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Wednesday, 1 May, 2002, 10:47 GMT 11:47 UK
Ministers 'failed' in fraud scandal
Ten police forces are investigating ILA fraud
The Department for Education has been condemned for "serious failings" in a training fraud that cost taxpayers millions of pounds.

In a report which is likely to embarrass the government, an all-party committee of MPs has strongly criticised weaknesses in the Individual Learning Account (ILA) scheme, which collapsed amid claims of widespread fraud.

The culpability of Capita was matched by that of the department, in particular for not demanding more robust anti-fraud mechanisms

MPs' report
The report from the House of Commons education select committee has also attacked the role of Capita, the company paid 55m to operate the scheme.

And the report presents a picture of a flagship training scheme which was a "disaster waiting to happen".

The Department for Education and Capita shared "culpability", and the scathing report talks of "confusion" and a "debacle".

Committee chairman, Barry Sheerman, expressed frustration that it was difficult to specify which individual ministers had been responsible for decision making.

He also criticised the "fudging" of responsibility between the education department and Capita.

And committee member Jeff Ennis said that the fiasco had "badly damaged the credibility of Capita".

The Individual Learning Accounts were launched in September 2000 as a training grant for all adults.


But the select committee, investigating the collapse of the scheme a year later, reported that the system was much too easy to defraud.

Barry Sheerman
Barry Sheerman, chair of the committee which has attacked the running of the ILA scheme
And it quotes claims that a single fraud involved 80,000 accounts - which could represent a loss of up to 16m of public money.

The total cost of the scheme was 268m - but there is no figure for how much of this might have been stolen, because it remains unclear how many of the 2.6m accounts opened were genuine.

At one point, accounts were being opened at the rate of 10,000 per day - and the budget for ILAs was over-spent by 93.6m, but it is not known how much of this was fraud.

The education secretary closed down the scheme in England in November 2001, after the discovery that criminals were selling thousands of ILA account numbers.

The schemes in Northern Ireland, Scotland and Wales were also ended within weeks.

Claims that the scheme had been closed down because of Treasury concerns over spiralling costs had not been confirmed, said Barry Sheerman.

But he said that correspondence with the Education Secretary Estelle Morris over the details of the closure had been "unsatisfactory".

'Feeding frenzy'

The report highlights that the Department for Education had received warnings about the vulnerability of the scheme even before it was launched.

By March 2001, there were press reports revealing the extent of ILA fraud - but the system was kept open for another eight months.

One of the key problems was the lack of vetting of training providers.

Doorstep con-men, organised gangs of fraudsters and high-tech computer criminals have all been claimed as contributing to the theft of public funds.

It was "a licence to print money", the report says.


Nor were there any checks on the quality of courses being funded.

Simon Cripwell, of Warwickshire Trading Standards officer, has described a "feeding frenzy of fraud", including the fraudulent use of people's names and the supply of inadequate training materials.

The widespread allegations of fraud are being investigated by 10 police forces.

So far there have been 45 arrests and one conviction.

There have been over 18,000 individual complaints about the scheme, including many from people who have had their names or accounts dishonestly used.

The Department for Education has been checking 571 learning providers, and has more serious concerns about 120 of them.


The select committee makes a series of recommendations for the successor scheme which ministers have promised to bring in.

It says it should be better targeted, to minimise the "deadweight" of those who already had qualifications and the means to afford training if they wanted it.

There should "not be an automatic assumption" that Capita would run the scheme.

"The committee notes the contrast between the department's continuing co-operation with Capita and its refusal to consider compensation for learning providers," the report says.

Quality assurance needed to be "built in from the start" - with prospective training providers having to seek accreditation in advance.

The committee also said that there was a "moral" obligation to pay outstanding debts to legitimate training providers.

Successor programme

Shadow Education Secretary Damian Green said that the report "excoriates ministers", showing that they "behaved like rabbits in headlights".

And he pointed to the months of delay between the exposure of fraud and the closure of the scheme.

"The awful truth is that we still don't know how many crooks were involved," he said.

Committee member Val Davey also stressed that this had been a very innovative scheme, which provided training for many people who had not previously benefited from adult education.

And committee members repeated their support for the underlying principle of grants for adult training.

Adult Skills Minister John Healey said: "We have been determined to get to the bottom of what went wrong and the Committee's inquiry has helped this process."

"We will ensure the lessons are learned in designing our ILA successor scheme," he promised.

"We are now moving closer to settling the design of a successor programme which will incorporate the lessons which we have learned following the closure of ILAs last November," he said.

The BBC's Sue Littlemore
"There were no checks on the trainers at all"
The BBC's Kim Catcheside
"It may be impossible to calculate the scale of the losses"
Shadow Education Secretary Damian Green
"Ministers should carry the can for this"
See also:

10 Oct 01 | Business
Tricksters target government scheme
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