Mr. CoombsTo ask the Secretary of State for Education and Science if he will make a statement about the administration of student loans.
§ Mr. John MacGregorAgreement has been reached between the Government and a number of financial institutions on the next steps in preparatory work for the student loans scheme.
A company, Student Loans Company Limited, is being formed. The company will be wholly owned by Barclays Bank plc, Midland Bank plc, National Westminster Bank plc, The Royal Bank of Scotland plc, TSB Bank plc, Girobank plc, Allied Irish Banks plc, Bank of Ireland, Northern Bank Limited and Ulster Bank Limited. I am placing a copy of the memorandum of understanding, which has been signed by the participating financial institutions, in the Library of the House. Additional financial institutions will be invited to become shareholders in Student Loans Company Limited when a brochure is issued.
Contracts will be placed by the Government with Student Loans Company Limited for preparatory work on the students loans scheme, the cost of which in 1989–90 will be met by estimates already approved by Parliament. The company's first task will be to sign a contract for the central loans processing system. Contractual negotiations are already in hand.
Subject to the passage of the necessary legislation and to final agreement being reached between the Government and the financial institutions, the Government intend to enter into a contract with the company for the administration of the scheme itself. As indicated in my predecessor's oral statement on 19 June at columns 21–22, the Government will fund the company for the administrative costs of the scheme and for the loans themselves and will pay a transaction fee of £12 per student loan application per year in return for the costs incurred at the branches of the financial institutions where certificates of entitlement are presented. The Government and the participating financial institutions agree that this fee represents a reasonable return for the work involved. The loans will be available to all eligible higher education students without reference to their credit rating.
I am also placing in the Library of the House a copy of the report prepared by Price Waterhouse on state 2 of preparatory work on the student loans scheme, in fulfilment of the undertaking given to the hon. Member for Blackburn in my written answer of 17 October, at col. 89.