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The innovative Individual Learning Accounts (ILA) scheme was aimed at widening participation in learning and helping to overcome financial barriers faced by learners, particularly amongst those who lack skills and qualifications. The scheme, which subsidised the costs of appropriate courses, was implemented too quickly and inadequately planned. The Department for Education and Skills had no detailed business model or quality assurance for courses and there were weaknesses in security arrangements. In addition, according to today’s report from head of the National Audit Office Sir John Bourn, the Department failed to monitor closely enough the escalating demand for accounts.

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Concerns that some providers were abusing the system and over the quality of some courses led the Department in October 2001 to announce that the ILA scheme would be withdrawn the following December. The Department acted promptly in November 2001 to close the scheme immediately following evidence of significant potential fraud and abuse: in particular, that the database holding details of the accounts (operated by the Department’s private sector partner in the scheme, Capita) was being improperly trawled for unused accounts by a few unscrupulous registered learning providers abusing their legitimate access to the system to make claims in respect of these accounts without the knowledge of the account holder. The Department estimated at the time that, had it not closed the scheme immediately, the value of fraudulent claims could have run into tens of millions of pounds.

According to today’s report the Department does not know precisely how many accounts were opened and incentives claimed without the knowledge of the account holders. The Department is seeking to determine the extent of this problem through detailed investigations and learner surveys. As at 1 August 2002, about 700 providers (out of a total of almost 9,000) were being checked. 133 of these, who had been paid a total of about £67 million, are being investigated by the Department’s Special Investigations Unit; 98 of the 133 had been referred to the police. Because of the volume and complexity of the police investigations, it may be two years before the full cost of fraud and abuse will be known.

The ILA scheme, introduced in September 2000, attracted much more interest than the Department expected, with some 2.6 million accounts being opened and expenditure amounting to some £273 million (against a budget of £199 million). About 65 per cent of all learning was IT-related. Half of the learning booked (for which data is available) was entry level training or level 1 qualifications. ILAs were a universal scheme to support lifelong learning for all. Some nine per cent of learners were young people with no qualifications, but many had A-levels or equivalent and a quarter were graduates.

The NAO point out that the Department was under pressure to agree the contract with Capita quickly. Instead of a risk-sharing partnership, the relationship the Department built with Capita was more like that with a contractor and most of the risks, in effect, remained with the Department. The Department excluded Capita from membership of the Project Board because its presence would restrict open discussions of policy. In the NAO’s view, this was a major factor that resulted in Capita having to act as a contractor bound by the terms and conditions of the contract, executing decisions made by the Department, rather than working together to develop and operate the scheme as it would have preferred to do.

The Department also decided against introducing a quality assurance system and expected instead that market forces would ensure that new providers would replace inefficient ones. This meant that the responsibility for identifying the most appropriate and good quality learning fell on learners, some of whom are amongst those least able to compare and contrast options and determine what learning would suit them best.

The NAO further concludes that the operation of the scheme was not monitored properly – with over a quarter of the learners registered as having started training not doing any. There was no requirement on Capita to make spot checks on the eligibility of learning or to carry out basic validity checks to ensure the bona fides of account holders. And, because there was no exception reporting, the Department was unaware that some 13 providers had registered over 10,000 accounts and 20 claimed payments of more than £1.5 million.

The Government is committed to introducing a successor scheme as soon as possible. The intention is to make the scheme attractive to learners but with better expenditure controls and less potential for abuse. The Department has agreed, in principle, to work with Capita to develop the scheme. A decision on whether the company will be involved in operating the scheme has not yet been made and negotiations are continuing.

"In some respects, this was a very good and innovative scheme: it was popular and encouraged many people to acquire or update much needed skills. But the speed with which the Department implemented the scheme resulted in corners being cut. Poor planning and risk management by the Department led to weaknesses in the system which made fraudulent activities possible. And the Department did not keep their eye on the quality of the learning and on the indications that a few unscrupulous providers were taking advantage of the inadequate security arrangements.

"I look to the Department to take account of these lessons when devising and implementing the new scheme."

Sir John Bourn

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