§ Mr. MacdonaldTo ask the Secretary of State for Education and Science when he expects the top-up loans for students scheme to make a cumulative net saving.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science what he estimates will be the first year in which the top-up loans scheme for students will make a cumulative net saving in public expenditure, assuming(a) 80 per cent., (b) 90 per cent. and (c) 100 per cent. take-up of the loans scheme and allowing for all costs of defaults, write-offs, and all administrative costs of the loans administration vehicle and his Department, the start-up costs of the loans administration vehicle; and his estimate of the costs of the interest subsidy to students.
Mr. JacksonMy answer on 21 March,Official Report, columns 497–99, showed the costs and savings associated with top-up loans on the basis of 80, 90 and 100 per cent. take-up. Those figures took account of default and write-off. They also showed the effect of the interest subsidy; if higher interest were charged, repayments would be larger, depending on the rate selected. Those figures did not include administrative costs.
On that basis, the scheme will show savings for the taxpayer as follows:
take-up 80 per cent. 90 per cent. 100 per cent. Savings first exceed outgoings 2002 2006 2010 Cumulative saving first arises 2013 2018 2022 Administrative costs have not been estimated beyond 1995. However, on the illustrative assumption that they average 20 million a year, savings would first accrue in 2003, 2009 and 2010 on 80, 90 and 100 per cent. take-up respectively, and cumulative savings would arise in 2014, 2021 and 2026 respectively. Inclusion of administrative costs will have only a marginal effect on the date at which the scheme breaks even.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science by how much he expects the recurring costs of student loans administration to rise(a) in total and (b) per account, in each year beyond 1995.
Mr. JacksonThe preparatory work on the administration of top-up loans has not so far included an assessment of operating costs after 1995; as is the case before 1995, I would expect costs to rise less fast than the total number of accounts with which the company will be dealing.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science if he has accepted the conclusion of the Price Waterhouse study on student loans that 1995 is typical of the scheme in full operation.
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Mr. JacksonBy 1995 the loans scheme will have been fully established, and it will be in the state of steady expansion which will be typical of its operation for a substantial number of years; so the choice of 1995 as a basis for calculating operating costs was entirely reasonable.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science if he expects to complete the detailed analysis and cost-time estimates scheduled for August 1989 in the Price Waterhouse study on student loans.
Mr. JacksonThe next stage of detailed analysis on the administration of the top-up loans scheme is now under way; it is due to be completed by the end of September.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science (1) if he will estimate the costs of(a) marketing to counter a poor take-up rate, (b) incentives and enthusiastic debt collection to counter a default rate, and (c) providing arm's-length return on investment to counter a poor level of participation or high level of exit, to counter the operational risks to the student loans scheme set out in the Price Waterhouse study;
(2) if he will estimate the costs of (a) reimbursement of nugatory expenditure if legislation is not passed or delayed, (b) marketing of the student loans scheme to counter student opposition and (c) protection of banks participating in the event of a change of Government policy or change of Government; and by how much he expects the latter cost to rise by 1991–92, to counter the external risks to the student loans scheme set out in the Price Waterhouse study.
Mr. JacksonThe Price Waterhouse initial feasibility study identified these items as potential risks. More detailed work on the administration of the top-up loans scheme is now under way: that work, and the associated negotiations with the financial institutions, will no doubt address at least some of the items listed, but it is too early to say what conclusions will be reached.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science (1) if he will estimate the number of accounts in default in each year from 1990 to 2027, assuming the Government's estimates of student numbers rising to 1.15 million by 1995 and to at least 2.5 million by 2027, and a default rate of 10 per cent.;
(2) if he will estimate the total numbers of repayments, defaults and deferrals on the top-up loans scheme for students in each year from 1991 to 1995 and for each year afterwards for which figures are available on the basis of the table in appendix VII, statement 3 of the Price Waterhouse study;
(3) if he will publish the basic statistical data and working assumptions about student take-up, default rates and repayment profiles which he provided for the Price Waterhouse study on student loans.
Mr. JacksonThe following tables were supplied to Price Waterhouse. They show respectively estimated numbers of accounts, and the sums involved in 1990 prices. Table 1 shows in addition estimated numbers of accounts in default, deferring and making repayments. The tables are based on the same assumptions as annex E of Cm. 520, including estimates of graduate incomes based on historic data; faster growth in graduate incomes will reduce the level of deferment.
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Table 1 Top-up loans: number of accounts (thousands) of which: Academic year Drawing loan of which: New Due to repay (1) Making repayment (2) Defaulting (3) Claiming deferral Total number of accounts 1990 427.6 427.6 0.0 0.0 0.0 0.0 427.6 1991 424.2 148.5 152.8 55.0 6.1 91.7 577.0 1992 415.2 145.6 305.6 110.1 12.2 183.4 720.8 1993 406.9 143.6 458.9 192.7 21.4 244.8 865.8 1994 400.4 141.7 607.2 273.6 30.4 303.2 1,007.5 1995 395.5 140.1 752.2 374.0 41.6 336.6 1,147.6 1996 394.6 143.0 834.9 418.1 46.5 370.3 1,229.5 1997 402.8 150.2 915.8 461.1 51.2 403.4 1,318.6 1998 414.3 153.4 965.8 489.1 54.3 422.3 1,380.1 1999 424.1 153.6 1,019.8 519.0 57.7 443.1 1,443.9 2000 427.4 152.6 1,057.4 530.9 59.0 467.5 1,484.8 2001 427.4 152.6 1,157.4 596.9 66.3 494.2 1,584.8 2002 427.4 152.6 1,257.9 664.0 73.8 520.1 1,685.4 2003 427.4 152.6 1,315.5 693.6 77.1 544.8 1,742.9 2004 427.4 152.6 1,374.3 724.9 80.5 568.9 1,801.7 2005 427.4 152.6 1,425.9 743.5 82.6 599.8 1,853.3 2006 427.4 152.6 1,477.7 762.1 84.7 631.0 1,905.1 2007 427.4 152.6 1,506.2 759.8 84.4 662.0 1,933.6 2008 427.4 152.6 1,601.1 817.3 90.8 693.0 2,028.5 2009 427.4 152.6 1,694.9 873.9 97.1 723.9 2,122.3 2010 427.4 152.6 1,811.0 950.5 105.6 754.9 2,238.4 2011 427.4 152.6 1,865.7 971.9 108.0 785.8 2,293.1 2012 427.4 152.6 1,942.9 1,013.7 112.6 816.5 2,370.3 2013 427.4 152.6 1,996.7 1,041.5 115.7 839.4 2,424.1 2014 427.4 152.6 2,050.3 1,069.2 118.8 862.2 2,477.7 2015 427.4 152.6 2,088.8 1,083.3 120.4 885.1 2,516.2 2016 427.4 152.6 2,112.1 1,097.5 121.9 892.7 2,539.5 2017 427.4 152.6 2,135.6 1,111.7 123.5 900.4 2,563.0 2018 427.4 152.6 2,151.2 1,118.9 124.3 907.9 2,578.6 2019 427.4 152.6 2,167.1 1,126.0 1251 916.1 2,594.5 2020 427.4 152.6 2,190.7 1,139.7 126.6 924.4 2,618.1 2021 427.4 152.6 2,207.3 1,153.4 128.2 925.8 2,634.7 2022 427.4 152.6 2,224.1 1,167.2 129.7 927.3 2,651.5 2023 427.4 152.6 2,225.7 1,167.2 129.7 928.8 2,653.1 2024 427.4 152.6 2,227.1 1,167.2 129.7 930.2 2,654.5 2025 427.4 152.6 2,227.6 1,167.2 129.7 930.7 2,655.0 2026 427.4 152.6 2,227.6 1,167.2 129.7 930.7 2,655.0 2027 427.4 152.6 2,227.6 1,167.2 129.7 930.7 2,655.0
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Table 2 Top-up loans: Grants and repayments (£ million, 1990 prices) Repayments Academic year Gross loan outlay No deferral/ default Deferral, no default Allowing for 10 per cent, default Actual repayments 1990 167.4 0.0 0.0 0.0 0.0 1991 193.2 6.0 2.4 .2 2.2 1992 215.2 24.0 9.6 1.0 8.6 1993 235.8 54.4 23.0 2.3 20.7 1994 255.7 94.2 42.5 4.2 38.2 1995 275.2 138.9 67.4 6.7 60.6 1996 296.7 174.5 92.2 9.2 83.0 1997 324.6 194.3 113.7 11.4 102.3 1998 355.6 204.4 131.4 13.1 118.3 1999 385.5 208.4 145.5 14.5 130.9 2000 409.6 211.7 157.2 15.7 141.5 2001 430.0 233.0 173.4 17.3 156.1 2002 449.8 272.8 196.0 19.6 176.4 2003 469.1 296.4 213.3 21.3 191.9 2004 487.8 302.4 225.1 22.5 202.6 2005 505.8 307.7 234.7 23.5 211.2 2006 523.4 311.7 241.7 24.2 217.5 2007 540.4 313.2 244.9 24.5 220.4 2008 540.4 339.2 256.5 25.7 230.9 2009 540.4 392.0 279.4 27.9 251.5 2010 540.4 445.6 306.0 30.6 275.4 2011 540.4 480.3 328.6 32.9 295.8 2012 540.4 494.6 346.8 34.7 312.2 2013 540.4 506.8 366.2 36.6 329.5 2014 540.4 516.9 382.5 38.3 344.3 2015 540.4 525.2 396.3 39.6 356.6
Repayments Academic year Gross loan outlay No deferral/ default Deferral, no default Allowing for 10 per cent, default Actual repayments 2016 540.4 531.5 407.4 40.7 366.7 2017 540.4 536.0 417.3 41.7 375.6 2018 540.4 538.7 425.0 42.5 382.5 2019 540.4 539.9 430.5 43.0 387.4 2020 540.4 540.3 436.3 43.6 392.7 2021 540.4 540.4 442.8 44.3 398.5 2022 540.4 540.4 448.9 44.9 404.0 2023 540.4 540.4 452.8 45.3 407.6 2024 540.4 540.4 454.5 45.5 409.1 2025 540.4 540.4 455.9 45.6 410.3 2026 540.4 540.4 457.0 45.7 411.3 2027 540.4 540.4 457.8 45.8 412.0
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science if he will estimate the numbers of students repaying loans in each year from 1990 to 2027 on the basis of 80, 90, and 100 per cent. take-up, assuming an increase in the numbers of students from 1.15 million in 1995 to 2.5 million by 2027 and repayment periods of five, 10 and 15 years, respectively.
Mr. JacksonEstimated numbers of graduates making repayments are shown in the table, for the take-up rates specified. In other respects the table is based on the assumptions used in annex E of Cm 520, including the assumption that the repayment period increases progressively from five to 10 years.
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Loan repayment numbers (thousands) Year 80 per cent. 90 per cent. 100 per cent. take-up take-up take-up 1990 0.0 0.0 0.0 1991 55.0 61.9 68.8 1992 110.1 123.9 137.6 1993 192.7 216.8 240.9 1994 273.6 307.8 342.0 1995 374.0 420.8 467.5 1996 418.1 470.4 522.6 1997 461.1 518.7 576.4 1998 489.1 550.2 611.4 1999 519.0 583.9 648.7 2000 530.9 597.3 663.6 2001 596.9 671.5 746.1 2002 664.0 747.0 830.0 2003 693.6 780.3 867.0 2004 724.9 815.5 906.1 2005 743.5 836.4 929.4 2006 762.1 857.4 952.6 2007 759.8 854.8 949.8 2008 817.3 919.5 1,021.6 2009 873.9 983.1 1,092.4 2010 950.5 1,069.3 1,188.1 2011 971.9 1,093.4 1,214.9 2012 1,013.7 1,140.4 1,267.1 2013 1,041.5 1,171.7 1,301.9 2014 1,069.2 1,202.9 1,336.5 2015 1,083.3 1,218.7 1,354.1 2016 1,097.5 1,234.7 1,371.9 2017 1,111.7 1,250.7 1,389.6 2018 1,118.9 1,258.8 1,398.6 2019 1,126.0 1,266.8 1,407.5 2020 1,139.7 1,282.2 1,424.6 2021 1,153.4 1,297.6 1,441.8 2022 1,167.2 1,313.1 1,459.0 2023 1,167.2 1,313.1 1,459.0 2024 1,167.2 1,313.1 1,459.0 2025 1,167.2 1,313.1 1,459.0 2026 1,167.2 1,313.1 1,459.0 2027 1,167.2 1,313.1 1,459.0
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science if he will estimate the total cost of defaults and the cost per defaulting account on student loans in 1995 on the basis of the estimates set out in appendix VI, statement 1 of the Price Waterhouse study.
Mr. JacksonOn the basis of the assumptions set out in annex E of the White Paper "Top-up Loans for Students" (Cm 520), including a default rate of 10 per cent., the cost of default in 1995 would be £6.7 million. That is equivalent to £161 per defaulting account.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science if he will estimate the total number of student loan deferrals and write-offs in each year from 1991 to 1995 and for each year thereafter for which figures are available on the basis of the table in appendix VIII, statement 3, of the Price Waterhouse study.
Mr. JacksonI refer the hon. Member to my other replies today showing estimated numbers claiming deferment of repayments. For the costings in Cm 520, no allowance was made for write-offs of debts arising from death. Numbers of loans written off because deferment continues for 25 years are estimated as follows:
Number of write-offs Year Number 2016 15,300 2017 15,300 2018 15,300 2019 14,800 2020 14,500 2021 21,600 2022 21,300 2023 21,300 2024 21,600 2025 22,400 2026 22,900 2027 22,900
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science (1) if he will estimate, and give an itemised breakdown of(a) marketing and publicity costs, (b) university administration costs and (c) other costs to his Department in each year up to 2027, which were excluded from the cost estimates in the Price Waterhouse study on student loans;
(2) if he will publish an equivalent to table 2 on page 12 of the Price Waterhouse study on student loans for each year from 1990 to 2027.
Mr. JacksonThis information is not available.
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§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science if he will list the occasions on which his officials participated in the Price Waterhouse study on student loans, specifying the nature of their contributions.
Mr. JacksonOfficials from the Department provided the Price Waterhouse team with a variety of information on both the Government's policy on top-up loans—as set out in the White Paper "Top-up Loans for Students"—and the analyses underlying the costings set out in that White Paper. Officials also discussed the findings of the study with the consultants. There were frequent contacts while the study was being carried out.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science if he will place in the Library the independent assessments contributed by the banks which
Table 1—Summary of Costs1 Start-up costs Recurring costs Cost category Low High Low High £ £ £ £ Systems 1,580,000 2,656,000 1,577,000 2,249,000 Staff 250,000 370,000 3,300,000 4,860,000 Professional fees 1,300,000 1,700,000 200,000 250,000 Premises 3,275,000 4,250,000 750,000 1,000,000 Branch costs — — 2,500,000 3,000,000 Other 1,862,000 2,533.000 2,039,000 2,649,000 Operating costs 8,267,000 11,509,000 10,366,000 14,008,000
£ £ Depreciation on start-up costs 827,000 1,151,000 Interest on initial investment 537,000 748,000 Debt collection agency fees 2,780,000 4,480,000 Total vehicle-related cost to government 14,510,000 20,387,000 1All figures in 1989 £'s. It should be noted that certain of the costs indicated, for example those identified as depreciation on start-up costs and interest on initial investment, will not arise if start-up funding is provided by grant rather than loan; and that the reference to debt collection agency fees is to the possible use—which will be the subject of further discussion—of debt collection agencies to collect repayments from graduates who are in default. The cost of normal loan recovery is included in the £10.4 million to £14 million estimate of recurring costs.
On the basis of the estimates of operating costs included for the years 1990–1995 in the Price Waterhouse report, and excluding the depreciation, interest and debt collection agency items, the operating cost per account would be as follows:
Year Operating costs (£ million) Estimated number of accounts Operating cost per account £ 1990 8.5–11.5 430,000 20–27 1991 8.8–11.6 577,000 15–20 1992 9.1–11.7 721,000 13–16 1993 9.5–11.9 866,000 11–14 1994 9.9–13.3 1,008,000 10–13 1995 10.4–14.0 1,148,000 9–12 Figures for the years after 1995 are not yet available.
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§ Mr. Andrew SmithTo ask the Secretary of State tor Education and Science if he will publish the table summarising start-up and recurring running costs of the student loans administration vehicle on page 11 of the Price Waterhouse study, and estimate the cost per account, for each year from 1990 to 2027, taking into account the statement in the Price Waterhouse study that annual costs will increase as the number of students repaying loans increases.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science if the same repayment regime will apply to graduates whose banks opt to leave the proposed loans administration vehicle in the Price Waterhouse study on student loans.
Mr. JacksonI would not expect any banks to cease to participate, but a graduate's obligation to repay, together with the opportunity for deferment in the case of low income, will remain in force in any case.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science what commitments in respect of bearing all credit risk he has entered into, or plans to enter into, as set out in section 1(3) of the Price Waterhouse study on student loans.
Mr. JacksonThe Government have made it clear that they are ready to stand behind the cost of default on the top-up loans scheme: that cost was explicity taken into account in the costings published in the White Paper "Top-up Loans for Students". We envisage that the company administering the loans scheme will receive, as part of its fee, an incentive to maximise repayments.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science what guarantees of reimbursement of start-up costs he has given, or plans to give, to the banks in the event of legislative defeat or substantial alteration of the forthcoming student loans Bill.
Mr. JacksonMy right hon. Friend said in his statement on 19 June that the Government would meet the costs of detailed preparatory work by the Committee of London and Scottish Bankers and by the company.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science when he expects to have secured 449W the agreements for ownership of the loans administration vehicle, cost reimbursement and the participation of the banks scheduled for May-June 1989 in the Price Waterhouse study on student loans.
Mr. JacksonMy right hon. Friend announced in his statement on 19 June that a scheme had been designed which was agreed to be a cost-effective and feasible means of introducing top-up loans in September 1990; and that it was clear that, subject to the satisfactory outcome of the contractual negotiations, a sufficient number of financial institutions would wish to participate from the outset to ensure that the company would be viable.
§ Mr. Andrew SmithTo ask the Secretary of State for Education and Science whether he plans to accept the criteria(a) that loans be kept off the balance sheets of participating banks and (b) that loans be funded by the Government, including default liability, for devising a loans administration vehicle as set out in the Price Waterhouse study.
£ million 1981–82 1982–83 1983–84 1984–85 1985–86 1986–87 1987–88 1988–89 Cash AFRC 9.7 10.3 10.1 9.5 9.5 8.9 8.8 9.9 Other 0.6 0.6 0.7 0.7 1.0 1.5 2.0 2.2 Total 10.3 10.9 10.8 10.2 10.5 10.4 10.8 12.1 1988–89 prices AFRC 14.0 13.9 13.0 11.7 11.1 10.1 9.4 9.9 Other 0.9 0.8 0.9 0.9 1.2 1.7 2.1 2.2 Total 14.9 14.7 13.9 12.6 12.3 11.8 11.5 12.1 Grants from the AFRC are in respect of both recurrent and capital expenditure and consist of both grant-in-aid from the DES Science Budget and commissions from MAFF.
§ Mr. CousinsTo ask the Secretary of State for Education and Science what was the employment at each site of the Institute for Horticultural Research in each year since 1982; and what is his estimate of the effect of the Barnes review implementation on employment at each site.
Mr. JacksonThe Institute of Horticultural Research came into existence in 1986 and was based on four former institutes of the Agricultural and Food Research Council. The numbers of staff employed at the four sites on 1 April in the years 1982–85 were as follows:
1982 1983 1984 1985 East Mailing 338 340 329 299 Littlehampton 261 261 253 233 Wye College 7 7 7 6 Wellesbourne 223 224 220 197 Figures are not available for each site for the years 1986–88, but the total number of staff of the institute were:
Number 1986 630 1987 579 1988 562 Currently the numbers of permanent staff are:
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Mr. JacksonThe White Paper "Top-up Loans for Students" made it clear that the cost of funding top-up loans, allowing for default, would fall to the Exchequer. The formation of a separate company to administer the loans scheme, as described in my right hon. Friend's statement on 19 June, means that there is no question of loans figuring on the balance sheet of participating financial institutions.