Warnings of grant abuses 'ignored'

Accounts were aimed at improving people's skills

New evidence has emerged that the government knew that the training grants scheme in England was open to abuse even before it was formally launched.

This is not just a shambles it's a scandal

Shadow education secretary, Damian Green

The head of a respected training company - Pitman Training - wrote to the education secretary more than a year ago warning that the rules for the Individual Learning Account (ILA) scheme were not detailed enough.

In the Commons, the shadow education secretary, Damian Green, said the government had "wilfully ignored" such warnings.

The Education Secretary, Estelle Morris, signalled to MPs that the scheme was unlikely to be revived in anything like its previous form.

But she gave a "cast-iron guarantee" that government funding for adult learning would continue in some form once the shortcomings of the ILA scheme had been reviewed.

'Open to abuse'

In a letter of 20 September 2000, Pitman Training managing director James O'Brien told Ms Morris's predecessor that he had expressed his company's concern both to Department for Education officials and to Capita - the commercial company with a £50m contract to run the ILA Centre for the government.

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"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."

"We now understand from your officials that such abuse has, indeed, been identified ...."

ILAs were launched in September 2000 providing people aged 19 and over with up to 80% off the cost of certain training courses - the money going to the training provider.

There have been allegations that some registered training providers have been manipulating the system to pocket the money while providing sub-standard courses or no courses at all.

'Warnings ignored'

During an opposition-led Commons debate on education, Conservative Damien Green said the government had tried to give the impression that they only knew of these problems earlier this year.

"The government wilfully ignored warnings that the scheme was flawed even before it started," he said.

He added: "This is not just a shambles it's a scandal, and someone should own up to the responsibility."

He has asked for an investigation by the Commons public accounts committee.

Complaints investigated

Estelle Morris told MPs that by July this year 1.5 million people had opened accounts.

There had been complaints from only about 3,000 - just 0.19% of the total - and only a minority of those were about allegedly fraudulent training providers.

Every single complaint was investigated. No fraud was found.

But the number of complaints rose so during July the department required every training provider to re-register - as a result of which 700 lost their registration.

In the next two months complaints continued to increase to 0.25% of what were by then 2.3 million account holders.

A "compliance unit" was set up within Capita. The rules were changed so that only individual applications from would-be trainees were accepted by the ILA Centre, not via training providers.

At that time - 28 September - registration of any new training providers was suspended.

Scheme withdrawn

By the end of October complaints had risen to about 8,000 out of 2.5 million accounts - still only 0.35%, Ms Morris said.

The number of applications had far exceeded the government's original expectations for the scheme - and the amount of subsidy it would have paid out.

"And we had what to me seemed an unusually high number of accounts that were then opened," she said.

So she decided to withdraw the scheme. Two days later, Northern Ireland's Minister for Employment and Learning, Dr Sean Farren, did the same.

Potential fraud

In Wales ILAs are continuing, although registration of new training providers has been halted for at least three months. In Scotland they are under review.

Estelle Morris said that only a quarter of the complaints - totalling 404 providers - related to misuse, mis-selling or potential fraud.

Her department says most of those 404 have had one or two complaints against them. But there are 84 about which it has had a larger number of complaints and about which it has more serious concerns.

"If potential fraud is suspected those cases are referred to the police," Ms Morris said.

She told MPs 30 people had been charged. This was incorrect.

Her department later confirmed there had been 30 arrests but no charges - and these arose out of a separate National Crime Squad investigation into animal rights extremism.

Ms Morris said an evaluation was going on of the strengths and weaknesses of the ILA scheme.

"What I can give ... is a cast-iron guarantee is that it's not the end of government funding for adult learning," she said.

"What is clear is that we are not about, next week, to open up applications for ILAs again."