Viscount Younger of Leckie
Main Page: Viscount Younger of Leckie (Conservative - Excepted Hereditary)Student Loans Company
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Viscount Younger of Leckie (Con)
My Lords, I am very pleased to respond to this Question for Short Debate. Very short it certainly has been, but with three weighty speeches—so far. I thank the noble Lord, Lord Mendelsohn, for raising this important issue.
This is a good opportunity to reiterate the raison d’être of the Student Loans Company and to look at its challenges, but also to touch on those aspects that we feel are going well. However, let me be clear that the SLC and the Government recognise that it will need to continue to change and improve, not least in the area of digital interaction with its customers, so that it is prepared not just for the next academic year but, looking ahead, for five or 10 years. In a way, this may turn out to be a rather lordly SWOT analysis of the SLC.
Let me take a step back and remind the House of the background of the SLC. To some extent the noble Lord, Lord Mendelsohn, has stolen some of my speech. There have been huge changes in the scale of the operations of the SLC since it was set up in 1989. In its first full year of operation in 1990-91, the SLC had 82 staff. Today, it has more than 3,000 staff, based across three sites in Glasgow, Darlington and Llandudno Junction. In 1990-91, it had only one product: a UK-wide mortgage-style maintenance loan, with an average loan-per-student value of just £390. Today, it offers its customers a range of 25 student finance products, customised to their needs. In 1990-91, it paid out loans to 180,000 customers. By 2017-18, that had increased tenfold as it paid loans and grants to 1,800,000 customers. The cumulative effect of these changes means that the SLC is now the equivalent size and complexity of a medium-sized retail bank, as the noble Lord, Lord Mendelsohn, said. It receives more than 6 million telephone calls every year.
The SLC is continually evolving and improving, as indeed it should, and continues to deliver good and valued service to its more than 8 million customers, 96% of whom are based in the UK. Since the 2011-12 financial year, the SLC has seen its customer base increase by 62% and the value of its loan book increase by 158%. The SLC has also continued to deliver new student finance products for its shareholders; by its shareholders I mean taxpayers, administered by the Governments of England, Scotland and Wales and of course the Administration, pro tem, of Northern Ireland.
These new products have, for example, allowed students to access funding for postgraduate study. They have allowed part-time students to access maintenance loans, reflecting the importance the Government place on part-time study. We are reminded once again of the 50th anniversary of the Open University this year. From this year, students will also be able to apply to access funding for new, two-year accelerated degree courses. This goes a little way to help with our promotion of lifelong learning, which was quite rightly raised by the noble Baroness, Lady Garden. The SLC has played a part in allowing young people from disadvantaged backgrounds to access funding to allow them to fulfil their potential. By 2018, 18 year-olds from disadvantaged backgrounds were, proportionally, 52% more likely to enter full-time higher education than in 2009. This must be a good thing.
We believe that the SLC continues to make good progress in delivering its core functions. For example, in 2017-18, it assessed 95.6% of the applications it received for full-time undergraduate study within 20 working days and 99% of them within 30 working days. This was up from 85.6% and 94% respectively in 2011-12. In 2017-18, customer satisfaction for those applying to the SLC was 84.1%, which was up from 70.5% in 2010-11. That is a much improved rate but we and the SLC believe that there is still room for improvement.
Let me now delve into the detail of the governance and operation of the SLC. Importantly, this is at a time when a number of reforms are under way in our higher and further education sectors. Notably, there is a review of post-18 education and funding, which your Lordships have heard me reference on numerous occasions over the past year, and which the Government intend to conclude later this year. This was raised by not only the noble Lord, Lord Stevenson, but the noble Baroness, Lady Garden, and I listened with some interest and care as it allowed them to expound their own policies. That will of course be on the record in Hansard.
The Office for National Statistics review of the classification of the student loan book, with which my noble friend Lord Forsyth and the Economic Affairs Committee that he so ably chairs are most familiar, will alter the way in which student loans are recorded in the national accounts. The noble Baroness, Lady Garden, and the noble Lord, Lord Stevenson, raised the question of RPI and its use. We will consider the interest rates and appropriate use of RPI as part of the Augar review. However, I can assure the House, as I have done previously, that this important change will not affect students and that the SLC stands ready to communicate that message to its customers.
The Government and the devolved Administrations are responsible for the governance and operation of the SLC, which is ultimately accountable to Parliament. The noble Lord, Lord Mendelsohn, talked about the profound operational issues identified by McKinsey five years ago. He also asked for an update on the transformation programme. It is an important point. The Government seriously and thoroughly considered McKinsey’s report, which was made to the then Department for Business, Innovation and Skills. The SLC and the DfE have actively learned the lessons from that report and continue to strengthen and improve the SLC’s governance and performance. I shall give your Lordships an update on the ongoing transformation later on.
The Department for Education is working closely with the SLC to ensure that its governance is robust to deal with the challenges it faces. That is in three specific ways. First, as I announced to the House by way of a Written Statement on 21 November 2018, the Department for Education is currently undertaking an in-depth tailored review of the SLC. The noble Baroness, Lady Garden, and the noble Lord, Lord Stevenson, asked about that. It is a wide-ranging review that the Cabinet Office requires departments to undertake of all their public bodies at least once in the lifetime of a Parliament, and is assessing the governance and control arrangements in place at the SLC to ensure that they are compliant with the recognised principles of good corporate governance and delivering best value for money. The structure, efficiency and effectiveness of the SLC will also be considered.
The noble Lord, Lord Mendelsohn, and the noble Baroness, Lady Garden, spoke about the departure of Steve Lamey. I do not want to say too much about that—that probably echoes the views of the noble Lord—but the NAO undertook a thorough investigation of the DfE’s oversight of the SLC shortly after Steve Lamey was dismissed by it, which goes back to November 2017—some time ago now. That report sets out clearly that Steve Lamey was dismissed by the SLC and that due process was followed by the SLC and the DfE. We are clear that we expect the highest standards of management and leadership consistent with those required for individuals in public life, as set out by the Nolan principles.
Lord Stevenson of Balmacara
Tailored reviews are routine, regular and periodic, as the Minister said, and are required by the Cabinet Office for all bodies in scope. Is he implying that this is just an ordinary review, or does it have the hallmarks of the points made by my noble friend Lord Mendelsohn and the noble Baroness, Lady Garden, about the need to pick up the particular train of events that led to the concerns being raised?
I had in my notes to say at the beginning, but I may not have said it—so I am repeating it in case that is so—that I have a son who is in receipt of a loan from the SLC and is currently repaying it.
Viscount Younger of Leckie
I think that I can answer the noble Lord’s first point by saying that it is a regular review, but I have no doubt that it will take account of the issues that have cropped up in recent years—I would be very surprised if that was not the case. If it is not the case, I shall certainly write to the noble Lord and clarify that.
The noble Lord, Lord Mendelsohn, spoke about governance shortfalls. As he will know, the SLC is a wholly government-owned company overseen by a board which currently consists of a non-executive chair, five non-executive directors, the chief executive, the deputy chief executive, the CFO and the company secretary. The board ensures that effective corporate governance arrangements are in place and provides assurance on risk management and internal control. There is a little more that I could say but, due to lack of time, I just want to make it clear that these structural arrangements are in place.
However, there is more to it than that, because the Government are confident that the SLC now has a leadership team in place that is equipped for the challenges ahead, under the able leadership of Paula Sussex, whom the noble Lord mentioned. Paula and her team, in conjunction with the DfE, have now begun to implement a wide-ranging, multi-year, multi-million-pound transformation programme. This will transform the way the SLC interacts with its customers, digitising processes and ensuring that the SLC communicates with its users in a way that is familiar to them—online, real-time and available 24/7.
Lord Mendelsohn
Just to clarify, is that the transformation programme that has operated for the last couple of years, the one that Steve Lamey was responsible for?
Viscount Younger of Leckie
I know that Steve Lamey has been involved in it, so the answer is yes, but it has been taken forward from the work that he has done.
The noble Baroness, Lady Garden, asked whether the new CEO had met Ministers, and I confirm that the Universities Minister met the CEO fairly recently in Glasgow.
I will move on to processes. The SLC is looking to remove inefficient manual processes that drive the small number of complaints it currently receives. The number of complaints is very small indeed: fewer than three complaints per 10,000 applicants and around one complaint per 10,000 loan repayers. Although the number of complaints is low, the SLC is seeking to reduce this further.
Time is running short and I have quite a lot more to say. We believe that the transformation programme has delivered real benefits already to the SLC’s workforce. The noble Lord, Lord Mendelsohn, mentioned pay. Recognising, as he did, the major constraining factor of recruitment and retention, which impacts on achieving even better performance from the SLC, 1,600 of the lowest-paid staff have just been awarded an in-year pay increase of up to 8%. I hope that that will address some of the recruitment problems and improve staff retention rates.
As I mentioned earlier, we are strengthening the SLC’s board through the appointment of non-executive directors with financial and public sector experience, which will also help. We will launch a fair and open campaign to recruit a new chair during the next few weeks, ensuring that the excellent work done by the incumbent, Chris Brodie, is continued when his final term of office ends in January 2020. I will write to the noble Lord, Lord Mendelsohn, about the loan book, giving him some details that I have. Bearing the late hour in mind, I will write to all three noble Lords who spoke to respond to any questions I have not answered. I thank the noble Lord, Lord Mendelsohn, once again, for securing this important debate and I hope he feels we have explored the subject. As I said earlier, there is more to do to be sure that the SLC is in very good shape and well prepared for the future.