Student Loans Company

Gordon Marsden Excerpts

Monday 20th November 2017 Commons Chamber

[Gordon Marsden (Blackpool South) (Lab)]

(Urgent Question): To ask the Secretary of State for Education if she will make a statement on the management and operation of the Student Loans Company.

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

The Student Loans Company’s performance has improved year on year for the past six years. SLC services account for about 1.8 million applications per year. It responds to about 4.5 million phone calls from borrowers and has more than 6 million repaying or due-to-repay customers, with loans totalling over £100 billion. In addition, it has delivered a range of new products for the Government on time and successfully, including postgraduate loans and simplified advanced learner loans.

This year, the SLC has processed more than 1.4 million applications for student funding, and so far this academic year it has paid out approximately £2.5 billion in maintenance funding and £2 billion in tuition fee payments to providers. Customer satisfaction remains high, at about 85%, and, for borrowers in repayment, at about 72%. It receives complaints from just 0.1% of its 4.7 million customers. The SLC is, of course, constantly looking to learn lessons from this low level of complaints and to use these complaints to improve the quality of its services.

The Department for Education is also working closely with the SLC on a range of initiatives that will further improve the user experience for the SLC’s borrowers and in respect of staff engagement. Proposals currently being developed include greater digitisation of the student loan application and repayment processes and investment in more efficient SLC systems.

Following two independent investigations into allegations about aspects of his management and leadership, the SLC has terminated Steve Lamey’s contract as chief executive officer of the SLC. The SLC and its shareholders expect the highest standards of management and leadership and, having taken into account the findings of the investigations, have concluded that these were not being upheld by Mr Lamey during his time in his role. The SLC board acted swiftly and has appointed the current chief executive of the Education and Skills Funding Agency and of the Institute for Apprenticeships, Peter Lauener, as interim CEO, with effect from 27 November. He will remain in post at SLC until a permanent appointment is made.

Mr Lauener was formerly chief executive of the Institute for Apprenticeships and the Education and Skills Funding Agency. He has had a long and successful career in a number of senior leadership positions in the Department and its partner organisations, and I have every confidence that he will provide the drive and stability the SLC requires at this time, as we recruit a permanent chief executive.

[Gordon Marsden]

This announcement was snuck out over the November recess on the same day as the Secretary of State for International Development resigned. Since last Monday, two articles in The Times have raised severe questions about the process. Why, in the Minister’s letter to me on 17 October, sent six weeks after I wrote to him about the SLC, did he refer to the suspension of the chief executive as a neutral act that did not imply wrongdoing, when he was actually made fully aware of the allegations against Steve Lamey in June, as his written reply has told me?

Will the Minister publish the findings of the performance review of the SLC, issued two months before the suspension, in which, as The Times says, Steve Lamey was rated “outstanding”? Was the Minister aware at the time that Mr Jenkins’s report on Mr Lamey had concluded that he was

“making a real and positive difference”

to the Student Loans Company, and was a popular and effective leader who staff found supportive, before the decision was made to sack him? Will he also publish the findings of the internal investigation, in which 52 of 58 allegations against Mr Lamey were dismissed, so that all Members can understand the issues at the SLC?

Who appointed the chair and the other three board members of the SLC, and what were the criteria and processes for those appointments? Can the Minister confirm that Simon Devonshire, the board member who heard and dismissed Mr Lamey’s appeal, and David Gravells are also members of the same venture capital trust?

The lack of proper co-operation between the SLC and HMRC has led to significant overpayment of debts. Can the Minister tell us how many overpayments amounting to more than £10,000 have been made since 2015-16? I have just been told that the Government have tacitly admitted their failure in this regard by saying that from 2019 onwards, HMRC and the SLC will co-operate on these matters. However, that does not address the fact that Mr Lamey and the HMRC’s permanent secretary have blamed each other for the issue. Mr Lamey has claimed that he asked for real-time updates that HMRC would not share. Who is telling the truth?

The BBC’s “Panorama” has raised questions about private providers of courses in which students have fraudulently enrolled in order to claim loans. How much has been paid to students of private higher education providers who were subsequently determined to be ineligible in the last five full financial years, and what mechanisms are there to enable the misused taxpayer money to be reclaimed? In the light of all that, will the Government now suspend the sale of a further chunk of the student loan book?

The Minister recently admitted that changes in interest rate thresholds on student debt would cost £175 million by 2020. Can he tell us where the money will come from? Given that tens of thousands of graduates are footing the bill for SLC failures, what confidence can Parliament have in the competence of this Minister, who is the key shareholder in the Student Loans Company?

[Joseph Johnson]

I would encourage the hon. Gentleman not to denigrate the hard work of the dedicated public servants at the Student Loans Company, who are undertaking a vital task in securing the finance that young people and learners in this country need to pursue higher education and who, as I have said, are doing so in a successful way: fewer than 0.1% of the SLC’s 4.7 million customers complain each year. They are delivering an important service, and the hon. Gentleman should support them rather than running them down.

The hon. Gentleman asked about a number of matters. He asked about the investigations that led to the dismissal of Mr Lamey from his position as chief executive of the SLC. The concerns were brought to the board’s attention in May, and to the attention of the Department for Education.

[Gordon Marsden]

When did you learn about it?

[Joseph Johnson]

We learnt about it in May.

[Gordon Marsden]

But when did you learn about it?

[Joseph Johnson]

I learnt about it in May, as I have just said. The two investigations were immediately set in motion to get to the bottom of the allegations received by the SLC board. One was led by the Government Internal Audit Agency, and the other by Sir Paul Jenkins, former Treasury Solicitor and head of the Government’s legal services. They concluded that Mr Lamey had not shown the leadership which would be expected of someone in that role, and accordingly the board decided that he should no longer continue in the role. As a consequence of the SLC’s decision, the Department decided to relieve him of his responsibilities as accounting officer of the SLC.

The hon. Gentleman asked about ineligible payments, some of which were highlighted by the “Panorama” programme that was broadcast a few days ago. I am sure he will be interested to know that the level of ineligible payments made to alternative providers has been falling sharply in recent years. In fact, it has fallen by over 80% since 2012-13, from about 4% of all payments to 0.5% of all payments in 2015-16. This rate is low; of course we want to eliminate fraud wherever we can identify it, but this is a low rate of ineligible payments to these providers. Indeed, the rate is now no higher than the average across the HEFCE-funded higher education system. So if I were the hon. Gentleman, I would not use this as a means of running down the newer entrants to our higher education system—which he often does from the Dispatch Box—because it cannot be used to support that sort of attack. This reduction in the level of ineligible payments is the direct consequence of the controls that previously the Department for Business, Innovation and Skills and now the Department for Education have been putting in place to ensure that public money is not abused.

We take the issue of overpayments extremely seriously, and the hon. Gentleman mentioned some of the steps we are taking. We want close and effective co-operation between HMRC and the SLC so we avoid the risk, to the extent that we possibly can, of students overpaying when they repay. I understand that the Chancellor will be considering this issue further in the Budget later this week, so the hon. Gentleman might want to wait to see the contents of the Budget for further details. We are committed to improving the interface between HMRC and the SLC. We ensure that all borrowers, as they enter the last two years of their repayments, are given the opportunity to move directly to a direct debit system of repayment, so that they eliminate almost all the risk of overpayment.