Education Bill

Debate between Baroness Verma and Lord Knight of Weymouth

Tuesday 4th October 2011 Grand Committee

[Lord Knight of Weymouth]

Before the Minister stands up, perhaps I could try to be helpful. This is a key question. My understanding is that the only circumstance in which RPI is lower than CPI is when mortgage interest rates are falling and that is relatively unusual, although we have experienced a bit of that recently.

When the Chancellor made his announcement about making the shift from Rossi to CPI, he was honest enough to say that it was to save money—it would save £6 billion to the Exchequer. Would it not be easier for the Minister to have the same sort of honesty as her right honourable friend in the Government and say, “It’s to save money”?

[Baroness Verma]

I remind the noble Lord, as he was in Government, that they also used RPI as a measure. It is a commonly used measure. My right honourable friend the Chancellor, of course, is the Chancellor, and has to find all means of reducing the debt that unfortunately we inherited from noble Lords opposite.

We should remember that the changes to the rate of interest on student loans are part of a new student finance package that creates a progressive repayment system and is designed to protect lower earning graduates, as well as balancing the financial demands of universities with the interests of students and future graduates by delivering necessary savings without cutting the quality of higher education or student numbers.

Under the new system, students from lower income households will receive more support than they do now—I hope that that satisfies the noble Lord, Lord Foulkes—although many will pay back for longer than they do now. Their monthly repayments will be less than now, and the variable interest rate we propose will mean that they will also pay back less overall. If we accepted this amendment and capped the rate of interest that we could charge on student loans, we simply could not deliver this new system, nor would it create a suitable or worthy alternative. A cap would have little or no positive effect on borrowers who did not repay in full, nor would it afford greater financial protection.

This amendment would mean that higher earners would be charged a lower rate of interest than under the Government’s proposals. Higher earners would therefore benefit the most from this amendment, since the interest rate that they are now charged would reduce typically from RPI plus 3 per cent to RPI plus 2.2 per cent, while lower earners would not benefit at all as their interest rate would already be less than the Government’s cost of borrowing.

The system of student support would be much less progressive as a result. The Government remain committed to delivering a progressive system whereby those who benefit the most from higher education contribute the most. Would the noble Lord really favour a package that meant that the highest earners did not contribute to the cost of their higher education in net terms, or one that would inhibit our ability to protect lower earners?

--- Later in debate ---

[Baroness Verma]

No, the Deputy Prime Minister has not got it wrong; maybe the noble Lord has got it wrong. It is 40 per cent. This is why the threshold for repayment is being increased to £21,000 and why repayments will be taken at 9 per cent above that level. This, hopefully, will mean that individuals will repay less. There will be less opportunity for them not to pay their loans off because we have made it easier for them to repay their loans. The noble Lord makes faces. I am sorry that I am not satisfying him. But I think he will agree, when he reads Hansard tomorrow, that I am laying out a very clear, comprehensive way of making sure that we are protecting most those on the lowest incomes and giving them an easier way of repaying so that there will be less opportunity for them to default and hopefully more students, rather than fewer, repaying the loans that have been taken out.

[Lord Knight of Weymouth]

Before the Minister sits down, could she answer the question that I asked quite directly about whether it is a condition of being able to sell the Student Loans Company book that this arrangement around interest rates is applied?

[Baroness Verma]

I am sorry if the noble Lord did not hear my response. I thought I had answered his question, but I will answer it again. The Sale of Student Loans Act makes it clear that the borrower will not be affected by the sale. Their loans will be subject to the same terms as those that remain unsold.

[Lord Knight of Weymouth]

That is not the question. The question was: as part of the Government’s desire to be able to sell off the student loan book, is being able to shift to this more commercial arrangement around interest rates one of the conditions of being able to do so?

[Baroness Verma]

I suspect that my answer will not satisfy the noble Lord, because I am not satisfied with it either. However, I will read it out, then look at my civil servants to give me a better response at some point. Looking at the existing loan portfolio now, I do not think that we can give the response that the noble Lord wants.

Socioeconomic Equality Duty

Debate between Baroness Verma and Lord Knight of Weymouth

Thursday 18th November 2010 Lords Chamber

[Baroness Verma]

My Lords, I could not have put it better than my noble friend Lord Lester.

[Lord Knight of Weymouth]

My Lords, I was disappointed in the Minister's Statement. I remind her, given her response to my noble friend, that the previous Government lifted 500,000 children and close to a million pensioners out of poverty. Therefore, for her to claim that we did nothing about poverty is at best disingenuous—I say this despite the respect that I have for her.

The Minister mentioned the pupil premium. Perhaps she saw that yesterday in the other place the Liberal Democrat MP David Ward walked out when it became clear that the pupil premium will not give a per-pupil increase in real terms. It is a sham. She will have seen in yesterday's unemployment figures that the number of unemployed women went up by 31,000 while the number of unemployed men went down by 40,000. Does that not show that we need legal duties in place as safeguards to ensure that we continue to address inequality?

[Baroness Verma]

My Lords, I do not need to take lessons from the noble Lord. However, I will add that the gap between those who have and those who have not has widened—and it widened during 13 years of the noble Lord’s Government. The noble Lord highlighted the issue of legal duty. That is why we supported the Equality Act.