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Sale of Student Loans Bill

I am more than pleased to respond to this group of amendments, which covers transfer and collection arrangements after sales have been made. Let me start with the comments that my hon. Friend the Member for Nottingham, South (Alan Simpson) made. As a lifelong Tottenham Hotspur supporter who is in a very good mood today, I hope that his team does well this evening and that we meet at Wembley on 24 February. My hon. Friend asked me who would seek to purchase the loans. We made it clear throughout the Committee stage that we believe that there will be a keen appetite for the loans in the private sector. The market will bid to purchase loans at a price that represents good value for money. A wide range of investors will be interested in buying the loans, because—we explored this issue at length in Committee—they are a new asset class that will enable investors to diversify their portfolios and meet specific investor needs. If they undertake that course of action, investors will receive the benefit of sustained income over a long period of time from a group of borrowers who, taken as a whole, are considered to be low risk. My hon. Friend also raised the issue of changing the terms and conditions—this was more than adequately dealt with in the intervention that my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) made. Let me be explicitly clear: as I said on Second Reading and throughout the Committee stage, there will be no different treatment of borrowers and debtors, whether their debt is owned by the Government or by the private sector. It is, of course, open to any future Government to change the terms and conditions; but they would have to do that equally for the loans that were owned by the Government as for those owned by the private sector, so there is no issue of unequal treatment. The hon. Member for Reading, East (Mr. Wilson) started by saying that there was enormous concern across the House on the issue. I have been a Member of the House for only 10 and a half years, but in my experience the presence in the Chamber of representatives on the three Front Benches and six or seven other MPs does not constitute enormous concern. As was demonstrated in Committee, there is a broad consensus on the issues. It is right, however, that we respond to any concerns put forward. I fully agree with the intention behind amendment No. 5. As I stated unequivocally throughout the Bill's passage, purchasers of loans will not be able to change the repayment terms. As is the case today, terms and conditions for all loans will be governed by the regulations scrutinised by the House. That is the explicit effect in statute, if the Bill is passed, of clause 4(1). The regulations that govern the terms and conditions on the repayment of student loans are made under section 22 of the Teaching and Higher Education Act 1998. In terms of scrutiny, which was one of the issues raised by the hon. Member for Reading, East, those regulations are subject to approval by Parliament under the negative procedure. Any new regulations with which the Government come forward would similarly be subject to such scrutiny. To that extent, amendment No. 5 is unnecessary, and I ask him to withdraw it. Amendment No. 6 would include a specific restriction on organisations to which sales can be made. As time goes by, that will be classified as the Northern Rock amendment, and it has much more to do with the Conservative party's irresponsible desire to make political hay out of the current Northern Rock situation than with real concerns about the Bill. The drafting does not make clear precisely how the target for the restriction would be defined. I reiterate that we do not expect that any financial institution would want to own the loans itself, as was made abundantly clear throughout Committee. It is therefore highly likely that the loans would be sold to a special purpose company and that ownership would stay with that organisation. Therefore, it is not straightforward to see how the restriction might be applied. Another difficulty is that the restriction would apply to onward sales as much as to initial sales, by virtue of clause 3(2). Government cannot exert substantial control over onward sales. If the proposed restriction on onward sales was included in a sales contract, the transaction would not constitute a sale. Under the current Office for National Statistics rules for classifying public and private debt, we would not see a transference of risk from public to private sector, and a capital receipt would not be available for reinvestment across Government public spending. On amendment No. 11, let me respond to the hon. Gentleman's comments about the Red Book estimate of £6.3 billion of income from the sale of student loans over the coming three-year comprehensive spending review period. As I was at pains to make clear throughout Committee, that figure is not set in tablets of stone. If market conditions do not allow for it—although I believe that they will—and we are not able to demonstrate value for money, the sale would not go ahead.