-Fylde, B.
Ashley of Stoke, L. Desai, L.
Barnett, L. Dormand of Easington, L.
Birdwood, L. Ewing of Kirkford, L.
Blackstone, B. Falkland, V.
Blease, L. Farrington of Ribbleton, B.
Borrie, L. Gallacher, L.
Broadbridge, L. Geraint, L.
Brookes, L. Gladwin of Clee, L.
Brooks of Tremorfa, L. Glasgow, E.
Butterfield, L. Glenamara, L.
Carmichael of Kelvingrove, L. Graham of Edmonton, L. [Teller.]
Carter, L. Gregson, L.
Chorley, L. Grey, E.
Cocks of Hartcliffe, L. Halsbury, E.
Crook, L. Hamwee, B.
Darcy (de Knayth), B. Harris of Greenwich, L.
David, B. Harrowby, E.
Hilton of Eggardon, B. Park of Monmouth, B.
Holme of Cheltenham, L. Peston, L.
Hutchinson of Lullington, L. Peyton of Yeovil, L. [Teller.]
Hylton-Foster, B. Ponsonby of Shulbrede, L.
Jay of Paddington, B. Rea, L.
Judd, L. Redesdale,L.
Kennet, L. Richard, L.
Kilbracken, L. Ripon, Bp.
Kilmarnock, L. Rochester, L.
Kirkhill, L. Russell, E.
Saltoun of Abernethy, Ly.
Kirkwood, L. Seear, B.
Lawrence, L. Sewel, L.
Lockwood, B. Stoddart of Swindon, L.
McIntosh of Haringey, L. Strabolgi, L.
Mackie of Benshie, L. Taylor of Blackburn, L.
Mason of Barnsley, L. Thomson of Monifieth, L.
Mayhew, L. Tope, L.
Mishcon, L. Turner of Camden, B.
Monkswell, L. Walton of Detchant, L.
Morris of Castle Morris, L. White, B.
Napier and Ettrick, L. Williams of Elvel, L.
Nicol, B. Williams of Mostyn, L.
Abercorn, D. Hothfield, L.
Abinger, L. Howe, E.
Addison, V. Inglewood, L.
Alexander of Tunis, E. Kingsland, L.
Allenby of Megiddo, V. Lane of Horsell, L.
Arran, E Layton, L.
Bethell, L. Leigh, L.
Blake, L. Lindsay, E.
Blaker, L. Liverpool, E.
Blatch, B. Long, V.
Boardman, L. Lucas, L.
Bowness, L. McColl of Dulwich, L.
Boyd-Carpenter, L. McConnell, L.
Brabazon of Tara, L. Mackay of Ardbrecknish, L
Butterworth, L. Mackay of Clashfern, L. [Lord Chancellor.]
Cadman, L.
Caithness, E. Mackay of Drumadoon, L.
Carnegy of Lour, B. Marlesford, L.
Carnock, L. Merrivale, L.
Chalker of Wallasey, B. Mersey, V.
Charteris of Amisfield, L. Miller of Hendon, B.
Chelmsford, V. Milverton, L.
Chesham, L. [Teller.] Montgomery of Alamein, V.
Clanwilliam, E. Mottistone, L.
Clark of Kempston, L. Mountevans, L.
Coleridge, L. Mowbray and Stourton, L.
Colwyn, L. Munster, E.
Courtown, E. Murton of Lindisfame, L.
Cranborne, V. [Lord Privy Seal.] Orkney, E.
Cumberlege, B. Orr-Ewing, L.
Dean of Harptree, L. Pearson of Rannoch, L.
Dilhorne, V. Peel, E.
Dixon-Smith, L. Rankeillour, L.
Elles, B. Reay, L.
Ferrers, E. Rees, L.
Finsberg, L. Renton, L.
Gilmour of Craigmillar, L. Renwick, L.
Gisborough, L. Sanderson of Bowden, L.
Goschen,V. Seccombe, B.
Gray of Contin, L. Selborne, E.
Harding of Petherton, L. Sharples, B.
Hardwicke, E. Shaw of Northstead, L.
Harlech, L. Shrewsbury, E.
Harmar-Nicholls, L. Skelmersdale, L.
Harmsworth, L Soulsby of Swaffham Prior, L.
Hayhoe, L. Stewartby, L.
Henley, L. Stodart of Leaston, L.
Hesketh, L. Strange, B.
Holderness, L. Strathclyde, L. [Teller.]
Hooper, B. Sudeley, L.
Swinfen, L. Ullswater, V.
Tebbit, L. Wilcox, B.
Teviot, L. Wynford, L.
Thomas of Gwydir, L. Young, B.
Trumpington, B. Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.

6.30 p.m.

Lord Morris of Castle Morris moved Amendment No. 5: Page 1, line 13, at end insert— ("( ) 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: The purpose of the amendment is to reopen an inconclusive and distinctly unsatisfactory debate which took place in Standing Committee B of another place on 19th December last, at cols. 104 and following of the Official Report, on the subject of privacy and credit rating for students seeking loans.

Creditworthiness is an essential virtue in this monetary age. Members of the Committee may have seen on television last night a documentary by that very agreeable company Granada Television on the ease with which one person can assume the identity of another. An entirely innocent young woman, Susan Cobb, had her identity stolen by a drug dealer who obtained a copy of her birth certificate. Miss Cobb knew nothing of that until she was refused credit by her bank. So also were her parents because the address had been blacklisted and so was everyone living at it. This went on and she was deemed not to be creditworthy even after the impostor was caught, tried, found guilty, sentenced and in prison. Creditworthiness is a vitally important thing that we have to preserve, certainly more than virginity in this difficult age.

A student is forced to seek a loan. He or she has no choice. You cannot live on a maintenance grant alone. You cannot live on a maintenance grant plus your earnings as a barperson or a sweeper-up of floors. You need to have the facility of a loan if you are going to do anything like justice to the academic demands of the course on which you are engaged. A student is forced to seek a loan and he may endanger his creditworthiness with no reason whatever given. It is that which seems to us unjust. That is the reason for bringing forward the amendment. I hope that the Minister will explain why this statement should not be given to a student. I hope that he will explain more fully how the ombudsman can operate. I hope that he will accept the amendment.

Lord Tope

I support the amendment. The Minister said several times tonight and on previous occasions that he is keen to encourage choice. As I understand it, the objective of the scheme is to offer that choice to students. But we are asking, indeed the Government wish to encourage, students to move from a scheme where a loan is guaranteed through the Student Loans Company into a private sector scheme where there is no guarantee that a loan will be forthcoming. It is important that they are offered the security of knowing the reasons that they are refused a loan. As the noble Lord, Lord Morris of Castle Morris, said, the refusal of a loan can affect the student's creditworthiness for many years to come. We all know of and hear about stories and occasions where dreadful and appalling errors of fact are made, completely unknown to the person concerned. If the students have no knowledge of the reason that they have been refused a loan, they can suffer for that whenever they seek creditworthiness in the future.

For better or worse, some form of student loan, by whatever term and by whatever repayment method, will he a fact of student life. We have to seek a way of offering students at least the reassurance that if they have to embark on a private sector loan the refusal of that loan will not blight them for many years to come in their attempts to seek another loan.

When the Minister replies, I hope that he will be able to offer reassurance on a point which is of great concern to many students, and will be increasingly so. Without such a reassurance, the Bill will be even more flawed than it is already.

Lord Ponsonby of Shulbrede

The points have been made succinctly by the two previous speakers. Choice is available for the banks; it is not available for students. Students need money to exist. I believe that that puts them in a different category from other borrowers of money. The Government are requiring them to make this application to incur debt. The banks may refuse that application. That puts the student in a different category. For that reason, students should be better treated than other applicants. If they are informed as to why their application has been turned down, they can either put some misapprehensions right, or they will know the problem for future applications.

Amendment No. 7 also provides an imaginative way of meeting our concern. I shall be interested to hear the Minister's principled arguments as regards putting students in the same category as those who wish to borrow money for cars, houses or any other reason. Why should students be treated in the same way when undertaking such a vital task as getting themselves properly educated?

Lord Henley

I dare say that we shall reach Amendment No. 7 in due course. I had originally wanted to group the amendments but I believe that the party opposite wished to "ungroup" them.

The amendment highlights a philosophical difference between our approach and that of the Opposition. We believe quite simply in the benefits of private sector involvement and the freedom it must be given to deliver those benefits. I suspect that the Opposition are mistrustful of the private sector and want to regulate it into inertia.

To get the benefits of the private sector, you need to work with the grain of the private sector's approach. It would be quite wrong to impose particular rules on how private companies should deal with loan applications. They are lending and risking their own money. That is one of the points behind the Bill. They must be free to reject applications; and they must be free to decide what to tell such applicants. We would not dream of doing so where, for example, students are refused current accounts or graduates are refused mortgages.

I appreciate that we are talking about public money in the form of subsidy. But the money risked on a loan is largely the private lender's. If we are to involve commercial practices, we must trust them. We cannot trust them and over-regulate them at the same time.

I think that the concerns on this issue are simply disproportionate. I do not accept that private lenders will be falling over themselves to reject applications, or that they will be secretive about their decisions.

I believe that it will be a strongly competitive market. Private lenders will not commit themselves to student loans unless they are keen to be major lenders to students. They will be committed to securing a fair share of the market. They will not achieve that by being over-selective or secretive.

Those students who are rejected will have the ability to turn to competitors; and the Student Loans Company will still be there as a formidable competitor available to all. I believe, therefore, that it would be as unreasonable as it is unnecessary to put on private lenders the restriction that the amendment imposes.

The noble Lord, Lord Morris, also asked about the role of the banking and building societies' ombudsman who will be able to consider genuine complaints from student loan borrowers about the service that they receive from the private lenders. I thought that I had made the position clear at Second Reading but perhaps I did not in the time available. Contrary to the remarks made by Mr. Byers (a colleague of the noble Lord, Lord Morris of Castle Morris) during Report stage of the Bill in another place, the ombudsman will look into complaints about an institution's refusal to offer a loan provided that the complainant has a piece of evidence of substance, however small, that the institution acted unfairly or illegally in granting a loan. I am certainly confident that the ombudsman will offer a rigorous and effective safeguard.

As we are only on Amendment No. 5 at twenty to seven, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Morris of Castle Morris

I am grateful to the Minister for that reply. He clarified the matter of the ombudsman. He did not make clear why a student should not be entitled to be given the reasons for the refusal of the loan under the Bill. However, at this hour of the night it is time that we got on. We shall return to the question of creditworthiness on Amendment No. 7. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Borrie moved Amendment No. 6: Page 1, line 13, at end insert— ("( ) The Secretary of State shall require any person to whom subsidy is to be paid to maintain confidentiality in relation to any details provided by eligible students and, in particular, not to make available to any third party (other than the eligible student concerned or to the Secretary of State) without the applicant's permission any information on whether an application by an eligible student was accepted or rejected or the reasons for such acceptance or rejection."").

The noble Lord said: In moving the amendment, I accept that when a student seeks a private sector loan, as when anyone seeks any type of loan, he or she must expect to answer questions about himself or herself and the financial circumstances. That is necessary not only for the lender's sake but for the applicant's sake, to ensure that he or she is not over-committed.

Confidentiality about the student should be maintained to a particularly high degree. It should apply not only to the information supplied by the student but also to the decisions that are made to deny a loan to the student applicant. As I understand it, the Data Protection Act 1984 already protects the confidentiality of the loan records of a student. If so, it would be helpful if the Minister would confirm that. It is important that lenders should not be able to pass on to others—particularly credit reference agencies—any information as to whether a student loan application has been rejected and the reasons for such a rejection, if any have been given.

I know what is the normal behaviour in the private sector and fully understand it. If I am asking for special treatment for students, it is because at the stage of life of a normal student one would not wish any stigma to attach to a refusal which would detract from—I use the same word as my noble friends when debating the last amendment—the creditworthiness of the student. I beg to move.

Lord Tope

There is not much more to say. As might be expected, the noble Lord, Lord Borrie, has put the case very well. This is another amendment concerned with the future of students, and it is important that it should be supported.

Lord Henley

I hope I can persuade the noble Lord, Lord Borrie, that his amendment is unnecessary. It may be helpful if I say a little about it. In seeking to regulate the flow of information from lenders of subsidised student loans to other parties the amendment assumes that other parties (in particular, I presume, other lenders) will have something to gain from knowing why a lender has rejected a student's application.

As mentioned earlier, private lenders will to some extent have their own selection policies and procedures. Just because a student has been rejected by one private lender, it does not follow that he will be rejected by all the rest. As the noble Lord will appreciate, such information can quickly go out of date anyway. I do not believe that a private lender will reject applications out of hand on the basis of old information about a student.

In any case, as the noble Lord is aware and as I mentioned, there is already significant protection. It is right that lenders should not be allowed to provide third parties with information for the purpose of soliciting goods or custom. The Student Loans Act 1990 prevents that and we intend to keep the provision. It will be applied to private sector lenders. In addition, there are specific safeguards in the Data Protection Act, mentioned by the noble Lord, Lord Borrie. It may be helpful if I set out what they are. They require that a financial institution be registered and that the registration includes details of what information it will hold, for what purpose it will be used, and to whom it could be passed.

The borrower has a right to know what information is held and to have any mistakes corrected. Borrowers also have the right of access to all personal computerised records on them held by a lender. Banks and building societies would have to follow those requirements in their dealings with student borrowers, as with other lenders. I do not believe that further safeguards are required. I hope that on this occasion the noble Lord will agree to withdraw the amendment.

Lord Borrie

I am grateful to the Minister for his reply. I shall read it closely. At this stage I can safely withdraw my amendment while reserving my position for the future.

Amendment, by leave, withdrawn.

6.45 p.m.

Lord Morris of Castle Morris moved Amendment No. 7: Page 1, line 13, at end insert— ("( ) 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 Lord said: This amendment returns to the question of creditworthiness and specifically the refusal of credit to someone whose loan was refused by a private sector bank. I am perfectly content to leave the elaboration in the capable hands of my noble friend Lord Williams of Mostyn. I beg to move.

Lord Williams of Mostyn

This amendment is of some importance to students who may suffer if they have to declare that they have been refused a student loan in any subsequent application in their financial lifetime. It is intended to underline the fact that a student is obliged, in the overwhelming majority of cases, to look to this form of loan. It is not a matter of choice but of necessity. If relatively few safeguards are to be imposed within the scheme, we respectfully commend this one on the basis that it is a necessary protection for students.

As has been said, the Bill is skeletal. We do not know the arrangements. We have no likely opportunity of reviewing them, bearing in mind what happened on Amendment No. 4. This is an important matter. One would have thought that it was not an issue that the Government would feel comfortable resisting. However, we shall see.

Lord Addington

The amendment refers to disclosure of a refusal to grant a loan to a student. Students would probably say that their financial situation could change radically when they stop being students. That fact is behind the amendment. However, it has been pointed out already that students have no choice but to apply for the loans. They are a necessity.

Students are calling for a subsistence level of income. Surely, a refusal should not be raised when their record of creditworthiness is being considered in later life.

Lord Henley

The noble Lord, Lord Williams, says that I should not feel comfortable in resisting the amendment. I have to say to him that it is a matter for me to decide as to the degree of comfort I feel rather than for him to impute it. I have to resist the amendment for two reasons. First, it goes considerably beyond the scope of the Bill. It seeks to regulate not only the private lender of student loans but private lenders of every kind. It is also unnecessary and impractical.

The amendment seeks to give a student refused a loan from the private sector the right to withhold that information whenever he applies for credit again. I sympathise with the feelings behind the amendment and the concern about students refused loans from the private sector possibly having a hard time getting credit in the future to buy a house, a car, or whatever. However, financial institutions, whether they be lenders of subsidised student loans or lenders of mortgages to graduates, must have the freedom to make commercial decisions. It would be wrong to expect a credit institution, when considering a mortgage application, to make a special exception for an applicant because he was refused a student loan by another institution.

In any case it is wrong to assume that future prospective lenders will have a great deal to gain from knowing why an applicant was refused a student loan some time before. They will all have their own selection policies and procedures, as I said earlier. The applicant's circumstances will also have changed. One should not make assumptions about the weight that past information will carry. I therefore consider the amendment unnecessary. I urge the noble Lord to withdraw it.

Lord Williams of Mostyn

Will the noble Lord say why he thinks the proposal is impractical?

Lord Henley

First, I consider that it goes beyond the scope of the Bill. I also think it wrong to impose such an obligation on the financial institutions, which must have the appropriate freedom to make their own commercial decisions.

Baroness Carnegy of Lour

It is very important to be clear about what my noble friend is saying and about the implications of the Bill. If a student is refused a subsidised private sector loan, can he or she then apply for an agency loan? If so, is that information confidential—so that we know what a student might do if he or she wanted a loan but was refused it by the public sector?

Lord Henley

If a private institution refuses the student a loan, as I have made clear more than once there will always be the availability of the Student Loans Company. It would always be possible for an individual to go to the Student Loans Company.

Baroness Carnegy of Lour

That is confidential under the Bill, is it not?

Lord Henley

Obviously it would he known that the individual had a student loan—it would come from the Student Loans Company. The point I am making is that the private sector institution should be free, should it so wish, to take account of a refusal of a loan. That is a commercial decision that it can make. The individual student will always have the availability of a loan. If he fails in the private sector, there is the Student Loans Company.

Lord Williams of Mostyn

Does the Minister appreciate that I am not speaking about feelings of discomfort, because discomfort is entirely subjective like questions of taste? The question I understood to have been put was: if a student is refused a private sector loan and then makes an application for a publicly supported loan, is there an obligation to report the refusal of the private sector loan on the occasion of the public sector application?

Lord Henley

I do not see that there would be any obligation to report to the Student Loans Company the fact that the student had been refused a loan elsewhere.

Baroness Farrington of Ribbleton

Will the Minister agree that if an individual applies for a mortgage on a house there are two reasons why that application may be turned down: one is the deemed creditworthiness and the ability of the individual to repay; the other is the quality, siting and value of the property? In the case of an application for further credit, often now in these days of computerisation there is merely a box to tick: "Have you, or have you not, ever been turned down for credit before?". Is it not possible that a bank or other financial institution may decide fairly arbitrarily in the case of a particular career option such as dance or fine art that the career possibilities are limited; and may it not rather arbitrarily reject certain careers as being less likely to lead to people being in a position to repay? Surely this is a very different set of circumstances. In the case of a car it is a question of whether the income is adequate. Here we are dealing with a subsidised private sector loan scheme in relation to which judgments will be made about particular careers leading to the ability to repay.

Lord Henley

We shall come to that point when we discuss the noble Baroness's Amendment No. 13, when we can address the matter in somewhat greater detail. The simple point I make is that these matters must be left to the institutions themselves to make their own commercial decisions.

Baroness Farrington of Ribbleton

It is not the same point.

Lord Morris of Castle Morris

This is an important amendment, as my noble friend said. We take it extremely seriously. The Minister laid out his position, with most of which we firmly disagree. Obviously we shall return to the matter at a later stage when we have had a good look tomorrow morning in Hansard at what he had to say. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Walton of Detchant moved Amendment No. 8: Page 1, line 13, at end insert— ("( ) No subsidy may be paid by the Secretary of State under subsection (1A) except where provision is made under the arrangements between the Secretary of State and persons making private sector student loans as to the maximum amount of loan that may be made to a student in any year, having regard to the length of the period of study for students with additional weeks of study in their final year."").

The noble Lord said: This amendment is tabled in the interests of students of medicine, dentistry and veterinary surgery. Medical, dental and veterinary students face particular problems because of the length of their final year of study. Most study for five years, some indeed for six, as undergraduates compared with three, or perhaps occasionally four, for most students. The longer period of study means that medical and dental student needs are greater and more debt is accumulated.

The most severe hardship is in the final year, when students are at present entitled only to a reduced final year rate of loan. For most medical and dental students the final year begins much earlier than for other students, finishing in mid to late June. Medical students then have to wait until 1st August before starting their pre-registration posts. That short interim period is now increasingly taken up with induction courses, so that students are unable to take up paid employment. The beginning of the final year to the start of employment is over 11 months. A CVCP survey found that nearly all medical and dental students study for between 40 and 45 weeks in their final year. Veterinary students usually have to undertake a number of weeks of extra-mural training in addition to the weeks of term. This is unpaid and eats into vocation time.

The Committee of Vice-Chancellors and Principals would like to see medical, dental and veterinary students receive the full rate of loan entitlement in the final year of study rather than the reduced final year rate as at present. There is a situation at the moment whereby students studying for the postgraduate certificate of education do receive the full loan in their final year. The same is true of those taking accelerated courses.

It is true that medical and dental students receive extra weekly amounts in mandatory grant as a recognition of the difficulties they face in studying for much longer periods than many other students. But those studying for the postgraduate certificate of education and for accelerated courses already receive these additional amounts in mandatory grant as well as being eligible for a full year loan in their final year. It seems inconsistent and illogical that the same benefits are not allowed to medical, dental and veterinary students. I beg to move.

Baroness Park of Monmouth

I very strongly support the amendment. We are all very much aware of the special problems of medical students because of the final year. The average level of debt is over £5,000 for finalists now; and that will go up and up. I cannot help feeling that it is extremely important that they—and, I may add, law students—should have some special consideration of this kind.

In Standing Committee B on 9th January the Minister made the amazing statement: I am not aware of a shortage of good quality students of medicine". Why then are we being reproached by South Africa for poaching much-needed doctors? Why are so many of our young registrars from the European Union? This is a very important amendment, not only now but because we have to think about the supply of medical students for the future.

Lord Soulsby of Swaffham Prior

I support the amendment. As mentioned at Second Reading, the length of the final year for veterinary, dental and medical students is such that it amounts to a whole year—at least of 46 weeks. Unlike so many other courses, in my own profession there is now a cumulative requirement of 35 weeks during a course of five years, or six years as it is in Cambridge, which is notionally a complete academic year but has to be taken out of vacation periods. The implication is that these students cannot earn the kind of money that other students earn by doing jobs in vacation periods. In the result, no financial sum is built up over the years to buffer the total cost of university education in vacation times.

I join the noble Lord, Lord Walton of Detchant, in pleading for special consideration to be given to these particular students. I believe that it is realistic to take into account the fact that the final year is a fully subscribed year of teaching (at least 46 weeks) but that previous vacation earnings do not permit a budget to offset the debt that may have accumulated over the five or six years of the course.

Lord Butterfield

I support the amendment moved by the noble Lord, Lord Walton. There is no doubt that the last year of a medical course can be a difficult one. The same is true for vets. I hope that the Minister will give consideration to this request.

Lord Henley

The noble Lord, Lord Walton, said that this amendment was related directly to medical, dental and veterinary students. I accept that. I imagine that it could apply also in a number of cases to architectural students. In reply to my noble friend Lady Park of Monmouth, as an ex-law student I am not sure that this applies necessarily to them. However, all of us have much less sympathy for lawyers than for doctors.

The Bill is very small and deals with a relatively short point. It is about enhancing the student loan system. It is not about who should get loans or how much they should get. In any case, the matter of rates of loan, with which this amendment is concerned, is dealt with in the Student Loans Regulations, which are reviewed annually, and not this Bill.

Obviously, we are aware of the concerns. They have been put to us on a number of occasions by a number of different bodies. I can assure the Committee that only recently my honourable friend Mr. Forth met representatives of the BMA to discuss their concerns about medical students in regard to this particular issue. The same applies to dental, veterinary and—dare I say?—architectural students. We very much note those concerns and welcome their ability to put them to Sir Ron Dearing. I believe that this is a matter which it is appropriate for the Dearing Committee to look into. If we felt that there were an immediate case—no doubt other representations would be put to us for increasing the support available to these students—we would consider it at the appropriate time when we reviewed the Student Loans Regulations. I am not persuaded that at the moment the existing arrangements for students who have to study for the additional weeks are inadequate, but obviously we will note the concerns and consider them in due course.

I hope that with the assurance that we will keep the matter under review, the noble Lord, Lord Walton, will feel able not to press his amendment on this occasion.

Lord Morris of Castle Morris

We on these Benches entirely agree that architectural, medical, dental and veterinary students form an easily recognisable special case in matters of this kind. We wholly support the amendment. I regret that my noble friend Lord Winston is unable to be present tonight. He has been delayed at another very necessary academic meeting, if not in an operating theatre. I know that he was most anxious to be here and that he would echo everything that has been said by the noble Lord, Lord Walton.

I am glad to hear that the Minister's right honourable friend met some of the representatives. I was worried when at the Committee stage of this Bill on 9th January Mr. Forth said that he was unaware of a shortage of good students of medicine, or of dental or veterinary studies, or that the present arrangement was a disincentive. I hope that all Members of this Chamber will find that tone slightly disagreeable.

Lord Walton of Detchant

In the light of the support that this amendment has received from all parts of the Committee, these concerns are real and are growing. It is unfortunate that one may have to wait for the outcome of the Dearing Committee before there can be a proper resolution of this matter. Nevertheless, I am much reassured by the statement of the Minister that he will draw these concerns to the attention of his colleagues and his right honourable friend, and that if they are satisfied—as I believe many of us are—that this is a matter of considerable seriousness, the regulations can, it is hoped, be amended. In the light of that assurance, and in the hope that he will urge upon his right honourable friend our increasingly serious concerns, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 9 not moved.]

Clause 1 agreed to.

Baroness Lockwood moved Amendment No. 10: After Clause 1, insert the following new clause— DISCRIMINATION ON GROUNDS OF RACE, SEX OR DISABILITY (". No subsidy may be paid by the Secretary of State under section 1(1A) of the Education (Student Loans) Act 1990 unless the Secretary of State is satisfied that the person by whom the private sector student loan will be made has ensured that the assessment criteria to be used in assessing applications by eligible students do not discriminate on grounds of race, sex or disability, directly or indirectly.").

The noble Baroness said: The purpose of Amendment No. 10 is to put on the face of the Bill a clause to prevent discrimination on the grounds of sex, race or disability. There is on the statute book already anti-discrimination legislation that covers those three areas. No doubt the Minister would say, as his colleagues in another place said when the Bill was before that House, that it was unnecessary to have on the face of the Bill such a clause because anti-discrimination legislation was already in place. He may even say that it is all the more unnecessary now that the Government have put a reference to discrimination in the terms of the contract. Nevertheless, we feel that it is important to have this written into the statute. It is particularly important to bear in mind the wording of the amendment. It refers to both direct and indirect discrimination. I do not expect finance companies to go in for blatant discrimination in any one of these three areas. They should already be familiar with some of the provisions. Nevertheless, indirect discrimination is much more subtle, and I believe that we should flag it up in relation to this Bill.

My noble friend Lord Morris of Castle Morris in an earlier amendment spoke about lenders selecting their students, not students selecting their lenders. He said that lenders would determine those students to whom they could provide loans. We have to guard against such discrimination, particularly in relation to a financial Bill. I remind the Committee that in the context of sex discrimination, on average, women's pay is still 20 per cent. below that of men. There are already examples of racial discrimination in the education field. As to disability, the Disability Discrimination Act 1995 is a much newer piece of legislation.

There are all kinds of implications in relation to the education of disabled people. For example, many of the disabled students already need additional funding and they are provided with that funding by the Government. But even then they go to other sources for additional funding to assist them with learning aids. Furthermore, they may have to take longer in carrying out their period of study, whether for a degree or a diploma, than an able-bodied person. In relation to their accommodation, they often need extra care and help to live an independent life. It is important that all these factors should be taken into account. The amendment recognises that and makes it clear from the outset that there shall be no discrimination on these grounds.

All three groups to which the amendment refers and about which I have spoken have a more uncertain future at the end of their period of study. In that sense they may appear to be the "less ripe cherries for picking", which is the phrase that has been used in connection with the Bill. I hope that the Minister will be sympathetic to the amendment.

Lord Desai

I must apologise that I was not in my place when the amendment was called. However, my noble friend Lady Lockwood has given an eloquent exposition of what the amendment is about.

If someone is refused a loan early in life, despite what safeguards one may like to put in place, it will block his creditworthiness for the rest of his life. Therefore, it is important that we should have safeguards in the Bill. We are talking about people who will take a loan when they are 18. It will probably be the first loan they have applied for—I hope it will be the first loan they have applied for; I hope that they are not already in debt. We should ensure that if they are refused a loan by one private agent or another it does not happen on grounds which are unconnected with their true creditworthiness. I can understand that for commercial reasons there are people to whom one would not like to give a loan. But there should not be discrimination on grounds which are irrelevant to creditworthiness and irrelevant to their ability to pursue a career.

I know that the Minister does not like the phrase "cherry picking". Indeed, he probably does not like "level playing field" any more. None of us does. However, it is an established point in economics that when these things are done by the market, the market will not take up "difficult" cases. Who are the difficult cases? They are usually people who are known on objective criteria to be the lower paid. They are lower paid on the grounds of race, sex and disability. We want to ensure that people are not refused loans on those grounds.

I know how these loan applications are processed. One is asked to tick certain boxes on the application form. The young clerks—I do not want to be pejorative—who are supposed to feed the information into the computer add up the score. If one has said that one is black, or a woman, or a disabled person, out one goes before anything further has been asked. I recently had a very nice experience of being asked by one of the Labour Party magazines to apply for a credit card. I applied for the credit card but I did not get one because I did not put myself down as a houseowner. I was honest because my wife is the houseowner and so I could not claim to be a houseowner. But I did not get the credit card. If one is not a houseowner, one does not get a loan. Very crude criteria are used by people who think they are scientific criteria. I bet that some of the criteria on which people would not be given loans are those which I have mentioned. It is very important to lay down these requirements in black and white.

I know the Minister will say that legislation already exists to cover these points. However, I have a suspicious mind about some of these matters. If it exists, fine; adding to it will not make any difference. One would not be imposing extra burdens on the loan givers. Therefore, why not do it? It will be a belt and braces approach. We can be extra cautious. Unless we do so, we will be likely to blight people's careers, especially their careers as borrowers, for a long time.

7.15 p.m.

Lord Henley

I understand the anxieties put forward by both the noble Lord, Lord Desai, and the noble Baroness, Lady Lockwood. I was also interested that the noble Lord should tell the Committee in advance what I am going to say. But I shall say it, nevertheless. I hope that in so doing I can persuade the Committee that the steps we have taken are sufficient, and that what is in place is sufficient.

The invitation to tender documents that we have heard so much about this evening ask that the financial institutions bidding should provide details of the credit selection policies and processes they intend to follow. We shall consider that information very carefully in evaluating the tenders. The documents also include a model contract. I can assure the Committee that our contract with successful bidders will include a requirement that they do not commit any act of discrimination rendered unlawful by the Sex Discrimination Act 1975, the Race Relations Act 1976 or the Disability Discrimination Act 1995. Further, I believe that the institutions to which we have sent the tender document are responsible organisations. I do not believe they would be guilty of discrimination or guilty of breaching the law as set out in those three Acts. But if they are, they will be in breach of the law and of our contracts.

I believe therefore that effective sanctions exist to deal with the points that have been raised by the noble Lord and by the noble Baroness. Useful though this debate has been, I hope they will accept that the new clause would add nothing to the Bill and that therefore it is not necessary to press it on this occasion.

Baroness Lockwood

The Minister has, unfortunately, responded in the way I expected. I am sorry about that. He clearly has nothing against the new clause. He did not speak against the clause as such. But he felt that it was unnecessary in the light of the arrangements that have already been made. I am grateful to him for the arrangements that have been made. I hope that the scrutiny will be careful.

No one would expect the financial institutions to discriminate. I certainly would not; and, as I said in my opening remarks, I know that they have had experience of the anti-discrimination legislation already operating. Nevertheless, some of those financial institutions, responsible though they are, have on occasions discriminated, and action has had to be taken. Sometimes it has been taken by the Equal Opportunities Commission and there has been an agreed programme of action to eliminate that discrimination. No matter how established a firm may be, there are still dangers, as I said originally, of indirect discrimination.

I am sorry that the Minister will not accept the amendment. It would add to the Bill and be an additional warning to organisations that they must be absolutely sure that there were no provisions likely to affect one sex or disabled people more adversely than others. However, in the light of what the Minister has said, I shall look at the details of the programme which he is suggesting. If I feel that they are satisfactory I shall leave the matter there. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Addington moved Amendment No. 11: After Clause 1, insert the following new clause— AGE DISCRIMINATION (". No subsidy may be paid by the Secretary of State under section 1(1A) of the Education (Student Loans) Act 1990 unless the Secretary of State is satisfied that the person by whom the private sector student loan will be made has ensured that the assessment criteria to be used in assessing applications by eligible students do not discriminate on grounds of age.").

The noble Lord said: There are two reasons behind this amendment. It is basically to stop age being used as a ground for discrimination. Ageism is a problem that we are facing more and more in our society. I say that with a certain degree of temerity, realising that I am the youngest person involved in this debate. One may be dealing with people who feel that they have missed out on educational prospects. I hope that that is something we shall never lose sight of in the education system. The other factor which I hope will get a better hearing from the Government is updating skills. For both these aspects we are talking about academic training. In the job market one constantly needs to update one's skills or go through new training processes. With the current level of prejudice against people over the age of 50, it is almost vital that one is up to date.

Currently, one cannot obtain funding for university or higher education courses. The current loan system does not give that support. Surely this is an opportunity to bring in this new provision. We need to bring back in to the system large sections of our society which are becoming almost permanently without hope of employment. If we can retrain them to a sufficiently high level of skills, they will surely stand a much better chance. That, combined with the fact that others may fulfil their life potential later on, is a very good reason why this amendment, or something very similar, should be included on the face of the Bill. I beg to move.

Lord Henley

I believe that there are two points here. First, there is the much wider question as to whether loans generally, either through the Student Loans Company or through the new private institutions, should be extended to the over-50s. I do not believe that that is a matter we should be debating this evening. We have discussed it on a number of other occasions. We have no intention of changing our policy in that regard. I am not sure that this amendment would achieve the point anyway. It would be wrong to press amendments to the Bill which might cast doubt on that policy.

Secondly, on the narrower point as to whether the institutions themselves should have anti-ageist policies, we shall obviously consider the policies of the private lenders on assessing applications when considering their tenders. If we have anxieties on that they will be reflected in our decisions. The noble Lord ought to accept that it is not generally unlawful to take decisions based on someone's age. Therefore, there is absolutely no case for seeking to regulate the private lenders on this occasion as if there were. Therefore, I hope that the noble Lord will feel that it is not necessary to press this amendment on this occasion.

Lord Addington

Although it may not be unlawful to discriminate on the ground of age, I cannot help but feel that at times it should be. I was also trying to introduce a provision to correct a major flaw in the current legislation and arrangements. The reasoning behind the amendment was to correct a fault of omission. But the hour is late and I do not believe that I have many allies to my left on this issue.

A noble Lord

There is one here.

Lord Addington

There is a possible disagreement between Front and Back Benches, which is interesting. At this moment I shall resist opening that can of worms. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Desai moved Amendment No. 12: After Clause 1, insert the following new clause— DISCRIMINATION ON GROUNDS OF SOCIAL OR ECONOMIC STATUS (". No subsidy may be paid by the Secretary of State under section 1(1 A) of the Education (Student Loans) Act 1990 unless the Secretary of State is satisfied that the person by whom the private sector student loan will be made has ensured that the assessment criteria to be wed in assessing applications by eligible students do not discriminate on grounds of the applicant's social or economic status, or that of his family, as defined by any system of classification.").

The noble Lord said: In this, as in the previous two amendments, we are pushing the same sort of argument. We argue that there are a variety of grounds on which discrimination will be practised unless care is taken specifically to introduce a ban against it. The ways in which discrimination on grounds of social or economic status can take place are very simple. In political discourse we talk about CI s, C2s, the Ds and the Es as though they were separate nations almost. It would be very easy for a form to be prepared on which a student could be asked the father's occupation or income or even his place of residence. That could easily be used in a computer program to grade people as coming from those classifications and therefore count as disqualification. It sounds incredible but that is exactly how many people do not get loans.

We must take care that assessment criteria are not so designed as to facilitate or even mask discrimination on the ground of social or economic status. It is a matter of fairness as regards people applying for loans. I beg to move.

Lord Addington

I believe that discrimination on the ground effectively of one's family background and income would be utterly inappropriate for people starting out on a new form of training. I support the amendment.

Baroness Farrington of Ribbleton

In supporting this amendment I ask the Minister to have regard to the fact that there is evidence that finance companies and finance credit rating are often denied to people simply because of the locality in which they live. The student making an application and going straight from school will be using the parental home. There is a danger here of finance companies applying a similar mechanism.

Lord Henley

In view of the hour I shall respond briefly. Here again is an issue which goes to the heart of the differences in approach between ourselves and the parties opposite. There are a number of reasons why this amendment is misconceived in its view of the private sector and the role that it will play in increasing choice and improving service quality.

Perhaps I may first make clear that we neither want nor expect private lenders to assess applications in the way that some fear. On the contrary, we want to involve the private sector so that students get the benefits in service quality of the expertise that it has in personal lending. To get these benefits we need to put a system in place which allows the banks and the building societies to operate efficiently along normal commercial lines.

Secondly, we must not lose sight of the fact that the financial institutions will be lending their own money and putting their own money at risk. In those circumstances, decisions on whether to lend to a particular applicant must be left to the private lenders.

Thirdly, although I understand the concerns that some students might suffer rejection because of their background, I believe that that possibility has been exaggerated. If the banks and building societies tender for the right to offer subsidised loans, they will do so because of the advantages of being in that market in a substantial way. Once in, why should they then take a restrictive view of applicants' creditworthiness? The incentive will be to maximise their share of the market. We trust that there will be strong competition and that they will be competing against other private lenders. They will also be competing against the Student Loans Company, which will obviously have a substantial share of the market. The private lenders will have market share to build up and reputations to protect. Why should they want to get involved in the scheme and then court adverse publicity by rejecting a large number of applicants? I hope, therefore, that noble Lords will feel that the amendment is unnecessary and that their fears are unjustified. I hope also that the noble Lord, Lord Desai, will feel able to withdraw his amendment.

7.30 p.m.

Baroness Farrington of Ribbleton

My Lords, I can only express deep concern about the tenor of the Minister's response to this series of amendments. We have heard almost an inversion of the words associated with the Statue of Liberty. The Minister keeps referring to the financial institutions wanting to maximise their share of the market. There is no evidence for that assertion. Perhaps their financial motive will be to maximise their share of the market with the least possible risk, having received a subsidy from the Government, from the public purse to help them to offset that risk.

I cannot accept that a young person of 18 will go to the media and make a fuss because the locality in which he or she lives happens to have been turned down by the financial institutions. We are not talking about a purely hypothetical issue. I have experience of it. I worked in a shop which dealt with a finance company. I have to tell the Minister that I came across cases of people being turned down for credit because they were considered unsuitable but, as a mere cog in the machine, I never heard why. However, it was not difficult to spot the trend. It seemed that anyone called Singh or Patel was considered uncreditworthy, although it was impossible to prove. It seemed that people living in a certain area of town were deemed to be feckless because of the location of their home. I have no evidence that people in those circumstances have the confidence to make a fuss or that young people at the start of their careers would want to risk going to the media because they had been turned down.

I find the Government's attitude unacceptable. This is about cherry picking and choice for private sector institutions masquerading under the Government's public statements as choice for students. A student who is discriminated against may have no recourse. I am sorry, but the Government cannot get away with claiming that they are providing student choice. This is about two issues. The first is the Government's wish to reduce the public sector borrowing requirement so that they can have maximum scope for making their own future financial decisions as a government. The second is that they want the private sector to be able to pick and choose between students. I find those answers unacceptable.

Lord Henley

I find the noble Baroness's remarks incomprehensible. They show complete and utter misunderstanding of the private sector. Obviously, we could compel private lenders to accept any application from any eligible student, but such a provision would work very much against the grain of the private sector's approach which I dare say the noble Baroness does not begin to understand. It is doubtful whether such an approach would be acceptable to the banks and the building societies. Frankly, we see nothing to be gained by compelling, first, their involvement and then their acceptance of all eligible applications.

We could seek to persuade the private lenders to take any applicant, but there would then inevitably be a much higher cost in higher subsidies. If the taxpayer were to meet that extra cost of universal provision in the private sector, how could we also ask the taxpayer to continue to fund the operation of the public sector through the Student Loans Company? For that reason, I do not accept what the noble Baroness said.

Lord Addington

Are we not dealing with a universally available system of higher education and are we not referring to its funding on an individual basis? If the financial institutions can pick and choose to whom to lend, they are going against the Government's intention of encouraging greater numbers into higher education.

Lord Henley

The expansion of higher education is something of which we can be proud. I believe that the numbers have doubled and doubled again since 1979. In addition, and in the teeth of opposition from the parties opposite, we recognise that those benefiting from higher education should make some direct contribution to it themselves. Hence we introduced the student loans scheme back in 1990, the principle of which now seems to have a degree of universal acceptance. Having said that, we shall always have the Student Loans Company to provide a loan to anyone who wishes to make use of it. Finance will also be available through the private institutions. Those private institutions have to be free to make their own decisions, on good commercial grounds, as to whom they should accept.

Baroness Farrington of Ribbleton

The Government need to make clear to this Chamber and to people in the country whether they are talking about providing a genuine choice for students with a scheme in which the private sector takes part in return for a degree—I believe that I quote the Minister—of shared risk. The question between us is whether in those circumstances the private sector should be allowed to pick and choose students as it wishes without any control

If that is the Government's approach and if market forces alone are to determine whether or not the private sector takes part, why are the Government putting hard-earned taxpayers' money into subsidies? If the private sector is to come in entirely on its own terms, surely it could do that anyway, yet the Government are putting up public money to encourage that involvement. Surely the Government have a responsibility to ensure that everyone is equally entitled to benefit from that subsidy of public money which has been paid not only by the parents of the young people who will be considered a good risk but also by the parents of those who are not regarded as a good risk by the financial institutions. If the Government are not going to protect the latter, they have no right to use their money.

Lord Henley

The Government are putting money into the scheme by way of the subsidy, but obviously there will be major savings to the PSBR, as the noble Baroness knows full well. The noble Baroness and I do not see eye to eye on the role of the private sector. The Student Loans Company will be able to offer loans to all students. The private sector will also be able to offer loans. Subject to the tenders, we shall allow the private sector institutions to make their own commercial decisions, as is right, as to the granting of their loans. I have made clear to the noble Baroness that if she wants to extend to the private sector a compulsion to accept everyone, against its wishes, she also has to accept that that will cost yet more money. I do not think that the noble Baroness wants that.

Lord Desai

The Minister has been saying that we do not understand choice. That is not the case. If he looks at the experience of the United States of America where there are loans, he will see that there are strict regulations about non-discrimination. We must be careful to ensure that unfairness is not exercised.

The Government are muddled about the free market. They do not have the courage to opt fully for loans for higher education. They considered the matter for eight years, but have now appointed a committee to deliberate on it for another two or three years. Then there is the limited loan scheme, which is a distortion. The Government still say they will not make it fair. That is their choice.

I find it strange that with choice they will not agree to a minimum degree of regulation to ensure fairness. As my noble friend Lady Farrington said, the Government are using the tax money of those who will not get loans to subsidise private companies which are cherry picking. I am sorry to say that again. It is late in the day. I shall have to look at all this. I beg leave lo withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Miller of Hendon

I beg to move that the Committee be adjourned until 8.40 p.m., and that the House do now resume.

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

House resumed.