Student Loans Act: Cost (Hansard, 5 November 1996)

§ The Minister of State, Department for Education and Employment (Lord Henley)
My Lords, it is not possible to isolate the different components which relate directly to enacting the Education (Student Loans) Act 1996. This would involve disaggregating the time spent by officials and Parliament from other work they were doing at the same time both in my department and elsewhere. There are no detailed records which would enable estimates to be produced with any degree of accuracy.

§ Baroness David
My Lords, I am not entirely surprised by the answer, although I am disappointed. It is a great pity that costs cannot be calculated a little more accurately. Is the Minister aware that this Act, which he described at Second Reading as giving students a better, quicker, convenient, more varied and comprehensive service, had its Third Reading in this House on 1st April 1996, which is perhaps a rather appropriate date in view of what happened later? Is he further aware that in September of this year, less than six months later, the Secretary of State announced that she was dropping the twin-track scheme in favour of privatisation of the Student Loans Company which will 599 be a private monopoly? How can the Government possibly justify the waste of money and parliamentary time that the passing of this Act involved?

§ Lord Henley
My Lords, I do not believe that it was a waste of parliamentary time or the time and cost of my officials. I believe that to have attempted to give the accurate reply which the noble Baroness sought would have been a disproportionate use of taxpayers' money and would not have been recommended. As we made clear earlier, lending to private individuals is not a natural or desirable function of the public sector. Our policy was to transfer provision from the public to the private sector. That will result in significant improvement in both effectiveness and customer service. The noble Baroness will be aware that we had discussions with a number of financial institutions. We concluded, in the light of the assurances that I gave to this House and that colleagues gave in another place, that our long-term goal to bring the private sector into the student loans scheme could best be achieved through the sale of part of the existing student debt and the contracting out of the administrative work of the Student Loans Company. We would not have been able to come to that conclusion had we not been able to carry out the market test that we did earlier this year. The 1996 Act enabled us to do just that market test.

§ Lord Morris of Castle Morris
My Lords, will Her Majesty's Government learn from what was certainly an unnecessary and expensive fiasco that it is foolish to rush privatisation legislation through Parliament before it has been accepted by the private sector? Can the Minister give this House an assurance that they will never do such a silly thing again?

§ Lord Henley
My Lords, we will continue to pursue privatisation wherever it is suitable. No doubt the party opposite will continue to oppose every single small act of privatisation, as it has done over the years; and it has been wrong on every single occasion.

§ Lord Campbell of Alloway
My Lords, will my noble friend accept from one noble Lord on these Back Benches that his explanation is wholly unacceptable?

§ Lord Henley
My Lords, I am sorry that my noble friend does not find my explanation as helpful as it might have been. I shall not repeat the explanation that I have given, but I may have further discussions outside the Chamber and possibly convince my noble friend of the correctness of our approach.

§ Baroness Farrington of Ribbleton
My Lords, would the noble Lord expand a little on the reply that he gave a few moments ago? Does he agree that the market testing occurred prior to the Bill becoming law and that there was no necessity for it in order to carry out that market testing?

§ Lord Henley
My Lords, I am afraid that the noble Baroness is wrong. We could not conduct that market testing without the legislation. That was why we had to have discussions with the financial institutions after the passing of that Act.

§ Baroness David
My Lords, surely consultation before publishing a Bill or passing an Act is sensible. Does the Minister agree that only two banks and I believe one building society showed any interest whatsoever in that legislation and a great many others were strongly against it?

§ Lord Henley
My Lords, obviously consultation is possible before the passage of legislation, but detailed negotiation was not possible until we had concluded that legislation. The noble Baroness is right. There were only two banks and a number of other financial institutions which were interested at the later stages, but at the earlier stages a considerable number expressed interest.

§ Baroness Farrington of Ribbleton
My Lords, can the Minister give the dates when the discussions and consultation with the private sector began?

§ Lord Henley
My Lords, not without notice, but the detailed negotiations which relied upon the passage of that Act took place after its passage. As I made clear to the noble Baroness, the 1996 Act enabled us to conduct that market test which was so important in terms of coming to the conclusions that we did.