Technical and Further Education Bill

Debate between Lord Aberdare and Baroness Watkins of Tavistock

Report stage (Hansard): House of Lords
Monday 27th March 2017 Lords Chamber

[Baroness Watkins of Tavistock (CB)]

My Lords, I support Amendment 16, to which I have added my name. It is very clear that many young people who take out government-backed loans believe that they give a quality indication to the provider, to which they then enrol to study. It seems extremely unfair that, in the event of such a provider becoming unable to continue, they would go to the back of the queue for the repayment of their loan.

When meeting the Bill team, who have been extremely helpful, we heard evidence that everybody tries to find an alternative provider so that the student can complete their programme, and that is clearly the most desirable outcome. The most undesirable outcome is if a student is unable to complete the programme and is left with debt, even if that debt does not have to be repaid immediately. Our amendment is intended to protect students in such circumstances so that their loan is repaid by a provider if they cannot find an alternative provider with which to complete their course.

We want to encourage people to undertake this kind of technical education, and I commend the Government on their Bill because it will encourage young people to do far more local-based technical education and should get both young and more mature people into work, which, after all, is the overall aim of the Bill. Therefore, I hope that the Minister will be in a position to take this matter away and to come back with something at Third Reading that will protect students in the future.

[Lord Aberdare (CB)]

My Lords, I too will speak mainly on Amendment 16, spoken to by my noble friend Lady Wolf, although I regret that I am not able to support it, so I hope that that is not the end of a beautiful noble friendship.

I am concerned that Amendment 16 would make it harder for independent training providers, which provide a significant proportion of the technical education we so desperately need, to compete on fair terms with FE colleges. I should perhaps declare an interest as having been an independent training provider in the distant past.

The effect of the amendment as worded would be to increase the price of such courses offered by commercial and charitable contract-funded providers in order to cover the cost of underwriting the loans made to students with an external financial institution. This would mean that the cost incurred by the vast majority of loan recipients, who will not suffer curtailment of their studies due to insolvency, would increase, even if only by a relatively small percentage. It might also discourage high-quality independent providers from offering loan-funded courses, not just because of the extra cost but because of the extra administration and bureaucracy involved, thereby limiting the range of options available to learners and, as the noble Baroness, Lady Cohen, said, providing a barrier to entry for potential new providers.

The amendment would not apply to FE colleges and other bodies covered by the insolvency regime being created by the Bill, so learners at FE colleges, which might be at least as likely to fail, would be protected by a special insolvency regime without any extra cost.

FE college loan-funded courses already have the additional benefit of being exempt from VAT, so most independent providers are already likely to face a 20% cost disadvantage. Apart from that, the cost and complexity of setting up the sorts of schemes proposed in Amendments 14 and 16 seem likely to considerably outweigh their effectiveness or value. If some special provision for independent training providers were needed, it would surely be better to take a similar approach to that proposed for colleges based on government underwriting, as I believe has happened in practice in the past. Of course, in some cases, independent training providers may even be partly owned by further education colleges, as was the case with the provider First4Skills, which was 60% owned by the City of Liverpool College and had to call in the administrators. I am not clear how the amendment would address a situation such as that.

Finally, I know that many independent training providers would be happy to help put a clear mechanism in place so that learners could easily transfer to another provider if their existing provider failed. For all those reasons, I believe that the amendment is not the right way forward.