HC Deb 20 December 1989 vol 164 cc256-8W
Mr. Strang

To ask the Secretary of State for Education and Science how many banks have agreed in principle to operate the student loan scheme.

Mr. Macgregor

[pursuant to the reply, 19 December 1989]: My predecessor announced on 19 June that, subject to the satisfactory outcome of the contractual negotiations, a sufficient number of financial institutions would wish to participate in the administration of the student loans scheme to ensure that the student loans company would be viable. I was able to announce on 16 November that agreement had been reached by 10 major banks to the establishment of a company, Student Loans Company Limited, to undertake preparatory work; and to the terms on which that company would operate the scheme.

Notwithstanding those agreements I have been told today by the chairman of the Committee of London and Scottish Bankers, speaking on behalf of his own bank (Barclays) and of the National Westminster bank, the Midland bank, the TSB and the Royal Bank of Scotland that in view of the fact that Lloyds bank in particular was not participating in the scheme, they now wished to withdraw. I have also been told today that Lloyds has now firmly decided that it will not participate. The four Irish banks have now also confirmed that in these circumstances they wish to withdraw. I am informed that the Girobank is not in a position to take a decision about full ownership of the company.

The objectives, principles and framework of the scheme as outlined in the Education (Student Loans) Bill remain completely unchanged. The Government decided that, on balance, there were advantages in operating the mechanics of the scheme through a sufficient number of banks, whose branch networks throughout the country would have provided swift and easy access for students. The main effect of their withdrawal will be to make the process of applying for a loan less convenient for students themselves. I have made clear to the chairman of the Committee of London and Scottish Bankers the Government's regret that the participants feel unable to honour the commitment entered into before the 19 June statement. The relevant negotiations were satisfactorily concluded, as I announced on 16 November.

Arrangements are now being made for the Student Loans Company to pass into the ownership of the Government so as to ensure continuity in the necessary preparations for the scheme.

The Government have spent just under £1 million so far on the preparations for the loans scheme, chiefly in the form of consultancy and legal fees. Although it is not possible to attribute this precisely as between preparing for the participation of the banks and preparing for the scheme itself, the banks have agreed to contribute £0.5 million to these preparatory costs.