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Sale of Student Loans Bill

By the looks of this packed House today, the Bill has generated enormous excitement and controversy in all parties. We will support the Bill, but we have a number of reservations that we would like to develop further in Committee, including the matter of how the Bill relates to Wales. I know that my hon. Friend the Member for Brecon and Radnorshire (Mr. Williams) hopes to catch your eye in a few minutes, Mr. Deputy Speaker, to raise that point. It is worth putting on the record that my party would not have started from this point. The so-called asset that the Government seek to sell today is the burden of debt that they have imposed on students since they came to office. The total student debt of £18 billion is more than the gross domestic product of Slovenia, believe it or not. It represents a millstone around the neck of each student who has graduated under this Labour Government. The truth is that we do not really know what the implications of the debt will be for a whole cohort of graduates throughout their lives. We have been engaged in what essentially amounts to a giant experiment. We do not know what effect it will have on their career choices, or on their decisions about whether to have a family, get married or buy a home. We will not know that for another 10, or even 15 years, by which stage it will be too late for us to turn back the clock. Despite the Minister’s assurances, many graduates now struggling to pay back their student debt on what are often quite low new graduate salaries remain concerned that the selling of the debt to a private company could be a precursor to raising the interest rates to commercial levels. I am pleased that the Minister denied that point on record, but I wish that he would include it in the Bill to reassure students who are likely to have their debts sold off in future, and graduates, who will be affected by this change. Graduates already face a hike in the interest rates on their loans this year. The rates have doubled to 4.8 per cent., as the hon. Member for Great Grimsby (Mr. Mitchell) mentioned, from 2.4 per cent. last year, due to the slightly bizarre way in which the Government calculate interest rates for student loans. It is not just that they use an entirely different inflation figure for students from the one they use for other purposes, but the rate is not even averaged over the year. It is set arbitrarily on the basis of one month in March. If that month happens to be one in which oil prices are running high, and there are hikes in utility bills, for the rest of that year students will pay the cost in their interest rates. Students are concerned that this is the beginning of a domino effect. They saw fees, then top-up fees and may assume the raising of the cap, and then the introduction of commercial interest rates. They would welcome the sort of assurance that I mentioned—the Minister including something clearly in the Bill to demonstrate the Government’s future intentions. They can always amend it later. We have seen plenty of amending legislation from the Government in the past 10 years. The Minister is adamant that although his Department is leading on the Bill, it is not about higher education and will have no effect on students or universities. It is merely a short-term tactic to raise immediate revenue for the Treasury and to offload risk on to someone else. If we are to accept the Government’s argument about offloading risk, are we sure that anyone would want to buy the student loan book? The loans are riskier than the mortgage-style loans that were sold, and it takes longer to pay them off. They were income contingent, so if income levels drop the loan repayments will dry up. Any investor would be gambling on the future of England’s economy.