Financial Services Bill

Lord Sharkey Excerpts

Committee stage
Monday 8th March 2021 Grand Committee

Moved by

[Lord Sharkey]

80: After Clause 40, insert the following new Clause—
“Sharia-compliant financial services
Within one year of the passing of this Act, the Secretary of State must publish an assessment of the availability of Sharia-compliant financial services in the United Kingdom, including financial services to support students.”

[Lord Sharkey (LD) [V]]

My Lords, Amendments 80 and 88 are probing amendments. Their purpose is to allow the Committee to debate access to Sharia-compliant student finance. I raise this issue because there is no such access.

Noble Lords will know that Islam forbids interest-bearing loans. This prohibition can be and is a barrier to Muslim students going on to attend our universities. I first became aware of this when I visited the Preston Muslim Girls High School as part of the Lord Speaker’s Peers in Schools programme. I talked about the work of the House and tried to answer the girls’ questions. There was one question I could not answer: why was there no Sharia-compliant system of student finance?

Many of the girls came from deeply religious backgrounds and would not be able to accept interest-bearing loans. This meant that they could not go on to university, which they were certainly qualified to do. Ofsted rated their school as outstanding on every measure. The headteacher explained to me that, when tuition fees were low, many Muslim students were able to attend university financed by family and friends, but, since 2012, this had become much more difficult because of the very large increase in fees and the real rate of interest now payable on student loans. The situation became even worse when maintenance grants were replaced by interest-bearing loans.

The Government have known about all this since 2012. In early 2014, the then Department for Business, Innovation and Skills consulted on the issue. The consultation generated an astonishing 20,000 responses. The Government’s report on the consultation noted:

“It is clear from the large number of responses … that the lack of an Alternative Finance product as an alternative to conventional student loans is a matter of major concern to many Muslims.”


This same report also identified the solution: a Takaful, a well-known and frequently used non-interest-bearing Muslim financial product. The Government explicitly supported

“the introduction of a Sharia-compliant Takaful Alternative Finance product available to everyone”.

That was six years ago, and nearly four years ago we passed enabling legislation in the Higher Education and Research Act 2017, but there is still no Sharia-compliant student product available. Over the past five years, I have repeatedly pressed the Government to act. I have spoken in debates in the Chamber; I have asked Questions, oral and written, and I have written directly to the Minister. I last spoke about the issue at length in the Queen’s Speech debate in October 2019. Soon after that, the Minister, the noble Baroness, Lady Berridge, wrote to me saying:

“The position remains the same as when the Government responded to your PQ in July. We will set out plans for implementation as we conclude the Post 18 Review. This will ensure that students in receipt of an Alternative Student Finance package are not disadvantaged compared to other students in receipt of mainstream student support.”


As I had heard nothing further, I emailed the Minister on 4 January this year. I pointed out that, since her letter to me, one more student cohort had entered higher education, and another was now preparing to do so, but there was still no available Sharia-compliant student finance. I asked her for an update on implementation. I asked whether we were still waiting for a formal response to the Augur review and suggested that we should not. I pointed out that the Government had recognised the problem more than six years previously and had had the power to deal with it for four years. I sent this email on 4 January and I have had no reply.

We are having this debate as students are considering their university choices for next September. Once more, there will be devout Muslim students who, though qualified, will not be going to university because of the lack of a sharia-compliant student finance product. It is very hard to understand or excuse the Government’s behaviour over this issue. They know the problem, acknowledge the need to act and have taken the powers to introduce the remedy, yet nothing has happened. It is shameful that the Government have allowed so much time to elapse and that they display such a casual neglect of and disregard for our Muslim community.

At the World Islamic Economic Forum in 2013, David Cameron promised to introduce a sharia-compliant student finance scheme, saying:

“Never again should a Muslim in Britain feel unable to go to university because they cannot get a student loan—simply because of their religion.”


When will the Government finally make good on this eight year-old promise? I beg to move.

[Lord Naseby (Con) [V]]

My Lords, I am absolutely delighted to support my friend, the noble Lord, Lord Sharkey, who has clearly positioned the problem. I have had the privilege of working in Pakistan—which is almost totally Muslim—and India, which has a very significant Muslim population, as well as Sri Lanka, where a big majority of the minorities are Muslim. Locally, they do not seem to have a problem in dealing with this issue; can we not learn from them, particularly Pakistan? We have high commissioners here, so why do we not at least find out from them what the problem is in relation to the UK—and get their help?

This issue is increasing. The sharia families who are really strong in their faith increasingly want to send their children to university—that is part of the philosophy of that faith—and here we are, years down the track, making it very difficult for them. We must do something about it. In towns and cities such as Luton, Leicester and some of the other major ones in the north of England—let alone London—there are students and families who do not know what to do about it. We have to take some action.

It goes further than that, does it not? We want students from overseas; we are seeking them. There are sharia-compliant students from the Muslim fraternity overseas who want to come. I really do not see why this is so difficult to do, so I say to my noble friend on the Front Bench: Her Majesty’s Government need to solve this problem; sit down with the sharia-compliant banks and, if necessary, with the high commissioners to seek their support and help; and solve this problem.

Frankly, it is an embarrassment for any of us who have good friends in that community—as I do and I guess most of your Lordships may well do—to find that potential students are not able to pay their tuition fees and receive student maintenance grants without being penalised or having to find some method to go around the scheme, where the senior mothers and fathers are doing that at all.

As such, I make a plea to my noble friend on the Front Bench: this is not a party-political issue or anything like that—this is just good and straightforward. The problem is known about and has taken years to be solved; can we please take a significant step forward?

--- Later in debate ---

[Lord True (Con)]

My Lords, as has been eloquently expressed, these amendments relate to sharia-compliant finance and specifically to the availability of sharia-compliant student finance products. This is an area where the Treasury and the Department for Education are in close contact. The Government are committed to ensuring that all students in England with the potential to benefit from further and higher education are able to access it. I know from this debate and from others that many noble Lords of all parties are keen to see action on this.

On the specific amendments, which the noble Lord, Lord Sharkey, stated are probing, Amendment 80 seeks to require the Treasury to publish an assessment of the availability of sharia-compliant financial services, I can assure noble Lords that the Government are committed to ensuring that no UK customer is denied access to competitive financial products because of their faith. As referred to in the debate, the United Kingdom is indeed the leading western hub for Islamic finance, a position we have maintained for several years now. Treasury Ministers and officials conduct regular engagement with key stakeholders in the Islamic finance sector to inform our policies.

Amendment 88 seeks to add access to sharia-compliant student finance to the FCA’s objectives within Section 1B of the Financial Services and Markets Act 2000. It would be ineffective to add this objective because student loans are exempt from FCA regulation, meaning that the FCA would not have the powers to fulfil this duty. Additionally, student finance provision is a devolved matter while the FCA is our UK-wide regulator. Finally, as I have explained, work is under way in government to ensure that all eligible students are able to access student finance.

A number of noble Lords commented on the pace of this work. As the noble Lord, Lord Sharkey, said, the Government published a consultation in September 2014 into a potential model that could form the basis of a new student finance product. The Government signalled in the consultation response that they would need to take new primary powers to enable the Secretary of State for Education to make alternative payments in addition to grants and loans. These were secured in the Higher Education and Research Act 2017. The Government have also carried out work with the Islamic Finance Council UK on an alternative student finance product for tuition fee and living cost support compatible with Islamic finance principles.

As has been stated, the implementation of alternative student finance is currently being considered alongside the review of post-18 education and funding. The interim report of that review was published on 21 January and the review is due to conclude alongside the next multi-year spending review. The Government will therefore provide an update on alternative student finance in due course. We should not underestimate the scale of complexity here. The Department for Education is trying to replicate a system of student finance that delivers the same results as now where students do not receive any advantage nor suffer any disadvantage through applying for alternative student finance.

I am sure that our colleagues in the departments concerned have heard the concerns expressed by noble Lords. I hope that, for these reasons, the noble Lord, Lord Sharkey, will feel able to withdraw his amendment.

[Lord Sharkey (LD) [V]]

I thank everybody who has spoken in the debate on this group. I confess that I should have said clearly at the beginning that my amendments and their text were not the issue; the amendments were simply the fossilised remains of my scope negotiations with the Public Bill Office and a means of introducing the subject of sharia-complaint student finance.

I must say that I am, as usual, extremely disappointed by the Minister’s evasive and unconvincing response. It is a great pity. I still do not understand why there has been such a long delay in addressing this serious problem. The Minister has not offered a reason for the delay except to point at various complications. Perhaps I should remind him that the takaful version of the Help to Buy mortgage system was introduced from a standing start in six months. This has taken nearly seven years, and we have not got there yet. I simply do not understand why this is going to be prolonged and why the Minister cannot give us any assurance about a firm date for the introduction of a sharia-compliant student product.

I also do not understand—I never did—why the Augar review is at all relevant; perhaps the Minister can explain why at some other point. However, I understand that the Muslim community continues to suffer a direct disadvantage without any good reason or plausible excuse. The Government are acting in a completely mean-spirited and heartless way. They are failing in their moral duty, failing to fulfil their explicit promises and failing to provide any real comfort that they might eventually do what they should have done long ago. They are behaving neglectfully and really rather disgracefully. We will return to this issue later.

[The Deputy Chairman of Committees (Baroness Fookes) (Con)]

Does the Minister wish to speak further? No? Does the noble Lord, Lord Sharkey, wish to withdraw his amendment?

[Lord Sharkey (LD) [V]]

I beg leave to withdraw the amendment.

Amendment 80 withdrawn.