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Student Loan Book: Sale

Volume 647: debated on Thursday 11 October 2018

Just before I call the shadow Secretary of State to ask the urgent question, I should like to point out to the House that this is not the occasion for a general debate on the merits or demerits of student loan arrangements. This will be narrowly focused—with laser-like precision, I am sure—on the sale of the student loan book, and inquiries that pertain thereto will be orderly. We must not have what I would call a Second Reading-style debate. In any case, I do not intend to run this for longer than half an hour, and possibly for a shorter period than that.

(Urgent Question): To ask the Secretary of State for Education if he will make a statement on the sale of the student loan book?

I want to explain to the House the rationale for the sale of the student loan book and make some important points. The sale will categorically not result in private investors setting the terms or operating the collection of repayments. Loans in scope will continue to be serviced by Her Majesty’s Revenue and Customs and the Student Loans Company on the same basis as equivalent unsold loans. Investors will have no right to change any of the current loan arrangements or to directly contact borrowers. Furthermore, the Government’s policies on student finance and higher education are not being altered by the sale. These older loans, the borrowers of which benefited from lower tuition fees and lower interest rates, are not in the scope of the current review of post-18 education and funding.

The sale represents an opportunity for the Government to guarantee money up front today, rather than fluctuating and uncertain payments over a longer period. That will allow the Government to invest in other policies with greater economic and social returns. We will proceed with the sale only if market conditions remain favourable and if the final value-for-money assessment is positive.

I thank you, Mr Speaker, for granting this urgent question, and I thank the Minister for turning up today. It is a shame that the Secretary of State is too busy talking about Labour’s policies to come to this House to explain his own, because the Government last night snuck out a plan to sell another £4 billion of the student loan book, but they have once again told us nothing about their proposal. Will the Minister therefore tell us his Department’s valuation of the loans that it is planning to sell? What value does the Treasury’s Green Book place on them?

Does the Minister acknowledge that the National Audit Office found that his Department made a loss of £900 million on the previous student loan book sale and that £600 million in future income was lost? The sale was supposed to be subject to a so-called value-for-money test, so will he commit to publish the details of the test so that the House can scrutinise them? The Government have previously said that they will raise £12 billion by privatising student debt, so will the Minister tell us whether that is still their plan and state the total value of loans they are planning to sell? How was the figure of £12 billion reached?

Will the Minister confirm that when the sales go ahead the Government will lose a source of income for as long as 25 years in exchange for a one-off payment? Can he give us any justification for the policy of selling off an asset to flatter this Government’s terrible position on national debt? With nearly £1 billion lost in the previous sale, just how low would the sale price have to go before the Government decided that selling simply was not worth it? In short, how much public money do we have to lose before Education Ministers start learning their own lessons?

I object to the hon. Lady’s point that the loan sales plan was snuck out under the radar. The proposal was set out in a written ministerial statement for the House to see, which is obviously why the Opposition spokesperson is in a position to ask an urgent question today. Student loan sales in this country have happened over nearly two decades. This is not new, and it started with two sales of mortgage-style loans under the previous Labour Government in the late 1990s. It was that Labour Administration in 2008 that passed the enabling legislation for the current sales. As I have said, the sale will not affect borrowers, who will continue to deal with the Student Loans Company.

The National Audit Office did refer to the write-down of the loan book, but anybody who has studied accounting will know that the present value of a future income stream will be lower than the value if one waited 30 years. In capturing some of that money, the Government can invest in vital public services today, and that is the rationale for selling the student loan book—the previous Labour Government saw that rationale as well.

The sale will also be good for the taxpayer. Once people have been to university, it serves no public purpose to have the money tied up. The sale will release that money to invest in other priorities. On the valuation, the face value of the sale is £3.9 billion, but what we will do and how we will look to proceed will ultimately depend on market conditions.

What is the Minister’s range of estimates for how much money the sale might raise, and will he confirm to the House that any money raised will be reinvested in other public services?

My hon. Friend will be aware that money raised from student loan sales goes to the Treasury, which makes a decision about in which public services to invest that money. This ultimately means that the taxpayer gets some of the reward now, rather than having to wait for 25 years. We are working with professionals on the range of estimates and I am happy to share it with my hon. Friend when we have the answer.

This policy highlights the limitations of how this Government assess value for money and measure the cost of student loans over time. It prompts the question which Department has it right: the Department for Education or HM Treasury. This is clearly another example of the UK Government selling off assets for short-term capital gain. Will the Minister confirm how much of the student loan book he intends to sell off? What assurances can the UK Government give that the selling off of the remaining tranches of the student loan book will achieve long-term benefit for the taxpayers? And why are the UK Government devaluing assets and selling them off for less than they are actually worth?

The sale remains subject to market conditions and a value-for-money assessment, but I will not be taking lessons from the Scottish National party on student finance. The SNP has created a system that actively works against the disadvantaged in Scotland. We have a system that is funding our universities well and helping the disadvantaged.

I thank my hon. Friend for his answers. Can he give me and my constituents, either students or borrowers, an assurance that whoever buys this loan book will have no access to personal data and no contact or involvement in setting the rates for the loans?

The Minister must know that those in the financial services sector—the sort of people who buy these loan books—are the least trusted people in this country. Is it not a fact that there are hundreds of thousands, if not millions, of former students out there with some £50,000 of personal debt who are extremely worried about what will happen to the debt sold to these unscrupulous people?

The loans we currently have are income contingent and are collected through the tax system, so even when the loans are sold off, the new owner of the loans has no means or mechanism to contact the students or chase them for payment.

The Minister seems to be saying that he is selling off the student loan book to invest in the public services that his Government have slashed. Given that it is the end of austerity, should it not be possible to invest in those public services without privatising the financing of our higher education and the debt of so many students?

All the Government are doing is trying to capture an income stream that we will get over 25 to 30 years. This is money due to the Government and the Government are coming to a financial arrangement that allows the money to be captured today. As the last Labour Government saw fit, so this Government see fit, in a sensible and prudent way, to manage the Government finances.

How many accountants does the Minister know who would advise their clients to sell off an asset worth £3.5 billion for less than half that?

The final sale price will be determined by market conditions, but it makes a lot of sense in terms of the time and the value of money for the Government to capture those assets now.

Surely now, like at no other time, we should be educating our country as best we can for the future, particularly in view of the uncertain times ahead. Does the Secretary of State not agree that this House has the right to demand that all the money thus received is spent on education and only education?

I thank the hon. Gentleman for that promotion, but I am not the Secretary of State. If he is willing to lobby the Treasury on my behalf, I would be delighted if all this money were to be spent on education.

The value of these loans is raised by the extortionate interest rate being charged to ex-students—at 3% above the retail prices index, it is currently 6.1%, which is far higher than the rate for any other loan available on similar terms. Have the Government made an assessment of the impact of these loans and repayments on young people’s ability to find housing, buy a home and get a secure financial future?

These loans are earlier loans and not affected by the current interest rate policy. I make it absolutely clear that whoever buys the loans cannot alter the terms of the loan. The post-18 review is looking at interest rates on existing loans, as well as a number of other aspects of the student finance system.

Will the Minister elucidate how many students have yet to make any payments in terms of their loan obligations? What analysis have the Government made of why they have not yet made any payments?

The hon. Gentleman, an experienced parliamentarian, will know that we have an income-contingent loan system. The repayment threshold has recently been raised from £21,000 to £25,000, thereby benefiting students to the tune of £300 a year. Deliberately designed into the system is a subsidy from the Government; we understand that 45% of students will not pay back the loans in full—that is the subsidy that goes into the loan system. The system means that no one is barred from going to university as a result of their personal financial circumstances.

One benefit of being elected to this place last year was that I was able to pay off my student loan much quicker than I expected. As the Minister will be aware, it was arrested from my wages directly, in the same way as national insurance contributions and income tax. So why on earth would the Government sell off future revenue sources such as student loans, given that they would not dream of doing it for national insurance or income tax? This is absurd.

The repayments are collected through the tax system, and that does not change at all. All that changes is that the benefits of the future income stream now accrue to someone else. That is done not only by Governments around the world, but by businesses. It is a simple fact that if we can capture the value of an uncertain income stream today at a reasonable price, it makes sense to do so.

I caught just the tail end of that question. If I understood it correctly, my hon. Friend was asking about the process and the decision making in the past. We have been dealing with this for two decades in this place; under the last Labour Government there were mortgage-style loans, where loans were sold to private investors, who could contact students directly and chase them for the money. That has now changed under this system.

Will the Minister tell the House at what level the Department is currently assessing the resource accounting and budgeting charge? Will he share his consideration of the Office for National Statistics review of the treatment of unrepayable debt on the Government books?

The RAB charge was at about 35%, but as a result of raising the repayment threshold from £21,000 to £25,000, which in essence makes the loan system more generous, it now stands at 45%. The hon. Gentleman is right to ask about the ONS reclassification of the student loan book, but that is an exercise the ONS is going through and we have yet to hear what its recommendations are. When we find out what those recommendations are, both the Department and the post-18 review will look at them and take the appropriate action.

It is very good of the Minister for Security and Economic Crime to drop in on us; he is just in time for the next urgent question and we are greatly obliged to him, but I note that the shadow Minister is not yet present, which is mildly disappointing. It was disappointing that the Minister left it as late as he did, but there is obviously not always very good communication between Whips Offices and ministerial offices. We should now proceed with the urgent question, because the hon. Member for Rhondda (Chris Bryant) is present, although if people wish to raise points of order, I might be tolerant of them. There appears to be no great appetite for points of order at this time—

On a point of order, Mr Speaker. As a new Member of the House, although I have managed to get on to the Front Bench, I was wondering whether you could guide me on what happens under these circumstances. Am I able to assist Mr Speaker in his dilemma?

Well, I thought it would be useful if the Opposition spokesman were here, but there is no formal requirement for that person to be present, because the question is of course to the Minister, so as long as a Minister is present, that suffices. What happens otherwise is one or other of two things: either a very helpful Member—perhaps even a shadow Secretary of State—pops up at the Dispatch Box to raise a very worthy point of order, which I take my time in responding to, or alternatively it is necessary for there to be a temporary suspension of the sitting. That would be if a Minister were not present, but the Minister is present—

Only just. He should not be too proud of the fact that he is present, because he is only just on time, but at least he is here. The hon. Member for Ashton-under-Lyne (Angela Rayner) has helped our proceedings, for which we are grateful, and we can now proceed. The shadow Minister, the hon. Member for Manchester, Gorton (Afzal Khan), will no doubt get here as soon as he can and take up his place on the Opposition Front Bench.