---

Sale of Student Loans Bill

When I get to my feet I usually speed the rush out of the Chamber, so it was surprising that those hon. Members delayed. I was not a member of the Public Bill Committee, so I come to this debate as a humble seeker of the truth. I want to focus on the issue of onward sales. During the debate we have received helpful assurances that provide some security, in particular for people who have taken out a student loan but also for the Government in respect of the long-term future of student loans. However, the issue of onward sales remains a matter of concern and does not yet offer us the security that is required. I welcome any correction if I have got this wrong, but I understand that the process from here on in is that a financial adviser will be appointed—I am not sure whether that has happened yet, but the last indication was that it would be Rothschild—a special purpose vehicle will be established, the sale will take place and the Government will pocket a sum. The loans will be protected, as my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) has mentioned, by the contract on the loan itself and by the assurances given today by the Minister that the regime will be protected by, at least, a report to the House and the use of the negative procedure of the House. That still means that the Government will be able to vary things at a future date—I hope that such a variance will be beneficial when the rate applied at the moment is examined—and they still have the opportunity to go in a different direction. The argument is that this system will offer value for money via the terms of the sale and the contract that will then be issued by the purchaser. Our anxieties are about onward sales. We live in a complex financial market and financial system, where we experience a range of what can only be described as ““exotic financial instruments””. They are complex, and in being so, they are increasingly precarious. So, a difficulty over regulation has emerged, as a result of which market conditions have become exceptionally difficult. In some instances, it would be difficult to envisage a purchaser of the loans, given the current market instability. I do not want to dwell too much on Northern Rock, but the Bank of England, the Financial Services Authority and the Government charter have all been unable to control Northern Rock and to ensure predictable certainty. That has thrown up a number of regulation issues that the Government have responded to by undertaking reviews that may lead to reform. In that uncertain climate, the Minister rightly made it clear on Second Reading and in Committee that there was a perceived need for protection for all parties in the future. That protection certainly needs to be given to those who have taken out loans. For most people, a student loan will probably be one of the biggest loans that they will take out in their lives alongside their mortgage, their car loan and, if membership rates keep increasing, their loan for membership of the Labour party. It is vital that we secure the future financial arrangements beyond the initial sale. The positive decision on the initial sale will be made by the Secretary of State. Amendment No. 4 would ensure that an onward sale would require the same level of ministerial consent. The amendment would mean that the Secretary of State's consent ““shall”” rather than ““may”” be required. If it were accepted, the Bill would require that ““transfer arrangements shall””, rather than may,"““prohibit the making of further transfer arrangements without the Secretary of State's consent””." In Committee, the Minister said in response to that suggestion that it was doubtful whether there would be a sell-on given the experience in the past decade of the first tranche of sales. I believe that the world has changed, and it is changing rapidly. New financial mechanisms are evolving almost daily to enable swifter sell-ons in a variety of forms. The Minister also said that there was no need to require the Secretary of State's consent because clause 3(6)(b) and (c) would provide satisfactory protection. However, it is uncertain whether those paragraphs would require the involvement of the Secretary of State. The Bill states:"““Transfer arrangements may…require further transfer arrangements to be effected by way of novation or other arrangements””" or they may"““include provision by virtue of which the Secretary of State is automatically a party””." The word used is still ““may””, and so the Secretary of State's involvement is still discretionary. The crux of the matter emerged in Committee. The problem with the inclusion of the word ““shall”” rather than ““may””—that is, a requirement for the Secretary of State's consent—is a result of the Treasury accountancy rules. In Committee, the Minister said that the inclusion of the word ““shall”” would prohibit the onward sale of loans as the risk would not be transferred from the public to the private sector so the result would not be full privatisation. The argument is that the word ““shall”” would mean that income received as a result of the sale would appear on the Treasury's books. In Committee, that discussion prompted a debate about motivation. What is the motivation for the sale? Is it to raise funds? Yes. Is it to increase value for money in the management of the funds or, as my hon. Friend the Member for Wolverhampton, South-West asked in Committee, is it ideological—that is, political? It is clear that funds will be raised, but the anxiety is that they will not be hypothecated—that is, that they will not be dedicated to funding higher education, for example, or to increasing maintenance grants for students. The National Union of Students has advised us today that the bursary schemes are failing to assist poorer students, and that there is concern that any funds raised will not be used in education. If the Government's motivation is to achieve value for money—and my hon. Friend the Member for Nottingham, South (Alan Simpson) has explained some of the costs incurred in the past—it is doubtful that the measure will succeed. Many people believe that the public sector can manage these matters better than the private sector, and that any risks that might exist would be discounted in the sale price. That leads me to doubt that value for money is the Government's aim, and to believe that the motivation is ideological and political. I believe that the Prime Minister and the Chancellor want to get the money involved off the Treasury books and to keep public sector debt below 40 per cent. of national income. The Government's refusal to use the word ““shall”” rather than ““may”” shows that they believe that requiring the Secretary of State's consent to the onward sale of the loans would undermine privatisation and ensure that income from the sale would appear on the Government's books. My contention is that the Bill undermines the future protection of the Government, the taxpayer and those who have taken out student loans. It is based on an ideological and political desire not to offend against Treasury rules and to ensure that borrowing does not go above 40 per cent. of national income. However, such rules are not unbreakable: as we have seen with Northern Rock, they can go out of the window when there is a need to protect people who have invested in, or borrowed from, a particular institution. Amendment No. 4 would ensure that the same protection that has been extended to Northern Rock's borrowers and savers is extended to the Government, the taxpayer and those with student loans if those loans are sold on. In part, the amendment reflects the debate that took place in Committee. I hope that the Minister can give us some further assurance about the onward sale of student loans, as the taxpayer and those who have taken out such loans need more security in that regard.