David Willetts

Responding to the damning report into the collapse of the student finance system this year, which says that ultimate accountability for the fiasco rests with ministers and that they were too distanced from operational delivery, Shadow Universities and Skills Secretary, David Willetts said:

“This year’s student finance fiasco has been a disaster for students and this report is a disaster for the reputation of ministers. The Government explicitly changed the system of student finance promising that it would be faster and more efficient. But in the first year of its operation the new system went into meltdown and ministers did not act despite warnings that serious problems were emerging.

“The Government were told about the problems with the system more than a year ago but they failed to act as it fell apart. Meanwhile, tens of thousands of students - and particularly those that are disabled - are facing hardship or having to drop out of university because they cannot afford to keep themselves.

“Ministers should hang their heads in shame, both for their serial failure and their attempt to pass the buck.”

Notes to editors

Student finance meltdown

The student loans system has been beset by problems ever since the Government launched its new online applications service this year. Ministers pledged that the new system would mean ‘Clearer information, faster decisions, timely payments and accurate repayments’, but it has collapsed in its first year of operation, leaving thousands of students dependent on emergency loans from their universities and struggling to stay afloat. The most recent figures available (published mid-November) show almost 120,000 students still waiting for loans. An additional 12,000 disabled students are still waiting for grants they need to pay for specialist equipment and helpers.

In his statement to the House of Commons today, David Lammy said he first learned of problems with the student loans system “at the beginning of September”. But Freedom of Information requests have revealed that his Department was warned about serious problems in the loans system more than a year previously. At a meeting in November 2008, the SLC told a senior civil servant that hundreds of thousands of phone calls to the SLC were going unanswered due to staff shortages. But after complaining about the ‘excessive amount of time’ wasted on phone calls, the meeting decided to adopt an official policy of ‘avoidable contact’ - discouraging staff from talking to students on the phone in order to save money. Two months later, at another meeting with a senior civil servant, the SLC’s Finance Director warned that funding shortages meant that ‘service standard levels may eventually be affected’. Chief Executive Ralph Seymour-Jackson ‘accepted that at peak times, service levels would worsen’. But a civil servant from Lammy’s department told them that the Government ‘expected efficiency savings within the Company to have an increased focus’.

Hopkin report

Professor Sir Dean Hopkin’s review of problems in the student loans system found that there had been “a conspicuous failure in key areas” of the Government’s new Customer First Programme, due to “deliberate under-resourcing of the contact centres” and “inappropriate and inadequate” use of resources to handle student demand. It concluded that “ultimate accountability for the Customer First Programme… remains with the Department [for Business, Innovation and Skills]” and criticised the Government for being ‘too distanced from operational delivery.’

Key findings included:

• The new Customer First Programme suffered “a conspicuous failure in key areas of its delivery which has had a far-reaching impact on applicants and stakeholders…due to a combination of technical, management and service failures” (p.3).

• In late September, just before term started, “39,250 applications had not been assessed for their potential full entitlement and 68,350 applications for financial support for new students had yet to be processed at all” (p.12).

• “At its worst, the Company were answering only 5 per cent of the calls attempted. …Call volumes peaked in the first week of September when almost 1.5 million calls were attempted. … There is strong evidence that the actions or inactions of the Company contributed to this volume.” These problems were exacerbated by a policy of “deliberate under-resourcing of the contact centres” (p.13).

• “The Company did not recognise and mitigate the inherent risks of procuring untried technology … There was a significant lack of oversight and involvement by senior personnel, a considerable financial overspend and inadequate operational assurance testing [of the new system] prior to live implementation…. The decision to proceed with the live implementation of the scanning solution prior to the completion of full operational assurance testing posed a high risk to successful service delivery” (p.16).

• “The new service, originally intended to be operational from September 2008 …was delayed because of decisions by the then Department for Innovation, Universities and Skills to alter the regulations governing student financial support. …… This resulted in a compressed timetable for processing applications, including missing a valuable link to the UCAS application window and potential data sharing. In turn this affected the speed at which the processing staff and management were able to gear up to their required performance levels, having had several months of down-time when many staff were under-utilised between the intended service launch date in September 2008 and the eventual launch in February 2009″ (p.17).

• “The information provided to students through the DirectGov website was confusing, complex and difficult to navigate. The student pages on DirectGov were not updated regularly enough and the information posted was, in our view, not specific enough to offer customers reassurance and prevent them from calling” (p.21).

• “The Executive team of the Student Loans Company is not sufficiently open or transparent, both within the organisation and with its Non-Executive Directors, or externally with stakeholders in the sector. This has been apparent in the way that the Company’s leadership dealt with the problems this year” (p.33).

• “The Department [for Business, Innovation and Skills] and the Company should review their requirements for management information… The Department should gain a fuller understanding of the Company’s operations and take account of best practice in other public service delivery organisations in order to more effectively scrutinise and challenge the Company. The Department should work with the Company to clarify responsibilities and to agree risk ownership and management” (p.41).

Student loans crisis: Timeline

July 2006

• Government announces reforms to deliver ‘Clearer information, faster decisions, timely payments and accurate repayments’. Higher Education Minister Bill Rammell unveils measures to simplify the delivery of student loans. He says that in the 2009/10 academic year students will benefit from ‘Clearer information, faster decisions, timely payments and accurate repayments.’ Rammell says: ‘I want students to understand that they don’t have to worry about how they will pay their fees and living costs…The student finance service needs to be as simple and accessible as possible to students, parents and graduates’ (DCSF press release, 3 July 2006)

July 2008

• SLC directors warned of serious problems in customer services. At a meeting of the Operational Delivery Board in Darlington on 15th July 2008, directors were told that: ‘Overall resource levels were too low to handle the total demand for contact across all channels’ and ‘that average handling time was increasing’ due to ‘low levels of staff availability’. The company forecast that 40% of all calls would be abandoned because customers would find the line engaged. Directors discussed problems with the email inquiry service, with the customer service centre ‘receiving 3 times as many Emails a day as it was possible to process and that as a result the email service could not be consistently made available’. But despite all these problems, they decided not to increase staff numbers in their call centres (SLC Operational Delivery Board meeting minutes, 15 July 2008)

September 2008

• The new loans processing system announced in July 2006 comes online. The Government says the new service will deliver a ‘seamless student finance delivery service’, ‘higher quality information, advice and guidance’, ‘faster decisions and payments’ and ‘a better customer experience’ (Student Finance England website).

November 2008

• SLC adopts ‘avoidable contact’ policy to cut costs. At a meeting with Michael Hipkins, a senior civil servant from DIUS, the SLC’s Board adopts an official policy of ‘avoidable contact’ - discouraging staff from talking to students on the phone in order to save money. The Board is told that over a quarter of a million phone calls to the SLC were abandoned in the last quarter, and Customer Services Director Dr Martin Herbert complains that staff are ‘spending an excessive amount of time on the phone to customers’. Chairman Keith Bedell-Pearce says ‘avoidable contact via call centres was … an area where considerable savings could be achieved’ and says ‘the Company should be looking to develop the area of avoidable contact’ as a means of addressing this (SLC Board of Directors meeting minutes, 25 November 2008).

2008

• SLC phone charges increased. The SLC switches its helpline from an 0800 to an 0845 number. Each call now costs up to 40p per minute from a mobile phone, and students reportedly have faced high phone bills even when their calls to the SLC have gone unanswered. Ofcom guidance says ‘public bodies should not use [0845] numbers exclusively … especially when dealing with people on low incomes or other vulnerable groups’ (Ofcom press release, 19 April 2006).

27th January 2009

• Government warned that funding shortages may lead to poor customer service. At a meeting with Michael Hipkins, a senior civil servant from DIUS, the SLC’s Finance Director Les Campbell warns that in financial terms ‘there was a significant gap between what the Company believed it required and what DIUS could provide’. The Government was told that because of the funding shortage, ‘service standard levels may eventually be affected’. Meeting minutes record that Chief Executive Ralph Seymour-Jackson ‘accepted that at peak times, service levels would worsen’. For the Government, Michael Hipkins said he ‘expected efficiency savings within the Company to have an increased focus’ (SLC Board of Directors meeting minutes, 27 January 2009)

25th August 2009

• Media reports of delays in loans system. Newspapers report that students face ‘loans chaos’. An SLC spokesman says: ‘We would like to reassure customers that anyone who has sent in their applications on time will be paid on time for the beginning of the academic year’. But in his statement today, David Lammy claimed he did not hear of the problems until ‘the beginning of September’.

11th September 2009

• David Willetts writes to Peter Mandelson, noting the problems with the new loan system and asking if he can guarantee that all young people who applied on schedule will receive their loans on schedule.

12th September 2009

• Government promises payment ‘at the start of the academic year’. Weeks before the start of term, media reports say 150,000 applications for student loans have not been processed’. A BIS spokesman says: ‘The loans company has assured us that all those who have applied on time for finance will receive this at the start of the next academic year’ (The Times, 12 September 2009).

17th September 2009

• SLC says ‘students … worry they won’t get their money on time, but they will’. The SLC admits there are backlogs but claims only 50,000 students will have to start university without the grants and loans they expected. Chief Executive Ralph Seymour-Jackson appears on BBC Breakfast and says that everyone who had applied for loans before mid-August will have their application processed by the time they start their course. He says that all applicants will receive at least ‘basic funding’ - tuition fees and the basic maintenance loan - within seven days of starting a course. Seymour-Jackson says the problem is not with processing applications, but is a ‘telephone issue’. ‘We admit the situation is not perfect, but it’s reasonable’, Seymour-Jackson said. He claimed: ‘students … worry they won’t get their money on time, but they will’. (BBC News Online, 17 September 2009).

8th October 2009

• Lammy holds meeting with the SLC. Two and a half months after problems with loan applications came to light, David Lammy meets with the SLC. His spokesman tells the BBC: ‘more than three quarters of a million students have now had their application for funds approved and others are being processed as swiftly as possible’ (BBC News Online, 9 October 2009).

9th October 2009

• 175,000 students still awaiting loans. A week after most university courses started, FOI requests reveal that up to 175,000 students are still waiting for loans. SLC documents show that sixteen per cent of the one million students who applied for funding this year have not yet received any loans or grants (BBC News Online, 9 October 2009).

12th October 2009

• SLC says lost applications are ‘like lost car keys’. In an interview with the BBC, SLC Deputy Chief Executive Derek Ross said that some students’ documents had been ‘temporarily mislaid’ but said the delays were no worse than in previous years. Ross said: ‘It’s a bit like losing your car keys - you think you have lost them, but they are in the house somewhere’ (The Guardian, 13 October 2009). The SLC said that as of October 8, 83,000 applications were still being processed (BBC News Online, 12 October 2009).

14th October 2009

• Conservatives hold emergency debate; inquiry announced. As soon as Parliament returns after recess, David Willetts MP calls a debate on the student loan crisis. Almost three months after problems with the loans system were first reported, David Lammy announces an inquiry into the crisis.

10th November 2009

• 120,000 students still waiting. More than a month after term started, figures released by the SLC reveal that up to 119,000 students are still waiting for loans.

25th November 2009

• Disabled students hardest hit. Official figures reveal that only 20% of applications for the Disabled Student Allowance have been processed, leaving more than 12,000 disabled students without funding to pay for specialist equipment and helpers.