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Student Loans Company

Volume 631: debated on Monday 20 November 2017

(Urgent Question): To ask the Secretary of State for Education if she will make a statement on the management and operation of the Student Loans Company.

The Student Loans Company’s performance has improved year on year for the past six years. SLC services account for about 1.8 million applications per year. It responds to about 4.5 million phone calls from borrowers and has more than 6 million repaying or due-to-repay customers, with loans totalling over £100 billion. In addition, it has delivered a range of new products for the Government on time and successfully, including postgraduate loans and simplified advanced learner loans.

This year, the SLC has processed more than 1.4 million applications for student funding, and so far this academic year it has paid out approximately £2.5 billion in maintenance funding and £2 billion in tuition fee payments to providers. Customer satisfaction remains high, at about 85%, and, for borrowers in repayment, at about 72%. It receives complaints from just 0.1% of its 4.7 million customers. The SLC is, of course, constantly looking to learn lessons from this low level of complaints and to use these complaints to improve the quality of its services.

The Department for Education is also working closely with the SLC on a range of initiatives that will further improve the user experience for the SLC’s borrowers and in respect of staff engagement. Proposals currently being developed include greater digitisation of the student loan application and repayment processes and investment in more efficient SLC systems.

Following two independent investigations into allegations about aspects of his management and leadership, the SLC has terminated Steve Lamey’s contract as chief executive officer of the SLC. The SLC and its shareholders expect the highest standards of management and leadership and, having taken into account the findings of the investigations, have concluded that these were not being upheld by Mr Lamey during his time in his role. The SLC board acted swiftly and has appointed the current chief executive of the Education and Skills Funding Agency and of the Institute for Apprenticeships, Peter Lauener, as interim CEO, with effect from 27 November. He will remain in post at SLC until a permanent appointment is made.

Mr Lauener was formerly chief executive of the Institute for Apprenticeships and the Education and Skills Funding Agency. He has had a long and successful career in a number of senior leadership positions in the Department and its partner organisations, and I have every confidence that he will provide the drive and stability the SLC requires at this time, as we recruit a permanent chief executive.

This announcement was snuck out over the November recess on the same day as the Secretary of State for International Development resigned. Since last Monday, two articles in The Times have raised severe questions about the process. Why, in the Minister’s letter to me on 17 October, sent six weeks after I wrote to him about the SLC, did he refer to the suspension of the chief executive as a neutral act that did not imply wrongdoing, when he was actually made fully aware of the allegations against Steve Lamey in June, as his written reply has told me?

Will the Minister publish the findings of the performance review of the SLC, issued two months before the suspension, in which, as The Times says, Steve Lamey was rated “outstanding”? Was the Minister aware at the time that Mr Jenkins’s report on Mr Lamey had concluded that he was

“making a real and positive difference”

to the Student Loans Company, and was a popular and effective leader who staff found supportive, before the decision was made to sack him? Will he also publish the findings of the internal investigation, in which 52 of 58 allegations against Mr Lamey were dismissed, so that all Members can understand the issues at the SLC?

Who appointed the chair and the other three board members of the SLC, and what were the criteria and processes for those appointments? Can the Minister confirm that Simon Devonshire, the board member who heard and dismissed Mr Lamey’s appeal, and David Gravells are also members of the same venture capital trust?

The lack of proper co-operation between the SLC and HMRC has led to significant overpayment of debts. Can the Minister tell us how many overpayments amounting to more than £10,000 have been made since 2015-16? I have just been told that the Government have tacitly admitted their failure in this regard by saying that from 2019 onwards, HMRC and the SLC will co-operate on these matters. However, that does not address the fact that Mr Lamey and the HMRC’s permanent secretary have blamed each other for the issue. Mr Lamey has claimed that he asked for real-time updates that HMRC would not share. Who is telling the truth?

The BBC’s “Panorama” has raised questions about private providers of courses in which students have fraudulently enrolled in order to claim loans. How much has been paid to students of private higher education providers who were subsequently determined to be ineligible in the last five full financial years, and what mechanisms are there to enable the misused taxpayer money to be reclaimed? In the light of all that, will the Government now suspend the sale of a further chunk of the student loan book?

The Minister recently admitted that changes in interest rate thresholds on student debt would cost £175 million by 2020. Can he tell us where the money will come from? Given that tens of thousands of graduates are footing the bill for SLC failures, what confidence can Parliament have in the competence of this Minister, who is the key shareholder in the Student Loans Company?

I would encourage the hon. Gentleman not to denigrate the hard work of the dedicated public servants at the Student Loans Company, who are undertaking a vital task in securing the finance that young people and learners in this country need to pursue higher education and who, as I have said, are doing so in a successful way: fewer than 0.1% of the SLC’s 4.7 million customers complain each year. They are delivering an important service, and the hon. Gentleman should support them rather than running them down.

The hon. Gentleman asked about a number of matters. He asked about the investigations that led to the dismissal of Mr Lamey from his position as chief executive of the SLC. The concerns were brought to the board’s attention in May, and to the attention of the Department for Education.

I learnt about it in May, as I have just said. The two investigations were immediately set in motion to get to the bottom of the allegations received by the SLC board. One was led by the Government Internal Audit Agency, and the other by Sir Paul Jenkins, former Treasury Solicitor and head of the Government’s legal services. They concluded that Mr Lamey had not shown the leadership which would be expected of someone in that role, and accordingly the board decided that he should no longer continue in the role. As a consequence of the SLC’s decision, the Department decided to relieve him of his responsibilities as accounting officer of the SLC.

The hon. Gentleman asked about ineligible payments, some of which were highlighted by the “Panorama” programme that was broadcast a few days ago. I am sure he will be interested to know that the level of ineligible payments made to alternative providers has been falling sharply in recent years. In fact, it has fallen by over 80% since 2012-13, from about 4% of all payments to 0.5% of all payments in 2015-16. This rate is low; of course we want to eliminate fraud wherever we can identify it, but this is a low rate of ineligible payments to these providers. Indeed, the rate is now no higher than the average across the HEFCE-funded higher education system. So if I were the hon. Gentleman, I would not use this as a means of running down the newer entrants to our higher education system—which he often does from the Dispatch Box—because it cannot be used to support that sort of attack. This reduction in the level of ineligible payments is the direct consequence of the controls that previously the Department for Business, Innovation and Skills and now the Department for Education have been putting in place to ensure that public money is not abused.

We take the issue of overpayments extremely seriously, and the hon. Gentleman mentioned some of the steps we are taking. We want close and effective co-operation between HMRC and the SLC so we avoid the risk, to the extent that we possibly can, of students overpaying when they repay. I understand that the Chancellor will be considering this issue further in the Budget later this week, so the hon. Gentleman might want to wait to see the contents of the Budget for further details. We are committed to improving the interface between HMRC and the SLC. We ensure that all borrowers, as they enter the last two years of their repayments, are given the opportunity to move directly to a direct debit system of repayment, so that they eliminate almost all the risk of overpayment.

I welcome the Minister’s efforts to reform the SLC, and he will know that our Select Committee on Education is doing a value-for-money inquiry into universities. As well as looking at the management of the SLC, will the Minister use this opportunity to look at reducing the rate of interest for students, which is much higher than in many other countries in the developed world?

We keep all aspects of our student finance system under review, to ensure that it is fair and effective as a system, and that it is meeting our core objectives of removing financial barriers to access, funding our university system fairly, and sharing the costs of doing so equitably between individual students and the general taxpayer. The rate of interest is heavily subsidised. This is to be compared with unsecured personal commercial borrowings. The Bank of England benchmark reference rate for unsecured personal commercial borrowing would be well over 7%, and this is a particularly unique product, which is written off entirely after 30 years with no recourse to a borrower’s other assets, and it only enters the repayment period when people are earning more than £25,000. So it is a unique product, and it is not easy to compare any element of it with loan offerings from elsewhere in the commercial sector.

In recent years the SLC has been plagued by mishaps, complaints of inefficient bureaucracy, and poor customer service. The latest student loan sell-off is also concerning; we saw the problems for many graduates, receiving letters telling them they must pay even though their earnings had not reached the repayment level. Can the Minister confirm that the SLC will not now, or in the foreseeable future, syphon loans off to a third party?

Devolved Administrations are shareholders in the SLC. Can the Minister outline the discussions he has had with fellow shareholders on the circumstances of the dismissal of the chief executive of that company?

Over 1,400 people are employed by the SLC in Glasgow. Can the Government confirm that any shake-up of practices will not involve a plan to move any part of the company from Glasgow and that all employees will have an opportunity to be consulted in any future discussions?

At a time when graduates are paying up to 6.1% in loan interest, student debt in England is nearly treble what it is in Scotland, so does the Minister not think that, while the SLC could use a radical-shake up and reform, his policies could, too? The Budget is just around the corner, so while the Minister works to clear up the managerial problems, why does he not clear up the mess of his policy and stop saddling English students with the millstone of debt around their necks?

I am not sure that we need lessons from Scotland on our higher education policies. Over successive Administrations in this country, those policies have resulted in levels of access for people from disadvantaged backgrounds that should frankly be the envy of Scottish National party Members rather than a source of criticism. The hon. Lady asked about the work that SLC staff do from its location in Glasgow, and of course that is valued. We support everything they are doing to ensure that the SLC continues to perform at the level that we all want it to, as an important agency of the Department for Education. As I have said, it is now in its sixth consecutive year of improvement in all its operational metrics, and we want that to continue. I am sure that Glasgow will play its part in that.

Would the Minister like to explain what role the Office for Students will play in this, and how it will help?

The new Office for Students comes into existence progressively from 1 January 2018, with its full operational existence commencing in April 2018. The Student Loans Company has its own statutory existence, independent of the Office for Students, and it will continue to carry out its vital function of ensuring that the loans we make available to remove barriers to access to higher education continue to be made available seamlessly to the students who are in need of them.

Order. I am looking at all these very academic colleagues, and of course my eye immediately focuses on Dr Roberta Blackman-Woods.

Thank you, Mr Speaker. I hope the Minister appreciates that the problems at the SLC go beyond the actions, or lack of them, of the previous chief executive. The Jenkins report pointed to “bad behaviour” among the whole of the executive leadership team. Will the Minister tell us what that bad behaviour is, how long he has known about it and what action is being taken to stop it?

The SLC board has taken prompt action to address the shortcomings in the leadership of the company that were identified in the two investigations that I have mentioned: the Government Internal Audit Agency report and the report by Sir Paul Jenkins. I have every confidence that the new chief executive we have put in place, Peter Lauener, who has worked successfully across a range of Department for Education partner organisations including the Institute for Apprenticeships, will do the job that we need him to do.

Picking up on the Minister’s reply about the Office for Students, what role does he see it playing in driving value for money across further education for our students?

Of course value for money is a critical part of our reforms, as it has been since the Green Paper, the White Paper and the Higher Education and Research Act 2017. We want the SLC to hold universities to account for the tuition fee income that they receive from the SLC, and to ensure that students are made aware of where the best teaching is available across the system and where really good outcomes are emanating from specific higher education institutions. We want that to be made clearer to students so that they can make informed choices about where to study, and so that universities can be held to account for the use of public resources.

An external audit of the SLC placed it at the bottom of all organisations in 35 out of the 36 criteria against which it was assessed. Can the Minister tell us what those criteria were?

I cannot tell the hon. Gentleman the precise criteria against which the SLC was assessed. I can tell him that the organisation is steadily improving from when the coalition Government inherited it in 2010. As I have said, it is in its sixth consecutive year of performance improvement, and that is something that we should be celebrating. No one is denying that all organisations have room for improvement, and we want to work with the company to ensure that steps are taken in particular to improve the interface between itself and HMRC.

Does the Minister agree that it is imperative not only that university students get value for money but that they are able to see where their money goes, and that both of those elements will be promoted by the Office for Students, which will be launched on 1 January?

I am happy to confirm that. Indeed, we are consulting on the new regulatory framework that the Office for Students will use as its operating manual. Among the things that we are consulting on is how we can clarify to students how institutions use their tuition fee income so that they—and the Government—can be confident that that income is supporting the core activities that we intend it to be used for: teaching, producing world-class research, and helping students to go on to get great outcomes in the world of work.

I have huge sympathy for Mr Lamey—not least because he has such a fantastic surname—but I also have sympathy for the Minister, because I have been in his shoes. Given the failure of the SLC to which colleagues have alluded, it is important that the House understands how often over the past year the Minister met Mr Lamey, the chairman and the senior management team. In the spirit of probity, will the Minister put before the House a list of those meetings so that the proper inquiries can be made?

I would of course be happy to do that, but I remind the right hon. Gentleman that the SLC is in many ways a successful organisation, so we should not denigrate it. Opposition Members are doing a massive disservice to public servants who are working hard in Darlington and in Glasgow to ensure that students are getting access to the finance they need to undertake higher education. It is an achievement for an organisation to have 4.7 million customers but to receive complaints from less than 0.1% of them each year, so we should not endlessly run the SLC down. Of course it has room to improve, and the Government are committed to helping it do so.

What does my hon. Friend consider to be the most significant change brought about by the Higher Education and Research Act 2017?

Order. That question is not altogether adjacent to the matter of the management and operation of the Student Loans Company. If I am being very polite to the hon. Gentleman, which I invariably am, I will say that his inquiry is at best tangential. It has at best a nodding acquaintance with the SLC, but no better than that. However, the Minister is a versatile and dextrous fellow, and I feel sure that he will be able to handle the matter eloquently and pithily.

Thank you, Mr Speaker.

Students receive their funding indirectly from the Student Loans Company, and universities receive their funding directly from it, so it is vital that there is a strong relationship and that students feel that they are getting value for money from the funding that the SLC provides. The spirit of the Higher Education and Research Act 2017 is to promote value for money in our system, and to ensure that universities are delivering great teaching, great research and great outcomes for students.

The Minister mentioned denigration, but no Opposition Member would denigrate the Student Loans Company. In fact, the SLC has offered a good service to many students and parents. If we compare it with our commercial banking sector, in which so many people should have gone to prison, the SLC has done very well indeed. Is there some secret agenda here? This Government are about to sell off £4 billion of student loans, and who is leading that consortium? It is British banks led by Barclays.

I thank the hon. Gentleman for acknowledging the good work that the SLC does—it is important that we all recognise that. The sale of the student loan book is a policy that the previous Labour Government made possible following the passage of the Sale of Student Loans Act 2008, so there is considerable cross-party recognition of the importance of ensuring the sustainability of our public finances. The sale of the student loan book, which was made possible by the previous Labour Government, is something that this Government are quite prepared to continue.

When we talk about student loans and access to university, we often quite rightly talk about disadvantaged students. Does my hon. Friend recognise that the current system has created opportunities for such students?

My hon. Friend is right that the income-contingent student loan repayment system has made a huge expansion of access to higher education possible. I have referred to this statistic several times while speaking at the Dispatch Box: young people from disadvantaged backgrounds are 43% more likely to go to university or other higher education today than they were in 2009-10, which is a direct result of successive Governments deciding to share the cost of higher education equitably between students and the general taxpayer.

Will the Minister have another go at the question put to him by the right hon. Member for Harlow (Robert Halfon), the Chair of the Education Committee, as to exactly why our students have to pay such a high rate of interest compared with those in other countries?

Many hon. Members are under the impression that all students in the repayment period are paying a 6% interest rate, which is of course wrong. Only between 2% and 5% of students in that period are paying rates of about 6.1%. Most students in the repayment period are paying somewhere between RPI and RPI plus 3. That takes us from RPI, which is roughly 3%, all the way to around 6.1%. Students are paying a spectrum of interest rates, and only those earning more than £42,000 in the repayment period will be paying the high rate of interest that has caught the imagination. From the statistics I have, that represents between 2% and 5% of students.

Notwithstanding my hon. Friend’s previous answer, is it not the case that far fewer people from deprived backgrounds now go to university? At least that is what I have heard from the Labour party—or has it got that wrong?

Yes, I am afraid the Labour party has got that wrong. As I have just said, the rate at which students from the most disadvantaged backgrounds are going to university has jumped sharply over the past six or seven years. They are now 43% more likely to go into higher education than they were in 2009-10.

As the mother of a daughter with a student loan, I was appalled by a BBC report of evidence that education agents are recruiting bogus students to private colleges to defraud the taxpayer of thousands of pounds in student loans. What are the Department, the Quality Assurance Agency for Higher Education and the Student Loans Company doing to detect and prevent bogus students? For instance, will the Government legislate to ban essay mills?

The Department takes allegations of fraud and malpractice extremely seriously, and we are grateful to “Panorama” for bringing to our attention the fraud allegations it aired in relation to student loans at three private providers. Fraud devalues the work of honest providers and students. Working with stakeholders, including the City of London police, we will take robust action where abuses of the system are evident.

To put this in context, it is vital we remember that the number of ineligible payments to such providers is very low. It is about 0.5% of all payments, and that has come down sharply from 4% in 2012-13. The rate is no higher than the rate of ineligible payments across the rest of the Higher Education Funding Council-funded, or publicly funded, world of higher education.

The Minister will agree that one of the key ways of judging the success of the student loan finance system is the number of people from disadvantaged backgrounds who are going to university. What role does he see for access agreements in particular alongside the support provided by the SLC?

Access agreements play a vital role. The funding now flowing through access agreements to support widening participation has doubled over recent years and now stands at well over £800 million a year. Access agreements are driving progress in widening participation, and the rate at which people from the most disadvantaged 20% of households are accessing higher education has jumped, with the figure now standing at more than 20% of that particular group.

Given that Mr Lamey has criticised the lack of support from the Department for Education, and given that this House has had to rely on various media reports that paint a picture of a Student Loans Company plagued by bullying, low morale and high sickness rates, is it not in the public interest that the Jenkins report is put into the public domain, not least so that Committees of this House can properly scrutinise the performance of the Student Loans Company and the support provided by the Department for Education?

This is an employment matter between Mr Lamey and the SLC. The Department for Education has taken quick action in response to the two reports by the GIAA and Sir Paul Jenkins. It suspended Mr Lamey from his role as accounting officer and took quick steps to put in place new management, in the form of Peter Lauener, to take the SLC forward in the coming months and years.

I declare my interest, in so far as I am currently repaying a student loan. What involvement does my hon. Friend see for Ministers or the new Office for Students in the appointment of a new permanent chief executive?

I think we can all agree that my hon. Friend is a good advertisement for the student loans system—he is a good outcome from his particular institution. The OFS will not have a direct role in the appointment of the new SLC chief executive. That will be a matter for its board, and of course it is a ministerial appointment as well.

The incompetence of the Student Loans Company is seen in things ranging from its scaremongering fake debt collection letters, to the predicament of my constituent Sibhoz Hallet of Acton, who is perversely barred from working any overtime as her debt would double—that is not an anomaly, but the norm. Is it not apparent that by exposing the SLC as a mess, with 50% of calls mishandled at peak times, Steve Lamey was dismissed for telling the truth?

Mr Lamey did not live up to the standards the SLC board felt were required for his role, so it took action to dismiss him, and the Department for Education followed on by removing his function as accounting officer. We want the SLC to continue to be a high-performing organisation, and we should remember that overall it is a successful organisation, with just 0.1% of its customers complaining every year. Many private sector organisations would envy such a record.

In his initial response, the Minister referred to last week’s “Panorama” revelations. Is he aware of any Welsh higher education institutions that have been caught up in fraudulent activity, and what discussions has he had with the Welsh Government?

I am personally not aware of any such allegations, but they would be a matter for the Higher Education Funding Council for Wales and the Welsh regulatory authorities. If the hon. Gentleman is aware of any, he should not lose any time in relaying his concerns to the appropriate bodies.

This chaos at the SLC adds insult to injury for those who are paying off these huge debts following graduation. A constituent who came to see me last Friday showed me his SLC statement. He is a paramedic who is doing an important, highly-skilled job in our emergency services. He completed his training with more than £28,000 of debt. He has paid off £1,084 since April 2016, but the SLC has applied £878.10 interest during that period. He said to me, “It’s no wonder graduates are tempted to leave the country.” What would the Minister say to him?

We want the student repayment experience to be as simple, smooth and effective as possible, and it is striking that the level of complaints is as low as it is. Of course there will be complaints, such as that made to the hon. Lady by her constituent, and she is right to raise it. We want to learn from all student experience, and the SLC does learn from the relatively few complaints it gets—it is important to do so.

I have been in contact with Leeds University union about many cases, particularly those involving overpayment. One student was given incorrect information and made a repayment, but now cannot get a further loan, having been told by the SLC that he had made a voluntary repayment. Another student was given four years’ loan but was subsequently told that he did not meet the residency requirement, so the full amount has now been demanded, even though the SLC admits that that was its mistake. How will the Minister ensure that students are treated fairly when the SLC makes a mistake and students are already deeply in debt?

Of course we want all students in repayment to be treated fairly by the SLC and we take the issue of overpayments particularly seriously. As I said in response to the hon. Member for Blackpool South (Gordon Marsden), we can expect to hear more on the theme of overpayments and the interaction between the SLC and Her Majesty’s Revenue and Customs in a couple of days’ time at the Budget.

The Minister seems complacent about the extent of fraud. He can report to us only the amount of fraud that is known about but, by their very nature, the people who carry out fraud are devious. Did the “Panorama” programme suggest to him an area of fraudulent activity of which he was not aware before? What action did he take in response to what was exposed by that programme?

The hon. Gentleman is of course right that the nature of fraud is such that we only really have a sighting shot at understanding its extent in any system. We have to look at comparable levels of ineligible payments across different types of provider. As I said, we do not see more fraud in the so-called alternative providers than we see in the HEFCE-funded public part of the higher education system.

Last Thursday, senior NHS leaders told me about the growing desperation to grow our own senior NHS professionals. Such people will have to pay all the money back because their earnings will be above the threshold, so will the Minister look again at the interest rate they will have to pay and the fact that they will start to accumulate interest before they even graduate?

The student loan product is heavily subsidised overall. Around 45% of loans are consciously written off by the Government as a deliberate investment in the country’s skills base. We do not want any financial barriers to access, so we make the money available on very favourable terms. The interest rate is a means of ensuring that graduates who go on to have higher than average lifetime earnings make a contribution towards the overall cost and sustainability of higher education, ensuring that it continues to drive access and widen participation systematically across the piece.

Is the Minister aware that this is not subsidised enough? There is only one solution and it stares us in the face every time he opens his mouth: let us have free education like we used to have, from the cradle to the grave.

The thing is that our system of student finance has enabled far, far more people to go to university than the kind of system that the hon. Gentleman advocates. In the 1950s and 1960s, when others in this House were thinking about whether to go to university, a far smaller proportion of each cohort of 18 to 19-year-olds was given the chance to do so. Now almost 46% of 18 and 19-year-olds get a chance to go to university, and that is a world away from the situation when we had an entirely state-funded higher education system, which meant that it was really just the preserve of a narrow elite.

Order. We have a statement coming, but if the hon. Gentleman is in a state of uncontrollable perturbation, I will take his point of order now.

You may not be aware, Mr Speaker, but in the other place this afternoon, Lord Callanan, a Minister in the Department for Exiting the European Union, had to give a specific statement to correct something that he said about whether article 50 could or could not be revoked. Indeed, he said that “for the avoidance of any doubt, the Supreme Court…did not rule on the legal position regarding its irrevocability.” That is relevant, because we are set to resume Committee proceedings on the European Union (Withdrawal) Bill tomorrow. It is important that everybody recognises that it is possible for article 50 to be revoked. The Government should not contradict that, even though it may be Government policy not to revoke article 50. Following that statement in the other place, have you had notice, Mr Speaker, of whether a Minister will also come to clarify the matter in the House of Commons?

I am grateful to the hon. Gentleman for his point of order. In short, I have received no indication that any Minister intends to come to this House to make a statement on that matter. What I can say to the hon. Gentleman is that if an error is made in the other place, it can be corrected only in the other place. The requirement for correction does not span the two Houses. However, the hon. Gentleman is an eager beaver and if, as these matters are broached by Members in Committee, he wishes to leap to his feet with the athleticism for which he is renowned in all parts of the House to challenge a Minister to confirm the veracity of that correction, it is open to him to do so. Knowing the hon. Gentleman as I do, I feel sure that he will be in his place and ready to leap at the first opportunity.