New allegations of corruption at loans company

The official investigation into the Government's troubled Student Loans Company has widened to include allegations of corruption, the National Audit Office said yesterday.

Sir John Bourn, the Comptroller and Auditor General who heads the Commons public spending watchdog, said that the NAO had received "significant new allegations of corruption" at the state-owned firm, which handles loan applications for Britain's 300,000

students.

The claims, which have been made by a former senior employee, are the latest in a series of allegations of malpractice made against the Glasgow-based company. They are thought to relate to the firm's former chief executive, Ron Harrison. Mr Harrison, whohas been accused of using company funds to support a lavish lifestyle, stepped down last month because of ill-health.

In a letter to Robert Maclennan, the Liberal Democrat MP, Sir John said that an investigation into the latest allegations, conducted on behalf of the Department for Education by accountants Coopers and Lybrand, had not been completed "as Ron Harrison hasbeen too ill to answer questions".

Sir John also said that NAO officials would conduct a second inquiry into the overall running of the company. An NAO report published in 1993 expressed concern at the high cost of processing loan applications.

Sir John's letter drew an angry response from the new head of the SLC, Sir Eric Ash, who described the corruption claims as "mystifying". Sir Eric conceded that, under Mr Harrison's stewardship, "allegations concerning certain improprieties relating to expenses" had been made. But, he said, "the sums of money involved are very small. There is not shred of evidence of any corruption at the company at any time."

Sir Eric admitted that "substantial backlogs" in processing up to 40,000 loan applications had built up in recent months, but, he argued, there was no need for a second NAO inquiry into the running of the company because it had met its financial targets,and most of the outstanding applications had been dealt with.

Ever since it was set up in 1990, the SLC has been dogged by claims of financial irregularities and mismanagement. Last year, leaked documents suggested that in two months in 1992 Mr Harrison spent £350 on whisky for the boardroom, on top of another whisky bill of £250. Allegations were also made that Mr Harrison had spent £61.80 on cigars and £82.80 on concert tickets. Company officials insisted that the bills were incurred as legitimate corporate entertainment.

Mr Maclennan, who is a member of the Commons Public Accounts Committee, will today call on Gillian Shephard, the Secretary of State for Education, to guarantee that the Coopers and Lybrand report be made public.