Sale of Student Loans: Regulation

Barry Sheerman Excerpts

Tuesday 7th March 2017 Westminster Hall

[Mr Cunningham]

I agree with my hon. Friend. Frankly, retrospective law is always bad law. The three previous sales were of mortgage-style student loans. There have been no sales of income-contingent loans. In 2013, the Government announced that the final sale of outstanding loans had been made to Erudio Student Loans for £160 million. There have been problems with those loans and a number of complaints about their handling. Can the Minister guarantee that the loans we are discussing will not be resold to overseas buyers? What mechanisms will be put in place to protect students?

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

My hon. Friend knows of my interest in this issue. I have only one university in my constituency, the University of Huddersfield. My students, too, fear that the sale is an ideological fix. We heard this morning in Justice questions that the Government are selling off a young offenders prison—it is ideology that is behind this. Does he agree that we should have an independent commission to look at the issue? I have never seen a compelling economic case for the sale.

[Mr Cunningham]

I totally agree with my hon. Friend. It is about time we stopped social engineering with education. We are getting to a point where we want some sort of commission established. I hope the Minister will announce that when he responds to the debate.

Will the personal details of students be secure? How will repayment work for European Union students? How will Welsh students be affected? The National Union of Students has consistently expressed concerns that such a sale is not in the interests of students, graduates or taxpayers. What implications will the sale have for students?

--- Later in debate ---

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for Coventry South (Mr Cunningham) on securing this debate. It provides a useful opportunity for me to set out the Government’s approach to the proposed sale of part of the student loan book. I would like to explain the rationale for the sale and make sure that some important points, particularly those relating to the protection of students and graduates and to our commitment to securing value for money for the taxpayer, are firmly on the record.

We are all aware that tomorrow the Chancellor of the Exchequer will make a statement to the House on the Budget. I have been re-reading the statement he made in November of last year. He set out then his commitment to fiscal responsibility, and as part of that, he was clear that public sector net debt must be falling by the end of this Parliament. It is vital that the public finances continue on the path to sustainability.

Selling assets can reduce fiscal pressures and allows the Government to invest in other policies with greater economic or social returns. The Government’s policy is to sell assets where there is no policy reason to own them and where it is value for money for the taxpayer to do so. There is clearly no policy purpose to continuing to hold the student loan book on the Government’s balance sheet.

When we provide student loans, our purpose is to ensure that people who want to pursue higher education and have the qualifications that come from it are able to do so, regardless of their personal financial situation and with no limit, now, on their numbers. As soon as a loan is issued to support a student as they study, its purpose has been met. As I will explain in more detail, the planned sale would have no impact on the position of students or graduates.

A comprehensive assessment indicates that we have a good prospect of achieving value for money. The sale process is designed to achieve the best possible price to benefit taxpayers. As additional reassurance, I must emphasise that we will only proceed with the sale if market conditions remain favourable and the final value-for-money assessment is positive.

I know there is interest in the reasons why a private investor might be interested in the student loan book. The student loan book generates a long-term, inflation-linked set of cash flows, through an efficient and established collection mechanism. Our engagement with the markets has shown that that is attractive to investors—crucially, at a price that represents value for money for the taxpayer.

[Mr Sheerman]

Could the Minister tell us who the Department has been consulting—which experts, City firms or organisations have been giving the advice that this is a viable enterprise?

[Joseph Johnson]

There has been a process of engagement with the market, which has been conducted on behalf of the Department by a number of financial advisers, including Barclays and Rothschild among others. Our engagement has shown us that this is attractive to investors at a price that represents value for money for the taxpayer.

The private sector is willing to take on the risk and uncertainty of future repayment cash flows because it values this long-dated asset, while Government are looking to transfer that risk and generate cash for reinvestment in policies with greater economic and social returns. I hope hon. Members will therefore agree that there is a strong rationale for selling part of the student loan book. It is good financial management by the Government; it can help support policies with greater economic and social returns; and can be achieved without affecting the position of students or graduates.

Hon. Members, including the hon. Member for West Bromwich West (Mr Bailey), asked whether terms might be changed. I can tell them that investors have no rights whatever to change terms as a result of any sale process.