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Student Loans: Muslim Students

Volume 769: debated on Thursday 3 March 2016


Asked by

To ask Her Majesty’s Government what help they provide to Muslim students whose religious beliefs prevent them from taking interest-charging student loans.

My Lords, the Government are aware that some students whose religious beliefs may prevent them from taking out a loan that bears interest may feel unable to take advantage of student loans. In April 2014, the Government conducted a consultation on a sharia-compliant alternative finance product for students. Upon review of consultation responses the Government supported the introduction of a takaful alternative finance product available to everyone. Work on this product is ongoing and, subject to Parliament, the Government hope to introduce the new system through legislation.

I asked the Minister the Question because the head teacher of the Preston Muslim Girls High School asked me the question and I could not answer it. I am not sure that the head teacher and his students will find much present comfort in the Minister’s reply. Every year that passes without a solution, thousands of Muslim students are disadvantaged. As she said, the Government identified the solution two years ago but still cannot say when it will be delivered. Will she agree to meet me so that we can discuss how to have a sharia-compliant system in place without further delay?

As I said, the Government did a consultation in 2014 and are continuing to work closely with experts in Islamic finance to develop the product but, at the moment, the Secretary of State does not have the power to just introduce it. We need primary legislation, which is why we are hoping and looking for a suitable opportunity to bring it forward.

My Lords, given that the student maintenance grants are now to be ended, this will be far more urgent because it means that a whole swathe of students will not have grants available to them. It really is not any good saying that the Government have been doing this for two and half years now; it has to be in place by the time the grants are withdrawn. Can we have that commitment from the Government?

As I said, we will be looking for a suitable vehicle with which to attempt to introduce the system. There is strong interest in it: of the consultation responses, 94% believed that there would be demand for such a system and 81% thought that the proposed scheme being developed was acceptable. We of course want to ensure access for all students to higher education, which is why we would be the first Government to introduce such a scheme, but we need primary legislation to do so.

My Lords, talking of the growing influence of sharia law in this country, is there any truth to the press reports that the Government have mortgaged Richmond House and other buildings with sharia bonds, which ban alcohol on those premises? If true, how would that affect the habits of Members of the House of Commons if they move into those premises during refurbishment of this Palace?

This proposed scheme has nothing to do with sharia law. It is about ensuring that all young people have access to university. We are very keen to try to ensure that we can provide a product that will help them to do so.

I am happy to. The takaful model will operate as a type of mutual fund. Students will apply for finance from the fund the same way that they would apply for an equivalent student loan and will enter a contract promising to repay a contribution. When they are earning above the repayment threshold, as with an equivalent student loan, they will make their contributions, which will be used to fund the education of future students. It is a type of mutual fund, which is why BIS cannot introduce it without primary legislation, as the Secretary of State does not have those powers.

My Lords, the Secretary of State does have the power to initiate legislation. I ask my noble friend to urge him to take the opportunity as soon as Parliament reassembles after State Opening to introduce a Bill—a small Bill—for the simple purpose of introducing this change, rather than waiting for some great wagon train to assemble for the next 18 months.

As I have said to noble Lords, the Government hope to introduce the system and will be looking at the appropriate legislative way to do so. As my noble friend says, the up-and-coming Session will be detailed in the Queen’s Speech in due course.

As I said, this model operates as a mutual fund so the contributions that a student pays go into that fund to be refunded. The idea of borrowing and paying back interest is absent from this model.

My Lords, could I follow up the comments of the noble Lord, Lord Elton, about the passivity of the Government on this issue? The Minister has said on several occasions that they were looking for a suitable vehicle, as if they were waiting for a bus to come round the corner. Can I underline the views that I think the whole House has on this issue? It would be a minor legislative tool but, in terms of the life chances of very many Muslim students, this change could make all the difference to whether they get a proper education or not.

I thank the noble Lord for his comments. The strength of the feeling in the House is quite clear, which I am sure will be noted by the Secretary of State.

My Lords, 45 years ago today the first British nuclear submarine reached the North Pole. It did that only courtesy of the engineers and their skills. In the interests of helping out on this, any Muslims who wish to join the Navy as engineers will get their courses paid for.

I thank the noble Lord for his comments and add my congratulations on this important occasion. As I said, we want to ensure that all young people who wish, and have the ability, to go to university have the access to do so. That is why we are looking forward on this and we would be the first Government to introduce such a product.

But, my Lords, those who do not want to go into the Navy could benefit from a simple one or two-clause Bill. I cannot for the life of me see why we are delaying on that.

I am sure that I shall see shrugs and groans, but I repeat that the Government understand the strength of feeling. We had an extremely high level of responses to the consultation and continue to work on developing this product. We are looking for a suitable vehicle by which to introduce it through primary legislation.

My Lords, would the Minister care to advise prospective students as to whether she envisages this provision being in place this autumn? Noble Lords have made reference to it coming after the Queen’s Speech. As we have not been given that date yet officially, it would be helpful for students to know how long they will have to wait.

As I said, we are looking for an appropriate time at which to do this and the forthcoming legislative programme will be detailed in due course in the Queen’s Speech.