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Sale of Student Loans Bill

We are in danger of being diverted. The difference between when my hon. Friend went to university and when I went is that an absolute minority of the population were offered that opportunity. In this day and age, we are talking about a mass system of higher education, in which there must be a balance of contributions from both the state and the individual who receives and is able to repay as a postgraduate on a fair basis, but with the additional support that comes from student grants. Let me return to the substance of the amendments. I stress at the outset that once the loans are sold to a special purpose company and securitised, we expect it to be a rare occurrence—I would go so far as to say a very rare occurrence—that the loans will be sold on, because the sole purpose of the special purpose company will be to hold and receive income from them. The main market relating to sold student loans will be in financial instruments issued by the owners of the loans. The loans sold in 1998 and 1999 were sold to major banks, in particular NatWest and Deutsche bank, which then created special purpose vehicles—thesis and honours—that hold the loans and issue the bonds. I understand that ownership of those loans has not been transferred, although there is an ongoing market in such bonds. However, in any sale the purchaser would expect to have the right to sell the asset. That is part and parcel of ownership. The Bill will therefore enable the SPV to make onward sales of the loans if so desired, even though that is unlikely. Clause 3 makes such onward sales possible and provides for the repayment system functions to get the appropriate repayments to the current owner of the loans. It also provides very important protections so that the Government can ensure that borrowers experience no difference in treatment following a sale. Clause 3(6) provides three options for methods by which the Secretary of State can be a party to onward sales, ensuring that the Government have the flexibility, which is important, to provide protection for borrowers in future sales contracts. The Bill enables a long-term programme of sales, so we need to ensure that it gives us the options that we may require to achieve our aim of protecting borrowers, as transactions and contractual arrangements are likely to evolve over time. As I explained in Committee, clause 3(6)(a) is an option that we may want to use in future contracts. It would require the Secretary of State's explicit consent for any onward sale of transferred loans. That option is rightly included in the Bill, in case future legal circumstances make such a provision appropriate. At the moment, however, we cannot include such a provision in sales contracts, because, under the current classification rules, the Government would not achieve a full transfer of ownership if the Secretary of State retained control over the loans in that way. Resources would therefore not be released for sustainable investment on the Government's priorities, negating one of the central purposes of the sales programme.