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Sale of Student Loans Bill

Perhaps I might start by again echoing the spirit evoked by the hon. Member for Bristol, West (Stephen Williams), who leads for the Liberal Democrats, and indeed by the Minister: a determination to ensure that the Bill does what it is supposed to, but, equally, to proceed in a spirit of co-operation wherever possible. I will not say collaboration, but there certainly should be co-operation—and to that end, both in this place and the other place, the official Opposition have done their best to improve the Bill. It is in that spirit that I speak to the amendment that stands in my name, and that represents the Opposition's position on Lords amendment No. 2, which was introduced by the Government. It was a significant addition to the Bill and is therefore worthy of detailed scrutiny here. By its nature, it has not been discussed here until now, and I think we might say unusually so. Although it is of course the Government's privilege—indeed right—to move amendments in the Lords, to do so in such a fundamental way is unusual; I say no more than that. The amendment that we are seeking to amend is about transfer arrangements, particularly undertakings by the Secretary of State about the power to make loan regulations. As you will see, Mr. Deputy Speaker, the amendment goes into some particulars, although I will not discuss them exhaustively. Our amendment is designed to leave out paragraph (a) of the Government amendment that speeds its way here from the Lords. The reason why is that the powers granted by that amendment are very permissive and wide-ranging. I shall detail the explanatory notes, if I might, Mr. Deputy Speaker, because it is important:"““Lords Amendment 2 would enable the Secretary of State to include in the sales contract with a purchaser undertakings about the exercise of the power to make loan regulations (which include terms and conditions of student loans). Such amendments to the ""loan regulations would have effect in relation to sold and unsold loans. The intention of the amendment is to reduce the uncertainty about changes which the Secretary of State could make to the terms and conditions of the loans.””" The question of certainty—to whom, and about what—is of great importance when considering the amendment, which has already been subject to considerable debate in the Lords. Members present will have read with some care the record of that debate, but what they may not have been privy to is some of the correspondence surrounding this matter. In a letter to Baroness Vermer dated 4 April, Baroness Morgan, who leads for the Government in the Lords on these matters, indicated that the amendment was principally about value for money. Following discussions with the Government's adviser on the loan book sale, Deutsche Bank, she argues that it has become necessary for the Government to think again about the precise nature of the likely sale and its circumstances. She says in the letter:"““Because we are legislating for a long-term programme of sales””—" the Minister, indeed all the Government Front Benchers, have made it clear that this is enabling legislation, and we understand that these sales may take place over a considerable period—"““and want to ensure sales achieve good value for money we think we ought to have at our disposal more than one way in which investors can be given confidence that a change in the terms and conditions of repaying the loans will not affect the value of the asset they have bought.””" Let me put that into rather clearer terms for the benefit of the House and, indeed, the record. The gist of it is this. If potential purchasers of part of the loan book were able to suggest that they were buying an unquantified risk, they might well drive the price down, and they might do so in circumstances in which they felt that the Secretary of State could change the loan terms, even though they had bought the product. It is perfectly acceptable for the Government to say, following advice, that that would make the whole process untenable, and that a potential purchaser would—if I may put it in the terms sometimes used in these circumstances—have the Government's hand twisted up behind their collective back. No salesman wants to be in that situation, and in these terms the Minister is indeed the salesman for the Government, trying to sell the loan book at the best possible price. That is certainly in the interest of taxpayers. However, having made the judgment that that was perfectly arguable and would justify the kind of amendment that the Government have tabled, Ministers indicated in subsequent discussions in the Lords that the reason for their amendment was rather different. They actually indicated that the amendment concerns the uncertain status of the loan book after sale and whether it would be counted as sold by the Office for National Statistics. In other words, on the one hand we were being told that this is a necessary change to facilitate the best commercial relationship with potential purchasers—to secure the best deal, if I might put it that way—and on the other, we were being told that it is a technical requirement to ensure that the asset had been shifted, so far as the ONS was concerned, from the public to the private sector. In the Lords Committee debate, Baroness Morgan stated:"““We do not want to put future Governments in a position where the only means they have to address the issue of future policy change became something that, under future rules, led to ""the transaction not counting as a true sale. We know that this is a real risk, as the classification rules have changed significantly since the previous sales of student loans a decade ago and we would not now be able to sell student loans in the way we did then.””—[Official Report, House of Lords, 8 May 2008; Vol. 701, c. 192.]" So I think it fair to say that there is some confusion about the advice that Ministers received from the sales arranger, their adviser Deutsche Bank. Did that advice also concern whether a transaction would count as a true sale or was there separate advice from a separate source that sponsored—encouraged—the Government to construct and propose their amendment? Was the advice only about value for money, an issue to which I shall return in relation to Lords amendment No. 7? The fact that the sales arranger thought it possible that the terms of the sale needed to be revised raises some questions, particularly in the current financial climate, about whether a good value deal can be secured, especially for the first sale. The essence of my point is to discover which is the more important to the Government: is it, as we have now been led to understand, the technical change that they claim that they have to make to satisfy the ONS—that position is perfectly feasible and supportable—or is it, as we were first led to believe, that the Government fear that they will not be able to sell the loan book, in part or as a whole, at an attractive price unless they make the product altogether more agreeable from the perspective of potential purchasers? If that is the reason driving the Government, the spectre—I do not want to be alarmist in any way, because that is not in my character—of the loan book being sold off at a price that would not be in taxpayers' interests, at a time that would not be optimal and in a fashion that would not be agreeable to this House or to those whom we represent begins to hover over our otherwise agreeable proceedings. That explains the reason for our amendment (a). Discussions have taken place on the Floor of the House, in Committee, in the Lords and privately about these matters, but we felt it important to put our concerns on the record in the form of our amendment. Concern was expressed in the Lords about the permissive nature of the Government's amendment, and I have made reference to that. Our amendment (a) would enable the Minister to give undertakings that are enforceable in law and that bind the hands of his successors. It would enable Ministers not only to give undertakings that the loan regulations will not be changed, but to give undertakings so as to achieve a specific result. Our amendment (a) proposes to remove paragraph (a) from Lord amendment No. 2, but it is essentially a probing amendment, which doubtless comes as a relief to Ministers. It aims to ascertain what undertakings may be made by Ministers in this regard. Could the undertakings have an impact on the threshold for loan repayments or the interest rate for repayments? My principal concern is, as it has been throughout these proceedings, not only for recipients of student loans, but for taxpayers. We must ensure that we secure best value for money as this asset moves from the public to the private sector.