Commitment to Pay Subsidy for Private Sector Student Loans Not to Be Made Before 31ST May 1997

Orders of the Day — Education (Student Loans) Bill – in the House of Commons at 6:44 pm on 17th January 1996.

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'No commitment which would require the payment of subsidy under subsection 1(1A) of the Education (Student Loans) Act 1990 shall be entered into before 31st May 1997.'.—[Mr. Byers.]

Brought up, and read the First time.

Photo of Stephen Byers Stephen Byers , Wallsend 7:14 pm, 17th January 1996

I beg to move, That the clause be read a Second time.

The need for the new clause arises because of the difficulties that the Government experienced in Committee, and it comes on top of a difficult couple of months for the Government on education matters. They have had to backtrack from their fast-track process of grant-maintained status for voluntary-aided schools. They have had difficulties with their nursery voucher scheme and with the four pilot authorities which have struggled to find sufficient places. On top of all that, the Minister had to announce on the second day of the Committee that the Government were unable to proceed according to their original timetable—which would have seen the Bill's proposals implemented by autumn this year—and would have to delay the implementation of the student loans measure by 12 months, so that the Bill's proposals will not start to be effective until autumn 1997.

Most hon. Members are aware that the proposals to privatise the student loans system appeared in the Queen's Speech very late in the day, and the measure was deemed necessary to appease those right-wing members of the parliamentary Conservative party who were desperate to have a privatisation measure somewhere in the Queen's Speech.

Photo of Eric Forth Eric Forth , Mid Worcestershire

I am grateful to the hon. Gentleman for giving way at such an early stage. I am sure that he does not mean quite what he says. This cannot be a privatisation of student loans, since—as the hon. Gentleman well knows—the Student Loans Company will continue to exist as an alternative source of lending for students. The hon. Gentleman might wish to clarify his unusually loose use of the term "privatise" in this case.

Photo of Stephen Byers Stephen Byers , Wallsend

I do not want to embark on an exercise in semantics, although the Minister clearly would prefer that to a debate on the matters of substance that are before the House this evening. But even this Minister should accept that the Bill will mean that the private sector will have an opportunity to take part in the student loans system. It is a privatisation by any other name.

The point that the Minister is trying to avoid is that he proclaimed the importance of the measure on Second Reading and on the first day in Committee, and added that it was vital that steps were taken—almost in haste—to ensure that the benefits, as the Minister saw them, of the measure would be available to students by autumn this year. Just 48 hours later, however, the Minister had to announce that the Government were unable to proceed along the lines they had originally intended. Instead, he had to announce to the Committee in a very embarrassed way on 14 December—

Photo of Dr Norman Godman Dr Norman Godman , Greenock and Port Glasgow

My hon. Friend will not embarrass the Minister.

Photo of Stephen Byers Stephen Byers , Wallsend

As my hon. Friend says, it is unusual for the Minister to be embarrassed, but, on this occasion, he was. On 14 December, he said: following our discussions with the banks, we have decided to defer the implementation of the loans scheme from October 1996 to October 1997. That is significant because it means that the scheme will not be implemented until a few months after the general election. New clause 3 deals with that issue as it is intended to ensure that under the Bill, and then the Act, no contractually binding arrangement will be entered into by the Government to provide subsidies for private sector student loans before 31 May 1997.

New clause 3 is intended to ensure that a new Government—who will be elected by 31 May 1997, and, we expect, of a different political complexion—

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

There is absolutely no way that will happen.

Photo of Stephen Byers Stephen Byers , Wallsend

We expect that we will have a Government of a different complexion, and therefore we feel that it is essential that that Government should have the freedom and flexibility to decide how to proceed and should not be tied into a contractually binding arrangement.

The thrust of the Minister's decision to defer implementation, as well as the nature of the public subsidies that will be made available to the private sector, is all to do with making the scheme attractive to the banks and other financial institutions, which he has accepted that it must be. When he announced the delay, he said: Following fruitful discussions with the banks to date, they have pointed out to us that, among other things, considerable changes to their information technology systems would be required to pick up the offer that we are making to them and that, obviously, the considerable merger activity taking place in some sectors of the financial institutions—mainly in building societies—would make it difficult for them to meet the tight deadline that we envisaged earlier."—[Official Report, Standing Committee B, 14 December 1995; c. 40.] The Minister had to admit that. Two days before, however, he had argued and voted against a Labour proposal to delay the implementation for precisely that length of time.

The Opposition's concern is that because the Government are now desperate to ensure the implementation and delivery of the scheme by autumn 1997—which will require the active participation and involvement of the private sector—they will be prepared to offer a subsidy from the public purse, paid by the taxpayer to the private sector. In normal circumstances, that would be unacceptable. The Government, in desperation, have been forced into a corner with a deadline of their own making, and might well enter into a contractually binding agreement that might be in the political interests of the Government but will not be in the long-term interests of the taxpayers and the students. That is why new clause 3 is particularly important.

One point that the Minister has failed to mention, arising from the delay that he announced on 14 December, is how the Government intend to make up the financial gap created as a result of the loss of the £100 million savings—which they announced in the Budget—that was expected to be accrued as a result of the student loans system privatisation coming into effect from autumn this year. Many of us are concerned that that £100 million will be found somewhere else in the education service.

The Minister has failed to give us any assurance on where that money will come from. It would greatly assist the House this evening if he would tell us where that money will be found. Is his silence a consequence of the fact that he knows that it will be taken away from other services within the Department for Education and Employment? He should identify this evening where it will come from.

Photo of Edward Leigh Edward Leigh , Gainsborough and Horncastle

If the new clause were passed and a Labour Government were elected, how would the incoming Labour Government finance student loans?

Photo of Stephen Byers Stephen Byers , Wallsend

The hon. Gentleman was an active participant in the proceedings in Committee. We made it clear on numerous occasions which criteria and principles we would apply to the system of student financial support. We clearly said that we would strike a balance between the interests of students and the legitimate interests of the taxpayer and the Exchequer which took into consideration the need wherever possible not to push students into debt and poverty while they were studying.

Our system of student financial support will bear those two interests in mind. We will make positive proposals that may not be supported by Conservative Members but will have broad and popular support throughout the country, which the present student loans system clearly does not.

Photo of Mr James Pawsey Mr James Pawsey , Rugby and Kenilworth

Returning to the point made by my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh), can the hon. Gentleman tell us when he expects he will make known his proposals on this matter, and what the costs will be?

Photo of Stephen Byers Stephen Byers , Wallsend

The hon. Gentleman should not be so impatient. We will come forward in good time with our own—

Photo of Stephen Byers Stephen Byers , Wallsend

"In good time" is the only answer that the hon. Gentleman will get from me this evening. We will come forward with positive and popular proposals, which will be of benefit to students and also recognise the demands that are made on the Exchequer. That is the balance that we will strike between the two, and we believe that we can provide financial support to students that reconciles those two conflicting interests.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

Is the hon. Gentleman aware that, just before our meeting at Lancaster university, the Labour party research department issued a document which said that the Labour party would abolish all grants? I know that the Labour party wriggled and wriggled—[Interruption.] Do not natter when I am talking. I know that the Labour party wriggled and wriggled and wriggled on this matter, but that is what was published at the time. Can the hon. Gentleman give an absolute and categoric assurance that that policy will not be implemented? If he cannot, my students will be interested to know it.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Order. The hon. Gentleman would not be wise to respond to that point. The debate is going much wider than new clause 3.

Photo of Stephen Byers Stephen Byers , Wallsend

Thank you, Mr. Deputy Speaker; I shall address new clause 3 in accordance with your guidance. The hon. Lady's point is an important one which could usefully be debated at some future time, and there will no doubt be opportunities to do so. If the Government's business managers wish to arrange a suitable opportunity, they can do so.

New clause 3 would prevent the Government from entering into a contractually binding agreement with private providers which would entail payments of public subsidies before the next general election. Our concern is that, because they have got themselves into political difficulties, the Government will put their own interests first. The delay of implementation until the beginning of the academic year 1997–98 will certainly come some months after the last possible date of the next general election.

The importance of the new clause is that it would prevent a future Administration from being bound by any contractual arrangements entered into by the present Administration. That would be appropriate, and it might be important, because as the Minister himself said, on Second Reading: Private financial institutions would be invited to bid for the right to offer subsidised loans. That would probably be for a period of five years."—[Official Report, 27 November 1995; Vol. 267, c. 951.] So any contractual agreement entered into by the Government would be likely to last throughout the period of the next Government. It would be inappropriate to tie the hands of a future Government in that way.

In Committee, the Government refused to accept any amendments to allow parliamentary scrutiny of the contractual arrangements between the Government and the banks, building societies and other financial institutions. Therefore, we have only a skeleton of a Bill. The interesting detail has not been revealed to hon. Members. Part of that detail will be the contractual agreements between the Government and private sector institutions. We believe that it is appropriate for that information to be made available to hon. Members before the Bill goes through all its stages.

The Minister has been steadfast in his refusal to disclose any details of discussions with institutions that might be interested in providing loans to students. Indeed, the Minister has not even been prepared to identify the institutions involved. No financial institution, bank or building society has been named by the Minister as being interested in taking part in the scheme. That raises the question of whether the financial institutions have any interest in taking part in the scheme.

7.30 pm

The Bill has been badly thought out, and the Government have tried to follow a highly restrictive and constrictive timetable. Sir Christopher Johnson, the former chief economic adviser to Lloyds bank, made an appropriate comment: There is every sign that a half-baked idea has been launched prematurely to get it into the Queen's Speech in time. Haste born of financial desperation is not a good recipe for fundamental reform. We agree with that.

The Bill has been born out of haste and political expediency and that is why we are concerned about the nature of the contractual agreements that the Government will make. We have had no information from the Minister about the financial institutions that might be involved in the scheme, so we fear that the Government, for their own reasons, will make an agreement or contract that will not be in the long-term interests of the taxpayer or of students.

I shall give the House three examples of the possible results—if the subsidy were made available to private sector institutions—and the sort of agreements that could be made in a desperate attempt to ensure that the private sector was enticed into the new scheme. First, the details of the loan scheme are not he published and debated in principle in the House. They are dealt with annually by an order, brought forward by the Government. That order states clearly the amount of the loans being made available, the period for which the loans will be available and the rates of interest that can be charged for the loans. Under the existing regime, the loans are, in effect, made available free of interest. The level of public subsidy is then set at a rate high enough to cover the commercial return for the financial institutions. If the scheme is privatised, the taxpayers' subsidy would provide the profit for the bank involved.

We know from the Committee stage that a second regime was suggested to the Secretary of State for Education and Employment and to the Chancellor of the Exchequer by the student loans working group. The Minister was kind enough to acknowledge—48 hours later—that such a group existed and that it made recommendations to the Chancellor and the Secretary of State. He also acknowledged that the working group suggested two approaches. The first was the one which is now followed—the loans are interest free. The second possible approach identified by the working group was radically different, but the working group claimed it would be far more attractive to the financial institutions. It would require the students to pay a commercial rate on their loans, but they would have an interest-free period while they were studying. They would have to repay that interest when they entered the world of work.

The working group claimed that only a commercial rate would convince the private sector that it should become involved in the scheme, because it would then receive a flow of income that fully covered the cost of borrowing, administrative costs and an element of profit. That regime is a radical departure from the system that we now have.

The Opposition are worried that, because that second scheme would be commercially attractive to the private sector, it will become the preferred option and the Government in desperation will adopt it. If we pass the Bill without the new clause, we will give them the power and authority to do that. That would be inappropriate, and it would ensure that more students would regard higher education as no option for them if students were to be charged a commercial rate for their loan. We would welcome a guarantee from the Minister that that will not be an option that the Conservative Government, for as long as they are in office, will support. We hope that he can give that guarantee this evening.

The second result could be that the Government will try to come to a cosy arrangement with the financial institutions that are interested in taking up other governmental financial services work. One financial service that the Government have offered for many years is the Teachers Pensions Agency. It is a high-quality service, which is highly profitable and very desirable to the private sector. We know that six financial institutions are being considered by the Government with a view to one of them being given the contract to run the privatised—as it will be—Teachers Pensions Agency.

It is interesting that the Minister refused in Committee to deny that those six organisations—during their meetings with the Government to consider the privatisation of the agency, work that they would like to do—might be encouraged to take on responsibility for the student loans privatisation as part of the arrangements into which they enter. In that context, there would of course be discussion of the amount of public subsidy to be provided, and that subsidy might be hidden because it would come from the profits that those companies would receive from the privatisation of the Teachers' Pensions Agency. That sort of cosy arrangement would not be in the long-term interests either of the operation of the agency or of the British taxpayer.

The third and possibly most important reason why we are concerned and why we believe that new clause 3 is essential lies in the amount of subsidy to be provided by the taxpayer for the private sector. As the Bill stands, there will be no limits on the subsidy; we must rely on the negotiating skills of the Minister to secure a good deal for the British taxpayer. We do not believe that any Minister, let alone this one, should be given a blank cheque.

In Committee, we tabled a modest and reasonable proposal that the subsidy should be capped at no more than a quarter of the total value of the loan being provided. That was voted down by the Minister and his colleagues. We must, however, ensure value for money for the taxpayer. There are considerable doubts whether the Bill would guarantee to secure that.

The worries are that some sweetheart deal will be struck between the Government and the lender to save face, not to meet the interests and needs of the British public. Our view is that the taxpayer should not have to bail out the Government from the political difficulties that they have caused for themselves. If money is available, it is surely better to use it not to subsidise the banks but to expand the financial support that we give students.

That is all the more important when we hear, as we have in the past 24 hours, that for the first time in living memory the number of applicants to universities has fallen. The reason why universities and higher education in general are becoming less attractive to 17 and 18-year-olds considering applying is that the latter recognise that their friends and colleagues who have entered higher education have entered a world of debt and poverty. That acts as a massive disincentive.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

Will the hon. Gentleman give way on that ridiculous point?

Photo of Stephen Byers Stephen Byers , Wallsend

If the hon. Lady cares to rephrase her question, I am prepared to give way.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

Will the hon. Gentleman give way on that precise point?

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

It is still a ridiculous one, though. Is the hon. Gentleman aware that my exceptionally well-run university has about 10 applicants for every place, and that some of its faculties attract about 100 for every place? We have absolutely no dearth of students applying even though they know perfectly well what the regime will be.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Order. Before the hon. Gentleman replies, may I point out that he is getting close to a Second Reading debate?

Photo of Stephen Byers Stephen Byers , Wallsend

I am rapidly coming to a conclusion. If the Government are providing money to subsidise the private student loan sector, their priorities must be questioned. Many of us think that the money would be better spent on financial support for students than on subsidising financial institutions with taxpayers' money.

The new clause deals with the concerns that I have expressed. It would ensure that a future Government would not have their hands tied, perhaps for as much as five years, by an agreement entered into for political expediency by this Government. I commend the new clause to the House.

Photo of Mrs Maria Fyfe Mrs Maria Fyfe , Glasgow Maryhill 7:45 pm, 17th January 1996

Earlier, the Minister objected to my hon. Friend the Member for Wallsend (Mr. Byers) calling the Bill a privatisation of student loans. Yet it was crystal clear from our discussions in Committee that if the scheme turned out so successful that the Student Loans Company ended up on its uppers, lending only to a tiny handful of students, that would be fine by the Minister, because he wants to open up the loans to as many financial institutions as happen to be interested.

Crucially, the amount of subsidy intended to be given to each bank has still not been revealed. We all know that the banks have expressed varying degrees of uninterest in the entire scheme—ranging from downright rejection to an expression of the view that a number of difficulties need to be overcome. Those difficulties include technological and merger problems.

The Minister claimed that it was not true that the banks were wholly uninterested: they were, he said, merely making opening moves in the negotiations. My hon. Friends will recall from serving on the Committee that the Minister seemed to think it laughable that the banks might mean what they are saying and that when they say no, they mean no. The clear implication is that the banks have only to keep on saying no to convince the Minister that they really mean yes—if the price is right.

We are talking about what may be immense subsidies of public money for these banks just to ensure that the Minister does not get egg on his face and can persuade an unembarrassing number of banks to take part. So the largesse will go to whichever banks can be persuaded to take part, if they ever can be.

This contrasts starkly with the treatment of the under-25s in respect of housing benefit, and with the treatment of students living in poverty. The citizens advice bureaux in Scotland and elsewhere have produced clear evidence of students in dire difficulty because of poverty. Thus the contrast between the treatment of the banks, which do not need the money, and the students, who do, is dramatic.

I was reminded of the Minister's view—that the banks do not really mean no when they say no—last night when I was re-reading "Pride and Prejudice", having recently watched the excellent BBC production of the novel. Everyone must be familiar with the character of Mr. Collins, and the part of the book in which he offers his hand in marriage to Elizabeth Bennet. She refuses, saying that she is quite sure that neither Mr. Collins' happiness nor her own would be enlarged by the prospect: under no circumstances would she marry him. He replies that he understands that young ladies may say no when they really mean yes, so he feels encouraged by her refusal.

What do the banks have to do to make the Minister understand that if they say no they really mean it? If the Minister thinks that he can persuade the banks to adopt this course, will he reveal what sums of money he has in mind?

Photo of Mr Gordon Oakes Mr Gordon Oakes , Halton

You and I have been in this House for a long time, Mr. Deputy Speaker. One of the advantages of the Report stage of a Bill is that it is brought back to the House. When I was Minister of State responsible for education, 17 years ago and dealing with higher education, funding students was a problem. Now, it is a far more acute problem because of the welcome increase in the number of people in universities and higher education.

I do not know what the Minister will say in reply to this debate, but he is looking a gift horse in the mouth if he rejects the new clause tabled by my hon. Friend the Member for Wallsend (Mr. Byers). The new clause defers consideration of negotiations until after the next general election. No matter how long the Government limp on, 31 May of next year will be beyond the next election.

This is a most unwelcome Bill. Students do not want it and have never wanted it; the universities and vice-chancellors have never wanted it; the banks and building societies do not want it. The Government are considering the time factor—whether 31 May 1997, or today—in which they can bribe banks and building societies to engage in the Bill's provisions. Frankly, the banks and building societies do not want it. It is of no commercial interest to them.

I must tell my hon. Friend the Member for Wallsend that I thought some of the comments by Conservative Members very fair. They asked what the Opposition would do if the Bill were deferred until 31 May next year. As the Irishman said when asked how he would get to a certain place, my reply would be, "I would not start from here." I would not start from this Bill and I would abandon this process altogether.

We must grasp the fact that we now have a very large student population—a population that the nation finds it difficult to support financially. Whether a Conservative Government are in office or we are in office, that is a fact that we have to face. Neither the Government nor we, the Opposition—I regret to say—have faced up to how we are to fund students.

Many schemes have been put forward and have been tinkered with or played with, but they have never really been considered due to political expediency, or whatever. One is the Australian scheme—Australian students repay loans through a statutory income tax system according to their degree and ability to pay. The vice-chancellors have put forward a scheme to the Government and the Opposition, suggesting ways to tackle the problem. The Australian scheme, the vice-chancellors' scheme or any other scheme bear no resemblance to the weird system that the Government propose, which will solve nothing.

Meanwhile, tens of thousands of students are living in poverty and misery, as my hon. Friend the Member for Glasgow, Maryhill (Mrs. Fyfe) said, when they should be devoting their attention to their studies. Instead, they have to devote their attention to wondering where their next meal is coming from and that must be wrong.

Photo of Mr Colin Pickthall Mr Colin Pickthall , West Lancashire

My right hon. Friend might not be aware that the Minister made it clear in Committee that he did not believe that there was any connection between student poverty and the quality of students' educational performance.

Photo of Mr Gordon Oakes Mr Gordon Oakes , Halton

If the Minister tried to make that clear, it is the most nonsensical statement that I have heard. Every hon. Member, on both sides of the House, is aware of student poverty—not just poverty among working-class students, but among middle-class students and across the board. They will be the leaders of industry, the professions and academia in this country and that is the way that we treat them. The new clause gives the Government and my hon. Friends on the Opposition Front Bench time to think of an alternative to this ludicrous scheme, which no one loves.

One of the advantages of a Report stage is that another line can be put. I have served on many Standing Committees, as you have, Mr. Deputy Speaker, and I know that members of such Committees look at the problem from the point of view of the Committee. The new clause will give more time and I hope, therefore, that when considering it the Minister will grasp the gift horse with which the Opposition have presented him and will willingly accept it, saying that negotiations shall not take place until after 31 May 1997. I hope that if we are in government, those negotiations will not take place at all because we will have a far better scheme for funding students than this ludicrous Government scheme.

Photo of Mike Hall Mike Hall , Warrington South

First, I must repeat something that I said in the Standing Committee about the principle behind new clause 3. The new clause is uncontroversial, helpful and necessary and it will benefit the Government. It is in line with the Government's timetable for the introduction of the private sector into the payment of student loans.

I hope that the Minister will accept the new clause on behalf of the Government because it will improve a very poor Bill. As it stands, the Bill encapsulates everything that is wrong with the Tory party approach to government—it is an arrogant abuse of power. The Government do not seem to care that they have not been able to explain to Parliament the full costs of the measures included in the Bill. The Government are asking Parliament for a blank cheque. They are saying, "Pass this enabling Bill and allow the Government to get involved in the negotiations with the private banks and to provide subsidies to them to grant loans to students." They are saying that they are not prepared to tell us what the cost to the taxpayer will be or to say what the cost of the student loans will he. They are asking us to take it on trust and to take the Bill through.

The new clause straightforwardly states that the Government can go so far but that, given that they do not want to implement the Bill in the private sector until 1997, the new Parliament can decide whether it wishes to proceed with the measure. That is the real strength of the new clause. It will prevent the Government's arrogant abuse of power—the fact that they are not telling us how much they are prepared to commit to the scheme.

The new clause allows time for the Government to say that the negotiations have been completed and to tell us which high-street banks will become involved in private sector student loans. So far they have been unable to tell us and, if they have the information, they have refused to reveal it. I believe that they are not holding anything back because they do not know which banks will become involved. A number have said that they will not do so. The new clause will allow Parliament the full knowledge of which high-street banks and private institutions are prepared to get involved in the scheme and, therefore, strengthen the democratic process.

The new clause will also give us time to consider the effects on students. Opposition Members tried to do that in Standing Committee, but the Government strongly resisted it. The Government have given great consideration to the effects that certain changes that we tried to make in Committee would have on private financial institutions, but have had no regard whatsoever to the impact on students. On Second Reading, in Committee and on Report—and, I suspect, on Third Reading—we have had no sign from the Government of how the scheme will affect students. New clause 3 introduces a means by which those omissions can be overcome.

At the second sitting of the Committee—it was almost thrown in as an aside—the Minister announced that there would be a delay in the implementation of the scheme. Instead of being introduced by October 1996, it would be done by October 1997, which will be some time after the next general election. That delay will give the Government the opportunity to put right all the problems that they have created within the Bill. That is another good reason for the delay that new clause 3 would put on the face of the Bill.

The Conservative party has nothing to fear from the new clause. If it wins the election, which is highly unlikely and most improbable—

Photo of Mike Hall Mike Hall , Warrington South

The hon. Lady says no, but she is completely wrong, as she is on every other issue.

Photo of Mike Hall Mike Hall , Warrington South

The hon. Lady continues to make the same mistakes. No doubt she will continue with the arrogant view that the Conservative party has nothing to fear from the electorate when it has everything to fear.

If the Tories win the election, they can proceed with the measure in the next Parliament. If they lose, the delay will allow the new, incoming Government, with a new mandate, to tackle the problem according to the promises in their election manifesto.

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The new clause strengthens the democratic process and is, therefore, nothing to fear. Accepting it would show, at this late stage, in the 17th year of the Conservative Government, that they have some regard to the democratic process. They would then be able to consider at length the principles involved in the Bill, which legislates for the use of taxpayers' money to subsidise private institutions to provide student loans. That is a crucial part of the Bill and represents a fundamental change from the current policy.

Parliament needs to give far more consideration to the principle of using taxpayers' money to subsidise banks to do the same business that they have carried out for years. Why do high-street banks or other financial institutions in the business of lending money need huge subsidies from the taxpayer to allow them to participate in the business in which they have been established for many years? That fundamental question goes to the core of the Bill and is one reason why new clause 3 is so important.

The new clause would allow proper parliamentary scrutiny. As I have said, although we have considered the Bill on Second Reading and in Standing Committee and we are now considering it on Report and no doubt will on Third Reading, we still do not know the precise cost to the taxpayer.

When the matter was raised in Committee, the Minister said that we will know the full cost to the taxpayer 12 months after the scheme has been implemented. Therefore, Parliament will not know how much the legislation will cost until October 1998. That is totally unsatisfactory and is an abuse of the democratic process.

Parliament needs to know the cost of the scheme and the new clause would allow us to address the errors in the Bill. It may well allow the Government to justify what we have said—that the estimated cost of the subsidy is £1,500 per loan. We used that figure throughout the Standing Committee and the Minister decided not to disavow it. He has made no comment whatsoever about the costs. Perhaps he is frightened to reveal them because he knows full well that the Government's use of money would create an outrage. Now he refuses to say whether the figure of £1,500 is right or wrong. The Minister may find it funny, but if the Government are prepared to subsidise high-street banks or private institutions at a cost of £1,500 per loan, perhaps they should give the money directly to the students and ease the problems of student poverty that has been well documented by my hon. Friends.

Implementation of the new clause would allow us to evaluate the effect of the Education (Student Loans) Bill on students. It is clear that the Government have been prepared to legislate to include discrimination. They decided that students should not be told why they may have been refused a private sector student loan; they see no reason why students need to know why they have been refused and they see nothing wrong in the institutions refusing the loans passing that information on to a third party. That is scandalous. It is an outrage in itself. The Government decided quite straightforwardly that there should be no appeals procedure. All that involves taxpayers' money to support our public education system. We need to build some accountability into that system and new clause 3 allows us to do that.

The Minister may respond by saying that the new clause expects him to negotiate on the Floor of the House the deals between the Government and the private sector. It does not. The Government can conduct their negotiations with the private sector, work out which banks are involved, produce the costs and tell us the implications of the scheme and that information will be available and ready to be used in the new Parliament on 31 May 1997, therefore the argument about negotiation on the Floor of the House does not hold water.

The other argument that the Minister used in Committee against the approach in new clause 3 was that it would delay the progress of the Bill. However, he has now delayed the progress of the Bill and moved the implementation date to October 1997, therefore there is no reason not to accept the new clause. The rationale of the arguments that the Government used in Committee does not apply. It does not stand up to scrutiny, so I hope that, even at this late stage, the Government will support the democratic process and allow hon. Members to do the job for which they were elected—to scrutinise legislation and improve it where they can.

Photo of Eric Forth Eric Forth , Mid Worcestershire

We have not yet learnt what Opposition Members would do. I fought valiantly in Committee to winkle that out of them, but I failed totally. Yet again, the hon. Member for Wallsend (Mr. Byers) disappointed us, although he did not surprise us. It was also significant that the right hon. Member for Halton (Mr. Oakes), in the perceptive way that we would expect of a Member of such experience, said with some sadness that he could detect no policies emerging from the Labour party.

We learnt only one significant and interesting fact, for which I am grateful. The hon. Member for Wallsend accepts—by implication, so do his colleagues—that the general election will not take place until April or May 1997. That was a step in the right direction. It gives not just the debate, but other matters, an interesting perspective. I assume that he has the approval of the Leader of the Opposition in making that statement. If he has not, that is something for the hon. Gentleman to sort out. That is part of the background to new clause 3.

The other piece of background that the House will want to recall is that the measure was duly signalled in the normal way as part of the Government's programme. It received a Second Reading and was considered in Committee, where, as has been said, I resisted an Opposition amendment to put on the face the Bill an arbitrary delay in the implementation period.

I then announced a delay of one year, because, for perfectly practical reasons, the financial institutions that might be interested in picking up the opportunities offered in the Bill persuaded me—with no great difficulty—that it would take that length of time properly to put in place the procedures and mechanisms to give effect to the Bill's measures.

Photo of Mike Hall Mike Hall , Warrington South

The Minister has just said that, during his discussions with the private sector institutions, they revealed that they would find it difficult to be ready for 1997, because of the information technology requirements. That statement implies that certain institutions had expressed an interest in the Bill. At this late stage, will he tell us the names of the institutions involved?

Photo of Eric Forth Eric Forth , Mid Worcestershire

The answer is no. I should correct the hon. Gentleman. The difficulty would have been with implementation in 1996, which was the original target date. There would be no difficulty with implementation in 1997, unless the House were to agree to the new clause—which I hope it will not—in which case there would be no possibility of meeting that target date for implementation in 1997. To implement the measure in time for the start of the 1997–98 academic year, contracts would have to be finalised by the mid-point of this year, to give the financial institutions sufficient time. To delay the Bill in the way that new clause 3 proposes would defer implementation until 1998, which would be unacceptable.

Another argument for new clause 3 is a constitutional theory of which I was not hitherto aware—that a Government are unable to make any new policies or commitments, or to promote their legislative programme, in the 15 to 18 months before the likely date of a general election—or, as the hon. Member for Warrington, South (Mr. Hall) told me, the actual date of the next general election. That is new stuff of which I was not aware.

I am not sure that new clause 3 is the correct vehicle for an entirely new constitutional theory that will guide us in the governance of this country. It seems that Opposition Members are persuaded that there must be a sterile period of 15 to 18 months before a possible general election, even though we generally do not know when a general election will be. That seems a complication, although Opposition Members seem secure in their knowledge that a general election will not occur until spring 1997. That is all a horrible muddle, and simply will not do.

I assume that it is not incompetence that has brought new clause 3 to the House this evening, but mischief. There has been an element of mischief-making in this Bill, which I accept in the spirit in which Opposition Members offer it, but anyone who pauses for thought will realise that the Government cannot accept the new clause.

We have made it clear that we want to introduce the measure as rapidly as possible, consistent with its being implemented in a proper fashion. I have been persuaded that it is reasonable to delay the provision for 12 months, and I believe it proper that we should now aim at the period of tendering, invitation and finalisation of contracts ending at the mid-point of 1996. That will give the financial institutions that come forward approximately one year in which to prepare, which is a reasonable and practical timetable for implementing the Bill. New clause 3 would undermine that process.

Photo of Mike Hall Mike Hall , Warrington South

The Minister is hopeful that, by the mid-point of this year, it will be possible to finalise the financial institutions that will be involved. Can the Minister say today, in mid-January, which financial institutions are involved now? If the Minister hopes to finalise matters by the middle of this year, he must know now the institutions involved.

Photo of Eric Forth Eric Forth , Mid Worcestershire

I cannot recall offhand the hon. Gentleman's career before he entered the House, but I believe that it was in education. I suspect that he does not have wide commercial experience, or he would realise the folly of his question. The term "commercial confidence" does not seem to have impinged on the hon. Gentleman's consciousness. If we were to proceed to make arrangements with private institutions in the way that the hon. Gentleman suggests, bandied names about in a loose fashion and revealed details of contractual agreements at every stage, that would effectively make any deal between Government and the private sector impossible.

That may be the way in which the hon. Gentleman envisages a Labour Government, if ever there were to be one, conducting themselves. Because the hon. Gentleman does not have wide commercial experience, he may be unaware of the difficulties that would be imposed. That cannot be the way to proceed because it would undermine the whole process.

If the hon. Gentleman is making a commitment on behalf of his party that, on any future occasion that a Labour Government had a requirement to deal with the private sector, that Government would follow the hon. Gentleman's precepts of naming names and making revelations of detailed contractual arrangements at every stage, we will take that into account. If the hon. Gentleman reflects for a moment, he will realise the folly of that approach.

Photo of Mr Roy Beggs Mr Roy Beggs , East Antrim

Has the Minister received assurances from financial institutions that, once his legislation is in place, he will have the support of those institutions in implementing the new conditions?

Photo of Eric Forth Eric Forth , Mid Worcestershire 8:15 pm, 17th January 1996

No, because we are nowhere near that stage. The institutions are aware of the direction in which the Bill is taking us, and we had considerable preliminary discussions with a wide range of financial institutions. The delay I mentioned was part of the result. The financial institutions persuaded us that the changes that they would have to make to their systems and other developments would make an implementation date of October 1996 impracticable. I was prepared to delay 12 months to give the institutions a reasonable opportunity to go through the tendering and contractual process, to establish their systems and to make other changes.

We have not reached the point about which the hon. Gentleman inquires. I envisage us doing so some time between spring and summer this year. At that stage, I will give the House as much information as I reasonably can, within the constraints that I explained. New clause 3 is either mischievous or ill-founded, or it has been tabled in the wrong debate, for the wrong Bill. It seeks to alter our constitutional arrangements. One way or another, I must ask the House to reject it.

Photo of Stephen Byers Stephen Byers , Wallsend

As to the date of the next general election, and for the sake of clarity

Photo of Stephen Byers Stephen Byers , Wallsend

I am not wriggling at all. We know that the Government want to hang on until Easter 1997, but we shall do all we can to ensure that does not happen. It is worth planning, on this occasion at least, on the basis that the Government and the Prime Minister may get what they want, which is why new clause 3 was tabled.

I was disappointed by the Minister's response. He failed to answer four specific questions. How do the Government intend to make up the £100 million deficit in the education budget as a result of the 12-month delay in implementing the measure? Will there be cuts elsewhere in the education budget? It would have been appropriate this evening for the Minister to give the House a reassurance that money will not be cut from other education services, or to identify precisely where cuts will be made. As it stands, £100 million of unspecified cuts will affect the education service in some way. I regret the Minister's failure to address that issue.

The Minister refused to give an assurance that the Government will not begin to charge a commercial rate for student loans, in accordance with the recommendation by the student loans working group to the Secretary of State and the Chancellor. The Minister confirmed that was one of two options, but he refused to give an assurance that that option will not be pursued. There has been no indication of the level of the taxpayers' subsidy to be made available to the private sector.

Finally, the Minister did not name one financial institution—be it a bank or a building society—that is interested in participating.

Photo of Mike Hall Mike Hall , Warrington South

I noted the Government's spurious arguments about commercial confidentiality. Does my hon. Friend agree that the Government have not even said how many institutions have been involved, let alone revealed their names?

Photo of Stephen Byers Stephen Byers , Wallsend

I agree. It is not without precedent for the Government to identify organisations with which they are in discussion in relation to such matters. The Teachers Pensions Agency is a good example. The six interested financial institutions have been named, and they are in negotiations and discussions with the Government to determine which will be selected. The procedure has been used in the past. The Minister has refused to respond this evening, because there is no interest in the private sector.

Photo of Mrs Maria Fyfe Mrs Maria Fyfe , Glasgow Maryhill

It is interesting that the Minister has also failed to make it clear that there is a possibility that a financial institution could receive a large amount of public subsidy, that a general election could take place, and that the institution could hang on to that subsidy although the process would not continue under a Labour Government.

Photo of Stephen Byers Stephen Byers , Wallsend

That is another good reason why the new clause has considerable merit. We are disappointed that the Minister is not prepared to accept it, given the positive way in which it was introduced.

We have had a useful debate. We do not want to divide the House. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.