Individual Learning Accounts

HC Deb 11 December 2001 vol 376 cc199-224WH 10.59 am

Mr. Richard Bacon (South Norfolk)

I am pleased to have the opportunity to introduce a debate on lifelong learning, following the closure of individual learning accounts. The subject is important to many people, including the students who were able to use the scheme until the Government suddenly cancelled it. Many of them were elderly, from ethnic minorities, unemployed or people who had missed out in one way or another on the chance for an education and who were seeking to do something about it. They suddenly found that the courses that they had hoped to do were denied to them.

The subject is also important to the training providers, who had done what the Government asked and set up community-based schemes to deliver to people from all groups the benefits of access to computer technology, only to find that the Government suddenly closed down the ILA scheme. The subject is of equal importance to all taxpayers, as there are indications that tens of millions of pounds of public money may have been wasted and that there may have been widespread fraud.

I shall quickly summarise the points that have led to the present position. After two years of pilot programmes and transitional arrangements, the Government introduced the individual learning account scheme in September 2000. Under the scheme, the Government offered £150 to help adults who were seeking training. The Government awarded a £50 million contract to Capita plc to run the scheme through the ILA agency. There were warnings even before the scheme started that the scheme as proposed was flawed and would be likely to lead to abuse.

There were many such warnings, perhaps most notably from Mr. James O'Brien of Pitman Training Group, one of the UK's leading training providers, who wrote to the then Secretary of State for Education and Employment on 20 September last year, before the scheme was launched. In his letter Mr. O'Brien stated: We have expressed our concern both to DfEE officials and to Capita plc that there was insufficient detail in the rules of the initiative. As a responsible training provider we worried that this lack of detail left the scheme open to abuse, which would not be helpful to either the initiative itself or the majority of the training sector. The Government then introduced a cap on the value of the training at 80 per cent. of the first £250 of eligible training in any one year, although that did not seem to do much to stop the abuses that were going on.

There were repeated stories in the press about abuse of the scheme—in the News of the World, The Mirror and the regional press. None the less, the Government continued to trumpet the scheme as a success. At the time, according to the Government, there were signs neither of a huge fraud, nor of such a massive increase in the take-up that the scheme required a rethink.

On 20 July, the Under-Secretary of State for Education and Skills, the hon. Member for Wentworth (John Healey), issued a statement under the exciting headline "Individual Learning Accounts to continue into new era", which began: Adult skills minister John Healey today confirmed details of how the successful introduction of Individual Learning Accounts over the last year will be followed up. I see the Minister smiling; I do not know how many times he has heard that quote. It does not seem consistent with what happened next.

Mr. Christopher Chope (Christchurch)

Does my hon. Friend know that one of my constituents was summoned to a focus group meeting at the Department on 25 July, and at that meeting told Department officials what scams were occurring? Since then, nothing seems to have been done about his specific complaints.

Mr. Bacon

I did not know about my hon. Friend's constituent, although it does not surprise me that the Government invited the constituent to a focus group meeting. We all know the Government's great fondness for focus groups. It does not surprise me that my hon. Friend's constituent explained to the Department that scams were going on. As I mentioned, people were doing that even before the launch of the scheme.

The scheme which the Minister described on 20 July as leaping and bounding towards the future, and which was described by the Secretary of State on 24 October as a "great success", was to be suspended from 7 December. The reason, she said, was that the rapid growth of the programme has exceeded all expectations, causing us to think again about how best to target public funds in this area and secure value for money. The Secretary of State also mentioned her concerns about the way some ILAs have been promoted and sold. She stated: There is growing evidence that some companies are abusing the scheme by offering low value, poor quality learning. My hon. Friend the Member for Christchurch (Mr. Chope) may be reassured to learn that the notion that something was amiss was starting to percolate, although the Secretary of State said no more than that some people were abusing the scheme and offering low value, poor quality learning. The possibility that they were offering no learning at all, but removing the funds from the individual learning accounts before the people whose accounts they were had the chance to use them, was not mentioned.

The Secretary of State continued by saying that in order to protect the interests of individual learners she had decided to prevent any further take-up of ILAs", although learning begun by existing account holders would continue to be supported, provided it was booked by 7 December. The Secretary of State assured learning providers and account holders that the decision to end the programme has not been made lightly"— a fairly terminal sentence which caused many training providers who had invested in the scheme a great deal of concern.

The scheme was thus closed to new applicants. That was an astonishing turn-about, considering what the Minister had been saying only in July and compared with three months previously, when it had seemed to be all systems go. However, the scheme did not close on 7 December, as the Secretary of State had announced. Suddenly, on 23 November, the Department put out an announcement that it had called in the police to investigate fraud and theft involving individual learning accounts, and that the ILA programme was to be suspended immediately, two weeks earlier than had been announced.

One of the key questions which remains unanswered, to which I hope the Minister will provide an answer today, is what new evidence emerged to justify the sudden change. If the fraud was on a fairly small scale, as we had been led to believe, why did not the Government deal with it and let the rest of the scheme go on intact?

I shall examine the effect of the sequence of events that I described on the various groups involved—first, the students whom the scheme was designed to benefit. I have a letter from a constituent, Mrs. Marion Ford, of Harleston in South Norfolk. Mrs. Ford applied for and was eventually sent a card with a membership number. On receiving the card, she immediately went to a local computer training firm in Harleston, only to be told via the ILA centre in Darlington that there were no longer any funds in her account.

As Mrs. Ford wrote to me, Apparently, someone had registered me on Tuesday 13th November, but I only received my card on Wednesday 14th November". Mrs. Ford had been registered by a different computer firm for a course that she did not know about. Her letter continued: How did they get my name? How did they know I wanted to do a course? How many details of me have they got, without my knowledge? The case of Mr. Philip Geggie, which has been brought to my attention, shows that even meeting the Government's new deadline did not necessarily help. Mr. Geggie applied for an ILA account before applications were shut down, but his ILA number took several weeks to arrive. After the number finally arrived, Mr. Geggie applied for and paid for his software on 19 November, four days before what became the new deadline, 23 November, only to find that the ILA centre was denying his training provider, Carrerra's, access to the Darlington computer; so he could not be registered, although the Department had said that it would honour only those who were registered.

In an e-mail to Mr. Nick Parry, an official in the workplace learning division of the Department for Education and Skills, Mr. Geggie wrote: What you should be doing is to honour those people who are in the system and who have been in the system from prior to 7th December and penalise those who are abusing the system. Mr. Parry replied: There has been some comment that ILAs could have continued if we had taken action to remove from the scheme those learning providers who were abusing it. You can be assured that if there had been a reliable way of doing this immediately, this action would have been taken. That prompts the question of why the Department did not listen to the advice that it was given in the first place about ensuring that learning providers had approval first, before they undertook training. We have a right to ask what will happen to the good people who have done nothing wrong and who have been denied training, simply because of the failure of the Government to promote a robust scheme.

I had another letter from a Mr. Granville Powell, a constituent of mine from Wortwell in south Norfolk. Mr. Powell signed up for a course at the Suffolk Learning and Resources centre, just over the county border in Bungay, Suffolk. He had already done two computer courses and wanted to study for the European computer driving licence, as he had decided that it would probably help him to get a job. On receiving a letter telling him about the 7 December deadline, Mr. Powell rushed to sign up quickly, only to be told that all funding had been stopped anyway by the ILA centre in Darlington. He writes that he knew about the alleged fraud from the newspapers. However, as he eloquently puts it: Why should the excellent teaching people at the brilliant Bungay Resources Centre be punished because not enough checks were put in place from the start? That brings me to the second group of people who are affected by this fiasco: the training providers. Pitman Training Group states in its document responding to the suspension of the ILA scheme that it had expressed its concerns to Ministers and officials on several occasions, since before the launch of the programme. It states: Without minimum standards, anyone has been able to set up business as a 'training provider' with the consequences that have become so apparent over the past few months". My own view is that it is just about understandable that Ministers might seek to take a light-touch approach to potential students. That is arguable. One could also argue that the lack of any completion thresholds for students, and the tying of at least part of the payment to the learning provider to such thresholds, has made it much easier for unscrupulous operators to take the money without showing any care whatever for the individual's learning experience.

Indeed, Pitman Training Group advances precisely that argument in its response document. Whether or not one agrees with such a view, one can at least see that there is an argument to be put for a light-touch regulation for customers, especially as they may lack confidence because of negative experiences with more formal education or training, or may wrongly feel that it is too late in life for them to learn to use new technology. That is at least an argument to be advanced, but I find it utterly incomprehensible that one would apply such a light-touch regulation or criterion—perhaps the best description would be a no-touch criterion—to the providers of the learning. Such an approach has two very predictable effects, both of which are bad. First, it guarantees that the quick-buck merchants, who have absolutely no concern for the students and are interested only in taking the money, will come steaming in for the kill. At best, students will get from such people a pathetically inadequate course consisting of one booklet that they could have bought for five or 10 quid anyway. At worst, their individual learning account numbers may be stolen. Secondly, many good training providers who are genuinely working to respond to Government policy are tarred with the same brush as the bad ones, which is quite wrong.

I shall mention some of the allegations that have been flying around. I do not know whether they are true; it is for the Minister to reassure us that they are not correct or to confirm the situation if they are. It has been suggested that at least one training provider was doing business of more than £1 million a week. Under the new £200 scheme rules, a provider would have to find 5,000 students each week—the equivalent of a small university—to generate such business. If that has been happening, one wonders what the paymaster in the Department was doing when he saw £200 going out of the door in one direction, £20,000 in another direction and more than £1 million in a third. Perhaps he did not know that that was happening, because it was all done by computer and nobody did anything but press buttons until it was too late.

Another allegation has been made by a banker who spotted an account that was set up in July and into which more than £2 million had since been paid. Apparently, that money came purely from the ILA scheme and there was no other source of income—not even the 20 per cent. of funds that one would have expected from the student contribution. It is alleged that, after the £2 million had dribbled in, the account holder requested that the sum be transferred to an offshore account. I have even heard it suggested that one dubious provider alone may have been responsible for busting the Department's budget, in so far as it appeared to have any budget or limit at all. Perhaps most horrible of all, is it possible that some of these tricksters kept just within the strict letter of the law, so that no action is possible against them?

Training providers have told me that they were approached by individuals attempting to buy large numbers of completed application forms. I assume that that was against the law. God help the Department if it managed to create a scheme in which even that was permissible.

Mr. Bill Wiggin (Leominster)

Jane Davidson of the Welsh Assembly noted that the Assembly foresaw at an early stage that ILAs would need to be closely managed to ensure that there was minimal opportunity for fraud. How can it be that the Welsh Assembly saw the potential for fraud, but the Department for Education and Skills did not?

Mr. Bacon

My hon. Friend makes an extremely good point. It is extraordinary that the Welsh Assembly, reputable training organisations such as Pitman Training Group, the press and even the Office of the e-Envoy, whose annual report, published a few days ago, refers to the need to look out for the potential for computer fraud and to provide safeguards against it, could see the problem and the need for safeguards, while the Department could not. Everybody—the world and its brother—could see that need. Indeed, I understand that the structuring of the scheme in Wales has been so successful that there has been no abuse and that it runs to this day. It is extraordinary that all the parties to which I have referred could recognise the threat—and where possible, as in Wales, do something about it—but that the Department could not. I share my hon. Friend's astonishment at that.

I referred to the scam in which completed application forms were being bought. It appears to have worked in the following way. Scammers—if I may call them that—sought to buy for £40 each completed application forms bearing the name and address of the student. When scammers succeeded in obtaining forms, they would copy the names and addresses on to their own database.

They would then send the forms to the ILA centre at Darlington. Three days later, they would know that, all other things being equal, the ILA centre computer would have generated an ILA account number. They might then have hacked into the ILA computer—assuming that there is no truth in the rumour that someone on the inside looked at the computer because they were already inside the premises—and obtained the ILA number using the name and address. They would then have put the number through one of the companies that they had set up. At that point, the student would still be waiting for an ILA number to arrive in the post, but the funds would already have gone. That would certainly explain how the funds of my constituent, Mrs. Ford, were used up the day before she even received her ILA account number.

There have been so many examples in which funds appear to have gone before clients received their account numbers—in some cases, fake registration occurred as much as one month before—that there appears to be something in the allegations. As I said, it has even been suggested that there may have been corruption among individuals inside the ILA centre, which is run by Capita. That is a most serious charge that deserves to be examined at once, so that the position can be made clear.

I look to the Minister to refute these allegations or to tell us what has been going on if there is any truth in any of them. The point is that the genuine trainers have had their good names besmirched by a breed of rogue providers.

Mr. Paul Goodman (Wycombe)

On that point, does my hon. Friend agree that bona fide operators such as my constituent Stephen Good have been left in an impossible situation? Inter alia, Mr. Good writes: Should we, or should we not, continue to retain our employees? If so for how long can we continue to pay them when all payment due from DfES has been indefinitely suspended and monies properly due for payment to us remain overdue and unpaid?

Mr. Bacon

My hon. Friend makes an excellent point. I spoke to another training provider who asked precisely the same question about whether he should hold on to his employees. He was a computer manufacturer who had branched out into training because he saw that it was a good fit in terms of his business. His employees are relatively lucky, as there is at least a possibility that he will be able to retain them. That is not the case with all the providers. Even the business man to whom I referred said that he wanted clarity above all. He wanted clear information about what would and would not happen so that he could begin to make decisions. I am sure that the same is true of my hon. Friend's constituent in Wycombe.

Genuine providers have been besmirched by rogue traders. The real providers are varied and include big and small businesses. Mr. Neil Avery, who is part of the Hairnet computer training network, wrote to me from Taverham, near Norwich. Since January, he has trained 33 people who have opened ILAs in the Norfolk area. His success stories include a 21-year-old hospital cleaner from Norwich who wanted to improve her employment prospects, a disabled elderly lady from Norwich who can now keep in touch with her extended family through e-mails and the internet, and, I am reliably informed, a Norfolk county councillor who can better serve the community because she can now use computer technology.

The Internet Exchange was founded in 1994. It runs 38 stores throughout the country, from Glasgow to Southampton; from Cardiff and Bristol to Cambridge, as well as in London, where the company is concentrated. Many of the stores, especially in London, are in deprived areas. Indeed, of the 34 stores in England, 25 are located in wards that feature on the Department's list of the 2,000 most deprived English wards.

The Internet Exchange has invested in training and worked with organisations such as the British Computer Society and the Training Standards Council to ensure that its training is of the highest quality. It has a diverse customer base: 51 per cent. female, 49 per cent. male, 45 per cent. ethnic minorities, 15 per cent. lone parents, and 35 per cent. unemployed or looking for work.

Hon. Members may hear more this afternoon about Henley Community Online at a meeting in Portcullis house. It is a not-for-profit company that offers computer and internet access. Two hundred and twenty people currently participate in its courses. Like the constituent of my hon. Friend the Member for Wycombe (Mr. Goodman), the people who run Henley Community Online are worried about what will happen to them and their employees.

Carrerra's is part of the Digital Network group, which is based in the west midlands. Between 40 and 50 per cent. of its customers are either disabled, elderly or unable to train during the day. It has taken on an extra 40 staff and invested in training them in software at a new training centre, so that customers can have a high quality training experience.

All those people were doing the right thing; they were doing what the Government asked of them. The Government owe them tens—in some cases, hundreds—of thousands of pounds. What will happen to them? Will they go to the wall because the Government did not have the common sense to get rid of the rogue providers at the beginning? Must they put their staff on the streets and thus add to the Government's unemployment bill? Will they get the money that they are owed? Will a new Government scheme emerge? If so, when? In a nutshell, what steps are the Government planning to restore confidence in the training sector? We look to the Minister for clear, specific answers.

The Government have created an environment in which the genuine training providers distrust them, and the most vulnerable customers—those whom the Government are trying to help—are scared off by stories of rogue providers. Mr. James Golfar of the Internet Exchange wrote in his response to the closure of the ILA scheme that the Department's explanation to clients of the scheme's operation was poor. Many were unaware that the cards were issued by the Department, not learning providers. They thus wrongly blamed the learning providers for problems in their application process. Some, especially those for whom barriers to learning were high, became confused and disheartened as their applications were lost or rejected unfairly, or when unscrupulous providers took advantage of them. Yet the scheme was designed to help those people above all.

The Minister and his colleagues should not underestimate the good will and trust that have been destroyed by the debacle. I hope that the Minister realises that the Government face a crisis of confidence among legitimate, community-based training providers and that warm words will not be enough. We need specific proposals from the Minister about the steps that he plans to take. The Government should be in no doubt that there is precious little hope of helping the most vulnerable people if they do not restore confidence among those who can do the most to help, namely, the legitimate training providers.

I must mention the taxpayer's plight. I am grateful to the Minister's office for supplying me with the figures yesterday. However, as a member of the Public Accounts Committee, I cannot say that they are pleasing. I have written to Sir John Bourn, the Comptroller and Auditor General, and to the Chairman of the PAC, asking for ILAs to be examined urgently.

According to the figures that the Minister supplied me with yesterday, the Department budgeted £202.1 million for the ILA scheme over the two years 2000–01 and 2001–02. That includes the Department's budget allocations and £115.1 million which has been recycled from training and enterprise council resources. Department records show that expenditure on the programme in 2000–01 and 2001–02 to 23 November totalled £260.9 million. That is an overspend of £58.8 million up to that point.

The Minister said in his communication to me that significant payments are due for claims that learning providers have already made, and for committed expenditure for learning that providers on the ILA centre system booked before it was shut down on 23 November. He also stated that the police investigation into abuse and fraud means that access to the ILA centre system is not available and it is therefore not possible to estimate the additional financial commitment. That is a scary remark.

The Government know about an overspend of approximately £60 million so far but do not know how much more is to come. They have ignored the warnings of experienced professionals before and since the scheme was launched. They have also ignored many warnings in the press, and lost the trust of the genuine training providers without whom they have no chance of achieving their goals. They have been reckless with taxpayers' money and the people who suffer most are ironically those whom the Government most want to help.

The Government have a lot of answering to do. I look forward to the Minister's reply.

11.27 am

Mr. Christopher Chope (Christchurch)

The figures that my hon. Friend the Member for South Norfolk (Mr. Bacon) presented in his excellent speech give the lie to the suggestion that we are simply considering fraud. The Government have realised late in the day that they will not be able to balance their books. Whom do they blame? As always, the answer is: the ILA holders and the genuine learning providers. Whatever scams have existed, they do not justify the Government breaking their contracts with ILA holders and providers, who have set up in business believing that they were part of a genuine scheme.

Like my hon. Friend, I have received several letters and visits to my constituency surgery from people who are adversely affected. Many people who are in genuine need have become ILA holders and find themselves in the soup. I have a letter, of which the Minister has a copy, from a lady in New Milton. It was copied to me because her tutor, Mr. Edwards, lives in my constituency. She used the ILA scheme to enable her to receive individual tuition at home on her computer. If she went on a course, she would be unable to get access to a computer with the magnification programme LunarPlus. She had the programme at home, and it meant that if Mr. Edwards or one of the other tutors went to her home, she could benefit from it.

The lady is a registered blind person, and she found the prospect of being able to get training enormously valuable. She signed up for her account and was sent a registration card. Her contribution was £50, but after she had received the first two lessons, the tutor was told that all funding had been cancelled, even though the scheme was only due to last until early December.

Will the Minister say what will happen in Mrs. Buckingham's case? Will she be given recompense for the money that she invested in the course as her contribution towards it? Will alternative provision be made available for her? What will happen to Mr. Edwards, her tutor, who took on the teaching commitment but is now being denied the funding initially promised by the Government?

I have passed on to the ombudsman another letter that I have received from a constituent. I suspect that the impact of the ILA scam, and the Government's massive maladministration of the scheme, will rival that of the Railtrack affair, and that it will make the Government even more unpopular than they are already.

With Railtrack, the Government took the view that, because matters were not working out to their satisfaction, they would penalise innocent shareholders and then say that they were fools to become shareholders in the first place. The Government seem to be applying the same principle to people who invested in becoming learning providers under the scheme, or who took out ILA accounts. The Government seem to be saying, "We can't guarantee to pay you anything now because there were a lot of fraudsters around." That cannot justify the course of action on which the Government are embarking.

My constituent Mr. Foskett wrote to me on 27 November, and his letter was copied to the chief executive of the ILA centre. He stated: As an unemployed person with a small income and no subsequent support from the state, I was in the final throws of selecting an education provider to improve my skill base when I read on your web site that you have suspended all ILA accounts 2 weeks early!! Mr. Foskett is an unemployed person who wants to gain access to lifelong learning. What will happen to him? I hope that the Minister will tell us when he responds to the debate. Will Mr. Foskett be able to use his ILA account in some other way? Will he get compensation? He is unemployed and cannot wait a long time, as he wants to improve his skill set so that he can get a job.

About a fortnight ago, I submitted a series of written questions to the Minister. The convention is that a Minister, knowing that a debate such as this is coming up, will answer as many outstanding questions as possible. However, there seems to be a clampdown on answering questions. I suspect that it is only the fact that my hon. Friend the Member for South Norfolk is a member of the Public Accounts Committee that allowed him to gain access to some of the relevant information.

Mr. Bacon

I ought to make it clear that I am grateful to the Minister, as his office sent me the figures that I quoted in the debate.

Mr. Chope

I am glad that the Minister and his staff are ingratiating themselves with a distinguished member of the PAC. I am sure that those responsible for the mess will need lots of help in the future when they are cross-examined by that Committee.

The figures made available to my hon. Friend yesterday are breathtaking, but similar figures must have been available four or six weeks ago. They must have been available when the Government announced that the scheme would be ended on 7 December, and when they decided to curtail it two weeks earlier than that.

I hope that the Minister will deal also with the position of large providers of learning. The Future Open Learning college in my constituency has about 283 account holders on its books. Because the computer system has been closed down, it has been unable to find out the number of accounts for which it will be paid. Some of the people registered with the college discovered that their account numbers had already been taken by other people—a problem referred to by my hon. Friend the Member for South Norfolk. The college had to lay staff off, because its management was not so foolish as to believe that the Government would meet their legal commitments.

The college is entitled to be paid. The people who run it want to know when the payments that have been curtailed will be resumed. I hope that the Minister will assure all learning providers that the weekly payments to which they were entitled, and which were suspended on 23 November, will be reinstated without delay.

The Department for Education and Skills is under a legal obligation to reinstate the payments. If the Minister does not do something about it, more and more cases will be referred to the ombudsman, to whom I advise my hon. Friends and others to send the cases about which they come to know. Only when he has seen those cases will the ombudsman be able to rule on this appalling episode of maladministration.

11.35 am

Angela Watkinson (Upminster)

No one would disagree that the idea of individual learning accounts was a good one, or deny that it was begun with good intentions. In May 1994, the then Conservative Government's White Paper on competitiveness contained a similar scheme, and a series of pilot schemes were introduced.

The intention was to reach people who would not normally access education beyond school age. Those people included those with low skill levels, those living in areas of skill shortage, or people in small firms who found it hard to provide staff development schemes. The scheme was also intended to reach women returners—women whose children had just started school and who were therefore able to access education for the first time in many years because they had part of the day free.

The pilot schemes showed that the scheme was administratively complex, and that it was ineffective in reaching the groups for which it was intended. In fact, it often subsidised existing educational activity and was being accessed by people who already had good qualifications. I wonder whether the Government examined the lessons to be learned from the 1994 scheme, as some of the same problems have been encountered this time. Some of the same conclusions apply, too, although fraud was not evident in 1994.

In 1999, the evaluation of the 1994 schemes found that they were resource intensive. Although those schemes could have been examined and improved, the ILA scheme unfortunately turned out to be so lacking in detail that it was open to computer fraud. It was also open to theft: people on street corners sold ILA accounts to unsuspecting and innocent people, who thereby lost their entitlement to the scheme and were therefore unable to take advantage of it. Moreover, the fact that the website was not registered left it open to other advertisers to take advantage of the scheme.

Many people who wanted to take advantage of an ILA account have been sold schemes that were of poor quality or which did not even exist. They have therefore lost their entitlement. Many genuine providers, and especially the small ones, have been left in an extremely difficult position, as we have heard. They do not know whether to keep their staff, or whether it will be possible to resurrect the scheme in some way.

The investigation is under way, and we do not know how long it will take. In the meantime, I am sure that compensation claims will be submitted by firms that in good faith set up training courses and learning schemes for people with ILA accounts. Now that the accounts have come to an abrupt end, those firms have no idea how they are going to continue. Moreover, I understand that the firms were not consulted about the closure of the programme, and that they were given no warning; they have therefore been left high and dry.

I am sure that, like me, most other hon. Members will have received letters from constituents who were offered schemes and who pursued them in good faith, even though the schemes might not always have been in the right place or at the right times for them to access them. People who took up the scheme hoped to pick up some of the higher education that they had not been able to take advantage of before. However, many found that the scheme was available only in the neighbouring town, or that they could not reach it because there was no public transport, or that it was being held at an inconvenient time of day. When they eventually found something that they could take advantage of, the scheme had been suspended.

What is to happen to existing students, who might be in the first stage of a training course or qualification? What will happen to those students, even if they are able to complete the part of the qualification in which they are currently involved? If that does not bring them to the end of their course or training, will they be able to access the next stage? Are we going to have to find new providers? Will there be a rescue scheme for those genuine providers who have been left high and dry by those who have fraudulently brought the scheme to an abrupt halt?

As yet, the total cost of the scheme to the taxpayer is unknown. Enormous costs have been incurred in contacting ILA holders, advertising the scheme and setting up the providers and in advertising in the national newspapers to announce that the scheme had come to an abrupt end.

I have been looking at some statistics on the scheme's users, and on the number of accounts opened and the number being used. The number of accounts opened appears to be double the number being operated. I may have misunderstood that, but on first examination it looks as though twice as many accounts have been opened as are being used; perhaps the Minister will clarify that.

The fact that the original target of 1 million users burgeoned to 2.5 million justifies the scheme and shows how popular it could be, if only it were run successfully. I understand, however, that targeting has been patchy, in terms of the sort of student that the scheme has attracted. Many types of account have lain dormant, while many other ILA learners already have higher education qualifications. Such people were not intended to be a target group for the scheme, or to be the beneficiaries of further subsidised schemes; the intended target group was the many people who have either no qualifications or low skills.

Employers with few staff may not be able to operate extensive staff development schemes and would be ideal participants in ILAs. Larger firms, however, may have been using the scheme as an alternative to staff development schemes that could and should be operated within their own businesses.

We should have had far tighter controls over eligibility for learners and for firms whose staff were accessing ILA schemes. There should also have been far tighter and more detailed control over those providers who have let the scheme down. As yet, we have no idea what the total cost will be, in terms of set-up costs, operating costs, closing-down costs and any compensation that might have to be paid to legitimate providers who have had to curtail their operations unexpectedly and who are uncertain whether to keep on their training staff.

If the eligibility criteria for students, the bona fides of providers and the security of computer programmes through which the public access information about ILAs were tightened up, the scheme could be resurrected. As larger numbers than anticipated wanted to take out ILAs, the total tax commitment was far higher than had been envisaged. If the total tax commitment per annum were stated so that people's expectations were not raised beyond the point at which they could be realised, the phoenix could rise from the ashes of this debacle, and we could have a successful scheme.

11.44 am

Paul Holmes (Chesterfield)

Lifelong learning is about three important things: addressing the needs of those who have been failed by the school system, equipping the workers that society and the economy need and allowing individuals to enrich their personal knowledge. Lifelong learning must, above all, bring adults who lack basic skills and qualifications back into a learning environment, on which the ILA system was supposed to be targeted.

A system of individual learning accounts based on the original Liberal Democrat proposals, rather than the version launched by the Government, would have provided good foundations for lifelong learning. Our ILAs would have allowed everyone access to an account from birth. They would have allowed parents, individuals, employers and the Government to contribute to an ILA throughout a person's lifetime, and allowed that individual to access their account to pay for any of their learning requirements.

The Liberal Democrats did, and still do, support the concept of ILAs, and the Government's mismanagement and scrapping of the scheme is serious because it undermines the very credibility of the system. The rapid dissolution of the ILA scheme has left large numbers of participants and providers disillusioned, confused and concerned. While people watch their businesses collapse around them, the Government remain almost silent about what they can offer those who have been caught up in this terrible mess.

I say "almost silent" because when I asked the Minister at the Select Committee on Education and Skills on 28 November whether any compensation would be available for the legitimate businesses that had invested huge amounts of time and money to make the scheme a success—some of which now face ruin—his answer was no. I then wrote, on the afternoon of 28 November, to the Secretary of State for Education and Skills, to clarify that issue and others. I am still waiting for an answer.

The Government's handling of ILAs has been a shambles. They set up a scheme with serious loopholes, allowing—it would appear—considerable fraud to take place, although Scotland and Wales appear to have managed the system better. The Government announced that they would terminate the scheme with effect from 7 December, but at 6.30 on a Friday evening they announced that they were going to close it two weeks early, with immediate effect.

On 24 October, the Secretary of State said that the ILA programme was to be suspended, as it had exceeded Government expectations and has quickly expanded beyond its capacity. There was a footnote to that press release about concerns that some companies were providing poor value for money. Yet on 28 November the Under-Secretary of State told the Select Committee meeting that it was all to do with fraud, and not with exceeding capacity. He gave the Select Committee some figures on the cost of the scheme, and I was interested to hear the figures that the hon. Member for Upminster (Angela Watkinson) had obtained from the Department yesterday, because they are considerably larger than the ones that the Select Committee was given less than two weeks ago, on 28 November.

On 28 November, the Under-Secretary of State told the Select Committee that the ILA budget, which had been £56 million, had gone up to £71 million, but that that had been exceeded, although the Government had no idea by how much. The Under-Secretary could not even tell the Select Committee when the scheme, or a replacement for it, would be reintroduced, leaving all the providers and individual learners in limbo.

The Secretary of State for Education and Skills told Parliament on 6 November that the police had charged four providers and 30 individuals with fraud. The Under-Secretary told the Select Committee on 28 November that sustained and serious allegations of theft in County Durham justified the early closure of the scheme. Yet, according to The Times Educational Supplement last Friday—just five days ago—Durham police, when contacted, said that no criminal investigation was being conducted on their patch. The Department for Education and Skills spokesman has also had to correct the Secretary of State's statement to Parliament on 6 November, saying that she had been mistaken in telling Parliament that charges had been brought, as none had. It seems that the Government have not had a clue what they are doing from the beginning to the end of this scheme.

Apart from the taxpayers, the people being hurt by this are the legitimate companies and the legitimate users of the ILA scheme. As a member of the Select Committee, I have received representations from individuals and companies all over the country, but one from my constituency of Chesterfield is typical of all of them. Critical Skills for Excellence is a reputable firm based in a state-of-the-art, high-tech innovation centre in Chesterfield. It wrote to me last week to say: As a reputable training provider, we have been totally committed to the training development and encouragement of local people to enable them to develop their full potential. Our area, as you are more than aware, has been hit hard over the past few years by the decline in the steel, mining and manufacturing industries. We have worked hard to encourage learning and addressing the skill deficiencies in our area, offering knowledge, skills and recognised qualifications that are of the highest quality, cost effective, timely and affordable. We are devastated and embarrassed for the loss incurred by each learner and potential learner, who has suffered as a result of the decision made by the department for Education and Skills. The firm sent me a petition, and the details of nearly 200 individual learners who had been badly affected by the decision.

The letter went on: Whilst we appreciate that it is to protect individual learners who are putting their own money alongside the Government's contribution, the fact that there were substantial loop holes in the system in the first instance to allow fraud to happen is not good enough and to add insult to injury the 'plug is pulled' on reputable centres with students eager to learn and fill gaps both locally and nationally. As regular taxpayers we (the providers and the students) hold the government responsible for ensuring that our money is invested wisely and accounted for, this has not happened in this instance. Following the collapse of the ILAs, we must ask what the Government will do to widen participation in adult education in the future—a question to which they could give no answer on 28 November. If the Government implemented the scheme that they said they would investigate in the pre-Budget report, we would welcome level 2 entitlement as a step towards reducing the unacceptably high number of adults lacking basic literacy and numeracy skills. The Government should go further, however, and extend the entitlement to level 3 qualifications. The Liberal Democrats have proposed that in the past. Why the Government could not have done it previously, when it was recommended by their own national skills taskforce or when we raised the idea, is beyond us.

What was the motivation behind the Government's change of heart? The Treasury view is summed up in the title of a chapter in the pre-Budget statement: "Meeting the productivity challenge". We infer from that that the Government see lifelong learning skills purely in terms of producing an army of technocrats ready to work in whichever sector the Government deem preferable. Other aspects of lifelong learning are equally important.

We need fast and decisive action from the Government now if we are not to see progress towards lifelong learning and entitlements to adult education slip back 10 years. I call on the Minister to give answers to the questions we are asking today, about the appalling catalogue of failures and confusion relating to the Government's failed ILA scheme and about what will replace it—and, equally important, when it will be replaced.

11.52 am

Alistair Burt (North-East Bedfordshire)

Let me begin with two brief expressions of sympathy for the Government.

First, I am sure that many people have already received excellent training via ILAs, and will have found it very valuable. The scheme's collapse, and our criticism of that, do not detract from our support for adult learning; if anything, they enhance our worry about the poor delivery to others. Secondly, I want to express my personal sympathy for the Minister. The ILA scheme was not his creation, but he finds himself engulfed in its failure. I have had a similar experience, so I know what he is going through. I must add, however, that if he was not the cause of the original problem, he is now closely involved in the success or otherwise of the solutions. That is his role in this wretched affair.

It is clear from what has been said this morning that we are only at a staging post in the bid to unravel the policy formerly known as individual learning accounts. In an excellent summary of the origins and history of the scheme, my hon. Friend the Member for South Norfolk (Mr. Bacon)—whom I congratulate on raising this important topic—told us what problems were evident from an early stage, how those problems grew to the incredulity of decent training providers working in the system, and what the impact of the problems has been.

I want to make five brief points, and to ask some questions. Let me go to the heart of the problem, which I see as a breach of trust on the Government's part. Individual learning accounts superseded a scheme operated by the previous Conservative Government, known as vocational training relief, with a monitoring system operated through the Inland Revenue. Many now compare that scheme favourably to the ILA scheme. Individual learning accounts were designed to take the opportunity of education to those who might have missed the chance in the past, and for whom access by way of ILAs would constitute a fresh start.

A substantial amount of trust has been engendered by the scheme, first and foremost—as a number of Members have made clear—among individuals attracted to it. Mr. Marvin Ryder took his training skills to the working men's clubs and community centres of the north-east, seeking out those whose previous experience of education had been poor in order to give them another chance. The Minister could not have found a more passionate advocate of the scheme, or anyone more determined to identify a real target for it. Mr. Ryder, however, writes: Due to the decision to close it down we have had to suspend our plans and lay off two members of stall". Mr. Ryder is far from being alone. We have heard from individual providers through my hon. Friends the Members for Christchurch (Mr. Chope) and for Upminster (Angela Watkinson); it is notable that no member of the Minister's party has felt moved to speak. The Association of Colleges has also written to me on behalf of further education colleges. It tells me that it conducted a quick postal survey of member colleges on 30 November to ascertain the effects of the early closure on colleges. Sixty-three colleges had submitted returns by 10 December. Almost all were able to give figures for the number of ILA account holders for whom learning had been booked in the current academic year: The total was 28,532. Forty-three colleges reported that they had been unable to book learning for ILA account holders because of the early closure of the ILA programme. Not all were able to give figures for the numbers involved, but the total for those who were able to quantify was 4,463. Twelve colleges reported that they would suffer losses amounting to £68,245 from investment which had been made in anticipation of ILA holders becoming enrolled. Forty-nine colleges reported that they expected to suffer a loss of income amounting in total to £695,414 as a result of the early closure of the ILA programme. Colleges generally expect to have to meet this loss of income in order to honour commitments to students. This breach of trust—in that the scheme failed to live up to the commitment of those who are learning and those who are teaching them—is compounded by the Government's astonishing insensitivity to the problem. One provider wrote to the ILA website to express concern over the loss of business, and was told by the customer complaints manager in an e-mail: The Secretary of State has always had the power to withdraw the Individual Learning Accounts initiative at any stage. This was the situation all learning providers accepted when they registered for participation in the initiative. There is no contract of supply between providers and the DfES for ILAs, therefore unfortunately compensation is not available. Once again please let me apologise for the difficulties that you have experienced.

Mr. Bacon

That quotation interests me. Does it not give one pause for thought? It makes one ask why any private sector organisation of any kind would ever wish to co-operate with Government about anything, if that is the basis on which Government treat the private sector.

Alistair Burt

My hon. Friend goes to the root of the matter. The breach of trust will have widespread ramifications, because the expectations built up deliberately by the Government have now been deliberately deflated.

The Minister himself recently told the Select Committee: I have to say the decisions those learning providers took to use the ILAs as part of their business planning and their revenue streams was a decision entirely for them. Our principal concern has to be, first, for the public purse and, secondly, our responsibilities to the individual learning providers, and it is to them we owe the first duty. We are not a party to the business decisions any individual learning provider might make based on the ILA scheme. In view of what the Minister has heard this morning from a variety of sources, let me ask him—before he is deluged by individuals' claims from the ombudsman, or turned over by the National Audit Office or other organisations—to reconsider.

The breach of trust leads me to my second point: that there is a complete lack of understanding of how that trust in Government was built up. The involvement—the business commitment—of so many providers was inevitable, because the introduction of the ILA system distorted the training market, leading to the creation of thousands of new companies providing training. For most existing providers, it was a question of involving themselves with ILAs or seeing their businesses disappear altogether. They had no choice. That is why the Minister cannot wash his hands of the matter at this stage.

Having become involved, providers naturally made plans based on what the Government said about the scheme. Had they read the Government publication "Education and Skills: Delivering Results A Strategy to 2006", published in early October this year, they would have seen pride of place given to the ILA scheme. Indeed, the only milestone target for the Department in 2001 is: Expand Individual Learning Accounts and set up a network of 6000 IT learning centres". The public might have been forgiven for thinking that there was some solid basis on which to build hope for the future, and that is what they did, but that is also why their businesses face devastation.

That breach of trust is most crucially at issue in respect of the premature premature closing of the scheme overnight on 23 November. The Government decided and announced on 24 October the scheme's closure, giving 7 December as the date to complete registrations for learners already taken on by providers. Providers made plans to register, assuring students that all would be well with their applications, but many were unable to get their application on the web because it seemed unaccountably clogged. I wonder who was registering what.

The Government announced on 23 November that the scheme had been closed overnight due to fear of fraud. What of those who were unable to register their students by that date? The situation is totally confused and it appears that the Government will cover only information already logged on the system by that date, so students who arranged to pay one sum for their course will be told that they must pay more, through no fault of theirs or their learning provider.

Depending on how far down the contractual road learners had travelled, they will either have their original expectation met by the provider at the provider's own cost or simply cancel if they cannot afford the new cost of training, again at the provider's cost. Can the Minister and the Government comprehend the sense of being let down and why the blame for that is being laid at their door?

Thirdly, I must draw attention to the sheer incompetence of the system. It failed to get resources to those who needed them most. In a recent Select Committee hearing, the Minister agreed with the estimate of the hon. Member for Bury, North (Mr. Chaytor) that up to £150 million may have gone in subsidy to those who did not have need of it. My hon. Friend the Member for Upminster (Angela Watkinson) made that point. In 1999, the Institute for Fiscal Studies examined the ILA system, saying: It is unclear how much of the £150 million subsidy to account holders will result in new training which would not have happened in the absence of the scheme, rather than just being a dead-weight transfer to people who would have done the training anyway. Why was no account taken of that likelihood?

The system, unlike vocational training relief, seems to have been incapable of detecting unfeasibly large payments. Experienced providers and hon. Members this morning have told us of the attentions of the Inland Revenue when claims for £5,000 a week were registered under the old system—that would get the tax man round—but we have heard a number of stories suggesting that some claims approached £1 million a week.

As my hon. Friend the Member for South Norfolk said, that is an enrolment strike rate of 5,000 students a week. Such success in attracting people to education would normally result in an offer to run a failing school and a knighthood, but in this example all it resulted in was a large cheque with no questions asked. One is entitled to ask whether a suspicion has arisen through the payments that needs to be dispelled.

The system appears to have been wide open to fraud, from the alleged sale of ILA numbers direct from Capita—a serious matter reported in the papers at the weekend that must be addressed, one way or another—to setting up front companies for political extremists to draw down cash from the taxpayer, and virtually all points in between. The Government proudly tell us that this wonderful scheme far exceeded its targets, with 2.5 million account holders, but how on earth does the Minister know how many are genuine and how many are completely false?

Fourthly, under pressure, the Government panic and the rest of the country picks up the tab. The scheme was shut down suddenly in October, with the Government citing exceeded expectations rather than abuse. We asked if the shutdown was due to fraud, but we were told, in effect, no, because fraud allegations are such a tiny part of the picture. The scheme was then closed overnight, due to fraud.

Now, either the fraud was small scale, in which case why not attack it and leave the scheme alone, or the system was riddled with fraud, as providers allege, and should have been dealt with long ago. Of course, the scheme may have been running far beyond budget, so the Chancellor decided to close it down, which has become the most likely suggestion, but how can that be squared with the "expansion" mentioned in the Government's targets? Either way, the announced and then sudden closure has caused massive disruption, significant financial loss and, frankly, a horlicks of Department for Transport, Local Government and the Regions proportions. Truly, this is the people's cock-up.

A constituent of my hon. Friend the Member for Broxbourne (Mrs. Roe), who apologises for being unable to attend, writes: I am a local businesswoman, single with two small children who opened a commercial Internet centre in Waltham Cross. This centre opened in May 2001, using a £24k bank loan, which was guaranteed by my house. I was responding to market signals, with the provision of training grants to the individual, by creating a learning environment with internationally recognised computer courses, as well as applying for and receiving accreditation to be a recognised exam centre for the ECDL. Many of my learners are mature women returning to work or seeking to change career. The accreditation was received 1 week before the suspension of the ILAs. My investment in the necessary software, fees, accreditation fees, training for staff etc has been considerable, and on top of my initial investment. Yes, my purpose is to repay my bank loan, but the service and facilities at my learning centre are second to none. I open 7 days a week, with late nights for those who work, provide a supportive and welcoming environment…and genuinely care about the achievements of my learners. My investment, which was personally funded once again, is now a noose around my neck. The suspension of the ILA grants has meant no income flow for my investment, and my livelihood and my house are now in danger. I also have an obligation to my existing learners to be able to provide them with the access and facilities, as they have paid for their courses, but how do I do that with cash flow problems. I myself complained to the local council and the BSC about the shady and underhand tactics being used by third party marketing companies who were obtaining ILA forms in the hundreds in my local shopping centre, but I do not fall into that category, and had a visit to the learning provider taken place prior to being granted learning provider status much of the fraud could have been avoided. What now for me, and many centres like me, and what about my learners? Fifthly, the Government have not begun to understand the damage done to lifelong learning. Initiatives depend on trust and the public's willingness to get behind them, whether as individuals committing time and effort to a new future or as deliverers working in tandem with the Government to make something happen. If both lose confidence in the Government, how does the Minister expect to engage them again?

What lessons will be drawn from all this? The Government may offer a discount learning scheme to help people out, but it might be withdrawn virtually overnight. If people work with the Government to provide such schemes, the Government's overnight evacuation from responsibility may leave them high and dry, and facing substantial losses.

I have some questions. What have Scotland and Wales done that England did not do? Why is their scheme alive, well and flourishing? Why was the system so designed as to be incapable of stopping fraud and abuse? When problems were identified, no levers could be pulled to prevent the few from ruining it for the many. Having heard all that evidence, and there is much more to come, will the Minister reconsider his Department's responsibility to learning providers to ensure that future initiatives have credibility? What is the current state of criminal investigations? I tabled written parliamentary questions for answer yesterday, but I received a holding reply. How widespread is the fraud? Crucially, can he say anything about the allegations against Capita, which are most damaging of all?

Finally, who is going to pay? How much is all this costing? Following the Select Committee meeting—as my hon. Friend the Member for South Norfolk pointed out—the Minister has done his best to provide costings, which he currently estimates as £58 million prior to 23 November. How much more, and—crucially—where is it coming from?

In the Minister's letter of 30 November to the Chairman of the Select Committee, he tellingly used the phrase The overspend will be met from within the Department's existing resources". We all know what that means: the Treasury has been round and has said, "The cock-up is yours. You sort it out—don't come to us". Which part of the education budget is to pick up the bill for the overspend? Will it be that for primary schools, secondary schools, teachers, new buildings, transport to schools, higher education or further education? Whose pocket will be picked to sort out the mess? The sum of £58 million represents 2,500 teachers—half the Government's commitment to new teachers over the next few years.

I am sure that colleagues on both sides of the Chamber can make their own calculations of what could be done with £58 million of the education budget: or will the Minister go to Queen Anne's Gate and hand the bill to the Home Secretary and ask for a modest contribution from the author of the scheme? Where do we go from this point? What will the new scheme be and when will it kick in? We have tabled written questions and we are now asking for an answer.

In my political experience, I have rarely seen a can as large as the one that the Minister now has to carry. I am intrigued as to how he will go about it and curious to hear what he will say in answer to all our questions.

12.11 pm

The Parliamentary Under-Secretary of State for Education and Skills(John Healey)

I congratulate the hon. Member for South Norfolk (Mr. Bacon) on securing the debate. He gave a true reflection of his membership of the Public Accounts Committee in the forensic way that he introduced the subject. He is well placed to do so. I welcome his interest in the debate and in the Committee. It is a proper role for Parliament to examine exactly what the Government have done and what we plan to do to sort out the problems that we are uncovering.

The hon. Gentleman rightly stressed the importance of the issue to learners, to providers and also to taxpayers. However, although hindsight is a fine thing, proper scrutiny and accountability require accurate information and examination of the facts. It is not the case that the scheme was, as the hon. Gentleman maintained, riddled with scams before it started. I hope that the debate and, subsequently, the examination undertaken by the PAC will help accurately to consider the facts and set out the chronology, will look closely at the evidence for the problems and will make a judgment about the details of the action taken by me and my departmental colleagues.

Mr. Bacon

I do not recall using the phrase "riddled with scams from the outset"—the record will show whether I did. Does the Minister agree that the question is far from being merely one of hindsight and that there were people, such as Mr. James O'Brien from Pitman, who warned the Department? Warnings were issued, but they were wilfully ignored.

John Healey

The record will show that the hon. Gentleman talked about the fact that there were scams even before the start of the scheme.

As regards Mr. O'Brien's letter, he was one of several providers who took part in the design of the scheme—they participated in workshops and offered their views. It is true that Mr. O'Brien warned of possible abuse. He also pointed out that the cap to limit information and communications technology, ICT—80 per cent. Discounts—was far too low; he argued that it should be set at £5,000. That would clearly have led to the use of much more public money.

In the context of the debate, I recognise how the decisions taken by my colleagues and me have left the constituents referred to by the hon. Gentleman. I hope to explain that the decisions were right and were indeed the only ones that we could have taken in the circumstances.

Ian Stewart (Eccles)

I welcome the decisiveness shown by the Government. Having taken that decision, does my hon. Friend understand that my constituents—trade unions, non-governmental organisations and private training providers, whose hands are clean—want things to be moved on? They want a new scheme to be set up as soon as possible and they want the Government to consider transitional arrangements. Will the Minister refer to that during his speech?

John Healey

I shall indeed, and I thank my hon. Friend for his intervention. I shall cover compensation or transitional arrangements, as well as the work that we are undertaking to design and re-introduce a successor scheme.

The introduction of individual learning accounts was an important and innovative approach to getting people engaged in learning. When we introduced them, no one knew how they might work. They have far exceeded everyone's expectations. Our original aim was for 1 million ILA holders by March 2002. We beat that target by nearly a year. By July 2001, only 10 months after the national launch of the scheme, we had attracted 1.5 million account holders. At present, there are more than 2.6 million account holders in England alone.

The hon. Member for South Norfolk asked about the budget. He gave details of the information that I set out when I spent an hour and three quarters with the Select Committee on 28 November. At that stage I could not give all the information as we had not yet calculated it. However, on 30 November, I wrote to the Chairman—the letter cited by the hon. Gentleman—and shall ensure that the letter is placed in the Library.

In that letter, as the hon. Gentleman explained, I pointed out that we had spent more on the programme—and more quickly—than expected. The total budget over two years was £202.1 million, drawn from the annual budgets of the Department for Education and Skills and the resources of the training and enterprise council. By 23 November, the budget was committed to the tune of £260.9 million. That was not surprising as, in the context of a budget set to realise 1 million ILA holders by March 2002, 1.5 million accounts had been opened by the end of July 2001.

I appreciate the introductory comments made by the hon. Member for North-East Bedfordshire (Alistair Burt), and realise that as the Minister who became responsible for the Child Support Agency he has some experience of my situation. However, the assertion that the most likely explanation is that the Chancellor closed down the scheme is an argument that beggars belief. It would be a unique event for an educational programme to be wound up for being too successful. If the point were not so serious, it would be laughable to suggest that Ministers are using the police inquiries as a cloak in which to bury a good policy.

The hon. Member for Chesterfield (Paul Holmes) quoted from The Times Educational Supplement. That paper was briefed on the latest details of the police investigations before it went to press, but chose to construct the story from which the hon. Gentleman quoted. My advice to him is straightforward: take no notice of such risible and wretched reporting; take more notice and a good look at the updated information that—as soon as I can do so—I shall regularly give the Chairman of the Select Committee on Education and Skills.

Alistair Burt

I am slightly puzzled as to where the overspend occurs in a scheme that was planned to expand. I understand the Minister's point that if the scheme is successful but forms part of future planning, there is no overspend. However, the use of the word "overspend" suggests that something has gone wrong with the budget. Will be clarify that?

John Healey

Yes, of course. The overspend is against the budget. The budget was set to achieve 1 million ILAs by March 2002. As I explained, we achieved 1.5 million by June 2001 and 2.6 million by October this year.

ILAs aimed to attract people back into learning, especially those who had a poor experience of previous learning—memories of failure, low esteem and lack of opportunity. From the outset, the decision was taken that it was vital to design a user-friendly system that avoided excessive bureaucracy and was, of course, simple to use.

Problems began to emerge this summer, however. Until July we had received 2,365 complaints—only 0.18 per cent. of the then 1.3 million account holders. At that time, one company was subject to a formal departmental investigation and no fraud was found to have taken place.

At the end of July, there was an increase in the number of complaints to 3,096. In particular, we had started to receive more complaints about misuse and mis-selling. We therefore took various steps to tighten up the operation and the rules of the programme, including new information for learners, a new provider agreement and a full re-registration process for learning providers. That resulted in 700 providers losing their ILA registration.

By the end of September, the number of complaints had increased to 6,053, which was equivalent to 0.25 per cent. of just under 2.4 million account holders. By then, we had also established a compliance unit to give us an additional resource to investigate the increasing volume of complaints; stopped the registration of new providers; withdrawn all the blank application forms distributed by learning providers; and required new ILA applicants to register themselves via the Capita website or the telephone helpline. All those moves sought to introduce a more robust procedure for people to open accounts and to control spending.

Within the terms of the programme, as it was designed, we were simply not able to stamp out the problem. By the end of October, the number of complaints had increased to 8,448, which was equivalent to 0.33 per cent. of the 2.5 million account holders.

Mr. Bacon

Will the Minister give way?

John Healey

I beg to be allowed to continue so that I can cover the points raised by the hon. Gentleman and other hon. Members and deal properly with the debate.

Overall numbers of complaints have always been low, but in a very short time they almost doubled as a proportion of the number of account holders. By the end of October, the number of providers about whom we had received at least one complaint was 404, which was about 5 per cent. of those registered as learning providers for the scheme. Therefore, the trend in those late summer and early autumn months was an increase in the number of complaints, an increase in the nature of more serious complaints, and, consequently, increasing concern felt by me as a Minister and by officials in the Department.

We therefore came to the conclusion that the ILA programme was in need of a radical overhaul. That is what led to the decision to withdraw the programme, which was announced on 24 October by the Secretary of State for Education and Skills. At that time she gave six weeks' notice that the programme would end in England on 7 December. The decision was difficult and not taken lightly. It was also reached bearing in mind the disappointment that it would cause to individual learners and the difficulties that it would inevitably cause to providers. I believe, however, that the decision has been vindicated by subsequent events: a continuing increase in the numbers of complaints and in the numbers of cases under investigation.

By 17 November, we had received 10,276 complaints, which was 0.39 per cent. of the number of ILA account holders. Of the 10,000-plus complaints that were logged since the start of the national scheme in the previous September, about 4,000 were about providers not complying with the rules of the scheme, mis-selling or potential fraud. The rest included complaints about the service of the ILA centre, the discount levels available for particular courses, cessation of the 150 opening offer and requests to backdate membership. There were also other complaints.

The complaints that seriously concerned us at that point related to 565 providers, which was almost 7 per cent. of the 8,500 that were registered with the ILA centre. The hon. Member for South Norfolk has cited one of the worst examples of the problems that crept into the system in recent months and with which we have had to start to deal: individuals discovering when they attempt to draw down their learning account that their account has been used already. That is a serious example of the problems encountered. It can be described at best as sharp practice and in the worst cases as outright fraud. The first suspension of an ILA provider because of that type of complaint and that type of fraud occurred on 25 June. The Department received the first letter in relation to that case on 11 June.

By 17 November, the Department had received 3,252 complaints from individuals claiming that money had been drawn from their ILA account without their knowledge or consent. The complaints were collated by the Department and the ILA-Capita centre. Those complaints are under investigation but are not yet substantiated.

We have serious concerns about 86 of the 565 providers in the system about whom we have had complaints. Sixty have already been referred for investigation, 27 are being investigated in co-operation with police, and six police forces are involved. So far there have been 39 arrests, with one charge, all of which relate to four learning providers. However, on top of all that, a new problem arose.

Mr. Chope

Will the Minister give way?

John Healey

No, I shall not. I have five minutes left to reply. I could speak to the hon. Gentleman after the debate.

Acting on new information about serious and sustained allegations of fraud and theft, the Department for Education and Skills special investigations unit confirmed those allegations. Subsequently, the Secretary of State and I took the decision to shut down the programme with immediate effect, from 6.30 pm on 23 November. That decision was taken to minimise a serious risk to public funds, and we called in the police at the same time.

Mr. Bacon

I am grateful to the Minister for giving way, and I shall try to be brief. Is he aware that, on Monday, 19 November, individuals were going into training providers and saying, "You'd better buy these numbers that we're offering soon because they're closing the scheme this coming Friday", to which the training providers replied, "We know that they're closing it, but they're closing it on 7 December, as they announced", to which those selling the numbers said, "No, trust me—they'll be closing it this Friday." It turned out that the sellers were right.

John Healey

That information is very surprising.

Mr. Bacon

I was given it by a training provider.

John Healey

It is surprising.

The relevant evidence was brought to the attention of the DFES investigations unit on the Wednesday of that week. On Thursday, investigators visited the individual concerned and verified and confirmed the strength of the allegations. On Friday, the investigators informed Ministers of the position. On Friday afternoon, the Secretary of State and I held a video conference, and we closed down the operation that evening.

I hope that hon. Members will understand that I cannot give full details of the allegations as police investigations into them are continuing. I can say, however, that a significant number of ILA numbers had been stolen and were being offered for sale, with the prospect that they would then be used to claim money fraudulently from the Department. The evidence that we were able to substantiate immediately was sufficiently convincing to make us conclude that there was a serious risk to large amounts of public money. That is why we closed the programme immediately.

Our subsequent investigations have confirmed that the ILA numbers had been extracted without authority from the Capita database system. I hope that the hon. Member for North-East Bedfordshire will therefore accept that the decision to close down the scheme immediately was not, as he described it, premature.

In reply to the point made by the hon. Member for Upminster (Angela Watkinson), it was simply not possible to consult training providers because of the need to take immediate action. I am well aware that the closure affects training providers, and we are currently assessing that impact. However, I do not want to give the impression that we are able to put in place provision to support the business and funding streams of learning providers who made a business decision to use ILAs as an income source. Our principal concern has to be the public purse, and our principal responsibility has to be to individual learners. I therefore stand by my comments to the Select Committee.

The hon. Member for South Norfolk said that the reputation of good providers is being besmirched because of the bad ones. He is absolutely right that, so far, 60 providers are under investigation. Police are involved in 27 of those cases, and 47 providers have been suspended from the provider register. There may well be more suspensions as we work to get to the bottom of the abuse that the so-called learning providers have inflicted on the ILA system.

Mr. Boris Johnson (Henley)

Will the Minister give way?

John Healey

I shall not.

Among those so-called learning providers are fraudsters who have burrowed their way into the learning system, acting like a cancer eating away at the opportunities that ILAs were creating for thousands of people. They are a minority seeking to milk the taxpayer with no regard to the deep harm that they were doing to individual learners and to the large number of decent learning providers who had seized on the ILA scheme to develop the support and services that they could offer to people from all walks of life in all parts of the country—

Mr. Bacon

What about the future?

John Healey

Make no mistake: where we confirm cases of fraud we shall pursue those providers for every penny that they have wrongly claimed from the public purse—[HON. MEMBERS: "What about the future?"]

As for the future, I have explained to the Select Committee the provision that we are putting in place. We are working hard on developing the design for a new scheme, and we shall re-introduce a scheme as soon as possible. The Secretary of State and I have given a cast-iron commitment that—

Mr. Peter L. Pike (in the Chair)

Order. We must move on to the next debate.