Student Loans Company
Lord Mendelsohn
To ask Her Majesty's Government what is their assessment of the governance, operations and performance of the Student Loans Company.
Lord Mendelsohn (Lab)
My Lords, I am very grateful for the opportunity to debate the governance, operations and performance of the Student Loans Company. I am also very grateful to colleagues for taking part and to the Library for producing an excellent briefing note. I hope that the Minister will take this contribution in the spirit in which it is intended—as a gentle chiding and not as a call for full disclosure of every answer from the Dispatch Box. I also hope that he will accept that some other issues have been raised with me in relation to the Student Loans Company which are not for this debate. I will write to him separately on those.
I have always had a feeling that the Government—all Governments—have been great at announcing business but not always as good at delivery. Most often, political and other pressures have delayed the correct evaluation of what is and is not working, as well as the ability to be open and flexible enough to find a better solution. Inevitably that leads to cost and to some degree of failure to achieve as much as we should, but often it means very real detriment.
In my view, some of the losers from that have been the many great, talented and committed public servants and those brought into public service or contracted to be part of the effort. They are not given enough of something—be it attention, authority, funding, independence or scope for change—that could make a real difference, and those are the people who know what a real difference they could make and how they could reach their potential. I introduced this debate to highlight these issues in relation to the Student Loans Company, in a sense making it the example.
The Student Loans Company is a significant organisation, administering over £118 billion in loans to over 8 million students and graduates. It has a size and complexity akin to a retail bank, with a loan book that continues to grow significantly each year. This is a very complex business and the company and its staff do not have an easy job. In highlighting some of these issues, I do not wish to talk down the company or underplay the challenges or even the new threats that it faces—the Student Loans Company was subject to 1 million cyberattacks last year alone.
The SLC is not without achievements. It was, I believe, the first government agency to achieve Government Digital Service accreditation for two of its services. Indeed, I wish the new chief executive, Paula Sussex, every success in that role. However, around five years ago it was clear that not only did it have profound operational difficulties but it was not really fit for purpose for the future. McKinsey was brought in to make an evaluation and made clear its obvious weaknesses. There were fundamental problems in its governance model. The main issue was identified as the Government’s tight control of decision-making, which introduced delay and risks. Improvements were sought not just at the departmental level but at the levels of the steering board and the main board and in the strength of the main board to operate. I believe—perhaps the Minister will confirm this—that at that time it was even floated that an alternative governance model which would make it more independent could be considered. Has that ever been addressed following the evaluation?
McKinsey identified problems in the repayments strategy. The focus on reducing leakage meant that the SLC was not focusing on delivering an overall recovery plan; nor was it able fully to communicate with government on the true state of repayments, the economic life choices of graduates, how to deal effectively with the loan book, the true level of government expenditure and the level of national debt. It uncovered that the commissioning process—that is, how you deliver the Government’s policy announcements and adjustments—increased costs and caused delivery problems and complexity. The report also suggested that bringing the Student Loans Company earlier into the design policy could address many of those problems.
It also highlighted the need to transform the organisation’s morale and overall health, and the governance and commissioning processes were seen as a critical factor in that. It also highlighted other obvious weaknesses in the IT capabilities and noted significant gaps. In many ways, those related to a mismatch of the talent that could be recruited because of the company’s low compensation compared with that of the financial institutions with which, in size and significance, it was competing. The problems of morale, health and governance were also hurdles for candidates to overcome.
Beyond the review, many other familiar problems dogged the company. There was the reluctance of some parts of government to work fully with the SLC. For example, the fact that HMRC, despite receiving payroll data every month, would share that data only on an annual basis was not exactly encouraging and not entirely helpful. There was a lack of available funds to make some of the improvements properly and an allocation process that did not allow for long-term planning. There was a commitment to try to transform this with the appointment of a new chief executive, but unfortunately that change and some of the divisions and conflicts within the operations of government and the governance structure mean that we are not very far from where we were then. In fact, the evidence given by the chairman and chief executive to the Commons Education Select Committee showed that all these issues remained, with the exception of governance. However, the answer to governance was not the changes identified in the report.
It is a matter of public record that during this time the conflicts between the many layers of government—Ministers, officials, senior staff at the SLC and the new external appointments—meant that there were challenges around the fears that people had about the breadth of the transformation plan and how it was delivered, the process of the review and some of the suggested solutions. As with many issues familiar to this House, people will understand that some of these issues were smoothed over and the reviews and outcomes have not fully brought things to light.
Tensions broke out into the open and manifested themselves most seriously in the case of Steve Lamey, who was recruited to be the new chief executive of the Student Loans Company in June 2016 and dismissed in November 2017. He seemed well qualified with his background in industry; he had been with HMRC for eight years and had been involved in many transformation projects in IT, serving both the private and public sectors. One of the most eminent recruitment firms and an excellent selection panel selected him as the only eminently qualified candidate. This does not seem to have been a flaw but rather an illustration of the high bar they established.
In fact, Sir Paul Jenkins’ review noted that Mr Lamey’s annual appraisal while at the Student Loans Company had reported “an excellent first 10 months”, and that he had “re-energised the business” and demonstrated “sound and effective” leadership qualities. In the next two months, as the question of redundancies and implementing change took place, it all went wrong. I do not want to rake over every detail, and this Chamber is not the best place to do so, but this event and the subsequent discussions made me consider that something more was amiss.
My concern is not in any way to dismiss the claims made or their seriousness, nor to cast aspersions on those who were involved or who dealt with the adjudication. But I believe there are many clear flaws in the substance and manner of how all the issues were addressed. Fundamentally, it appears that, yet again, an outsider was outmanoeuvred in office and organisational politics, and that processes for questions that he should indeed have addressed did not seem to be handled proportionately or fairly. I wish there was some way in which what appears to have been an injustice to Steve Lamey could be rectified and the matter dealt with properly and independently. I hope so, but I do not expect so.
While this particular drama became the overall narrative, it meant that such fundamental issues, confirmed and expanded by McKinsey, and evident not only in its review but in other evaluations, have not been addressed with either the pace or commitment needed to get to the heart of the matter and empower the SLC to do the job it needs to do. Today, we have continuing problems of weakness in the retention of clerical staff and high sickness absence, as well as unsettling business practices which, unfortunately, continue to be unearthed.
It was no surprise that, in 2017, the National Audit Office judged that there was enough concern with the SLC to warrant an investigation into its oversight by the Department for Education. Its report highlighted a catalogue of shortcomings. In 2017, the DfE told the National Audit Office that it would be reviewing the governance, structure and operating model, with a first phase concluding by June 2018—and many other aspects to be included in the review. I would be grateful if the Minister could give some indication about that process—its different phases and timings, and its conclusions.
The Student Loans Company has not been able to get into a transformation process that deals adequately with its customers. This does not just cause difficulties in its operations, or with the challenges that we have. It shows a constant approach of underplaying some of the problems associated with the overall policy. I am not charging the Student Loans Company with this problem, but it manifests itself in the operation of loan sales and the accounting of loan numbers.
The Student Loans Company plays an important role in enabling the Government to package and sell their loans. We have had tremendous problems. We are selling loans at levels far below their value: £3.5 billion worth of loans for £1.7 billion, meaning a write-off of £1.8 billion. As the noble Lord, Lord Forsyth, has shown in the excellent report of the Economic Affairs Committee, we will underplay with the £12 billion sale a cost of £28.1 billion. The Government make the case that this might not be the value over time, but issue 1 of the prospectus for the Student Loans Company includes a calculation that demonstrates, in my view, that the Government’s argument is entirely flawed. Moreover, the fact that we will not be able to recover a likely 60% of student debt—and not appreciating that, for example, 60% of graduates take some form of career break—means that we are placing a huge bet on something that will not come off. The ONS has uncovered this and by the end of the year, we hope that we will see how things will change.
I hope this debate will give us a chance to chivvy the Government—to think about the importance of policy and delivery, understand the importance of reflection and challenge, and be open to being more open about how they are dealing with policy and how that might need to change. When Ministers are comfortable with being challenged, the system should not act to protect them from themselves. It will gain great credit, as companies and local authorities do, for being able to adapt when it gets things wrong, or goes wrong.
We should strive for excellence in our delivery of every policy and always be customer-focused, willing to have effective performance reviews and a degree of independence. This will allow our talented and able Civil Service to thrive. Finally, as we look forward to the Augar review, I hope that the Government might add a little to it, even at this late stage, to include a better assessment of how the policy could work and to design a delivery mechanism that the Student Loans Company could operate and which has the proper interests of its stated objectives in mind: namely, students, higher education and the strength of the UK.
Baroness Garden of Frognal (LD)
My Lords, I thank the noble Lord, Lord Mendelsohn, for introducing this debate on the Student Loans Company, a company which has had more than its fair share of problems. It has had four CEOs within a matter of months. As we have heard, Steve Lamey was suspended and his contract terminated. He was followed by interim CEO David Wallace; then the veteran Peter Lauener took over, also as interim CEO. Finally, in September 2018, Paula Sussex was appointed to this role. To lose one CEO seems careless, but to have four within such a short period smacks of a real disquiet.
The job of the SLC, as we know, is to manage money, pay maintenance grants and loans to learners, and pay grants to HE and FE providers. As the noble Lord has said, this is a complex business, and it appears to be a challenge too far. We know that Mr Lamey was appointed in spite of reservations, apparently on the advice of one of the Minister’s special advisers, and he was appointed with an extended probationary period. But then, on 7 November 2017, he was sacked without pay for gross misconduct in public office. Criticisms were made of his leadership and management style, and various other allegations were made which might have been foreseen. Was an injustice done to Steve Lamey?
The Student Loans Company has been plagued by a series of executive scandals. In 2009, two senior executives resigned after the company failed to cope with more than 1 million applications for loans, after taking over responsibility for loans from the local authorities. In 2010, the then CEO Ralph Seymour-Jackson resigned over thousands of late and failed repayments that left undergraduates without cash and universities having to resort to distributing emergency funds. In 2013, the then CEO Ed Lester resigned after he avoided tax by getting his salary paid through a private company. In 2014, the former chair of the company offered their resignation after the SLC used letters from a fictitious debt collection company to threaten legal action against graduates who had missed repayments. Regulators forced the company to change the wording of the letters. It is a short and unhappy life leading the SLC.
The student loan repayment process has been widely criticised. In 2016-17, 85,000 graduates paid off more than they owed and 40 people overpaid by more than £10,000. The Student Loans Company now recommends that graduates transfer to paying their student loan contributions by direct debit in the final two years to avoid overpayments, but only 34% of eligible graduates do this. However, HMRC and the Student Loans Company have now developed a protocol that allows them to exchange data weekly rather than annually, and hopefully this will prevent overpayments.
Interest on student loans is linked to inflation and is capped at 3% above RPI inflation for the highest earners. By contrast, the Bank of England base rate is 0.75%. This should certainly be reviewed. It seems outrageous that students are expected to pay interest at rates so much higher than other people’s. In March 2017, outstanding student loan debt exceeded £100 billion for the first time, which is more than double the outstanding debt from five years ago. Should we be worried about this?
The Education Select Committee has criticised how the Student Loans Company assesses the eligibility of “estranged students”—those who are no longer in regular contact with their parents—for student finance. The National Union of Students has evidence that the Student Loans Company is trawling through the public social media posts of these students to identify conversations between them and their parents.
The Student Loans Company’s new chief executive says that governance is improving—it could hardly get worse. However, as of October 2018, the new chief executive had not met a government Minister. Ministers are supposed to meet the chief executive at least twice a year. Could the Minister say whether such meetings have now taken place?
All of this makes me really nostalgic for the much-maligned Liberal Democrat policy of no fees. Think of all the money spent on the Student Loans Company that would have been saved—money spent on its administration and chasing students, rightly or wrongly, for payments—and the fact that over half of students will not repay the loans, so the Government will be paying anyway. How wonderfully simple it would have been, and arguably more economic, to have adopted our fully costed policy in 2010. Alas, it was not to be and the moment has now passed, but can the Minister say what the actual costs of the student loans are?
The Liberal Democrats would reverse Conservative cuts to higher education so that it remains open and outward-looking and promotes opportunity for all. We would also reinstate maintenance grants for the poorest students, ensuring that disadvantaged young people do not have the highest loans to repay. We would argue for the reinstatement of nurses’ bursaries, recognising the urgent need to address the crisis in NHS recruitment and retention. We would lower the cap on interest rates so that it better reflects the cost to government of administering the loans and establish a review of higher education finance in the next Parliament to consider any necessary reforms. This would include the option of a graduate tax, in light of the latest evidence on the impact of HE finance on access, participation and quality.
We all wonder what the long-awaited Augar review will say. We need a better assessment of how the policy would work and its impacts, and to design one which has the proper interests of its stated objectives in mind: namely, students, higher education and the strength of the UK.
I have just come from being awarded a fellowship by Birkbeck. What are the Government doing to restore faith in adult and lifelong learning and how can the loans company contribute in a positive way to this essential part of education?
The Student Loans Company was branded the worst place to work at one stage, with severe discontent among employees. However, last month, it celebrated obtaining silver-standard accreditation status from Investors in People for its ongoing commitment to supporting, developing and empowering its staff, so maybe things are looking up. Last year, the then Minister Sam Gyimah ordered a review of the SLC. I can find no evidence of this review. Am I not looking in the right place? Can the Minister say what has happened to that review?
We hear that in the five years to 2023, the amount lent to students is expected to grow by almost £5 billion, partly due to the increase in maintenance loans following the ending of grants. Do the Government have any plans to reinstate grants? We know that, particularly for adult learners, the prospect of debt is a considerable deterrent to learning, yet the country needs all the adult learners we can encourage if skills gaps are to be filled. It is important that FE is funded and supported, just like HE.
There are questions aplenty to answer over this beleaguered company, and we look forward with interest to the Minister’s reply.
Lord Stevenson of Balmacara (Lab)
My Lords, this is a very quick-fire debate. It covers a lot of ground, but I am afraid we are all coming from roughly the same position, so I will try not to elaborate too much on points already made. There is, however, a real need for the Minister to give serious answers to some of the questions raised.
There seem to be three main issues in play here. The question of whether an injustice has been done to the former chief executive of the SLC is part of a wider package of concerns about the overall function and performance of this body. As my noble friend Lord Mendelsohn says, it is sadly not an uncommon story in bodies spun out from previously internally organised functions: when they become independent and have to negotiate their own commercial and policy paths, tensions that were perhaps hidden in the department or under a departmental heading become more exposed. There will be issues that are very familiar to this House from our various discussions about the performance of bodies established to deliver services over that period.
However, as the noble Baroness, Lady Garden, just said, the catalogue of activity and problems in the SLC that she read out would be hard to imagine, let alone recognise as a reality. The constant year-on-year mistakes, errors and judgments that have proved not to be correct and financially impact on individual students might not be large in number, but it would be devastating if every single one hit them. When they did not receive the funding they were promised, or were overcharged in their repayments, they felt betrayed by the system they had put their trust into. They, their parents and others involved in the process of the decision to go to university, very often for the first time in a family, get squashed in the incompetency perpetrated on them through the system. It does not seem right.
I hope the answer to the question the noble Baroness asked about the announced review into the SLC, which seems to have disappeared, can be revealed. When it was announced, my colleague in another place, Gordon Marsden, said that the dismal track record and the problems ventilated about the individual staff do not seem to limit the possible scope of the review to just the SLC. It also needs to have some concern for ministerial oversight and internal governance. Can the Minister confirm that that will be included in the discussion?
The overall list of errors and misjudgments relating to the SLC, which, as I said, affect individuals, also have a cost in terms of the taxpayer’s potential returns. Will he also confirm that some effort will be given to providing information about the totality of the costs involved in that arrangement and the evidence behind it? Will he also confirm that the Commons Public Accounts Committee, which has fiercely criticised the Government for selling off part of the loan book—a point I shall come back to—will also receive a full response so that it can continue to monitor the work that has been going on?
The second point is about the current system of student loans: what is it? What is actually happening on the ground here? The two elements about that both concern the ridiculously small amount of money raised by the previous sale. The Government raised about £1.7 billion, according to the NAO, in a sale of the student loans of more than 400,000 borrowers that became eligible for repayment between 2002 and 2006, but the outstanding face value is £3.5 billion. This was picked up by both previous speakers and is the subject of a separate report.
The points that have not been raised and which need to be added to the list of matters that I hope the noble Viscount will respond to are those raised by the NAO later in its findings. They are not specifically about the amounts but about the impact. The Government have, in essence, been selling,
“an uncertain stream of future repayments”,
in return for “a lump sum”. That is not an uncommon commercial activity, but the NAO continues:
“If government chooses to change repayment terms in future or makes specific mistakes in administering the loans it will need to compensate investors”.
There is a hidden additional cost. Will the Minister confirm that? If so, will he give some indication of what the provisional amount of money set aside to cover it is?
The second point, which is more of a policy issue than a practical one, is that that sale is about reducing a headline figure of the amount of public debt. We understand the motivation behind that. Generating £1.7 billion is, of course, not an inconsiderable amount of money and I am not trying to argue against it, but simply reducing headline debt as a measure of public sector net debt does not take into account, the NAO says,
“the loss of future receipts from student loan repayments”,
which could in fact go up, because, as the noble Baroness said, this is based on a figure related to RPI—very unfairly, because RPI is a measure no longer used in any other part of government that I am aware of. It should be more directly related to CPI. It is a rather high rate of return. If the judgment is made only on the cash taken, are the Government not also in danger of losing out on future receipts from increases that they might have had from 3% plus RPI? Again, can the Minister confirm that and give us an estimate of what the provisional figure of loss is in that scenario?
Moving on to the broader questions raised by both previous speakers on what the scheme is actually doing, the Minister is well aware of my long-held view that this is the wrong system for financing. I would not go as far as the Liberal Democrats by having free provision—although that is an attractive prospect in terms of the savings and the organisational structures, which are rarely costed in. The Labour Party’s previous policy was for a co-payment system. We accept that this is probably the right solution, but the balance is completely wrong. The idea that in some senses it continues to be a market economy in which the student is able to pick and mix between the various options available from the courses and the various institutions is simply a fiction.
We hope that the Augar review, when looking at this, takes into account the broader question of what the system is best able to do. It seems to have been delayed yet again, but when it does report, I very much hope it takes into account the idea that there should be a mixed economy operating in higher education, and that there should be some payment from the benefits that will come directly to the individual undertaking the course, which must be proportionate to the overall cost to the system.
Secondly, and most importantly, unless the Government have some control over the system, through grants and aid to institutions, there is a real danger that the Secretary of State will not have the political power to manage and organise the structure in the most efficient way, which must be against the public good. In that situation, one hopes very much that the figures which have been bouncing around—reducing the maximum fee from £9,000 to nearer £6,000—have some merit. Presumably they would not have leaked if there was not some serious work being done on that. What is needed—I hope the Minister will take this away and think about it—is a much broader and deeper understanding of what the system should be, to maximise the benefit not just to individual students but to the economy as a whole. By holding control through payment, the present structure is too focused on regulation and not focused enough on growth and support of the sector. We need to think of how best to allow the higher education system to realise the good ambitions of the industrial strategy, and the need it poses for high-quality graduates and postgraduates to come out of a system that has some alignment to the broad economic goals of the UK. Without that, I do not see how the system can operate.
Thirdly, we have seen the Government preside over a situation in which part-time higher education has collapsed and is no longer a viable and important part of our higher education system. This is a tragedy. The noble Baroness made all the points that I would have made on this. The figures are absolutely astonishing. A 54% reduction in part-time students from a peak of almost 590,000 in 2008-09 is disastrous. There have to be multiple routes for individuals who wish to pursue higher education that fit their circumstances and the way they plan their lives. For years, almost for decades, this country has been at the forefront in providing that sort of mixed economy: those who want to go straight from school to university can do so; those who wish to take time out and earn a little or do something else and then go to university can do so; those who want to learn while they earn can do so. However, that is no longer the case. Major institutions such as the Open University are facing bankruptcy simply because of a perverse, market-orientated philosophy that requires students wanting to better themselves to take out additional grants at the most inappropriate time in their lives—when they are trying to save for a mortgage or educate and support their children. It is just bonkers. I hope very much that, within the overall scheme of policy-making, my points can be taken on board, but the most important is this one—about part-time students.
Viscount Younger of Leckie (Con)
My Lords, I am very pleased to respond to this Question for Short Debate. Very short it certainly has been, but with three weighty speeches—so far. I thank the noble Lord, Lord Mendelsohn, for raising this important issue.
This is a good opportunity to reiterate the raison d’être of the Student Loans Company and to look at its challenges, but also to touch on those aspects that we feel are going well. However, let me be clear that the SLC and the Government recognise that it will need to continue to change and improve, not least in the area of digital interaction with its customers, so that it is prepared not just for the next academic year but, looking ahead, for five or 10 years. In a way, this may turn out to be a rather lordly SWOT analysis of the SLC.
Let me take a step back and remind the House of the background of the SLC. To some extent the noble Lord, Lord Mendelsohn, has stolen some of my speech. There have been huge changes in the scale of the operations of the SLC since it was set up in 1989. In its first full year of operation in 1990-91, the SLC had 82 staff. Today, it has more than 3,000 staff, based across three sites in Glasgow, Darlington and Llandudno Junction. In 1990-91, it had only one product: a UK-wide mortgage-style maintenance loan, with an average loan-per-student value of just £390. Today, it offers its customers a range of 25 student finance products, customised to their needs. In 1990-91, it paid out loans to 180,000 customers. By 2017-18, that had increased tenfold as it paid loans and grants to 1,800,000 customers. The cumulative effect of these changes means that the SLC is now the equivalent size and complexity of a medium-sized retail bank, as the noble Lord, Lord Mendelsohn, said. It receives more than 6 million telephone calls every year.
The SLC is continually evolving and improving, as indeed it should, and continues to deliver good and valued service to its more than 8 million customers, 96% of whom are based in the UK. Since the 2011-12 financial year, the SLC has seen its customer base increase by 62% and the value of its loan book increase by 158%. The SLC has also continued to deliver new student finance products for its shareholders; by its shareholders I mean taxpayers, administered by the Governments of England, Scotland and Wales and of course the Administration, pro tem, of Northern Ireland.
These new products have, for example, allowed students to access funding for postgraduate study. They have allowed part-time students to access maintenance loans, reflecting the importance the Government place on part-time study. We are reminded once again of the 50th anniversary of the Open University this year. From this year, students will also be able to apply to access funding for new, two-year accelerated degree courses. This goes a little way to help with our promotion of lifelong learning, which was quite rightly raised by the noble Baroness, Lady Garden. The SLC has played a part in allowing young people from disadvantaged backgrounds to access funding to allow them to fulfil their potential. By 2018, 18 year-olds from disadvantaged backgrounds were, proportionally, 52% more likely to enter full-time higher education than in 2009. This must be a good thing.
We believe that the SLC continues to make good progress in delivering its core functions. For example, in 2017-18, it assessed 95.6% of the applications it received for full-time undergraduate study within 20 working days and 99% of them within 30 working days. This was up from 85.6% and 94% respectively in 2011-12. In 2017-18, customer satisfaction for those applying to the SLC was 84.1%, which was up from 70.5% in 2010-11. That is a much improved rate but we and the SLC believe that there is still room for improvement.
Let me now delve into the detail of the governance and operation of the SLC. Importantly, this is at a time when a number of reforms are under way in our higher and further education sectors. Notably, there is a review of post-18 education and funding, which your Lordships have heard me reference on numerous occasions over the past year, and which the Government intend to conclude later this year. This was raised by not only the noble Lord, Lord Stevenson, but the noble Baroness, Lady Garden, and I listened with some interest and care as it allowed them to expound their own policies. That will of course be on the record in Hansard.
The Office for National Statistics review of the classification of the student loan book, with which my noble friend Lord Forsyth and the Economic Affairs Committee that he so ably chairs are most familiar, will alter the way in which student loans are recorded in the national accounts. The noble Baroness, Lady Garden, and the noble Lord, Lord Stevenson, raised the question of RPI and its use. We will consider the interest rates and appropriate use of RPI as part of the Augar review. However, I can assure the House, as I have done previously, that this important change will not affect students and that the SLC stands ready to communicate that message to its customers.
The Government and the devolved Administrations are responsible for the governance and operation of the SLC, which is ultimately accountable to Parliament. The noble Lord, Lord Mendelsohn, talked about the profound operational issues identified by McKinsey five years ago. He also asked for an update on the transformation programme. It is an important point. The Government seriously and thoroughly considered McKinsey’s report, which was made to the then Department for Business, Innovation and Skills. The SLC and the DfE have actively learned the lessons from that report and continue to strengthen and improve the SLC’s governance and performance. I shall give your Lordships an update on the ongoing transformation later on.
The Department for Education is working closely with the SLC to ensure that its governance is robust to deal with the challenges it faces. That is in three specific ways. First, as I announced to the House by way of a Written Statement on 21 November 2018, the Department for Education is currently undertaking an in-depth tailored review of the SLC. The noble Baroness, Lady Garden, and the noble Lord, Lord Stevenson, asked about that. It is a wide-ranging review that the Cabinet Office requires departments to undertake of all their public bodies at least once in the lifetime of a Parliament, and is assessing the governance and control arrangements in place at the SLC to ensure that they are compliant with the recognised principles of good corporate governance and delivering best value for money. The structure, efficiency and effectiveness of the SLC will also be considered.
The noble Lord, Lord Mendelsohn, and the noble Baroness, Lady Garden, spoke about the departure of Steve Lamey. I do not want to say too much about that—that probably echoes the views of the noble Lord—but the NAO undertook a thorough investigation of the DfE’s oversight of the SLC shortly after Steve Lamey was dismissed by it, which goes back to November 2017—some time ago now. That report sets out clearly that Steve Lamey was dismissed by the SLC and that due process was followed by the SLC and the DfE. We are clear that we expect the highest standards of management and leadership consistent with those required for individuals in public life, as set out by the Nolan principles.
Lord Stevenson of Balmacara
Tailored reviews are routine, regular and periodic, as the Minister said, and are required by the Cabinet Office for all bodies in scope. Is he implying that this is just an ordinary review, or does it have the hallmarks of the points made by my noble friend Lord Mendelsohn and the noble Baroness, Lady Garden, about the need to pick up the particular train of events that led to the concerns being raised?
I had in my notes to say at the beginning, but I may not have said it—so I am repeating it in case that is so—that I have a son who is in receipt of a loan from the SLC and is currently repaying it.
Viscount Younger of Leckie
I think that I can answer the noble Lord’s first point by saying that it is a regular review, but I have no doubt that it will take account of the issues that have cropped up in recent years—I would be very surprised if that was not the case. If it is not the case, I shall certainly write to the noble Lord and clarify that.
The noble Lord, Lord Mendelsohn, spoke about governance shortfalls. As he will know, the SLC is a wholly government-owned company overseen by a board which currently consists of a non-executive chair, five non-executive directors, the chief executive, the deputy chief executive, the CFO and the company secretary. The board ensures that effective corporate governance arrangements are in place and provides assurance on risk management and internal control. There is a little more that I could say but, due to lack of time, I just want to make it clear that these structural arrangements are in place.
However, there is more to it than that, because the Government are confident that the SLC now has a leadership team in place that is equipped for the challenges ahead, under the able leadership of Paula Sussex, whom the noble Lord mentioned. Paula and her team, in conjunction with the DfE, have now begun to implement a wide-ranging, multi-year, multi-million-pound transformation programme. This will transform the way the SLC interacts with its customers, digitising processes and ensuring that the SLC communicates with its users in a way that is familiar to them—online, real-time and available 24/7.
Lord Mendelsohn
Just to clarify, is that the transformation programme that has operated for the last couple of years, the one that Steve Lamey was responsible for?
Viscount Younger of Leckie
I know that Steve Lamey has been involved in it, so the answer is yes, but it has been taken forward from the work that he has done.
The noble Baroness, Lady Garden, asked whether the new CEO had met Ministers, and I confirm that the Universities Minister met the CEO fairly recently in Glasgow.
I will move on to processes. The SLC is looking to remove inefficient manual processes that drive the small number of complaints it currently receives. The number of complaints is very small indeed: fewer than three complaints per 10,000 applicants and around one complaint per 10,000 loan repayers. Although the number of complaints is low, the SLC is seeking to reduce this further.
Time is running short and I have quite a lot more to say. We believe that the transformation programme has delivered real benefits already to the SLC’s workforce. The noble Lord, Lord Mendelsohn, mentioned pay. Recognising, as he did, the major constraining factor of recruitment and retention, which impacts on achieving even better performance from the SLC, 1,600 of the lowest-paid staff have just been awarded an in-year pay increase of up to 8%. I hope that that will address some of the recruitment problems and improve staff retention rates.
As I mentioned earlier, we are strengthening the SLC’s board through the appointment of non-executive directors with financial and public sector experience, which will also help. We will launch a fair and open campaign to recruit a new chair during the next few weeks, ensuring that the excellent work done by the incumbent, Chris Brodie, is continued when his final term of office ends in January 2020. I will write to the noble Lord, Lord Mendelsohn, about the loan book, giving him some details that I have. Bearing the late hour in mind, I will write to all three noble Lords who spoke to respond to any questions I have not answered. I thank the noble Lord, Lord Mendelsohn, once again, for securing this important debate and I hope he feels we have explored the subject. As I said earlier, there is more to do to be sure that the SLC is in very good shape and well prepared for the future.