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Thursday, 13 December, 2001, 11:33 GMT
Stolen learning accounts 'for sale'
adult training class
People wanting to take courses found their accounts had been used
Account numbers obtained from the official database of people who had signed up for training grants were stolen and offered for sale, an education minister said.

The discovery of this latest swindle to hit the already-troubled Individual Learning Accounts (ILAs) was what caused ministers in England to stop the scheme suddenly on the evening of Friday 23 November.

The Adult Skills Minister, John Healey, told MPs that fraudsters had "burrowed their way" into the learning accounts system, acting like a cancer.

But he rejected opposition claims that the scheme had been "riddled by scams" from the outset.

"Hindsight is a fine thing," he said during a Commons adjournment debate in Westminster Hall.

58m overspend

Individual Learning Accounts provided subsidies for people aged over 18 to pursue certain government-approved training courses to improve their skills.

Mr Healey charted the chronology of events following the scheme's launch in September 2000, when the target was to get a million individual account holders by March 2002.

There had been 1.5 million by this summer, and more than 2.6 million in England alone when it was scrapped last month.

The original budget of 202m had already been overspent by more than 58m. But he ridiculed any suggestion that the Treasury had called a halt because the scheme had been too successful.

Rising complaints

During the summer the number of complaints from users of the scheme had increased, rising to 8,448 by the end of October - or 0.33% of the number of account holders.

Of those, almost half were about training providers breaking the rules, mis-selling accounts, or potential fraud.

So on 24 October the announcement was made that there would be no new applications for learning accounts in England, and the existing ones would have to be used by 7 December.

But individuals were finding that when they came to draw down their learning accounts to take a training course, somehow they had been used already.

Numbers stolen

This has happened in 3,252 cases and the Department for Education had serious concerns about 86 training providers - 27 of which were being investigated with police help.

But then on 21 November the department learnt about "serious and sustained allegations of fraud and theft".

"A significant number of ILA numbers had been stolen and were being offered for sale with the prospect that they would be used to claim money fraudulently from the department," he said.

This had presented "a serious risk to large amounts of public money".

The allegations were verified the next day and the scheme was shut down a day later.

Security puzzle

Investigations had since confirmed that the numbers had been extracted "without authority" from the database system held by Capita - the company running the scheme for the department.

A police investigation was ongoing, he said.

There was no immediate comment from Capita, which on Monday told BBC News Online that no evidence has been put forward to substantiate claims of a breach of its computer security. It said none of its staff was under investigation.

Police inquiries are also beginning in Cheshire, with suggestions that criminals associated with a learning-account fraud are based in the area.

But a police spokesperson said that so far they had only just begun to evaluate whether there was sufficient evidence to investigate.

Who pays?

The National Audit Office is to investigate ministers' handling of the scheme.

In the Westminster Hall debate, Tory education spokesman Alistair Burt wanted to know which part of the education budget would be used to pay for the 58m overspend on the scheme.

"Is it primary schools, is it secondary, is it teachers ... whose pocket will be picked to sort out this mess?" he said.

Another Tory MP, Richard Bacon, claimed that at least one "scammer" had been claiming up to 1m a week, equivalent to training for 5,000 students.

He said these actions had "besmirched the good name" of genuine training providers.

Providers angry

"The government has been reckless with taxpayers' money, and the people who suffer most from that recklessness are ironically the people the government most wants to help," he added.

Small training providers who say they could be put out of business by the ending of the scheme were lobbying Parliament on Tuesday to demand a new scheme.

Mr Healey said he recognised the uncertainty many training providers now faced, but ruled out any compensation for the companies.

"We are working on developing design for a new scheme," he said.

  • Individual Learning Accounts were suspended in Northern Ireland also, but are still operating in Wales and Scotland.

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