Sale of Student Loans Bill
12:15 pm
Bill Rammell: It is probably worth while restating what I set out on Second Reading with respect to value for money. The Bill is about enabling a long-term programme of student loan sales, so we need to think about market conditions over the longer term, not just the short term. As far as any continuation of the current market turbulence translating into poor value for money of any sales of student loans, if those circumstances prevailed, we would not go ahead with the sale at that time. I also said that part of the value for money assessment will involve gathering full and clear market information and, crucially, assessing the value of keeping the loans in the public sector on our balance sheet. We need to do that in order to be able to compare bids for selling the loans against the value of holding them. Assessing those values requires a number of projections that estimate the level of repayments that would be made by borrowers stretching far into the future. We will estimate the rate at which graduates will repay and the number of loans that will be written off because, for example, the borrower has become permanently disabled. Those projections have to be based on assumptions and estimates, so there is a degree of risk built into them.
In assessing value for money, we also need to take into account the value of transferring that risk from the public sector to the person or the organisation who buys the loan—that is not something that lends itself to easy quantification. As a result, the assessment will need to consider a range of values based on differing assumptions and estimates of risk. That is only one part of the value for money test; the others include ensuring that the sale is competitive and that it takes place under normal market conditions. It also entails ensuring that potential bidders have enough information to make good bids—that is an important requirement, so we will make a judgment about what type of loans in general are initially being sold—and ensuring that there is a genuine transference of risk from Government to the purchasers. That is the framework within which we will make judgments. It is also the framework against which the NAO, the PAC and others will be able to judge us in the longer-term, once the sales have taken place.