Sale of Student Loans: Regulation

Debate between Adrian Bailey and Philip Hollobone

Tuesday 7th March 2017 Westminster Hall

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

rose—

[Mr Philip Hollobone (in the Chair)]

Order. Mr Bailey, are you wishing to speak? Do you have the permission of the Minister and the proposer of the motion to do so?

[Mr Bailey]

I do, Mr Hollobone. I apologise—I was under the impression that you knew.

[Mr Philip Hollobone (in the Chair)]

There has been some confusion. I am delighted that you are able to speak, Mr Bailey. We must allow the Minister at least 15 minutes to reply, so if you could, temper your remarks accordingly.

[Mr Bailey]

Thank you, Mr Hollobone. It is a pleasure to serve under your chairmanship. I congratulate my hon. Friend the Member for Coventry South (Mr Cunningham) on securing the debate, and I thank him and the Minister for allowing me to make a short contribution.

I wanted to contribute because I was Chair of the Select Committee on Business, Innovation and Skills in 2014 when it examined the Government’s proposals on this issue, which were mooted by the then Business Secretary. The Committee’s report posed a number of questions and made a number of assertions, which are as relevant now as then. Arising at least in part from the Select Committee’s contribution to the debate, the sale was subsequently withdrawn as the then Minister said he did not consider it to be value for money. The basis on which he made that observation is probably as relevant to this sale as it was to that previous attempt.

I would like to pose a number of questions to the Minister about the sale. I understand that the structure of the sale will be different from the previous one—it is not a whole loan sale going to a single investor, but is to be packaged up in the form of bonds. That is what I read in the Financial Times of 7 February. It seems to me that that process will redistribute the risk involved in the sale from a particular company to the bondholders. In view of that, I wonder whether the discount that the Government will give will have to be even greater to attract would-be bondholders to buy.

The arguments about discounts and the potential revenue to the Government were highlighted by a number of academics, and Rothschild, prior to the previous sale. The basic problem is that the dividend stream—the revenue stream—is now determined as 0.25% plus 1%, and of course the retail prices index is running at 3% and is projected to be between 3% and 3.2% in the next three years. It will be difficult to persuade any investors to invest when the return will be less than the rate of inflation.

Rothschild said that the Government would have to give some sort of “synthetic hedge” in order to attract purchasers of the debt. The crucial underlying paradox that comes with marketing the debt underlines the value for money principles that we should be looking for in such a sale. Rothschild estimated that it would realise only £2 billion of the £12 billion that the Government projected—ironically, I see that they are projecting £12 billion on this occasion. If the calculations were done, I suspect that that may well be scaled down to the sort of figure that Rothschild projected before.

Is the Minister prepared to guarantee that the current loan terms will not be changed as a result of the loans being privatised? What are the estimates of future income that the Government would have if this loan book were not sold? What sort of discount would be offered, and what would the total revenue be if they were sold under the processes that appear to be outlined at the moment? Finally, given that Government projections can be wrong—heaven forbid—what processes will be put in place to evaluate the Government’s approach and ensure that there is value for money for the taxpayer?

Debt Advice (FCA Levy)

Debate between Adrian Bailey and Philip Hollobone

Tuesday 21st January 2014 Westminster Hall

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I would like to reiterate what the hon. Member for North Swindon (Justin Tomlinson) said about your commitment to Back-Bench involvement. I also thank the Backbench Business Committee for recommending this issue for debate.

Above all, I thank my colleague on the Business, Innovation and Skills Committee, the hon. Member for Worcester (Mr Walker), for having the foresight and judgment to table this debate at this time, because its timing is crucial. Last night, we debated payday loan companies in the Chamber. A number of headline-grabbing issues that have long been discussed publicly were debated, but there is a real danger that the significance of the BIS Committee’s recommendation on ring-fencing may have fallen below the radar. Certainly, in the numerous interviews that I have done with the media, I have yet to be asked a question on it. The sheer significance of it may well have gone unrecognised. He has taken up the issue and run with it, and the timing is impeccable. It is extremely important.

I emphasise that this is not just a dry academic issue. Debt advice does not sound very exciting, but I was first confronted with its importance in deprived areas when I was approached by members of my local branch of Christians Against Poverty, based at St Matthew’s church in Tipton, who wanted me to see the work that they had done. I have attended events run by the branch and talked to people who have spoken of the life-transformative experience of taking advice from Christians Against Poverty and adhering to the organisation’s recommendations and support. They were so grateful that it was almost unbelievable. It was very moving. Make no mistake: debt advice is not just about somebody sitting in an armchair talking to people on the other side of a desk. It is about talking to them, giving them support, comfort and advice, pointing them in the right direction and monitoring their life as they come out of the trough that debt imposes on them.

The issue is very important, and there is a danger if MAS goes for a flatline budget. We could be left in a position where although demand for the service is increasing hugely—all the indications are that it will continue to increase—the budget is static, meaning that an increasing number of people would not be able to access the support that they need to transform their lives. I support the recommendations made by the previous speakers. I will not go into all the detail, as they have argued the case effectively and I realise that others want to contribute to this debate, but to finish, I will say one thing to the Minister: this is an easy win. It does not cost the Government anything. Politically, it would be highly popular across the board to ensure that the major contributors to the problem fund at least part of the solution.

That is the positive side. The negative side is that the social cost of people running into heavy debt and the potential impact on families can be so devastating that the Government will incur costs by picking up the bill for the resulting social breakdown and deprivation. If the Government ignore the opportunity to get more money from the private sector that is creating the problem, they will incur greater social problems with a price tag, and they will have to pick up the tab. That is illogical and incoherent. There is an easy win that has popular and political support. It will benefit Government finances in the long run and address the problem that we confront.

[Mr Philip Hollobone (in the Chair)]

I am about to call the Front-Bench speakers. I thank all hon. Members for their contributions and for being so disciplined in the timing of their remarks. We have just over 35 minutes left. As this is a Back Bench-sponsored debate, I encourage Back-Bench Members who want to hold both Front Benches to account to do so through interventions.