---

Sale of Student Loans Bill

I wholeheartedly agree with the noble Baroness, Lady Sharp, about how this impacts on students. With the cost of living going up and everything else, students are facing higher tax bills than most millionaires. The Government and the Minister need to seriously look at that. The government amendments in this group are very strange. For a start, they are so open-ended that there is little that the Secretary of State would not be empowered to do with regard to the sale of student loans, including altering the terms of the loan and specifying various terms of the sale. Perhaps the Minister could outline any powers regarding the terms of the student loans and the sale of the loan book that the Secretary of State would be prevented from exercising. Is there anything that he or she cannot do? The purpose of these amendments is not entirely clear. They seem to have two potentially very different purposes. First, the letter that I gratefully received from the Minister said that this amendment was inspired by consultation with Deutsche Bank. The consultation, as I understand it, was on what mechanisms needed to be included to ensure that loans were commercially viable. The whole business of selling off the student loan book is complicated by the fact that the Government are doing the selling and that changes in government policy might affect the product on offer. In commercial terms, a purchaser then faces the unquantifiable risk of changes in government policy which could have real effects on cash flows. Any savvy negotiator seeking to purchase these loans would surely pounce on this unquantifiable risk to drive down the price and thus jeopardise our ability to get value for money. Is this amendment intended to make the loan book more commercially attractive by dampening the degree of unquantifiable risk and effectively saying that if it is changed it will be changed only in certain ways? If that is the case, there seem to be several problems. First, there is absolutely no specificity as to what a Secretary of State would promise; that is, what terms of sale would be appropriate. Would it take the form of agreeing only to change the terms of student loans along with RPI? Could it be an agreement on any other index of inflation? What promises is the Secretary of State likely to make? Under this amendment, it seems that he or she could make any promise he or she wanted, and do so in private. While I appreciate that this is commercially sensitive and therefore cannot be public, and that the way in which it might change is unpredictable and therefore must be flexible, an enormous amount of power seems to be being handed to the Secretary of State without any real transparency or checks. Are the Government just asking everyone to trust them? Secondly, agreeing that the loan book, or even just a particular tranche of loans, will change only in certain ways binds the hands of future Secretaries of State to amend education policy as he or she and the people of this country who elected him or her see fit. That seems particularly dangerous. Will the Minister unravel the paradox that places a firm commitment on the purchaser on the one side and the sovereignty of Parliament on the other? Are the two mutually exclusive? However, increasing commercial viability of the loan might not be the only reason that this amendment has been brought forward, although it seems unlikely that Deutsche Bank can, or should, be allowed to advise on anything else. The other issue concerns the ONS and the ability to classify these sales as genuine because there has been a transfer of risk. There was no mention of that in the letter I received from the Minister. The current mechanism in the Bill which provides for compensation to purchasers whose cash flow is affected by changes in government policy means that the purchaser is not taking much of a risk. As I mentioned before, the rate of default is fairly low, thus the Government would essentially be saying to purchasers that they will fix any mess they cause, once again placing the Treasury coffers in the firing line. I understand that the Government have been in consultation with the ONS regarding whether this compensation mechanism would mean that the sale of the loan book would be a genuine sale. Will the Minister outline in detail the results of that consultation? If the consultation has not been completed, does the Minister not agree that it is hugely irresponsible to make this law without such guarantees? Is this amendment intended to get around this hitch by giving assurances to purchasers so that they will be willing to take on the risk, and therefore firmly get this debt off the government books? Essentially, is the heart of this amendment about making the loan book more attractive, or is it about the genuine transfer of risk from the public accounts to the private sector?