Session 2010/2011

First Report

COMMITTEE FOR EMPLOYMENT AND LEARNING

Report on the
Student Loans (Amendment) Bill

Together with the Minutes of Proceedings of the committee
relating to the report and the minutes of evidence

Ordered by the Committee for Employment and Learning to be printed 3 November 2010
Report: NIA 19/10/11R (Committee for Employment and Learning)

This document is available in a range of alternative formats.
For more information please contact the
Northern Ireland Assembly, Printed Paper Office,
Parliament Buildings, Stormont, Belfast, BT4 3XX
Tel: 028 9052 1078

Membership and Powers

Powers

The Committee for Employment and Learning is a Statutory Departmental Committee of the Northern Ireland Assembly established in accordance with paragraphs 8 and 9 of the Belfast Agreement, Section 29 of the Northern Ireland Act 1998 and under Standing Orders 48 of the Northern Ireland Assembly. The Committee has a scrutiny, policy development and consultation role with respect to the Department for Employment and Learning and has a role in the initiation of legislation.

The Committee has power to:

• Consider and advise on Departmental budgets and annual plans in the context of the overall budget allocation;
• Approve relevant secondary legislation and take the Committee stage of relevant primary legislation;
• Call for persons and papers;
• Initiate inquiries and make reports; and
• Consider and advise on matters brought to the Committee by the Minister for Employment and Learning.

Membership

The Committee has eleven members, including a Chairperson and Deputy Chairperson, with a quorum of five. The membership of the Committee since 9 May 2007 has been as follows:

Mrs Dolores Kelly (Chairperson) [1]
Mr Jonathan Bell (Deputy Chairman) 2
Mr Sydney Anderson 3 Mrs Claire McGill
Mr Paul Butler Mr Pat Ramsey 4
Rev Dr Robert Coulter 5 Ms Sue Ramsey 6
Mr Chris Lyttle 7 Mr Peter Weir 8 9
Mr David McClarty

[1] Mrs Dolores Kelly replaced Ms Sue Ramsey as Chairperson on 12 April 2010.
2. Mr Jonathan Bell replaced Mr Thomas Buchanan as a member only on 1 February 2010 and left the Committee on 13 April 2010; he rejoined the Committee on 28 June 2010, replacing Mr Peter Weir as Deputy Chairperson and Mr Trevor Clarke as a member.
3. Mr Alex Easton, Mr David Hilditch and Mr William Irwin replaced Mr Nelson McCausland, Mr Alastair Ross and Mr Jimmy Spratt on 15 September 2008; Mr Sydney Anderson replaced Mr William Irwin on 13 September 2010.
4. Mr Pat Ramsey replaced Mr Alex Attwood on 29 June 2009.
5. Rev Dr Robert Coulter replaced Mr Basil McCrea on 15 September 2008.
6. Ms Sue Ramsey was Chairperson of the Committee from 9 May 2007 to 11 April 2010.
7. Mr Chris Lyttle replaced Ms Anna Lo on 13 September 2010.
8. Mr Peter Weir replaced Mr David Hilditch on 13 April 2010.
9. Mr Alastair Ross replaced Mr Jim Wells on 29 May 2007; Mr Robin Newton replaced Mr Jimmy Spratt as Deputy Chairperson on 10 June 2008; Mr Thomas Buchanan replaced Mr Robin Newton as Deputy Chairperson on 4 July 2009; Mr Trevor Clarke replaced Mr Alex Easton on 14 September 2009; Mr Peter Weir replaced Mr David Hilditch and became Deputy Chairperson on 13 April 2010

Table of Contents

List of abbreviations used in the Report

Report

Executive Summary

Introduction

Consideration of the Bill

Clause by Clause Scrutiny of the Bill

Appendix 1:

Minutes of Proceedings

Appendix 2:

Minutes of Evidence

Appendix 3:

Written Submissions

Appendix 4:

List of Witnesses

Appendix 5:

Other Papers

List of abbreviations used in the Report

'IVAs' Individual Voluntary Arrangements

'The Bill' The Student Loans (Amendment) Bill 2010

'The Committee' The Committee for Employment and Learning

'The Department' The Department for Employment and Learning

'The Executive' The Northern Ireland Executive

'The Minister' The Minister for Employment and Learning

NI Northern Ireland

SLC Student Loans Company

NUS-USI National Union of Students – Union of Students in Ireland

Executive Summary

1. The purpose of the Student Loans (Amendment) Bill is to exclude student loans from Individual Voluntary Arrangements (IVAs) in the same way as they are currently excluded from bankruptcy debts. The Department initiated the Bill to address this existing anomaly to ensure that student loans can be recovered in full and not reduced under an IVA at a substantial cost to the public purse.

2. Similar legislation was included in Great Britain in The Apprenticeships, Skills, Children and Learning Act 2009 which clarified the position that student loans could no longer be incorporated into IVAs.

3. The Committee requested further information from the Department regarding the number of IVAs which have included student loans in Northern Ireland during the last six years – this information is included at Appendix 5.

4. The Committee has indicated its satisfaction with the Department's public consultation process and its engagement with Members before and during the introduction of the Bill. The Committee is grateful to the Minister and his Department for their willingness to provide explanations and clarification as requested.

5. The Committee is content with the clauses as drafted.

Introduction

6. The Student Loans (Amendment) Bill was introduced to the Assembly with its first reading on 25 May 2010 and passed its second stage on 8 June 2010. It was then referred to the Committee for Employment and Learning for consideration in accordance with Standing Order 33(1) on 9 June 2010. Upon introduction of the Bill to the Assembly the Minister made the following statement under Section 9 of the Northern Ireland Act 1998:

7. "In my view the Student Loans (Amendment) Bill would be within the legislative competence of the Northern Ireland Assembly"

8. Departmental considerations and consultation

(1) Policy objectives –There are currently two types of student loans. Under the Education (Student Loans) (Northern Ireland) Order 1990, mortgage-style loan finance was first made available to students in higher education. This was replaced in 1998 by income-contingent repayment loans for fees and living costs, under the provisions of the Education (Student Support) (Northern Ireland) Order 1998.

Student loans are subsidised by public funds and are made on non-commercial terms with low interest rates by the Student Loans Company. The Higher Education Order 2005 has already excluded student loans from bankruptcy debts, so that, after the bankruptcy has been discharged, the borrower is still liable to repay his loan.

Individual Voluntary Arrangements (IVAs) cancel up to 90% of a borrower's debts, which must exceed £15,000, by agreement with all creditors to whom money is owed. IVAs were relatively uncommon at the time of the Higher Education Order, but have become increasingly popular since that date – up to 31 December 2003 the Student Loans Company (SLC) had only dealt with 11 IVAs, whereas by the end of 2007 the SLC had dealt with over 3,000 IVAs.

In England and Wales The Apprenticeships, Skills, Children and Learning Act 2009 was introduced to address this anomaly whereby student loans were excluded from bankruptcies but not IVAs, and the Student Loans (Amendment) Bill will similarly close the loophole.

(2) Consultation – In March 2009 the Department notified the Committee of its intention to conduct a public consultation on its proposed legislation. The consultation ran from 23 July 2009 to 24 October 2009, and the Department received thirteen responses, none of which raised any objections to the Bill.

(3) Options considered by the Department were to do nothing, and leave the existing primary legislation in place, or to introduce an amendment to this legislation. In the interests of treating loans on an equal basis with bankruptcy, of ensuring minimum loss to public funds, and of responding to the results of the public consultation, the Department decided to pursue the option of introducing an amendment to the existing primary legislation.

Pre-introduction Committee scrutiny

9. At its meeting on 11 March 2009 the Committee was briefed by Departmental officials on outline proposals to exclude student loans from Individual Voluntary Arrangements. Members indicated their agreement on the proposals put forward and looked forward to seeing and discussing a finalised policy document. These proposals were also agreed by the Executive at its meeting on 18 June 2009. The Department forwarded a final draft of the policy consultation document to the Committee on 7 July 2009. The consultation commenced on 23 July 2009 and the policy document was considered by the Committee at its meetings on 9 and 16 September 2009. The Committee was content to await the outcome of the consultation before returning to the issue, and was satisfied that there were no responses which objected to the proposals.

Second Stage of the Bill

10. The Minister opened the debate on the Second Stage of the Bill on 8 June 2010 by outlining how the Bill would extend the Department's regulation-making powers under the Education (Student Support) (Northern Ireland) Order 1998 and the Education (Student Loans) (Northern Ireland) Order 1990 to allow the exclusion of student loans from Individual Voluntary Arrangements. He explained that such an extension was considered in 2005 during the passage of the Higher Education (Northern Ireland) Order which excluded student loans from bankruptcy, but that the effect of IVAs was negligible at that time and so it was decided to keep the situation under review. As the Student Loans Company is now dealing with an increasing number of IVAs, the Department decided to proceed with legislation to resolve the anomalous position with bankruptcy.

During the debate, the Chairperson of the Committee thanked the Minister for the co-operation of Departmental officials, in particular for the forthcoming briefing to the Committee on the provisions of the Bill. In their pre-introduction scrutiny Members had highlighted no difficulties and noted that there were no objections to the Bill arising from the public consultation. The Chairperson agreed to undertake appropriate scrutiny and to report the Committee's findings to the Assembly in due course.

Committee Public Notice regarding the Bill

11. As is the normal procedure during the Committee stage of a Bill, a public notice inviting submissions was inserted in the Belfast Telegraph, the Irish News and the Newsletter on 1 July 2010, with a closing date of 12 August 2010. Only one submission was received, from the National Union of Students – Union of Students in Ireland (NUS-USI), and a copy of this submission is included at Appendix 3 to this Report.

Extension of the Committee Stage of the Bill

12. At its meeting on 30 June 2010 the Committee agreed to seek a short period of extension to the Committee stage of the Bill to enable Members to take further evidence. A draft motion extending the Committee stage to 11 November 2010 was agreed by the Committee on 8 September 2010 and supported by the Assembly on 20 September 2010.

Committee Stage Scrutiny of the Bill

13. The Committee had before it the Student Loans (Amendment) Bill (NIA Bill 22/09) and the Explanatory and Financial Memorandum that accompanied the Bill.

14. Following the referral of the Bill for Committee stage, Members received a briefing on 9 June 2010 from Departmental officials on the purpose and main provisions of the Bill. This was followed by a briefing from Assembly Legal Services on 15 September 2010 in order to clarify the main differences in law between the requirements of bankruptcies and IVAs. On 22 September 2010 the Committee took evidence from the NUS-USI representatives on the views of student members. The Minutes of Evidence are included at Appendix 2.

15. The Committee carried out its clause-by-clause scrutiny on 29 September 2010 – see Appendix 2.

Report on the Bill

16. At its meeting on 3 November 2010 the Committee agreed its Report on the Bill and ordered that it should be printed.

Consideration of the Bill

17. The Student Loans (Amendment) Bill contains the following provisions:

• Amendments to the Education (Student Support) (Northern Ireland) Order 1998 to include references to IVAs.
• Amendments to the Education (Student Loans) (Northern Ireland) Order 1990 to specify the exclusion of student loan debt from insolvency arrangements.

18. The Bill has 2 clauses as follows:

Clause 1: Student Loans: effect of voluntary arrangement

Clause 2: Short Title

Explanation of Clauses and Schedules

19. Clause 1: Student Loans: effect of voluntary arrangement

This clause amends the Education (Student Support) (Northern Ireland) Order 1998 to insert references to IVAs under the same paragraph (Article 3(3)) which currently excludes the liability for repayment of student loans from bankruptcy.

The clause also amends the remaining provisions of the earlier legislation, the Education (Student Loans) (Northern Ireland) Order 1990, to extend the provisions for insolvency to specifically exclude a student loan debt.

20. Clause 2: Short title

This clause cites the title of the Act by which it will be known.

Committee meeting 9 June 2010

21. The Committee commenced its scrutiny of the Bill on 9 June 2010 with a briefing from Departmental officials on the circumstances which had necessitated the introduction of this amending legislation. The Department also provided details of all the responses received to the public consultation on the policy proposals. During the briefing officials detailed the increasing number of student loans being included in IVAs since the legal precedent had been set and the resultant loss to the public purse. The Committee requested further information from the officials on the number of Northern Ireland domiciled people who had had student loans written off by the Student Loans Company under IVAs, and this was provided by the Department on 29 September 2010.

Committee meeting 15 September 2010

22. On 15 September 2010 the Committee was briefed by the Northern Ireland Assembly Legal Services on the inequality currently existing between debtors who enter into Individual Voluntary Arrangements and those who are involved in bankruptcy proceedings. The briefing clarified the differences between IVAs and bankruptcy, and explained how the repayment of student loans could be impacted by the different forms of debt management.

Committee meeting 22 September 2010

23. The Committee heard oral evidence from representatives of the National Union of Students-Union of Students in Ireland (NUS-USI) on 22 September 2010. NUS-USI welcomed the provisions of the Bill and agreed that the amount of a student loan due for repayment should not be reduced under an IVA in the interests of fairness. The Union stressed that the financial sustainability of the student loans system is crucial to allowing many young people to enter third level education and that resources in the higher education sector could be used more effectively than in meeting the shortfall in student loan repayments due to IVAs.

Clause by Clause Scrutiny of the Bill

24. The Committee carried out its clause by clause scrutiny at its meeting on 29 September 2010 – see Minutes of Evidence in Appendix 2.

25. The clauses of the Bill as drafted were agreed by the Committee without amendments as follows:

26. Clause 1: Student Loans: effect of voluntary arrangement.

Agreed: That the Committee agreed to clause 1 as drafted

27. Clause 2: Short title

Agreed: That the Committee agreed to clause 2 as drafted

28. At its meeting on 29 September 2010 the Committee accepted advice from the Examiner of Statutory Rules that the delegated powers outlined in this Bill were not inappropriate.

Appendix 1

Minutes of Proceedings

Wednesday, 9 June 2010
Senate Chamber, Parliament Buildings

Present: Mr Peter Weir MLA (Deputy Chairperson)
Mr Paul Butler MLA
Mr Trevor Clarke MLA
Mr David McClarty MLA
Mr William Irwin MLA
Ms Anna Lo MLA
Mrs Claire McGill MLA
Ms Sue Ramsey MLA

In Attendance: Mr Peter Hall (Assembly Clerk)
Mrs Sheila Mawhinney (Assistant Assembly Clerk)
Miss Pauline Devlin (Clerical Supervisor)
Mr Bill Kinnear (Clerical Officer)

Apologies: Rev Dr Robert Coulter MLA
Mrs Dolores Kelly MLA (Chairperson)
Mr Pat Ramsey MLA

10.02 am The meeting opened in public session.

3. Briefing by Departmental officials on the Student Loans (Amendment) Bill

Fergus Devitt, Director of Higher Education, and Angela McAllister, Higher Education Division, briefed members on the above Bill which was referred to the Committee for scrutiny on 8 June 2010.

Agreed: Members agreed that Departmental officials would provide further information on student loan debtors.

[EXTRACT]

Wednesday, 8 September 2010
Room 135, Parliament Buildings

Present: Mrs Dolores Kelly MLA (Chairperson)
Mr Jonathan Bell MLA (Deputy Chairperson)
Mr David McClarty MLA
Mrs Claire McGill MLA
Ms Anna Lo MLA
Ms Sue Ramsey MLA

In Attendance: Mr Peter Hall (Assembly Clerk)
Mrs Sheila Mawhinney (Assistant Assembly Clerk)
Miss Pauline Devlin (Clerical Supervisor)
Mr Bill Kinnear (Clerical Officer)

Apologies: Mr Paul Butler MLA
Rev Dr Robert Coulter MLA
Mr William Irwin MLA
Mr Pat Ramsey MLA
Mr Peter Weir MLA

10.06 am The meeting opened in public session.

4. The Employment (No.2) Bill and the Student Loans (Amendment) Bill: Motions for extension of Committee stage.

Agreed: Members agreed motions to extend the Committee stage of the Employment Bill (No.2) until 2 December 2010 and the Student Loans (Amendment) Bill until 11 November 2010.

[EXTRACT]

Wednesday, 15 September 2010
Room 29, Parliament Buildings

Present: Mrs Dolores Kelly MLA (Chairperson)
Mr Jonathan Bell MLA (Deputy Chairperson)
Mr Sydney Anderson MLA
Mr Paul Butler MLA
Rev Dr Robert Coulter MLA
Mrs Claire McGill MLA
Mr Chris Lyttle MLA
Mr Pat Ramsey MLA
Ms Sue Ramsey MLA
Mr Peter Weir MLA

In Attendance: Mr Peter Hall (Assembly Clerk)
Mrs Sheila Mawhinney (Assistant Assembly Clerk)
Miss Pauline Devlin (Clerical Supervisor)
Mr Bill Kinnear (Clerical Officer)

Apologies: Mr David McClarty MLA

10.05 am The meeting opened in public session.

6. Briefing from Assembly Legal Services on the Student Loans (Amendment) Bill

The Committee was briefed by Angela Kelly, Assembly Legal Advisor, on the differences between Bankruptcy and Individual Voluntary Arrangements, with reference to the repayment of Student Loans. The briefing was followed by a question and answer session.

[EXTRACT]

Wednesday, 22 September 2010
Room 29, Parliament Buildings

Present: Mrs Dolores Kelly MLA (Chairperson)
Mr Jonathan Bell MLA (Deputy Chairperson)
Mr Sydney Anderson MLA
Rev Dr Robert Coulter MLA
Mr Chris Lyttle MLA
Mr David McClarty MLA
Mrs Claire McGill MLA
Mr Pat Ramsey MLA
Ms Sue Ramsey MLA
Mr Peter Weir MLA

In Attendance: Mr Peter Hall (Assembly Clerk)
Mrs Sheila Mawhinney (Assistant Assembly Clerk)
Miss Pauline Devlin (Clerical Supervisor)
Mr Bill Kinnear (Clerical Officer)

Apologies: Mr Paul Butler MLA

10.03 am The meeting opened in public session.

6. Briefing from Student Union Presidents on the Student Loans (Amendment) Bill

Adrian Kelly, President, University of Ulster Students' Union, and Gareth McGreevy, President, Queen's University Students' Union, briefed the Committee on their views on the Bill. The briefing was followed by a question and answer session.

11.31 am Ms Sue Ramsey left the meeting

11.53 am Mr Pat Ramsey left the meeting

[EXTRACT]

Wednesday, 29 September 2010
Senate Chamber, Parliament Buildings

Present: Mrs Dolores Kelly MLA (Chairperson)
Mr Jonathan Bell MLA (Deputy Chairperson)
Mr Sydney Anderson MLA
Rev Dr Robert Coulter MLA
Mr Chris Lyttle MLA
Mr David McClarty MLA
Mrs Claire McGill MLA
Mr Pat Ramsey MLA
Mr Peter Weir MLA

In Attendance: Mr Peter Hall (Assembly Clerk)
Mrs Sheila Mawhinney (Assistant Assembly Clerk)
Miss Pauline Devlin (Clerical Supervisor)
Mr Bill Kinnear (Clerical Officer)

Apologies: Mr Paul Butler MLA
Ms Sue Ramsey MLA

10.10 am The meeting opened in public session.

6. Committee Stage of the Student Loans (Amendment) Bill (Northern Ireland) 2010

The Committee completed its formal clause-by-clause scrutiny of the above Bill and agreed the following:

Clause 1 – Student Loans: Effect of Voluntary Arrangement

Question put and agreed:

"That the Committee is content with Clause 1"

Clause 2 – Short Title

Question put and agreed:

"That the Committee is content with Clause 2"

[EXTRACT]

Wednesday, 3 November 2010
Room 29, Parliament Building

Present: Mrs Dolores Kelly MLA (Chairperson)
Mr Jonathan Bell MLA (Deputy Chairperson)
Mr Sydney Anderson MLA
Rev Dr Robert Coulter MLA
Mr Chris Lyttle MLA
Mr David McClarty MLA
Mrs Claire McGill MLA
Mr Pat Ramsey MLA
Ms Sue Ramsey MLA
Mr Peter Weir MLA

In Attendance: Mr Peter Hall (Assembly Clerk)
Mrs Sheila Mawhinney (Assistant Assembly Clerk)
Miss Pauline Devlin (Clerical Supervisor)
Mr Bill Kinnear (Clerical Officer)

10.00 am The meeting opened in public session.

Apologies

There were no apologies tendered for the meeting

3. Student Loans (Amendment) Bill

The Committee considered the Committee Report on the Student Loans (Amendment) Bill.

10.33 am Ms Sue Ramsey left the meeting

Agreed: Members agreed the Executive Summary, paragraphs 1 to 5 of the report

Agreed: Members agreed the Introduction, paragraphs 6 to 16 of the report

Agreed: Members agreed the Consideration of the Bill, paragraphs 17 to 23 of the report

Agreed: Members agreed the Clause by Clause Scrutiny of the Bill, paragraphs 24 to 28 of the report

Agreed: Members were content that the report should be printed and that the required extract of the minutes should be attached unapproved.

10.35 am Mr Peter Weir joined the meeting

[EXTRACT]

Appendix 2

Minutes of Evidence

9 June 2010

Members present for all or part of the proceedings:

Mr Peter Weir (Deputy Chairperson)
Mr Paul Butler
Mr Trevor Clarke
Mr William Irwin
Ms Anna Lo
Mr David McClarty

Witnesses:

Mr Fergus Devitt Ms Angela McAllister

Department for Employment and Learning

1. The Deputy Chairperson (Mr Weir): I remind Members that this item is being reported by Hansard. This marks the beginning of the Committee Stage, after the Bill received its Second Stage yesterday. Fergus will remain with us; there is no escape as yet. He is joined by Angela McAllister from the higher education division — you are welcome, Angela. Fergus and Angela will brief us on the Bill.

2. Mr Fergus Devitt (Department for Employment and Learning): In March 2009, the Committee for Employment and Learning gave its approval for a public consultation on the Department's proposal to introduce legislation to exempt student loans from individual voluntary arrangements (IVAs). The public consultation, which was open from 23 July 2009 to 24 October 2009, did not elicit any objection to the proposals.

3. Executive approval to introduce the Bill to the Assembly was given on 13 May 2010, and the Bill was introduced to the Assembly on 25 May. The Second Stage debate took place yesterday, during which a number of Members who are here spoke. This evidence session is, therefore, part of the Committee Stage of the Bill.

4. IVAs are the policy responsibility of the Department of Enterprise, Trade and Investment (DETI), and the Bill does not make any policy changes in relation to them. DETI is fully aware of the Department's intention to legislate in this regard. The Bill deals exclusively with a borrower's liability to repay a student loan if he or she enters into an IVA. An IVA is a form of insolvency similar to bankruptcy — a legal channel for cancelling or reducing a borrower's debt. In an IVA, the debtor agrees to pay a single, reduced, affordable monthly payment for between three and five years, after which the unpaid part of the debt is written off by the creditors.

5. In the case of student loans, the Student Loans Company is the creditor acting on behalf of the Department. Student loans have been excluded from bankruptcy since 2006, under provisions in the Higher Education (Northern Ireland) Order 2005. At that time, it was considered whether student loans should also be excluded from IVAs, which are a form of insolvency similar to bankruptcy, as I mentioned. However, IVAs were relatively uncommon then, so it was decided not to legislate at that time with respect to IVAs and to keep the situation under review. At that time, their financial effect on the Student Loans Company was negligible. It had dealt with only 11 IVAs, with a value of £28,500, by 31 December 2003. However, IVAs have increased in number, and the precedent of including student loans as apart of an IVA has been set.

6. By the close of 2007, the Student Loans Company had dealt with over 3,000 IVAs, with a value of over £17 million, in England and Wales. In 2008-09, the Student Loans Company wrote off over £41,000 in publicly funded student loans in respect of Northern Ireland-domiciled students, and that amount is expected to increase when the 2009-2010 figures become available shortly. Therefore, the Department considers it anomalous to exclude student loans from bankruptcy but not from IVAs.

7. Student loans are made on non-commercial terms, including low interest rates, as you heard earlier, and the obligation to repay being linked to a student's income. In addition, as student loans are paid out of and subsidised by public funds, it is not considered appropriate to allow borrowers to reduce or limit their liability to repay by entering into an IVA.

8. It may be useful for Committee members to note that introducing the Bill will restore parity with England and Wales, where similar provisions have been introduced. I am grateful to the Committee for its interest in this issue. Angela and I are happy to take questions.

9. The Deputy Chairperson: Parity seems to be one of the themes of today. Members will be aware that there is a summary of the responses, and there has not been any particular controversy raised in relation to the issue.

10. Mr Butler: I broadly agree with the Bill, but in relation to the debt that students are getting into, Fergus — that is £41,000 at the moment, but that figure is going to be higher. How much higher? Is there an increasing trend of students getting into more debt in the present climate?

11. Mr Devitt: The £41,000 specifically refers to the IVAs that have been written off.

12. The Deputy Chairperson: Do we know how many people that relates to?

13. Ms Angela McAllister (Department for Employment and Learning): I do not have the figure with me, but I can get you that information.

14. Mr Devitt: The Committee will be aware that the issue of student debt is a much broader one than what relates specifically to IVAs. It is something that student leaders and others are pushing through.

15. Mr Butler: The figure in GB is £17 million. That gives us some indication that it is a serious issue.

16. Mr Devitt: Again, that is the figure for those who have entered into IVAs. It is not the total amount of student loans that have been taken out.

17. Mr Butler: Yes, but it does give you some sort of —

18. The Deputy Chairperson: It is interesting to note the response in annexe A from the National Union of Students.

19. Mr Irwin: Is there a limit on what students are allowed to borrow?

20. Ms A McAllister: Yes. They borrow a fee loan and a maintenance loan. The fee loan is capped at £3,290 this year, and the maximum maintenance loan is £4,800.

21. Mr Irwin: Is that per year?

22. Ms A McAllister: Yes; per academic year.

23. Mr Irwin: So that could multiply?

24. Ms A McAllister: Yes; it is easy to do the arithmetic depending on the length of the course.

25. The Deputy Chairperson: Does the cap apply to every subject?

26. Ms A McAllister: Yes.

27. The Deputy Chairperson: OK. But obviously it depends on the length of the course. Medicine, for example, is a five-year course, or someone could go on to do postgraduate work, which could take a number of years, so it is a movable target. That is a bit of an aside from the Bill itself.

28. Ms A McAllister: Student loans are just for undergraduates, not for postgraduates.

29. The Deputy Chairperson: OK, so it is purely on that side. I thank you for your evidence. I suspect that if you had been here to discuss a more controversial Bill you would have got more of a grilling.

30. Mr Devitt: We will do our best next time.

15 September 2010

Members present for all or part of the proceedings:

Mrs Dolores Kelly (Chairperson)
Mr Jonathan Bell (Deputy Chairperson)
Mr Sydney Anderson
Mr Paul Butler
Rev Dr Robert Coulter
Mr Chris Lyttle
Mrs Claire McGill
Mr Pat Ramsey
Ms Sue Ramsey
Mr Peter Weir

Witnesses:

Angela Kelly

Northern Ireland Assembly Legal Services

31. The Chairperson (Mrs D Kelly): I welcome our legal adviser, Angela Kelly. I remind Committee members that the Bill is a technical Bill that seeks to close the loophole whereby student loan repayments can be included in individual voluntary arrangements (IVAs) but not bankruptcy proceedings.

32. I also remind members that the briefing is being recorded by Hansard, so I would be grateful if all electronic devices could be switched off.

33. The responses that the Department received to the consultation on the Bill were supportive, and the single response to the Committee's public notice on the Bill was positive. I invite Angela to take us through the briefing paper.

34. Ms Angela Kelly (Northern Ireland Assembly Legal Services): Thank you. The briefing paper is somewhat detailed, so I propose to take a broad approach before addressing any particular issues.

35. The Student Loans (Amendment) Bill is a short, technical Bill that deals with the discrete issue of the inequality that currently exists between those debtors who enter into individual voluntary arrangements and those who proceed down the bankruptcy route. If one is made bankrupt, one's student loan cannot be included in the bankruptcy procedure, and one remains liable for it after one's discharge from bankruptcy. At present, if one enters into an individual voluntary arrangement, the student loan can be included and become part of that arrangement.

36. There are certain debts, in parity with a bankrupt's situation, that cannot be included in an individual voluntary arrangement: for example, money owed under Family Court proceedings or arising out of personal injury claims against the debtor; court fines; and secured credit. Student loans should fit into that list, as they do in a bankrupt's situation. There is disparity there at present.

37. The essential differences between an IVA and bankruptcy centre on the debtor's situation. One is not necessarily a better way to proceed than the other. One of the advantages of an IVA is that one has more control over the process. The proposal sets out the debtor's assets and liabilities, and what he proposes to distribute among all creditors, or those that can be included.

38. There is also less publicity with an IVA. Details would be published in the insolvency services list and there is a public register, but there is no publication in 'The Belfast Gazette' and no publicity in the 'Belfast Telegraph'. People often prefer an IVA for that reason.

39. The significant difference is that a debtor engaging in an IVA is not subject to the restrictions of a bankrupt, which are many and significant. Those include, for example, the inability to sit as a director. There are also restrictions around holding public office and obtaining credit in excess of £500. None of those restrictions would apply to an IVA. However, an IVA will work only if there are working funds with which to pursue it. The debtor must have sufficient capital to be able to meet a percentage of his or her debts on an ongoing basis for up to three years, whereas a bankruptcy is discharged after one year. Although there are benefits, an IVA does not have the advantage of the clean sweep or closed book of bankruptcy.

40. I do not know whether members require any more detail on the procedure aspects.

41. The Chairperson: Do members have any questions?

42. The Committee Clerk: May I just mention that the students' union presidents from the University of Ulster and Queen's University are coming to the Committee meeting next week to give their views on the Student Loans (Amendment) Bill? We have not received any objections to the Bill, and my discussions with the students' union presidents suggest that they are not objecting to it either but just want to give the viewpoints of the universities and their students.

43. The Chairperson: That will be very useful. Thank you.

44. Mr Weir: We can discuss this with the students' unions presidents. The Committee Clerk indicated that they are not objecting to the Bill, but are they consultees?

45. The Committee Clerk: Yes; the Department's consultation ran for the usual consultation period. Input was received from the National Union of Students and the Union of Students in Ireland, which was the single respondee to the Committee's public notice. They supported the idea of parity between bankruptcy and IVAs, as Angela Kelly outlined. They felt it a good idea that one should have no particular advantage over the other and that they should essentially do the same thing. They felt that people should not be able to drop the student loans into the IVAs, largely because of the salary level. Repayments on student loans occur only at a particular level of salary, and it was felt unfair that that offered protection for the person repaying.

46. The Chairperson: We will hear more next week.

47. Mr Butler: How many people have availed themselves of an IVA?

48. The Committee Clerk: We can find that out from the Department. That is not something about which we are concerned.

49. Mr Weir: From memory, I think that the argument was that the number was extremely minimal, and that IVAs were almost not being used in Northern Ireland. There was a concern that, as we moved into a tougher financial situation, more people would become bankrupt. The IVA could be seen as a loophole.

50. Mr Butler: If people have availed themselves of an IVA, would there be implications if we bring in a piece of legislation that would exclude them?

51. Ms A Kelly: The legislation will not be retrospective. Once someone has entered into an IVA, the agreement is registered with the courts.

52. The Chairperson: We will ask the Department for an update on the number.

53. The Committee Clerk: I think that it was 49, but I do not want to say that that is a definite figure; that is just my recollection. We will ask the Department to clarify that for us for next week.

54. The Chairperson: Are members happy enough?

55. Ms A Kelly: If one has already applied for bankruptcy, in which case the student loan will not be allowed to be included, people can at present apply for an IVA, and the student loan can come back out again. That is another strange little discrepancy that the Bill will address.

56. The Chairperson: Thank you very much.

22 September 2010

Members present for all or part of the proceedings:

Mrs Dolores Kelly (Chairperson)
Mr Jonathan Bell (Deputy Chairperson)
Mr Sydney Anderson
Mr Chris Lyttle
Mr David McClarty
Mrs Claire McGill
Mr Pat Ramsey
Ms Sue Ramsey
Mr Peter Weir

Witnesses:

Mr Adrian Kelly Mr Gareth McGreevy

National Union of Students – Union of Students in Ireland

57. The Chairperson (Mrs D Kelly): We have with us no less than two presidents, one from Queen's University, Gareth McGreevy, and the other from the University of Ulster, Adrian Kelly. I started off talking about Ulster Unionist presidents. Given the day that is in it, I suppose that that is an easy mistake to make.

58. You are both very welcome this morning. This briefing will be recorded by Hansard. I remind Committee members and members of the public to switch off all electronic devices because they have, thus far, had a detrimental effect on Hansard. The Bill will prevent student loans from being included in individual voluntary arrangements (IVAs). Responses to the Department's consultation on the Bill were supportive, and the single response to the Committee's public notice on the Bill was positive. I invite Mr Kelly and Mr McGreevy to brief the Committee on their respective views of the Bill and to raise any other issues of concern.

59. Mr Adrian Kelly (National Union of Students – Union of Students in Ireland): Thank you, Chairperson. Thank you very much for the opportunity to speak to the Committee this morning. I hope that members will bear with me. This is the first time that I have made a presentation to any such Committee so, to be honest, my presentation is not much more than what is in the briefing document.

60. The University of Ulster students' union greatly appreciates the opportunity to comment on the Student Loans (Amendment) Bill and the opinion of our membership being sought. The students' union accepts and supports the Bill and agrees with the reasoning that student loans should not be reduced under any individual voluntary arrangement. We strongly believe that the financial sustainability of the student loans system is crucial to allowing many young people to enter third level education. Without that form of financial assistance, the opportunity of higher education would simply not be available to them. That is very poignant for a lot of members of my students' union who come from the University of Ulster. As I am sure the Committee is aware, the University of Ulster has a commitment to widening participation. A lot of our members come from lower socio-economic backgrounds and have relied on the student loan system to allow them to enter third level education.

61. The students' union believes also that the Government could better allocate financial resources in the higher education sector to benefit a greater number of students, rather than having to cover the shortfalls in the student loan repayments that are currently due to IVAs. Furthermore, the students' union recognises that the fairness in the current system must be maintained and is crucial to its success.

62. Although the University of Ulster students' union greatly appreciates the opportunity to comment on the Bill, we and our membership believe that of far greater importance is the general issue of student debt and the future of funding of third level education in the North. The increasing numbers of students and recent graduates applying for IVAs is but a symptom of the increased financial pressures that are being exerted on students. We urge the Committee for Employment and Learning to take cognisance of that larger issue.

63. On the issue of debt, every other region in the UK is having a discussion on the future of higher education funding. We need to begin that discussion. Vince Cable, the Secretary of State for Business, Innovation and Skills, started that discussion in England over the summer. The discussion was about graduate tax, which is outside of the Browne review. We believe that public money, and a vast amount of time, has been spent on the Stuart review of third level education in Northern Ireland, and yet, six months after its completion, that review remains parked on the shelf. We would like to see the review published for those who participated, especially us. We invested a large amount of time in that and would like to begin the discussion on the future of third level education funding.

64. The Chairperson: Thank you very much. Gareth, I invite you to say a few words, during which you may want to tease out some of the comments that you made over and above the IVAs.

65. Mr Gareth McGreevy (National Union of Students – Union of Students in Ireland): The sentiments of the Queen's University Belfast student union (QUBSU) echo Adrian's. In principle, we support the Bill to maintain a financially sustainable student loan system in Northern Ireland. Student loans should be fully recoverable and not substantially reduced under any IVA system. The principle of higher education being free at the point of entry is of the utmost importance to students in Northern Ireland. As Adrian said, the efforts of each university in Northern Ireland to increase and widen participation among those from the lower socio-economic backgrounds are of great importance and a key principle of free-at-the-point-of-entry education that we would like to see maintained.

66. There is a fear that, if the Bill is not passed, there may be a substantial increase in the number of people applying for IVAs, due to the current economic climate in Northern Ireland, which would leave our higher education funding system open to abuse. QUBSU does not believe that the Government should add any additional funding for unpaid student loans. Student debt is an issue of great importance and a wider issue under IVAs. There is an increasing level of student debt and an increasing level of graduate unemployment — it has grown by 5% over the past few years. That is something that the Department needs to address, and we can work in partnership with the national unions to try to combat that.

67. Another area of concern is the repayment level of student loans, which should have some reflection of the inflation in student tuition fees from the original £3,000. The threshold of repayment should be increased to reflect that.

68. An increase in student support, possibly under the student finance system in Northern Ireland, is something that we would like to discuss. The debate on higher education funding needs to start. Given the amount of public money that was spent on the Stuart review, and bearing in mind that we are independent of the Browne review in the UK, it is time that we in Northern Ireland saw the report. I put time into that review, and student officers know that you put time into that review, my predecessors put time into it, and, most importantly, the student body in Northern Ireland put time and effort into it. Therefore, it is time for the report to be released, independently of the Browne review at Westminster.

69. The Chairperson: We have certainly heard that message loud and clear, and the Committee shares your concerns.

70. You both talked about student debt. Perhaps I should declare an interest, because I have two daughters with considerable student debt. Will you give us a sense of what the average student debt is?

71. Ms S Ramsey: Not your own. [Laughter.]

72. Mr A Kelly: Luckily enough, our debt is slightly less than that of the students coming through at the minute, because students who started university the year after I did saw an increase in their tuition fees. Therefore, their debt is substantially more. I do not mind declaring that my debt is in and around £13,500, whereas students are now coming out of university with debts ranging from £17,500 — if they are looking after the pennies — to £22,500. The evidence from the NUS in England is that student debt is considerably higher there, at £25,000, and that it is only going upwards.

73. The Chairperson: Had I not used my endowment policy, my daughter would be nearly £25,000 in debt, because she did a postgraduate degree in Scotland, the fees for which were £6,500 a year.

74. Mr McGreevy: Adrian went through the previous system. However, I was one of the first students to go through the new system and have a debt of around £19,000. That is without taking into consideration hidden course costs and living costs. I do not know what it is like at the University of Ulster; I am talking specifically about those at Queen's. Students have to buy course materials and pay for trips away. I studied law, so I spent lot of time on work experience. Therefore, there is a lot more than just student loans and tuition fees to take into consideration, especially living costs.

75. The Chairperson: I must say that those are shocking figures.

76. Mr Weir: I am not aware of the detail of the Stuart report, so one of the actions that we need to pursue is to ask the Department for some degree of clarification about that.

77. The Committee Clerk: The Department has indicated that it is — let me phrase this properly and carefully — waiting for the outcome of Lord Browne's review before it publishes the findings of the Stuart report. Joanne Stuart, who authored that independent report, will be at the Committee's further education and business breakfast in a fortnight and will be available for discussions with members. She understands that situation. Lord Browne is due to report very soon, so it is likely that Joanne Stuart's report will be realised fairly soon as well. However, we can ask the Department to clarify that.

78. Mr Weir: First of all, as regards the IVA side of it, you have obviously indicated that you are fairly supportive. From what you said, I presume that that is on the ground of protection of the overall system in case too many people — at present, not many people have used IVAs in terms of the student loan side of it — flood into that loophole and wreck the whole system. Presumably, if I am picking you up right, there are also equity or equality issues involved, because the people who use IVAs lurch a much greater burden onto those who do not. Is that a fair summation of your position?

79. Mr A Kelly: For want of a better term, that hits the nail on the head. We believe that the majority of students do not know about that system at the minute. If it became common knowledge among the student body, there would be a sharp increase in the numbers claiming IVAs, because, as I am sure everyone can appreciate, nobody likes to be lumbered with a large debt. The terms of an IVA stand for six years, but it takes a lot longer than six years to repay most student loans. Some may view IVAs as the easier option in unburdening themselves from that debt. To maintain a fairer system for all and for those not entering into IVAs, the Bill should be enacted.

80. Mr Weir: Secondly, turning to the wider student loan system, you have acknowledged the pluses and minuses. It generates a high level of student debt, but, on the flip side of the coin, you have also acknowledged that the student loan system is fairly crucial to the idea of a wide level of participation. The Deputy Chairperson and I were at university during the pre-loan days of student grants, when there was a lot less financial burden on students. However, by the same token, there were fewer opportunities for people to go to university then.

81. Mr Bell: Only the special ones.

82. Mr Weir: I cannot comment on that.

83. You mentioned that you felt that, particularly in light of the rise in fees, the threshold for repaying student loans should be increased. Do you have any specific figure in mind for the increased threshold? How do you see that operating from your side of things?

84. Mr McGreevy: NUS-USI actually submitted a paper about that to the former Chairperson, Sue Ramsey, in March. It highlighted the —

85. The Committee Clerk: We have received that paper. We requested the NUS-USI's view on what level of salary graduates should be earning before student loan repayments begin. The figure that it gave us was £21,000.

86. Mr A Kelly: There were three figures, and that figure was the average. The Higher Education Statistics Agency found that a new graduate employed in 2009 earned £19,677. The Prospects directory said that graduates earned an average salary of £24,048 in 2008. The Association of Graduate Recruiters said that it would pay a graduate £25,000 in 2009. That gives the Committee an idea of what graduates are earning.

87. Mr Weir: I understand that, previously, repayments did not kick in until there was a certain percentage threshold of the average wage. Is that still the case?

88. Mr A Kelly: The threshold is £15,000 per annum.

89. Mr Weir: Is it set at a specific figure or at a percentage?

90. Mr McGreevy: It is set at that figure.

91. The Chairperson: Given that the Committee has a number of new members, I suggest that we recirculate that paper.

92. The Committee Clerk: On the back of the NUS-USI paper, the Committee took advice from the Department as to how that threshold could be raised. The Department advised that that would have to be a joint action from England, Wales and Northern Ireland, with participation from the Student Loans Company. We wrote to the corresponding Committees in England and Wales and asked for their assistance in pushing their Departments to do that. Our understanding at the time was that the Department for Employment and Learning was engaging with its counterpart Departments in Wales and England. We have not had any feedback on the matter since. We were told that it would be a long process. However, that was some time ago. Perhaps this is an opportune time to pursue that.

93. The Chairperson: We will pursue it.

94. Mr A Kelly: Graduates have to make repayments to the Student Loans Company of 9% of all earnings above £15,000. NUS-USI argues that that level has remained the same, with no inflationary increase. Inflation has not been applied since 2006-07. We do not see why the rationale of annual inflationary rises is applied to tuition fees and not to the repayment level. The paper contains a number of figures that detail repayment levels, the increase and how that short-changes students.

95. Mr McGreevy: They are calculated on the respective percentage increase in student tuition fees versus the repayments.

96. The Chairperson: It would be useful to recirculate the paper to all members. This is going to become a very real issue. Has the paper been updated or amended in any way?

97. Mr McGreevy: It includes statistics for the current academic year. Therefore, it is up to date.

98. The Chairperson: Maybe you would leave a copy or send one to Peter.

99. The Committee Clerk: Obviously, the Committee went to the Department and asked about the logistics of raising the starting salary. At the time, the Department pointed out that if you raise the starting salary at which loans begin to be repaid, you take more repayments out of the system, which, theoretically, was initially designed to fund new loans. That means that the Student Loans Company's income drops considerably. That shortfall would have to be met, by and large, by Departments.

100. The Department for Employment and Learning (DEL) already puts considerable resources into that system. As members are aware from figures that we have seen, student maintenance accounts for £300 million of the DEL budget. Altogether, higher education receives £0·5 billion — around 60% — of DEL's budget. The Department was trying to highlight the fact that if the starting salary were raised, it would have to step in considerably more, which would squeeze resources elsewhere. It seems to be a particularly complex problem. If members are agreeable, we will seek a further update from the Department on how that sits and what is happening in its discussions with the other jurisdictions.

101. The Chairperson: Indeed, that would be useful.

102. Mr P Ramsey: Adrian and Gareth, you are very welcome. There is reasonable contentment on the fundamental reason why you are here, which is the Student Loans (Amendment) Bill. Clearly, it is a good opportunity for you to present to the Committee in a more formal way. There are a number of issues. You represent almost a quarter of a million students across Northern Ireland. It is important that we hear what students think and believe in. Sir Graeme Davies is carrying out a review of higher education. I am keen to hear how you see that going from your perspective, as well as how we can look at the repayment levels of those loans. It is the first time since I have been on the Committee that I have seen the students' unions formally coming in.

103. The Chairperson: I met them in June; I thought it would be a good idea to bring them along.

104. Mr P Ramsey: We have a forthcoming Committee meeting at the Magee campus. There is no reason why the representatives of the students' unions should not attend the networking event — the breakfast morning — that we are having as well. I propose that we include them in it.

105. There is a range of issues that affect all of us, and the campuses. Tremendous work goes on at Magee on campaigns about alcohol-related events and so on, and I welcome the tremendous work that is ongoing with the alcohol forum in Derry. You are here for a fundamental and specific reason, but it would be good to hear other issues affecting students. I suggest that, at a later stage, we invite you back to discuss in more detail the higher education review or other areas of ultimate concern, so that we can give students an open door to let young people know that their voices are being heard. That is more important to me.

106. The Chairperson: The Derry meeting at Magee is on 20 October, and Sir Graeme Davies will be reporting to the Committee then. It may be useful for you to listen in on that. It may be too early at that stage for your response, but thereafter, we would seek to formally invite you back to give us your perspective.

107. The Committee Clerk: Also, by that stage the Stuart and Browne reports will be available.

108. The Chairperson: Hopefully.

109. The Committee Clerk: We assume that the debate on those reports will have started by then. That would be a useful time to do that.

110. Mr Bell: The Stuart report is independent, but the Browne report, if the leaks are to be believed, is likely to make some sort of statement about the Russell Group of universities and about increased tuition fees — up to a maximum of £6,000, and then each university sets them. The Stuart report will not be completely independent of what Lord Browne reports, and the Browne report will have relevance to Queen's University as part of the Russell Group of universities.

111. Mr McGreevy: I met our vice-chancellor and several members of our executive in relation to that. At senate, they had supported the proposal by the Russell Group. We questioned why, and the vice-chancellor said that he would not support it because we have our own independent review here in Northern Ireland and that we was taking his position as a director of the Russell Group, not as vice-chancellor of Queen's University, Belfast, which I found quite comical.

112. I think that shows that Queen's is trying to distance itself from the Browne review in name, and is trying to play up the Stuart review. That is where we are coming from. We held a referendum on that issue.

113. The Chairperson: That is an interesting dynamic.

114. Mr Bell: My view, for the record, is that if you are going to retain quality in education at Queen's, you will have to go with the Russell Group. However, we can agree to differ.

115. The Chairperson: Or they may well have to invest in the economy and realise that higher education —

116. Mr Weir: That is for the University of Ulster. [Laughter.]

117. The Chairperson: Those are arguments that will play out on the Floor of the Assembly somewhat.

118. Mrs McGill: Adrian and Gareth, you are welcome. You are unambiguous in your support for the Bill; that is welcome. That helps someone like me. I want to put on record that you raised the review of student fees. I raised that issue a number of times before recess, and I was wondering where it was. I heard Joanne Stuart say recently — perhaps within the past week — that it has been agreed that the Minister wants the review to come out in tandem with the Browne review. Is that the case?

119. The Committee Clerk: That is the understanding that we have.

120. The Chairperson: We can write to the Minister and ask whether that is still his intent.

121. Mrs McGill: I am open to contradiction on this, but I heard Joanne Stuart say that on TV.

122. The Committee Clerk: My understanding is that that is the way that the Department is working now. Obviously, Lord Browne's review started at a different time. When Joanne Stuart's review started, Lord Browne's review was not envisaged. That is as far as I am aware, but I am willing to be corrected. That is why the timings are different. The Minister indicated that there would have to be a debate generally, and that the Student Loans Company operates across jurisdictions, so any variance in tuition fees and so on may well have implications — if there is some kind of graduate tax — for Revenue and Customs, and that that would also have to be across the jurisdictions. That was why the Department said that it needed to hear what was being said elsewhere and that the debate should be all at the same time, hence keeping the publishing of the two reports in tandem.

123. Mrs McGill: I should like to have seen that much sooner. That is why I raised the issue on a number of occasions.

124. Mr A Kelly: Just to reiterate the point, my executive, members of our union and I are very disappointed that the Stuart review has not yet been published. We are of the opinion that it has been stalled for six months simply to wait for the Browne report to come out. We accept that the Browne report and the Stuart report will have to be taken together and consideration given to both, but we feel that the Stuart report has been stalled deliberately to allow the Browne report, which will receive much wider publicity and coverage, to overshadow it. Given the amount of time invested by our members, people in government and Joanne Stuart, and given the money invested, it is very disappointing not to see a return and that paper to be published.

125. The higher education system in Northern Ireland is not the same as England's. The higher education system in Scotland does not operate in the same way as England's either. There will be contradictions in both reports, but the fact is that the Browne report will receive much more attention and will overshadow any recommendations that come from the Stuart report.

126. The Chairperson: There was talk about consultants' reports earlier on the radio, but, unfortunately, there are lots of buried reports around here. We can raise that point with the Minister.

127. Mr McGreevy: I want to reiterate a point that I made in my presentation: we do not want to see the report parked. We want to see it out in the open. It would also be interesting to find out how much public money was spent on the report.

128. The Committee Clerk: We have established already that there was no remuneration to Joanne Stuart at all.

129. The Chairperson: There is a cost for publication of the report.

130. The Committee Clerk: But I just —

131. Mr Weir: It has not been published yet.

132. The Committee Clerk: The Committee wrote to Joanne Stuart and commended her for not taking any remuneration. That needs to be on the record.

133. Mr P Ramsey: She is one of few.

134. Mr Weir: I am sure that the Committee will do likewise and the Chairperson and Deputy Chairperson will follow suit.

135. Mr S Anderson: I don't know about the Deputy Chairperson.

136. The Chairperson: I do know.

137. Mr Lyttle: I realise that we are pressed for time, so I will try to be brief. I echo the welcome to Mr McGreevy and Mr Kelly. I am a recent graduate of Queen's, and it is great to see the student bodies making such concise contributions to these issues. The NUS-USI briefing touched on graduates making a contribution based on their post-study earnings. Have you given any thought to that wider debate that you can feed back to the Committee?

138. Mr McGreevy: The wider debate about the graduate tax proposal?

139. Mr Lyttle: The briefing says that:

"a contribution based on their post-study earnings"

should be considered in the wider debate about student finance and ensuring accessibility. I am happy to discuss that with you further at another stage.

140. Mr McGreevy: Is that in terms of repayment level?

141. Mr Lyttle: It does not link it to anything, really; it just makes the comment.

142. Mr McGreevy: There are two issues: whether it be reflective of the repayment level or whether it is the higher education funding system in respect of a graduate tax proposal, which, as Adrian Kelly mentioned, Vince Cable — [Inaudible due to mobile phone interference.]

143. Mr Lyttle: Do either of the bodies have a position on that at the moment?

144. Mr McGreevy: We would need to consult our membership, first and foremost.

145. Mr A Kelly: Our membership is opposed to a graduate tax. The Committee is probably aware of the NUS blueprint for change. That was voted down by our student body at a recent union general meeting. However, in the times that we are in and moving forward, we realise that there is a need for changes to the higher education funding system and that our student body will have to look at that blueprint again. One of our priorities for this year is to find a definitive way forward, because we realise, and I am sure that Queen's and NUS-USI realise, that we cannot continually come to the table and raise issues and complaints without bringing with us some solutions. We realise that that is key to solving any problem. We might meet you only halfway, but at least we are coming forward with some form of solution.

146. The Chairperson: That is a useful approach, and I am sure that it will be broadly welcomed.

147. Mrs McGill: I think that it was Adrian who mentioned widening participation. Is either of you aware of the widening participation regional strategy that the Department is involved in and on which we are awaiting a report?

148. Mr McGreevy: I have heard rumours in relation to cuts in the funding of widening participation.

149. The Chairperson: Have you heard anything other than rumours? Were you formally invited to comment?

150. Mrs McGill: Mr Kelly mentioned widening participation. It is important, particularly for those who come from the lower socio-economic groups. It is obvious to me that it is important to you and your members. I was keen to know whether either of you had heard of the strategy. I think that it is on its way.

151. The Chairperson: Have you been consultees on the strategy?

152. Mr A Kelly: No. I was not formally aware that there was a formal strategy in place. I heard discussions in university committees, similar to what Gareth heard. I know that it is of concern to the University of Ulster, because widening participation is one of its key aims. It will be a bit of light reading for me.

153. The Chairperson: We await progress with interest. There are no other questions. I thank you for your presentation, which was broader than the remit that you were given. Thank you for your attendance and your contribution. I hope that you will be able to take up our invitation for 20 October and that we can form a relationship, because there are tough times ahead for all of us. We want the voices of the students and young people to be heard at Committee level.

29 September 2010

Members present for all or part of the proceedings:

Mrs Dolores Kelly (Chairperson)
Mr Jonathan Bell (Deputy Chairperson)
Mr Sydney Anderson
Rev Dr Robert Coulter
Mr Chris Lyttle
Mr David McClarty
Mrs Claire McGill

154. The Chairperson (Mrs D Kelly): We move to our clause-by-clause scrutiny of the Student Loans (Amendment) Bill. The Bill will prevent student loans being included in individual voluntary arrangements. The responses to the Department's consultation on the Bill were supportive, as was the single response to the Committee's public notice on the Bill. The Examiner of Statutory Rules has provisionally indicated that the delegated powers in the Bill are appropriate and that a full report will be forthcoming. At its last meeting, the Committee heard from the presidents of the two student unions, and they had no objections to the Bill; correspondence to the Committee from the National Union of Students and the Union of Students in Ireland was also supportive.

155. The Committee Clerk: As members are aware, the Bill has only two clauses: clause 1 is the substantive provision that prevents student loans being included in individual arrangements; that brings the legislation into line with the provisions for student loans and bankruptcy. Members will recall the member of Legal Services who is attached to the Bill outlining the reasons for the change. It is a technical, amending Bill, and, as the Chairperson said, no issues were raised with the Committee about any aspect of it. If members are content, we can move to formal clause-by-clause scrutiny, which would enable the Committee to put together its report on the Bill.

Members indicated assent.

Clause 1 (Student loans: effect of voluntary arrangement)

156. The Chairperson: Clause 1 contains a delegated power allowing subordinate legislation to be made in the form of regulations where the level of Assembly control is negative resolution. The Examiner of Statutory Rules has made a provisional assessment of the delegated power and suggests that it is set at an appropriate level of Assembly control. Are members content with the clause?

Question, That the Committee is content with the clause, put and agreed to.

Clause 1 agreed to.

Clause 2 (Short title)

157. The Chairperson: Clause 2 is the short title. Are members content with the clause?

Question, That the Committee is content with the clause, put and agreed to.

Clause 2 agreed to.

158. The Committee Clerk: That concludes the Committee's scrutiny of the Bill. A draft report will be brought before the Committee in the next two or three weeks, which we can take to the Floor of the Assembly.

Appendix 3

Written Submissions

Consultation Response Student Loans (Amendment) Bill 12 August 201

Student Loans (Amendment) Bill

August 2010

NUS-USI is a charitable organisation and representative body of almost 200,000 students in Northern Ireland. We provide representation and support to students and act as the voice for the student body on the matters that affecting our students most. We were first established in 1972 under a unique arrangement where both the British and Irish national student unions, National Union of Students (NUS) and Union of Students in Ireland (USI) respectively, jointly organised in Northern Ireland to promote student unity across the sectarian divide, and as such, our work focuses on achieving fairness, equality, balance and justice.

NUS-USI supports the principle of the bill and we believe that student loans should be recovered in full and not reduced under Individual Voluntary Arrangements (IVAs).

Higher education should be free at the point of use and graduates should make a contribution based on their post-study earnings. We are concerned by the rise of IVAs by students in the UK, an increase to 3,000 from 2006. We agree with the Department of Employment and Learning that student access to IVAs is an anomaly that should be corrected.

It is important to maintain the financial sustainability of the student loans system. Trends suggest that the number of students securing IVAs will continue to grow and this will create problems with ensuring that the student loans system is well funded. We do not believe that government should add additional funding to make up for student loans that have not been repaid.

Fairness in the student loans system must be maintained. Student access to IVAs creates a loophole that allows a special category of person to receive preferential treatment. The bill rightly creates parity with England, ensuring that students from Northern Ireland who decided to study in England are treated fairly and equally.

We are concerned with the continuing impact of student debt. We understand that 48 successful IVAs have been taken out in relation to student loans in Northern Ireland and we recommend the Committee for Employment and Learning analyse the circumstances in which these persons have availed of IVAs.

Appendix 4

List of Witnesses

 

Angela McAllister Department for Employment and Learning

Fergus Devitt Department for Employment and Learning

Mr Adrian Kelly University of Ulster, Students Union

Mr Gareth McGreevy Queens' University Belfast, Students Union

Appendix 5

Other Papers

Contents

1. 17 February 2009 – Correspondence from the Department for Employment and Learning – Policy proposals to Exclude Student Loans from IVAs

2. 12 March 2010 – Clerk's Response

3. 7 July 2009 – Correspondence from the Department for Employment and Learning – Policy consultation document

4. July 2009 – Consultation document

5. 13 May 2010 – Statement of Legislative Competence from the Minister for Employment and Learning

6. 18 May 2010 – Correspondence from the Minister of Employment and Learning – Advance Copy of the Student Loans (Amendment) Bill

7. 7 June 2010 – Briefing paper from the Department

8. 14 September 2010 – Background briefing paper from Assembly Legal Services

9. 29 September 2010 - Correspondence from the Department for Employment and Learning – Response to Committee request for further information

10. September 2010 – Briefing paper from the University of Ulster Students Union

17 February 2009 – Correspondence from the Department for Employment and Learning –
Policy proposals to Exclude Student Loans from IVAs

Adelaide House
39-49 Adelaide Street
BELFAST
BT2 8FD

Mr Peter Hall
Committee Clerk
The Committee for Employment and Learning
Northern Ireland Assembly
Parliament Buildings
Stormont
BELFAST
BT4 3SW 17 February 2009

Dear Peter,

Policy Proposal to Exclude Student Loans from Individual Voluntary Arrangements (IVAs)

Background

1. The Department is proposing to legislate to exclude publicly funded student loans from any individual voluntary arrangements ("IVAs") which borrowers may enter into during the lifetime of their loans.

2. Student loans are currently excluded by provisions in the Higher Education (Northern Ireland) Order 2005 ("the 2005 Order") from a borrower's bankruptcy debts, so that upon discharge from bankruptcy the borrower remains liable to repay his/her student loan.

3. During the passage of the 2005 Order, it was considered whether student loans should also be excluded from IVAs. IVAs enable an individual to enter into an arrangement with a creditor or creditors whereby those creditors agree to accept less than the full value of the debt as satisfaction for the whole amount.

4. In 2005 IVAs were relatively uncommon. In line with England, the Department decided not to legislate at that time with respect to IVAs and to keep the situation under review. At that time their financial effect on the Student Loans Company ("the SLC") (which administers loan payments and collection) was negligible: the SLC had dealt with only 11 IVAs in the United Kingdom, covering £41,000 in value of student loans.

5. However IVAs have increased in number recently and legislation is being brought forward in England to close the loophole which allows borrowers to write off or reduce student loan debt by entering into IVAs. By the close of 2007, the SLC had dealt with over 3000 IVAs with a value of over £17m. Whilst the number of IVAs taken out to date by NI domiciles is significantly lower than corresponding take up in England and Wales (to date £11,000 in value), this is likely to increase as the procedure has become cheaper and more accessible and a precedent to include student loan debt as part of an IVA has been set.

6. Current financial projections suggest that if the Department does not proceed with excluding student loan debt from IVAs, the projected cost in writing off debt resulting from IVAs, based on current loan book value (£1 billion) and uptake trends in GB ( 1 in 4000), is £250k. However this is likely to increase as IVAs become more popular.

Rationale

7. The Department now considers that it is anomalous to exclude student loans from bankruptcy but not from IVAs. Student loans are made on non-commercial terms, including low interest rates and the obligation to repay being linked to a student's income. In addition, as student loans are paid out of and subsidised by public funds, it is not considered appropriate to allow borrowers to reduce or limit their liability to repay by entering into IVAs.

8. It is important to emphasise that, whilst the development of this policy and passage of subsequent legislation might coincide with the current review of variable fees and student finance arrangements, this policy deals explicitly with (a) aligning the treatment of student loans in relation to IVAs with that which applies to bankruptcy and (b) the protection of public money.

Legislative position in relation to student loans and IVAs

9. Currently both mortgage style loans (those loans which are a legacy of the original student loans regime) and income contingent repayment loans (the current arrangement) can be included by a borrower in an IVA. This may have the effect of permanently restricting the Government's ability to recover the full amount of the loan from the borrower.

10. There is no power in the Student Loans Order 1990 or the Student Support Order 1998 which would allow the Department to make regulations excluding student loans from IVAs. The 1998 Order had to be amended by the 2005 Order to extend regulation making powers to exclude student loans from bankruptcy. Although the 1990 Order had already been repealed it was amended to the extent that it continued to be in operation under saving provisions. Similar amendments to both Orders would be required should the Department wish to exclude student loans from IVAs.

11. Although the change will affect existing loans, this is not retrospective, as the change will apply only to IVAs to be made in the future.

12. The policy and processes in relation to IVAs are the responsibility of the Department of Enterprise, Trade and Investment (DETI). These are set out in Annex 1. DETI has been consulted about our policy intention to exclude student loans from IVAs and is content with our proposed approach.

Next Steps

13. The Department would welcome the Committee's views on this issue as we are still at policy development stage. It would be the Department's intention to finalise a policy document over the next few months, which would then be brought to the Committee before seeking Executive approval.

Yours sincerely

C G McCONKEY
Departmental Assembly Liaison Officer

Annex 1

Background on Individual Voluntary Arrangements (IVAs)

• The policy and processes around IVAs are the responsibility of the Department of Enterprise, Trade and Investment (DETI). They are governed by Part VIII of the Insolvency (Northern Ireland) Order 1989. They are intended to be an alternative to bankruptcy. They are intended to be more flexible than bankruptcy, less costly and they avoid some of the restrictions which apply to a bankrupt. An IVA is a composition in satisfaction of an individual's debts or a scheme of arrangement of his/her affairs.
• A composition is an agreement between the compounding debtor and all or some of his/her creditors by which the creditors agree with the debtor and with each other to accept from the debtor payment of less than the amounts due to them in full satisfaction of the whole of their claims. A scheme of arrangement does not necessarily involve any compromise or release. It may take any form acceptable to the parties, but it is usually by assignment by the debtor of his property to a trustee for realisation and distribution of the proceeds of sale amongst his creditors.
• The IVA process begins with an application to court for an interim order to prevent creditors from presenting or proceeding with a bankruptcy petition whilst the order is in force and to prevent creditors from taking any other action during that period without the court's permission.
• The debtor must be represented by an authorised insolvency practitioner. The debtor presents a proposal through the insolvency practitioner to the court. It must explain why an IVA is desirable and give reasons why his/her creditors may be expected to concur with the arrangements. It will also state the debtor's assets and liabilities and proposals as to how his/her debts will be repaid (including, for example, over what period, in what instalments, and what proportion of the debt each creditor will receive). The insolvency practitioner then gives a report of his opinion to the court on whether a meeting of creditors should be called to consider the proposal.
• If the court is satisfied that a meeting of the creditors should be summoned, the nominee must summon the meeting and the court may extend as appropriate the interim order to enable the debtor's proposal to be considered.
• At the meeting the creditors then vote on whether the debtor's proposals should be accepted. The meeting may approve modifications to the proposed arrangement, if the debtor consents to each modification. If over 75% in value of the creditors present in person or by proxy vote in favour, the proposals are accepted and are binding on all creditors. A report of the meeting is then given to the court and to the Insolvency Service with the details of the arrangement to be kept on a register of IVAs.

12 March 2010 – Clerk's Response

Committee for Employment and Learning

Chris McConkey
Departmental Assembly Liaison Officer
Department for Employment and Learning
Adelaide House
39-49 Adelaide Street
Belfast
BT2 8FD

12th March 2009

Dear Chris,

Re: Policy proposals to exclude student loans from Individual Voluntary Arrangements (IVAs)

Further to your letter of 17th February regarding the above, I can confirm that the Committee is content with the proposals set out in your letter. The proposals were outlined to Members during departmental officials' briefing on the Apprenticeships, Children, Skills and Learning Bill and the associated Legislative Consent Motion. While it had not been our intention to associate the IVA proposals with the Bill, officials outlined the IVA proposals during their briefing on the Bill. Members indicated their agreement on the proposals put forward and look forward to seeing and discussing a finalised policy document in the months to come.

Yours sincerely,

Clerk to the Committee

7 July 2009 – Correspondence from the Department for Employment and Learning –
Policy consultation document

Adelaide House
39-49 Adelaide Street
BELFAST
BT2 8FD

Mr Peter Hall
Committee Clerk
The Committee for Employment and Learning
Northern Ireland Assembly
Parliament Buildings
Stormont
BELFAST
BT4 3SW 7 July 2009

Dear Peter,

Policy Consultation Document to Exclude Student Loans from Individual Voluntary Arrangements (IVAs)

This letter follows up earlier correspondence of 17 February 2009 in which Committee Members were issued with a paper outlining the Minister's proposals to bring forward an Assembly Bill to legislate for the exemption of Student Loans from Individual Voluntary Arrangements.

As confirmed in your letter of 12 March 2009, Members agreed to the proposals put forward. Members also indicated that they looked forward to discussing the policy document once available. You should note that a paper on the proposed policy consultation was considered by the Executive at its meeting on 18 June and agreed without amendment.

I attach a final draft copy of the text of the policy consultation document. It is expected that the consultation period will be launched this week. A press release will coincide with this launch and printed copies of the policy consultation document will be distributed to Committee Members in accordance with the guidance for departmental publications and consultations.

Yours sincerely

C G McCONKEY
Departmental Assembly Liaison Officer

July 2009 – Consultation Document

13 May 2010 – Statement of Legislative Competence from the Minister for Employment and Learning

18 May 2010 – Correspondence from the Minister of Employment and Learning – Advance Copy of the Student Loans (Amendment) Bill

7 June 2010 – Briefing paper from the Department

From: Fiona Stanley
DALO

To: Peter Hall
Clerk to the Committee for Employment and Learning

Date: 7 June 2010

Dear

Student Loans (Amendment) Bill – Update

Further to the letter from the Minister to the Committee Chair of 18th May, please see attached a paper which I hope Committee members find useful.

It provides an update on the Student Loans (Amendment) Bill in advance of the appearance of DEL officials to give evidence as part of the Committee Stage of the Bill on 9th June ( subject to successful completion on the second stage debate in the Assembly on 8th June). Fergus Devitt and Angela McAllister will attend the Committee meeting on 9th June.

I am also attaching a copy of the Student Loans (Amendment) Bill and its Explanatory and Financial Memorandum (EFM) for your convenience.

Fiona Stanley

Student Loans (Amendment) Bill – Update

Introduction

In March 2009 the Assembly Committee for Employment and Learning gave its approval to conduct a public consultation on the Department's proposal to introduce legislation to exempt student loans from Individual Voluntary Arrangements (IVAs). The responses to the public consultation, which was open from 23 July 2009 to 24 October 2009, did not elicit any objection to the proposals. A summary of responses is attached at Annex A.

Executive approval to introduce the Bill to the Assembly was given at its meeting on 13 May 2010 and the Bill was introduced to the Assembly on Tuesday 25 May 2010. The second stage Assembly debate is scheduled for 8th June. If the Bill passes second stage then procedurally, the evidence session scheduled for 9th June will be part of the Committee stage.

Policy Background

The following paragraphs set out the background to the issues addressed by the Bill to allow Members to consider the Bill and respond to the evidence provided at Committee Stage on 9th June 2010.

Firstly it must be noted that Individual Voluntary Arrangements (IVAs) are the policy responsibility of the Department of Enterprise, Trade and Investment (DETI) and this Bill does not make any policy changes in relation to IVAs. Instead, it relates to a borrowers liability to repay a student loan under an IVA. DETI are fully aware of the Department's intention to legislate in this regard.

An IVA cancels up to 90% of a borrower's debt legally. Debts must exceed £15,000 and the debtor must have an income. It is a legal agreement drawn up between the person in debt, all creditors to whom money is owed (banks, credit cards etc) and a Licensed Insolvency Practitioner. In an IVA the debtor agrees to pay a single, reduced, affordable, monthly payment for a period between 3 and 5 years after which the unpaid part of the debt is written off by the creditors. The creditors are aware of this and are in agreement with it.

In terms of liability to repay student loans – these are currently excluded from a borrower's bankruptcy debts (under provisions in the Higher Education Order 2005), so that during and upon discharge from bankruptcy the borrower remains liable to repay his student loan.

At that time it was considered whether student loans should also be excluded from IVAs which are a form of insolvency similar to bankruptcy.

However, IVAs were relatively uncommon then so the Government decided not to legislate at that time with respect to IVAs and to keep the situation under review. At that time their financial effect on the Student Loan Company (SLC) was negligible - the SLC had dealt with only 11 IVAs, with an outstanding student loans balance for English borrowers of £28,500 by 31 December 2003.

However, IVAs have increased in number and their increasing popularity is likely to continue given the current economic climate and that the precedent of including student loans as apart of an IVA has been set. In these circumstances the financial impact upon the SLC has increased and is most likely to continue to do so.

A useful illustration of this is that by the close of 2007 the SLC had dealt with over 3000 IVA's with a value of over £17m in England and Wales and in the financial year 2008/09, the Student Loans Company wrote off over £41,000 in publicly funded student loans in respect of Northern Ireland domiciled students and this amount is expected to increase when the 2009/10 figures become available shortly.

Therefore, it is now considered anomalous to exclude student loans from bankruptcy but not from IVAs. Student loans are made on non-commercial terms, including low interest rates and the obligation to repay being linked to a student's income. In addition, as student loans are paid out of and subsidised by public funds, it is not considered appropriate to allow borrowers to reduce or limit their liability to repay by entering into IVAs.

Finally, it may be useful for Committee members to note that introducing this Bill will restore parity with England and Wales where similar provisions have already been introduced.

ANNEX A

Summary of the 13 responses received to the consultation on the proposal to exempt student loans from individual voluntary arrangements.

1. NUS-USI acknowledges that there should be equality in the application of legislation to all students. As bankruptcy legislation exempts student loans then it appears equitable that Individual Voluntary Arrangements should also exempt student loans. (NUS/USI)

2. No particular views on the above policy. (Disability Action)

3. The proposal outlined in the consultation document would therefore bring Northern Ireland into line with the rest of the UK which, from a consistency point of view, should be welcomed by all parties concerned. (Lloyds Banking Group)

4. No-one has identified any issues or raised any objections to DELNI's proposal to exclude student loans from Individual Voluntary Arrangements. (Her Majesty's Revenue and Customs)

5. I accept that student loans should be exempt from IVAs and be treated in the same way as bankruptcy. (Debt Advisor Limited)

6. No comments. (Northern Ireland Judicial Appointments Commission)

7. Content with your Department's proposals as outlined in your consultation document. I would point out that an Individual Voluntary Arrangement, once approved by the necessary majority of creditors voting in its favour, can last for a considerable period. It is not uncommon for Individual Voluntary Arrangements to go on for several years, during which time assets are sold and monies gathered in, or a sum is built up for the benefit of creditors using payments made by the debtor out of his income. (Insolvency Service, Northern Ireland)

8. This is to inform you that I agree in full with the purpose and aim of the proposal; that is to exempt student loans from individual voluntary arrangements. The proposal is soundly based and well argued from a public funds protection perspective. (PCM Associates)

9. Having reviewed the proposal and rationale for change, I would support the proposal that for consistency student loans, which are excluded from bankruptcy regulation, should also be excluded from individual voluntary arrangements particularly given that the terms for student loans are on a non-commercial basis and therefore any write off would require further subsidiary of public funds. (University of Ulster)

10. The above consultation document was considered at a recent Meeting of Council's Community Planning Committee and Members were generally supportive of the proposals outlined. (Antrim Borough Council)

11. No Comment. (Student Loans Company)

12. In making this response the University Operating board noted that student loans are currently excluded by provisions in the HE (NI) Order 2005 from borrowers bankruptcy debts, so that upon discharge from bankruptcy the borrower remains liable to pay his/her student loan. It seems sensible and consistent, therefore, that this provision should be extended to individual voluntary arrangements and, as a result, the University is happy to support the proposals as set out by DEL. (Queen's University, Belfast)

13. In the interests of equality of treatment of all graduates obliged to repay student loans, the vast majority of whom will meet such obligations, we support this proposal to exempt publicly funded student loans from Individual Voluntary Arrangements. We agree that, while there are safeguards already in place to protect low-income or over-indebted borrowers, it is not appropriate to allow borrowers to reduce or limit their ability to repay by entering into an IVA. (Stranmillis University College)

14 September 2010 – Background briefing paper from Assembly Legal Services

From: Angela Kelly
Date: 14 September 2010
To: Peter Hall
CC: Tara Caul
RE: Student Loans (Amendment) Bill - IVAs and bankruptcy

1. The Student Loans (Amendment) Bill proposes to amend the law relating to student loans to extend the powers of the Department for Employment and Learning under the Education (Student Support) (Northern Ireland) Order 1998 (the 1998 Order) and the Education (Student Loans) (Northern Ireland) Order 1990 (the 1990 Order) to allow provisions to be made to exclude student loans from Individual Voluntary Arrangements (IVAs) in Northern Ireland.

2. Clause 1 of the Bill amends the 1998 Order and the 1990 Order by extending regulation making powers to provide that a student loan made to a borrower who enters an IVA in Northern Ireland will not be included in that IVA, thereby providing that student loans will be treated under IVAs as they are presently treated under bankruptcy.

3. Regulations[1] under the 1998 Order, as amended by the Higher Education (Northern Ireland) Order 2005, provide that student loans are currently excluded from a borrower's bankruptcy debts so that upon discharge from bankruptcy the borrower remains liable to repay the student loan.

4. The law governing both bankruptcy and IVAs are set out in the Insolvency (Northern Ireland) Order 1989 (the 1989 Order) as amended by the Insolvency (Northern Ireland) Order 2005 (the 2005 Order). IVAs were created by the 1989 Order and are intended to provide a more flexible alternative to bankruptcy avoiding some of the restrictions which apply to a bankrupt. However, bankruptcy may be more appropriate for an individual debtor depending on his circumstances. Set out below are the principle differences between the regimes.

5. A voluntary arrangement (IVA) under the 1989 Order is an agreement between a debtor and all or some of his creditors by which the creditors agree with the debtor and each other to accept from the debtor payment of less than the amount due in satisfaction of the whole of their claims.

Individual Voluntary Arrangements

6. The IVA procedure begins with a formal proposal by the debtor for a voluntary arrangement. The proposal must provide a short explanation as to why, in his opinion an IVA is desirable and give reasons why his creditors may be expected to concur with such an arrangement. The debtor must set out his assets, any other property which is proposed to be included in the arrangement, the nature and amount of his liabilities the proposed distribution to creditors.

7. The proposal must provide for an authorised insolvency practitioner to act in relation to the IVA as trustee or to otherwise supervise its implementation. The debtor commits a criminal offence if he makes any false representations or commits any other fraud for the purpose of obtaining the approval of his creditors of the proposal.

8. A debtor may propose an IVA even if he is already bankrupt. In this case the Official Receiver may be able to act as the supervisor of the IVA. On the approval of an IVA the court must annul any bankruptcy order made against the bankrupt on his application.

9. The debtor may then apply to the High Court for an interim order to prevent his creditors from presenting, or proceeding with, a bankruptcy petition against him whilst that interim order is in force and from taking other action against the debtor during the term of the Order without the permission of the Court. It is not compulsory to apply for an interim order to put a proposal for a voluntary arrangement to his creditors.

10. The insolvency practitioner reports to the Court the details of the proposed arrangement and whether, in his opinion, a meeting of creditors should be called to consider it.

11. If over 75% (in value) of the creditors voting on the resolution, in person at the meeting or by proxy, vote in favour of accepting the proposal , the proposals are then binding on all creditors who had notice, or were entitled to receive notice, of the meeting. Note however that agreement and acceptance of a dividend by a mortgagee does not require that mortgagee to be treated as having elected to abandon its security for any part of the mortgage debt that is secured.[2]

12. The insolvency practitioner will supervise the arrangement and pays the creditors in accordance with the accepted proposal. He will also prepare an abstract of payments and receipts and , not less than once every twelve months beginning with his appointment, report these findings to the Court, the debtor and the creditors.

13. The Court cannot make an interim order if the debtor has applied for one in previous 12 months. There is no maximum or minimum level of debt and no maximum or minimum level of repayments.

14. If a debtor entering a voluntary arrangement fails to give full details of his assets and debts or fails to comply with the arrangement, the insolvency practitioner, or any creditor bound by the IVA, may petition for bankruptcy.

15. An application may be made to the Court challenging an IVA if it is believed that the IVA unfairly prejudices the interests of a creditor or that there has been some material irregularity in relation to the creditors' meeting. The Court may order the suspension or revocation of the IVA. If the debtor is also an undischarged bankrupt, he must give notice of same to his creditors and within seven days of receiving his copy of the order of the Court, give notice to the Court whether it is his intention to make a revised proposal to his creditors or invite reconsideration of the original proposal.

16. Not more than 28 days after the final completion or termination of the IVA, the supervising insolvency practitioner must send to all creditors bound by the arrangements and to the debtor a notice that the IVA has been fully implemented or terminated. He must also provide a report summarizing all receipts and payments and explain any differences in the implementation of the IVA from that originally agreed.

17. The supervising insolvency practitioner must also send that report and a copy of the notice to creditors to the Court. A register of IVAs is maintained by the Insolvency Service. This is a publically accessible register and is also searchable online.

18. Entering into an IVA provides the debtor with more control over how his assets are dealt with and how payments are made to creditors and may enable the debtor to arrange that certain assets, such as his home, might be retained.

19. The debtor will also avoid the restrictions which apply to a bankrupt which are discussed out below.

Bankruptcy

20. A debtor or his creditor may petition for the bankruptcy of that debtor.

21. A creditor may make a petition for the bankruptcy of the debtor where that debtor owes the creditor the sum of £750 or more. If the debtor does not owe the individual creditor this much, a joint petition of several creditors is necessary.

22. The amount owed must be an unsecured, liquidated sum. In order to show that the debtor is unable to pay their debts, a creditor will usually rely upon either the debtor's failure to comply with a statutory demand for payment or else upon their failure to honour a court's order to pay a debt.

23. At the hearing, the Court will determine whether to make a bankruptcy order or not. On the making of a bankruptcy order, the court will appoint an Official Receiver to take control of the debtor's property.

24. The debtor is required to submit a statement of affairs to the Official Receiver within 21 days of the making of a bankruptcy order. Based on the statement of affairs, the Official Receiver will decide whether it is necessary to call a meeting of creditors to enable them to appoint an insolvency practitioner of the creditors' choice as the trustee in bankruptcy.

25. A creditors' meeting will be held at the discretion of the Official Receiver or the request of creditors who make up at least one quarter in value of the bankrupt's creditors. A trustee in bankruptcy can be appointed at the creditors' meeting.

26. All of the debtor's personal property would be treated as vested in the trustee in bankruptcy on the date of the bankruptcy order. The debtor is only allowed to retain the basic essentials for their trade and living. Accordingly, valuable items may have to be sold and replaced with something more practical.

27. The trustee in bankruptcy will convert the debtor's property into money, and use that money to pay the bankrupt's debts.

28. The assets realised will include any interest the debtor holds in his home. If the bankrupt owns his own home, whether solely or jointly, mortgaged or otherwise, the home may be required to be sold in order that the proceeds from his interest in it be applied to the bankrupt's debts. However, under the Insolvency (Northern Ireland) Order 2005 a limit of three years has been placed on the trustee's rights to realise equity in a debtor's home.

29. The trustee may apply to court for an income payments order (IPO), which requires the debtor to make contributions towards the bankruptcy debts from his income.

30. The court will not make an IPO if it would leave the debtor without enough to meet his reasonable domestic needs and that of his family. IPO payments continue for a maximum of 3 years from the date the order is made by the court and may continue after the debtor has been discharged from bankruptcy. The debtor may also enter into a written agreement with his trustee, called an income payments agreement (IPA), to pay a certain amount of his income to the trustee for an agreed period, which cannot be longer than 3 years.

31. The money realised from sale of the bankrupt's assets will be distributed in the following order:

i. The costs of bankruptcy - the expenses incurred as a result of bankruptcy, including the professional charges of the trustee in bankruptcy.

ii. Preferential debts[3] – those debts which are designated as 'preferential debts' to be paid in priority to other debts of the debtor.

They include:

Pay as You Earn income tax and national insurance contributions due in the last twelve months before the bankruptcy order;

VAT (value-added tax) due in the six months prior to the order;

Accrued holiday pay owed to employees;

Wages of employees due in the last four months before the bankruptcy order (subject to a current maximum amount of £800 per employee)

iii. Ordinary unsecured creditors

iv. Postponed creditors - Certain debts can only be paid once all the ordinary creditors' debts have been paid in full.

32. The bankrupt debtor is subject to certain restrictions which will not apply to a debtor who has entered an IVA. The bankrupt debtor must not -

• obtain credit of £500 or more either alone or jointly with any another person without disclosing his bankruptcy;
• carry on business (directly or indirectly) in a different name from that in which he was made bankrupt, without telling all those with whom he does business the name in which he was made bankrupt;
• be concerned (directly or indirectly) in promoting, forming or managing a limited company, or acting as a company director, without the High Court's permission, whether formally appointed as a director or not;
• hold certain public offices including, for example, not being able to act as a local councillor;
• hold office as a trustee of a charity or a pension fund.

33. When an Order for bankruptcy is made this is publicized by an entry in the Belfast Gazette and in the Belfast Telegraph. A Bankruptcy and Liquidation Register is maintained by the Northern Ireland Courts Service. This is a publically accessible register and is also searchable online.

34. Under the 2005 Order, those debtors made bankrupt on or after 27 March 2006 have their bankruptcy discharged after one year. When the bankruptcy order is discharged, the bankruptcy comes to an end and the bankrupt is released from most of their previous debts and freed from most of the disqualifications that affect a bankrupt. Any property that has vested in the trustee in bankruptcy remains so, and is not returned to the debtor. Any property acquired by the debtor after discharge of the bankruptcy order does not vest in the trustee in bankruptcy but belongs to the ex-bankrupt.

35. Upon discharge the bankrupt debtor will be freed from most of his debts. However, the debtor will not be discharged from certain of his debts, these include –

• any money owed under family court proceedings for example, for maintenance or CSA payments or arising from any personal injury claims against the debtor, unless the court directs otherwise;
• any court fines or debts arising from fraud or certain other crimes;
• debts incurred after the bankruptcy order;
• since 13 April 2005, all outstanding student loans;
• Secured creditors (lenders who hold security such as a mortgage for the owed) still have the right to enforce or recover their security if payments are not met.

36. After discharge the debtor can carry on a business without the restrictions that applied during the bankruptcy.

37. The debtor can act as a director of a limited company or be involved in its operation (unless subject to a separate disqualification order/undertaking or bankruptcy restrictions order/undertaking). However, the debtor must continue to assist the Official Receiver and the trustee, for example by providing any information requested, even after charge. Failure to do so may be contempt of court.

38. Please do let me know if you have any comments or queries.

Angela Kelly
20311

[1] Education (Student Support) Regulations (Northern Ireland) 2007

[2] Whitehead v Household Mortgage Corpn plc [2002] EWCA Civ 1657, [2003] 1 All ER 319

[3] Article 346 Insolvency (NI) Order 1989

29 September 2010 - Correspondence from the Department for Employment and Learning – Response to Committee Request for Further Information

September 2010 – Briefing paper from the University of Ulster Students Union

Student Loans (Amendment) Bill
September 2010

The University of Ulster Students Union' is a representative body of some 26,000 students enrolled at the University of Ulster. The current Students' Union was established in 1984 and our vision is to be a sustainable, recognised and respected Students' Union that proactively engages the student body, University and wider community. It is also our mission to be an inclusive student led organisation which provides high quality representation, membership and commercial services to enhance the student experience at the University of Ulster.

The University of Ulster Students' Union greatly appreciates the opportunity to comment on the Student Loans (Amendment) Bill and that the opinion of our membership has been sought.

The Students' Union accepts and supports the current Bill and agrees with the reasoning in which student loans should not be reduced under an Individual Voluntary Arrangement (IVA).

We strongly believe that the financial sustainability of the student loans system is crucial to allowing many young people to enter third level education, as without out this form of financial assistance the opportunity of higher education would simply not be available to them. The Students' Union also believes that the Government could better allocate financial resources within the Higher Education sector that would be of benefit to a greater number of students, rather than having to cover shortfalls in student loan repayments due to IVAs.

The Students' Union also recognises the fact that fairness in the current student loan system must be maintained and is critical to its success. The Bill also allows the conditions of IVAs to match what is already current practice and legislation in England and ensures that students from the North that study in England are treated as equally as those that study at home.

Although as stated, the University of Ulster Students' Union greatly appreciates the opportunity to comment on this Bill, we and our membership believe that off far greater importance is the general issue of student debt and the future of funding for third level education within the North. The increasing number of students and recent graduates applying for IVAs is but a symptom of the increased financial pressures being exerted on students and we urge the Committee for Employment and Learning to take cognisance of this larger issue.