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Sale of Student Loans Bill

It seems quite a long time ago that we were last here debating this Bill. In fact, it was last January. It was such a long time ago that my hon. Friend the Member for South Holland and The Deepings (Mr. Hayes) has advanced another year—in fact, he does so today, so I hope that everyone will join me in wishing him a very happy birthday. The long time for which the Bill has been in the other place seems to have been extremely well spent, as it appears that there is much for us to agree on today. I think that we can largely welcome what is before us, although, as would be expected of a diligent Opposition, we will wish to explore a few issues in further detail. I hope that I will not detain you for too long, Mr. Deputy Speaker; after all, lengthy periods of detention are Government policy, not Opposition policy, are they not? Let me deal first with Lords amendments Nos. 1 and 4 together. They were proposed in response to another amendment tabled in the other place by Baroness Sharp. In moving Government amendment No. 1, Baroness Morgan said that it had"““always been our clear intention to let borrowers know when their loans are sold. Having reflected on the argument that it would be better to strengthen that intention into an obligation, we propose Amendment No. 1. The Secretary of State would have to take reasonable steps to let all affected borrowers know that their loans have been sold within three months of the transaction.””—[Official Report, House of Lords, 2 June 2008; Vol. 707, c. 47.]" Conservative Members have raised these matters on several occasions, so it would be extremely churlish of us not to welcome these amendments. They build the Government's intention to inform borrowers directly into the Bill, exactly where it should be, and they also give the purchasers of the loan an obligation to do the same. Letting those affected by changes know within three months is appropriate and welcome. However, it would be extremely helpful if the Minister clarified what will constitute ““reasonable steps”” in those circumstances, both for the Government and indeed for the loan purchasers. As the explanatory notes state, amendment No. 5"““would oblige the Secretary of State to ensure that initial sale contracts contain provision for the Secretary of State to be party to any onward sale contract.””" Conservative Members particularly welcome that concession by the Government. The Minister will acknowledge that it follows considerable pressure from us, not least from my hon. Friend the Member for South Holland and The Deepings, who referred to those matters in his opening remarks. Following debate on Second Reading and in Committee about onward sales, Conservative Members tabled an amendment on Report that would have ensured that the Secretary of State would indeed have to be party to onward sales. A similar amendment was tabled by the hon. Member for Hayes and Harlington (John McDonnell). As my hon. Friend the Member for South Holland and The Deepings said during the debate back in January:"““There are legitimate concerns about collateralised debt…History has taught us that loans can easily be repackaged and, in the end, involve a large number of different purchasers, some of whom, if they are known at all, could be outside the jurisdiction of the Secretary of State.””" The logic of such wisdom from my hon. Friend was so powerful that obviously, the Minister could not resist. Although the Minister expressed the need for flexibility in those matters, he conceded that if an amendment tabled in the other place could be worded in such a way as to ensure that the Secretary of State was party to any onward sale, while maintaining flexibility as to the specific mechanism,"““we would certainly consider it.”” .””—[Official Report, 23 January 2008; Vol. 470, c. 1558, 1570.]" The Minister has been as good as his word and has confirmed that today, so we are satisfied that this is an appropriate concession that fulfils our expectations. The explanatory notes make it clear, as the Minister did in his opening remarks, that amendment No. 6 is essentially a technical measure. I therefore do not propose to dwell on it and shall move directly to amendment No. 8. I will also speak to amendment No. 9, and to the amendment in the name of my hon. Friend the Member for South Holland and The Deepings. Let me be frank: our amendment is probing and it aims to tease out a little more reassurance from the Minister. We would like further explanation on the record about how those loans might end up in circumstances in which a particular loan structure changed. The explanatory notes state:"““Lords Amendments 8 and 9 would require the Secretary of State to give consideration to borrowers whose loans have been sold in making or amending loan regulations, and in making or amending regulations under section 186 of the Education Act 2002, so as to””—" this is the important bit—"““avoid detriment to any such borrower resulting solely from the fact that the loan is sold.””" Essentially, the Secretary of State must make a comparison to ascertain whether a borrower is worse off as a result of any proposed amendment to regulations. That must be compared with no change at all—that is, with what would have been the situation if the loan had never been sold. Lords amendment No. 8 is specifically concerned with the financial impact on borrowers, about which Conservative Members have expressed unease during previous debates. The Minister said on the record, early on in the process of considering the Bill, that the Government"““want to be able to demonstrate, and for the reality to be, that a graduate repaying their loan finance will see not one iota of difference in the way in which that process is handled, whether their debt is owned by the Government or by the private sector.””––[Official Report, Sale of Student Loans Public Bill Committee, 4 December 2007; c. 14, Q33.]" Conservative Members—and those with loans, watching avidly on BBC Parliament— will welcome that statement, which is to be commended. However, Lords amendment No. 8 was tabled in response to concerns that Lords amendment No. 2 to clause 2 might leave borrowers worse off. In moving the amendment in the Lords, Baroness Morgan stated:"““No borrower will be in a worse position for their loan having been sold and, in developing the amendment on undertakings, we have reflected on the importance of borrowers being fully reassured on that fact. That is why Amendment No. 6””—" as it was numbered in the other place—"““will mean that, when amending the regulations, the Secretary of State must seek to ensure that borrowers will not be in a worse position as a consequence of their loan being sold.””—[Official Report, House of Lords, 2 June 2008; Vol. 702, c. 54.]" We welcome the amendment and the noble Baroness's comments, but we have some concerns about the effectiveness of her assurance, and that of the Minister, to borrowers. In particular, we are concerned about the wording of the amendment, which does not appear to be as strong as it could be. Our amendment would give further certainty by leaving out the words ““aim to””. We are uncertain what the Secretary of State would achieve by ““aiming to”” ensure that no borrower whose loan was transferred would be in a worse position. I would appreciate some clarification from the Minister on what exactly is meant by ““aim to””. Would it, for example, be possible under the amendment for borrowers to be objectively worse off, so long as the Secretary of State had aimed to prevent that? Having read the certainty in the Minister's words, and in those of the noble Baroness in the other place, I notice that Lords amendment No. 8 does not give the same level of reassurance and commitment. Why not? Will the Minister explain fully to the House why that was not possible? I am also keen to learn the legal status of the current wording. What has the Minister been advised about the steps that would have to be taken to ensure that he had fulfilled his duty under the amendment? What advice has he been given about the possible legal interpretation of the amendment if a transfer were subject to judicial review? By removing the words ““aim to””, our amendment would give a copper-bottomed guarantee to borrowers that they would not be worse off as a result of their loan being transferred. Our main concern is for those who hold loans. We want to ensure that the exercise has no detrimental impact on them whatever. I urge the Minister to consider our amendment carefully and to fulfil his and the wider Government's earlier reassurances to the House. Finally, on amendment No. 10 to clause 5, the Government have conceded that the original wording in the Bill was not as clear as it should have been. As Baroness Morgan stated in her letter to Baroness Verma, dated 4 April, the amendment clarifies what the Government had always originally intended, and is ““a minor drafting change””. That implies that the matter does not need much debate. But will the Minister put it on record that the provision is what the Government always intended, and that it is indeed ““a minor drafting change””? As the Minister has agreed, there is no doubt that the Bill has been much improved by Her Majesty's Opposition's thorough inspection and the Lords amendments. Therefore, I thank the Minister and his colleagues for the professional and constructive way in which they have engaged with us.