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Sale of Student Loans Bill

The Minister may be aware of the early-day motion tabled by some Labour Back Benchers—I described them as the usual suspects—that calls for the abolition of interest on student loan repayments, which would raise costs for the Treasury significantly. I wondered whether he could advise us how much that would cost, perhaps in terms of how many nurses and teachers would need to be sacked. In any case, I advise him to keep an eye on the left wing of his party, so that it does not lurch too far to the left. We are satisfied in general terms that the Bill includes sufficient safeguards for buyers and borrowers. The proposals will transfer a growing debt portfolio, and all the risks that go with it, out of public hands and into those of private institutions, which are vastly more experienced than Government in debt management. Those private institutions are also probably more experienced in data protection, given this week’s calamity—a point made powerfully by the hon. Member for Great Grimsby (Mr. Mitchell). The National Union of Students has already stated its concern that the Bill may be a step towards students paying commercial rates of interest. I do not believe that it is, and it should be noted that students still enjoy a favourable interest rate that is pegged to inflation. There is little for students to worry about in the Bill, which probably explains why they have not been more vociferous in their representations to hon. Members. Students may be more concerned, however, that the average graduate debt is £15,000 and takes some 13 years to pay off, as the Minister recently informed me in a written answer. Like the hon. Member for Brent, East, we recognise that financing a university education can be a challenge for many students and their families. We welcome the fact that the Bill enables the Government to preserve the low interest rate that students currently enjoy. In that context the point made by the hon. Member for Bury, North (Mr. Chaytor) is relevant in making sure that we are communicating directly with students on this matter. The Minister, in his opening remarks, was right to say that it is prudent to consider the timing of any sale of the loan book. I understand that passing the legislation does not necessarily mean an immediate sale. As many hon. Members have said, in the light of the Northern Rock fiasco and the dark economic clouds over the banking sector and the economy, that is a particularly relevant and important concern. There are questions on which I hope the Minister can shed some light. I understand that the proceeds from the sale are already accounted for in the comprehensive spending review. Perhaps he can tell the House whether there is a time limit on when the sale must be undertaken. If putting the revenue into the comprehensive spending review means that the money must be raised within three years, does that weaken our negotiating position in getting the best deal? My hon. Friend the Member for South Holland and The Deepings (Mr. Hayes) made a good point when he asked how much of the £6 billion is already accounted for in the comprehensive spending review and where it is allocated. If the Government do not raise the expected sum, what impact will that have on the Government’s spending plans? I remind the Government that the student loan book is a public asset and taxpayers will expect a reasonable price from any sell-off. The Government must avoid the temptation to cash in too quickly for the sake of the public sector borrowing requirement and pressure to raise funds. It was absolutely right for my hon. Friend the Member for Daventry (Mr. Boswell) to remind the Minister that the former Chancellor of the Exchequer sold a large portion of the gold reserves for a quarter of the price that we could have got shortly afterwards, even if in doing so my hon. Friend slightly changed the flow of my hon. Friend the Member for South Holland and The Deepings. As the hon. Member for Twickenham (Dr. Cable) pointed out yesterday, the Government undervalued QinetiQ to the tune of £300 million. I will be helpful to the Government, because they have had such a stinker of a week, and demonstrate why there is no rush to sell. Despite the concern put by the hon. Members for Great Grimsby and for Brent, East, this sale is a good deal for whichever commercial entity wins it. The House should note that these loans are not sub-prime mortgages. Graduates are likely to move directly into employment and begin repayment quickly. These loans are an attractive asset for banks, providing a continuous income over a long period from a low-risk group, collected securely through the tax system. They will also diversify the banks’ portfolios and give them direct contact with an important socio-economic group. The Government have a strong hand to play and we will watch to ensure that they play it well. It is worth remembering that the first two sales of student loans failed to reach the estimated value. Valuations of £1.6 billion and £1.5 billion raised a combined total of just under £2.1 billion when sold. Does the Minister expect to lose as much as a third of the face value with this sale, as the Government have on previous occasions? Is that what he suggested in his opening remarks was good value for money? According to the figure we have been given, the sale will involve £6 billion-worth of loans from the current £18 billion, but I am not clear whether that is the amount that the Government expect to receive into Treasury coffers or whether that figure is negotiable. I again remind the Government that these are public assets and Parliament expects full disclosure on how the sale will be handled and conducted. However, I am sure that we can deal with many of these questions in Committee rather than detain the House too long this afternoon.