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Sale of Student Loans Bill

I beg to move, That the Bill be now read the Third time. We have had a thoughtful debate today, as we did in Committee. I thank the members of that Committee for the constructive way in which they contributed at that stage. The Bill has enjoyed a good measure of consensus about its basic principles, with wide agreement that it is right for the Government to consider how the growing student loan book is managed so as to ensure good value for money and sound management of public finances. It is accepted across the House that a sales programme for student loans is appropriate, provided that it yields good value for money and that the position of borrowers is not affected. Those two issues are the Government's policy objectives in proposing that we embark on a sales programme. During the course of the debate, hon. Members rightly sought to satisfy themselves that the Bill allows us to ensure that the proposed sales will meet those specific objectives. We have taken the view that the small number amendments proposed should not be accepted, but we acknowledge that the intention behind them has been to ensure that the aims that we have set out for the programme of sales come to fruition. I shall now reiterate the key commitments that I emphasised when we embarked on our consideration of the Bill in November. The terms and conditions for all loans will, as now, be governed by regulations scrutinised by this House. I confirm that there will be no adverse change for borrowers, whether their loans are sold or retained, and I hope that that gives some further reassurance to my hon. Friends the Members for Hayes and Harlington (John McDonnell) and for Nottingham, South (Alan Simpson). The borrowers' experience will not change and the collection and administration systems will be the same, whether or not a loan has been sold. The Bill contains the provisions that we need to ensure that the enduring protection for borrowers is secured. All transactions will be subject to a rigorous assessment that good value for money is being achieved—a matter that has been the subject of much discussion, both in Committee and in today's debate. Some hon. Members have asked whether material for testing value for money should be included in, or appended to, the Bill. As I have said, I do not believe that that can be done: it would be irresponsible to put in the public domain in advance of a transaction any details of the Government's assessment of what price would constitute good value for money, as that would undermine the competitive process. In any event, such an assessment would be different for each sale in what is a long-term programme, as the characteristics of each portfolio to be sold are unlikely to be identical. What principles govern the value for money assessment, and what issues will be considered? I explained the Government's approach on Second Reading, and I am happy to do so again today. Part of the value for money assessment will involve the gathering of full and clear market information, and weighing the value of keeping the loans in the public sector on the balance sheet of the Department for Innovation, Universities and Skills. That process will help us to compare bids for selling the loans against the value of holding them. Assessing those values will require various estimates of the level of repayments to be made by borrowers, stretching far into the future. In addition, we will estimate the rate at which graduates will repay their loans, and the number of loans that will have to be written off because, for example, the people who have taken them out have become permanently disabled. Those projections will have to be based on assumptions and estimates, so it is clear that they have a built-in degree of risk. In assessing value for money, we will also have to take into account the value of transferring that risk from the public sector to the person who buys the loan. That is not something that lends itself to precise quantification, so the assessment will have to consider a range of values based on differing assumptions and estimates of risk. That is only one part of the value for money assessment. The other elements include ensuring that a sale is competitive, that it takes place under normal market conditions, that potential bidders have enough information to make informed bids, and that there is a genuine transfer of risk from Government to purchasers. We are making a clear commitment that sales will take place only in circumstances where good value for money can be assured. It will be for the Government of the day to make a judgment about value for money for each proposed transaction. Some elements involved in that judgment may alter over time, for example as market conditions change and as the experience from earlier sales is built on. As I have said repeatedly, the judgments will be open to parliamentary scrutiny in the usual way. The Government will report to the House after each sale transaction, and no doubt the National Audit Office will report to the Public Accounts Committee on the programme of sales as a whole. The debate on the Bill has been a constructive but rather technical discussion of how we can ensure that the programme of sales can proceed. It has also dealt with how we can fulfil our commitment that borrowers will notice no effect. I hope that I have been able to explain more fully how the Bill will achieve the Government's widely accepted policy objectives. No one should doubt our commitment to working in a thorough way to ensure that the sales programme is a success for borrowers, the Government and the taxpayer alike.