Education and Skills

"We will invest public money for training in Individual Learning Accounts which individuals—for example women returning to the labour force—can then use to gain the skills they want. We will kick start the programme for up to a million people, using the £150 million of TEC money which could be better used and which would provide a contribution of £150, alongside individuals making small investments of their own. Employers will be encouraged to make voluntary contributions to these funds."

SLIDE 3

INITIATION

Securing financial institutions' support

Market Feasibility Study

Market and Communications Strategy

Consultation with financial institutions and key stakeholders

SLIDE 4

INTERIM ARRANGEMENTS

Early work with Training and Enterprise Councils (TECs) to secure £150 million from TEC resources to fund the first million £150 incentives. English TEC share £127 million

The Learning Age Green Paper setting out key principles

Range of consultative and development work with TECs and other key stakeholders

Series of early TEC pilots to test a variety of different ILA approaches

Budget Statement 1999

TEC pilot evaluations

SLIDE 5

DEVELOPING THE NATIONAL FRAMEWORK

Consultation with providers and other key stakeholders including Learning to Succeed Consultation

Start of procurement process

Brand identity development/name visual identity

SLIDE 6

IMPLEMENTATION

Capita selected as provider

Statutory Framework in the Learning and Skills Act and Statutory Instruments

National Framework implemented

Customer evaluation

SLIDE 7

KEY FACTS

Over 2.6 million accounts opened; over 1.4 million courses booked

91 per cent of ILA learning met or exceeded expectations

85 per cent of ILA redeemers said the ILA had increased the training/learning options open to them

51 per cent ILA redeemers said they had little or no prior knowledge of the subject(s) they were studying with ILA support

Around 46-50 per cent of ILA redeemers would not have been able to pay for their course without their ILA

22 per cent had not participated in any training/learning in 12 months preceding ILA use

16 per cent of ILA redeemers had no previous qualifications

54 per cent of ILA redeemers more interested in learning

Department for Education and Skills

January 2002

Examination of Witnesses

WEDNESDAY 23 JANUARY 2002

MR PETER LAUENER AND MR DEREK GROVER

Chairman

1. Good morning. Can I welcome both of you to the Committee's proceedings. You will know that we only decided this time last week to initiate an inquiry into ILAs. I want to emphasise that this is not an audit committee: we are not mainly interested in fraud or that aspect of ILAs although that will impinge on some of the questions that we ask. We are interested in what has happened to the ILAs. Many of us were great supporters of the whole principle of individual learning accounts and know that, in very many ways, it has been a great success. A large number of people have had learning opened up to them in a way that was not possible before, so we start by saying to you that we have a real balance in this Committee on how we view what has happened. On the other hand, we are astounded that something that really only got the go-ahead formally on September 1 2000 within something like 14 months had had a trajectory of enormous support and enormous growth provision across the country and now, sadly, it is the end of the scheme. We are, therefore, very interested in two questions: what went wrong in the sense of issues like quality control, what went wrong in terms of the checking of the quality of provision; also, the mechanisms that were built in at the very beginning to prevent mis-use of the fund and the individual learning accounts? We are also very strongly interested in ILA mark 2. We are very interested in knowing how quickly we can get back on stream a very successful scheme and a scheme that speaks to the needs of a large number of providers who, at this moment, are struggling financially. Can I first ask, briefly, both Derek Grover and Peter Lauener if they would like to say a couple of words in introduction?

(Mr Grover) Thank you very much. I think the clerk has had a list of our respective responsibilities. I am responsible essentially for policy, for all learning post 19 outside the higher education sector, and Peter is responsible for learning delivery, particularly relations with the Learning and Skills Council.

2. Mr Grover, I am afraid you will have to speak up, otherwise there will be glazed expressions!
(Mr Grover) I would not want to induce glazed expressions anywhere! I am responsible for ILA policy and, in particular, future policy; Peter at the moment is looking after particularly the wind-up of the first ILA scheme. What we have done is produce for the Committee what I fear you may think is a rather formidable bundle of documents that sets out the history, because the advice we had from the Clerk was that you wanted to start with an overview of the history of the scheme. What we have given you is a collection of all the public documents we could put our hands on in the last week that we thought would be helpful. In some cases they are samples of categories of documents of which there are a number of others—reports of consultations, that sort of thing—but we have included all the main public documents that the Department issued.

  3. Thank you.
  (Mr Grover) What I thought I would do, if it would be helpful, is just very quickly summarise the history so there is a common background, and I have offered some slides that just set out the headlines. On the second page there are four key phases for the development of individual learning accounts. These, please remember, run over a period of nearly five years, so it is a rather long history that I am attempting to summarise, and the four phases are not strictly sequential—some overlap. First of all, there was an initiation phase: then a phase while we were putting in place the longer term arrangements where we ran a set of interim arrangements largely through the Training and Enterprise Councils; the work that we did to develop the national framework; and then, finally, the full implementation which, as you say, came from September 2000. The next page just sets out the manifesto commitment with which I am sure the Committee is familiar, but that is what we were charged with implementing from May 1997. On the first phase, which I have called the initiation phase, the initial model we were looking at was one in which we were trying to develop something that looked much more like an account in the sense of a financial services instrument, so we began a very extensive series of discussions individually and collectively with a range of financial institutions to see if we could develop some sort of public/private partnership with one or more of them to deliver individual learning accounts. We also commissioned some work to look at the market for individual learning accounts; what individuals wanted from accounts; what their perceptions were of the usefulness of a financial instrument of this sort and whether they would use it or not: looked at issues of marketing and communications; and then went into some pretty detailed consultations with the financial institutions but also with some other key stakeholders, including providers in public and private sectors. That was a phase of work that lasted, I guess, for something like a year to 18 months from the date of the May 1997 election. The next slide sets out what we put in place by way of interim arrangements because we were anxious to learn some practical lessons as quickly as we could. We invited all the Training and Enterprise Councils to submit proposals to run development projects on individual learning accounts—in the bundle of papers that you have, the invitation to tender is document 4, so that would show you clearly what it was we were trying to test. There were twelve pilot programmes involving Training and Enterprise Councils, some of them involving more than one, so there were more than twelve Training and Enterprise Councils involved. Some of those were run by the Training and Enterprise Councils themselves: some were run by the Training and Enterprise Councils in partnership with financial institutions and, again, in the bundle at document 6 you will see an example of a newsletter from one of the TECS setting out what their scheme was and the sorts of results they got from it. Clearly, there is a great deal of material of that sort which we can show you. From the beginning of the 1999-2000 financial year it was open to all Training and Enterprise Councils to offer individual learning accounts and, in varying degrees, they all did. The other important milestone in that interim period was the 1999 budget which included four relevant items. The first of them was the removal of the vocational training tax relief for which other arrangements were intended to substitute. Secondly, the Chancellor reaffirmed the commitment to offer a £150 subsidy to the first million people to open individual learning accounts if they contributed £25 of their own towards the cost of training: thirdly, there were 20 per cent discounts on very wide range of learning and, fourthly, there was an 80 per cent discount for basic IT and numeracy training. The third phase was the development of the national framework. After, as I said, really very extensive discussions with financial institutions, it became plain we were not going to be able to set up a model that enabled us to work jointly with them to offer individual learning accounts for two important reasons: one was that the market research I referred to showed that individuals were not particularly interested in saving for learning. They were quite prepared to borrow for learning and in some circumstances to pay for it, but saving for it as a proposition was not something that appealed very much so there did not seem to be a great market for it. If we did not have to have a savings element to the account we did not necessarily need to work with financial institutions offering the package. Secondly, the financial institutions themselves were not especially interested in developing a product of this sort. They had other pressures at the time—individual savings accounts and coping with the millennium bug or preparing for it—and we were not able to develop a business proposition with which they felt comfortable and secure. So we developed an alternative approach which was to develop the national framework, where we delivered from the national customer provider the service to the individual account holders. So we started a procurement process for that national service provider with an advertisement in the journal of the European Communities in August 1999 and at the same time began developing things like the brand, the visual identity, how we were going to market and present it. The last phase, of course, is the implementation of the individual learning account national framework. After that procurement process, we selected Capita as the provider of the national service centre: we put in place the statutory framework required for the delivery of ILAs in the Learning and Skills Act—that was the Act that set up the Learning and Skills Council—and then the related statutory instruments to implement it. We implemented the national framework from September 2000 and immediately began a programme of collecting management information but also collecting customer evaluation of how the programme had gone. The last of the pages on the slides sets out some of the key facts about the scheme which I know in the Minister's previous evidence you have heard many of. I will not take time going through them now but these show the sorts of impact that the ILA system had and then, of course, towards the middle of last year, we began to identify and deal with the problems that I know you have discussed extensively with the Minister before. I hope that is helpful; it is a bit of a rush through what is quite a lengthy history, but I hope it sets the background.
  (Mr Lauener) Adding one point to fill in a bit of background, one very important part about the TEC involvement was that TEC resources were used to support the £150 incentive element of individual learning accounts and over the first couple of years a very important part of the work the Department was doing was securing agreement to the use of Training and Enterprise Council resources with Training and Enterprise Councils to fund the individual learning accounts. Some of those resources were used in 1999-00 and then in the two subsequent years as well, but in the budget figures that you have seen for the programme over the two years, since April 2000, there is quite an element of the Training and Enterprise Council funding that is involved in that. Although the manifesto referred to £150 million of Training and Enterprise Council resources, in fact the English share of that is £127.5 million and that is the amount of money from Training and Enterprise Councils in the overall individual learning account programme.

4. Reading your documentation and the excellent briefing we have had from our own staff and from the House of Commons Library, it seemed that all was going well when you were rooted in the Training and Enterprise Councils and had a local delivery point and local input, but that things went wrong when you went to the national service framework. Is that the reality?
(Mr Lauener) I do not think that is maybe an appropriate comparison. As Derek has explained, the Training and Enterprise Councils were involved in a lot of the early development work: they helped develop a lot of the ideas that went into the national framework as well as some ideas that they tested out that did not make it because they just did not work, and a lot of the work the Training and Enterprise Councils did in that early phase was extremely useful in developing the final version of the national framework. What was also apparent from the early stages, though, is that while some of the local pilots from the local work were quite successful, it was going to be difficult to operate on a national framework with equal availability throughout the country—

5. Yes but, when you were rooted in a locality, a community, even in a sub-region, people knew about the local providers and the quality of local providers and so you had some checking mechanism of quality, cowboys or whoever was pulled in, to the expansion of the scheme when it went national. What seemed to be missing is that, when you went national, you lost your local roots and the ability to check who was providing, both their quality and reliability?
(Mr Lauener) I think that is a very fair point: the framework that was developed was designed to encourage new learners back into learning and also to encourage new providers into the market, and it was designed to be simple and non bureaucratic in a way that would build the demand for learning. The downside of that was that there was less knowledge about some of the providers than there would have been if it had been an entirely local scheme with contracting with locally known providers who would have been doing other things. The upside is it did undoubtedly stimulate the market, as you have seen with the very rapid build-up of learning. So there are certainly issues to look at there. The previous discussions you have had in this Committee about individual learning accounts have already drawn attention, I think rightly, to the quality assurance arrangements for providers and that is certainly a very important part of designing a new programme—to look at what might be appropriate arrangements.

Mr Baron

6. Mr Grover, can I take us back to October of last year, hoping to learn lessons for the future? There does seem to have been an extraordinary turn of events in the sense that there we were, halfway through the month, with 2.5 million ILA account holders: we had John Healey saying on Radio 4, I believe, that ILAs were achieving the Government's objective of increasing the investment individuals are prepared to make in their learning and future skills; yet on 24 October—eight days later—we had the Secretary of State for education informing this Committee that ILAs were to be closed. We have taken evidence from the ministers involved with regard to this particular ten day period, but can I hear what went wrong from your point of view? Why this sudden turn of events?
(Mr Grover) As Mr Healey explained to the Committee, the position was that from the summer onwards we had increasing evidence that there was mis-selling going on of the individual learning accounts because of the way the scheme had been structured. There was evidence that some providers, probably a small number, were using the scheme inappropriately, putting inappropriate pressure on learners to sign up and offering learning that was, in fact, bad value for money, and that was something that emerged over that period and that was one of the main motivations behind the decision in October to suspend the scheme. The difficulty I think was that, in trying to set up the scheme initially, we were trying to balance the need to attract, as you said, a very large number of new learners back into learning to get at non traditional learners and, indeed, to use a very wide range of providers, perhaps wider than traditionally had been used, and trying to balance that against a need to ensure that you control the use of public money. Those were the issues, therefore, that led to the October announcement. The information that we had from our management information systems and, indeed, what we got from what was an increasingly worrying level of complaints was what led ministers to take that decision in October.

7. You made the point there that there was a small number of providers exploiting the situation. Why did you simply not close down those small number of providers causing the problem and allow the rest to move forward, the vast majority? It does appear to many that you were throwing the baby out with the bathwater?
(Mr Grover) I do not think there was a practicable way of identifying the providers who had to be removed because one of the difficulties of the situation was that it was easy in the system that was set up to register as a provider, and we do know there were cases where people would be suspended from the list of providers and, in effect, would set up in business again under another name. In other words, the way the system was set up—and this is something we clearly needed to address in the design of a successor system—it was extremely difficult to stop individuals determined to exploit the system from doing so.

8. What you are saying, in essence, is there were no structures in place to insulate, if you like, the initiative from fraud. What lessons are you going to carry forward from this? How are you going to stop this happening in the future?
(Mr Grover) We clearly have to put in place a system that enables us to address those issues of quality and value for money effectively in the way in which providers are admitted to a new system. It is clear from what has happened that the old system was not robust enough to deliver the programme that was intended to be delivered, so that clearly has to be addressed in setting up a new successor system.

9. Can I press you on this? Can you be more specific? Obviously there are lessons to be learned and we have to try to ensure this does not happen again, but how specifically are you going to ensure this? You have expressed an intention but given very few details.
(Mr Grover) It is something we are still working on and thinking through. There are a number of possibilities; you might want to rely on existing systems of inspection or accreditation, as I believe was done in Scotland: you might want to designate categories of providers whom you would accept: there are a number of different ways of doing it but, in deciding what the best way of doing it is, you have still to strike a balance. We are talking about a set of arrangements in which a very large number of relatively small learning episodes is undertaken, we hope, by a very large number of people, so it is not something where you can have a universal inspection system: that simply would not be economic. You are driven back to say, "How, then, do we get a handle on the quality of the providers?" One of the issues we were trying to address in designing this scheme was to widen the base of providers: not to rely simply on, say, the further education colleges or a particular short list of private providers. We did want to broaden the base, and that was why we deliberately did not restrict it to particular categories of provider because we wanted to widen the opportunities and give people the widest possible choice of learning provider. Clearly, what we put in place was not strong enough and robust enough to deliver value for money in the way we want and intend, and particularly value for the learners involved, so that is the issue we have to address, but it has to be a solution that addresses that balance as well if we are not to go back to a very rigid system that would be just as off-putting to new learners as we fear the old arrangements were. There is an old saying—"If you do what you always did, you get what you always got"—and we really wanted to get some different learners involved and some different providers, so in any new system we would have to strike that balance.

Valerie Davey

  10. Following on from that, who is responsible, who was responsible, and who would be responsible for the quality monitoring? The DfES is saying "We, we, we", yet set up the Capita or statutory framework to do that for you. Who do you feel should be responsible and when, going back to the history of it, did Capita first raise any concerns about the quality of the providers?
  (Mr Grover) It was not Capita's job to be expert on the quality of training provision; that is not what they were asked to do in their contract. What they were asked to do was to run the system that brought together the providers' claim for funding in the individuals' account and their entitlements and to bring those two together. There was a system of provider registration but it was a very basic system; it simply required them to say who they were and give the contact name and the details that were required to do that processing work I have described. It was not a quality assurance system in that sense. What we had built into that initial system was alongside what was being done through the national service centre, and there was the learndirect information line introduced at the same time to give individuals information about what was available to give them the basis on which they could choose and, at the same time, we were improving the services available in terms of information, advice and guidance for adults with developments in information, advice and guidance partnerships. But there was no specific inspection regime in relation to ILAs, and what we would need to introduce in a successor scheme is how best to put in place quality assurance arrangements to fill that gap.
  (Mr Lauener) Let me add very quickly, Capita was responsible for supplying monitoring and management information and one of the things we looked at which is a good measure of quality was the level of complaints we were getting for individuals. As Mr Healey has explained when he has been here, one of the things we were looking at was the way that that measure was rising quite sharply during the summer and, right through into the autumn, the complaints were getting more numerous and including very alarming aspects. Some of the complaints were, if you like, that something minor had gone wrong, but a significant number were about people saying, "I tried to use the money in my account but I found the money had gone" or "My account was empty", and that alerted us to the risk of fraud and the concern that led to the suspension and closure of the programme.

11. I think we have heard a lot about the financial side of it; I am concerned now with the quality of what those individuals achieved. The other way of monitoring the quality of a provider is to see the qualifications or the level of attainment which the people using that service arrive at. Have we any evidence of not just emotional satisfaction, which I am sure was enormous for people who were coming back to learning in their 40s and 50s for first time, but what they actually achieved? Have we any evidence of the quality of the achievement of the people who undertook these courses?
(Mr Grover) In setting up the programme, it was not the intention to make Individual Learning Accounts conditional on achieving particular qualification levels because, again, that was one of the things that the survey showed was off-putting for returners to learning. The thought that they would have to do an exam at the end of the process or that there was some rigorous qualification system attached to it was something that put people off. We did not, therefore, say that all the courses had to lead to a level 2 qualification or whatever. That is not one of the parameters against which we have assessed the scheme. I think you will have seen from the material that has been submitted to you already that quite a lot of the people taking part in the scheme did already have some level of qualification. I do not think that is necessarily a criticism: there are people, myself included, who would find it very useful to have an IT qualification to add to an existing qualification, just because life changes and you need to develop to work with it, but what we did not do and therefore have not evaluated in a very specific way is levels of qualification achieved. I have to say also, in considering any successor scheme, we might be rather reluctant to move to that as the measure because that would rather work against a policy objective that is about bringing a lot of people back into learning, because there is evidence that reluctant learners do find that off-putting.

12. May I suggest that there ought to be something, however? It does not have to be a GCSE, not a hard qualification in that sense, but what level of attainment people reach for their own eventual satisfaction I think is important, as well as the quality of provision which we are asking for.
(Mr Grover) I think that does raise a very important point: I think we almost certainly need to do more than was done in the original scheme to offer information and advice to the individuals taking it up. We did issue last summer a leaflet with some quite detailed advice and clear indications of sources of further advice. That is something we want to see how we can most effectively build on in a successor scheme.

Chairman

13. Someone looking at this independently, objectively, would say it is a rather odd aspect of the scheme that you have no quality assurance on the providers and no check on the qualification that is achieved. You can have one without the other, but having neither seems to be rather bizarre.
(Mr Grover) As I say, what drove the development of the scheme was the intention to get a very large number of people back into learning—"kickstart learning" I think was the phrase used in the manifesto. That was what lay behind the design. Yes, with hindsight, I understand the points very well that have been made about quality assessment: they are well made and taken.

Ms Munn

14. I would like to pursue this because I am more interested in the process in which people got registered in the first place. Quality assurance once they are in there is fine but I am a little astounded to hear what you said about the registration. I have had a look at the procurement for the national framework in document 18, and very clearly there it says that what you were asking people to bid for was registration of learning providers. Now, given that these have been piloted through Training and Enterprise Councils, what process were learning providers expected to go through when it was being looked at in the pilot phase, and what really were they expected to provide when it was the national framework?
(Mr Lauener) Perhaps I could pick up the first point of that. With the early Training and Enterprise Council work, particularly the Training and Enterprise Council development pilots, the quality assurance arrangements varied from Training and Enterprise Council to Training and Enterprise Council, but generally they were much more likely to use, as was reflected in the discussion earlier on, their existing provider bases that were dealing with adult training or young people's training and colleges in the area, so the provider network for the Training and Enterprise Council work was usually much more their existing network, generally known providers. It was a feature of the new arrangements to try and stimulate new providers, and that led to the very simple registration arrangements for learning providers which are described in the document that you have.

15. So literally anybody could come along, fill in a form, and say "I provide training", and they were up and running, is that what you were saying?
(Mr Lauener) It was very open to new providers by design. But there was a further important aspect: that individuals were also expected to contribute to the costs of training. £25 in respect of the first million £150 incentives and then, of course, with the 20 per cent discount and the 80 per cent discount they were expected to contribute the remaining element of the cost. So this was not a system where the individual did not have a stake and the individual was expected to look around. There was information given about where to get advice and I think the individual stake in this is an important safeguard as well, but as we have already said we feel we need stronger mechanisms than that in the future.

16. So individuals were supposed to know that somebody was a genuine, good provider when they were registered under a scheme when nobody else had bothered to check anything about whether they were able to provide the training to a quality at all, or had ever done so before?
(Mr Lauener) Well, individuals were meant to be taking decisions about the learning that was right for them.

17. Individuals who had been out of learning for many years.
(Mr Lauener) In many cases, but there was also information available on learndirect, on the range of learning —

18. So eventually what you are saying is that a system was set up to produce a large quantity of people learning, and that is what it did?
(Mr Lauener) It was set up to bring people back into learning and it did, and some of the figures on that are quite striking and showed that a lot of people valued the learning they had, and had got learning for the first time for a long time. Some of the facts are in the material you have but 91 per cent of ILA learning met or exceeded expectations and 85 per cent of ILA redeemers said the ILA had increased training options already open to them.

19. All I am suggesting is that, if you set up a system which is very simple in order to get a lot of people in, that is what you get. You do not necessarily get people who have the experience and track record to provide the training that you would really want people to have, and if that is your measure of success it was successful but we seem to have had other worries about it along the way.
(Mr Lauener) I think there is a very fair issue about the balance between volume and quality and advice and guidance.

Chairman: Is there not a saying, "Never mind the quality, just feel the width"? It comes from the textile region but I can see what you are aiming for. Meg Munn is pushing you on this and I do not think she is being given a direct answer.

Ms Munn

20. I am also suggesting that from the outset it was wide open to people mis-using it. It is not just that you might get people of poor quality, but you might get people thinking "This is easy to do".
(Mr Lauener) On the point you make on it being wide open to being mis-used, I think all the evidence we have—and we are still building the story and it is vital we get to the bottom of what happened—is that the problems we have had really accelerated in the summer. Up until that point they seemed manageable and we introduced additional quality assurance mechanisms, but it was from the summer onwards that we had major problems —

21. So people caught on about it?
(Mr Lauener) There is plenty of evidence that unscrupulous providers started to exploit the scheme in a major way from about the summer onwards.

Mr Simmonds

22. I am staggered by the seeming lack of quality assurance and monitoring structure that seems to have been in place where public funds are concerned, particularly with regard to the fact that indeed at least one service provider, I think in September 2000, wrote to the Department setting out that the system was very clearly open to abuse. I wondered what additional structures you put in place since the Department received those warnings?
(Mr Grover) Last summer we did put in two additional elements of the structure.[1] The first was a provider agreement which providers, as a condition of registration, had to sign setting out a set of principles that they undertook to adhere to which included things like not mis-selling, not putting unfair pressure on learners to learn, with that provider. The reason for putting that agreement in place, of course, was that then gave us a reason, if we found evidence that the provider was not meeting the terms of that agreement, to be able to remove them from the list of registered providers, otherwise it would have been a difficult thing to do, and that is something we have done in the period since then when evidence has come to light that registered providers have not complied with the terms of that agreement. So that is one element that was put in place in response to the worries that emerged. The other which I have already mentioned was some additional advice for learners about the sorts of things they should be looking at, which included qualification levels and what would be available at the end of the course—the sorts of things they ought to consider in deciding for themselves what learning they wanted to undertake.

23. Do you accept that not enough was done after those original warnings were received?
(Mr Grover) As I think the Minister said when he appeared in front of the Committee, it became apparent that putting those additional elements in place was not enough to stop the problem that was emerging, what Peter Lauener has just described, so clearly it was not sufficient building on what we had by way of a basic system, which was what lay behind the decision to suspend and then close the scheme.

24. One of the other themes that has run through the ILA is that the number of applicants was far greater than predicted. I wonder how much you thought that was down to the lack of quality assurance and the obvious elements of fraud that were in-built within the system?
(Mr Grover) It did take off a great deal faster than we had expected, far faster than the market research I have referred to in describing the work we did in advance had suggested. I think it was not until the sorts of evidence of acceleration from June or so onwards emerged that we began to feel that what we were seeing was not something that was a genuine explosion of interest in learning if you like—though there was certainly that element there and it is important not to lose sight of that. There were a lot of new learners brought in who were satisfied with the learning that they got. It certainly did tap a real vein of wish to learn, but it also did become apparent that the way the scheme was structured was not sufficiently robust to enable us to tackle the situation.

Chairman: This Committee understands and applauds the expansion of the Individual Learning Accounts but what we are here to discuss is why it went wrong and what damage has been done to individual learning by what has occurred.

Mr Simmonds

25. I do not think, with all due respect, that answers my question. Do you think that the expansion, or the increasing numbers that were over and above the expectations of the Department, was down to the element of fraud and the lack of robustness of the quality assurance within the Department structures at that time?
(Mr Lauener) I think the answer is not entirely —

26. But there is an element that is due to that?
(Mr Lauener) There is certainly an element: we are investigating all the complaints and discussing many cases, as the Committee knows, with the police but those same elements that allowed things that we would all say are unacceptable and must not be part of the new programme are the same elements that allow the scheme to be very flexible and to allow bona fide providers to encourage new learners into the market by actively promoting it to people that will benefit. I think the secret, therefore, is to find a way of making sure we do not lose that while making sure that we get rid of the exploitation and fraudulent activity. The answer has to include better quality assurance arrangements.

Chairman

27. What this Committee wants to hear is why could it not have been fixed? What has never really been said by any minister or anybody giving evidence to the Committee so far is would not less damage have been done to the whole process of individual learning and ILAs if you had actually fixed it—had a temporary halt but fixed it—rather than, first of all, freeze it, then end it, and now re-invent it with a big gap that is doing a lot of damage both to providers and learners? Why could you not have fixed it, rather than just cancel it?
(Mr Lauener) I think most damaging of all would have been to have had a gap, made some changes, reintroduced it, think we had fixed it and then had more problems. We felt that we had to get right to the bottom of what has been happening over the last few months. Although the picture is becoming clearer—and John Healey described last week the way numbers have been taken out of the system—we still do not have the whole picture and until we have that whole picture, which of course we will make available when we have had the results of all the analysis and the further work that is under way with Capita and Cap Gemini Ernst & Young, we cannot be absolutely confident that new arrangements will be better. There are already ingredients that we can see and have talked about and better quality assurance is a part of that, but I think we have to get the whole story, get right to the bottom of the problems we have had, and make sure that the problems we have had cannot recur.

28. That is a very good civil service answer. The fact of the matter is you are going to have more criticism and this Committee is going to be more entrenched in its criticism, as will other people. If, on analysis, we find it could have been fixed and this hiaetus has been caused by over-reaction to something that could have been fixed and the problems were manageable, that is going to cause, I think, greater vulnerability if we discover in time that you could have fixed it and all the pain and suffering that providers and learners have been going through was unnecessary? Would you not agree?
(Mr Lauener) The judgment we took was that it was too risky an option to stop and patch and re-launch as soon as possible. We had to get to the bottom of all the problems and I think the best thing for all the excellent providers that have done a lot to get more learners back into the scheme is to drive out the unscrupulous providers and make sure they cannot come back in, and I think that is the best security in the long term and the best way of re-establishing the success.

Chairman: I hear what you say but I do not know how convinced I am about that.

Mr Chaytor

29. Could you remind us of the total budget spend on the scheme to date?
(Mr Lauener) Yes. It is the figure that John Healey gave in his letter of last week. For the two years including the Training and Enterprise Council funding that I referred to before, against a budget of £202.1 million for the two years 2000-2001/2001-2002, the spend to date is £62.9 in excess of that, so the overspend is £62.9 million. It will very shortly be slightly more than that because, as John Healey explained last week, we are making a further payment run for billing that was made on 22 and 23 November, and the money from that will be in providers' accounts. Where we have been satisfied that it is right and appropriate to make the claims the money will be in accounts by this Friday, so the spend will edge up a little bit.

30. So the overspend is just under 30 per cent of the budget allocation and is likely to go over 30 per cent?
(Mr Lauener) It will go up again because, in addition to that payment I have just talked about, we have made the commitment that learning that has been booked by 23 November will be paid for and there is six months for that learning to happen. We are working now on the arrangements for ensuring that providers can claim for that learning. There is quite a bit to do but we are working hard on that, so the overspend will go up above the £62.9 million.

31. You talked of £150 million when you were replying earlier and that somehow that was separate and that was not public money, but that was the money from the TEC reserves which had been built up over a number of years as a result of creaming off of public sector contracts with the Employment Service.
(Mr Lauener) It was TEC money, a lot of which came from TEC reserves. It was money from TEC resources and in some cases money which would otherwise have been spent on other things.

32. So it was substantially public money also?
(Mr Lauener) TEC reserves were originally substantially made on the back of the government funding and this element has been recycled for the benefit of the Individual Learning Account programme, as of course set out in the Manifesto of 1997.

33. If I can come back to your comments on the learning-provider agreements, you said in response to the question as to what steps were taken to improve the quality assurance after the first warnings were given that you published a revised learning-provider agreement. Now, my recollection, and with all the documents I just cannot put my finger on it, my recollection is that within that learning-provider agreement, it does still explicitly sanction third party-selling of ILAs, so even after the warnings had been given about abuse of the system, you produced a new learning-provider agreement which explicitly sanctioned the "Costa Brava timeshare" approach to this.
(Mr Grover) The learning-provider agreement is actually the very last document in the second bundle, if the Committee is able to find it, and, as I said, it set out the conditions we expected learning providers to adhere to in making provision as a basis for us to look at their registration if there were complaints about them. There is not anything in that agreement, as you rightly say, about the practice of submitting block applications. That is one of the areas it became apparent was a source of abuse and we did end that practice and make that unacceptable. I cannot immediately recall the exact date, but we did stop that practice, but that was one of the things we were trying to—

34. I just want to move on because it was not just the question of submitting block applications, but my recollection, from looking through the documents last night, and it may not be the learning-provider agreement, but it may be somewhere else, is that there is explicit sanction of third-party selling of ILAs as long as the third-party salesperson is employed by the learning provider. I come back to my point that in the guidelines for this scheme the Department had explicitly sanctioned this approach and, therefore, it was inevitable that a degree of unscrupulous practice was going to take place. Can you just confirm that is the case, that you had not explicitly ruled out learner providers employing other people to recruit eventual students of ILAs?
(Mr Lauener) I think what you describe is correct, but I think the point I was trying to make earlier is relevant which is that under the ambit of a provider who is in agreement with the aims and ambitions of the scheme, that is not necessarily a bad thing. It is a way of getting more people into learning than would otherwise be there, but there are many arrangements where it is an extremely bad thing, where there is no interest in the learning on the part of the third party or the provider but it is purely due to a desire to make money out of the scheme, so it is that which is bad rather than necessarily the third-party selling.

35. Given the experience, for example, on this point of franchising within the further educational sector between 1993 and 1997, which in itself was a major scandal for which the Department was then responsible, was it not pretty inevitable that the lax rules of this scheme would lead to a replication of franchising scandals, albeit on a small scale?
(Mr Lauener) I think it is easy to say with hindsight that all the problems that we have had were inevitable because of the design of the scheme. It is quite clear that we have had problems that none of us wanted with the delivery of the scheme and they are completely unacceptable problems. Again—

36. My argument is that it is not a question of hindsight now, but it is a question where the Department was warned explicitly in advance that this would happen.
(Mr Lauener) I think the point I am making is still relevant which is there is a difference with the franchising arrangement, that a significant contribution, either 20 per cent or 80 per cent or £25, is expected from the individual. Again I quite accept contribution does not equate to satisfactory quality assurance on its own, but it is an important element of this which was designed in from the start to ensure that this was not only government funding and we are quite clear again that if that contribution has not been made, then we pursue providers for recovery and indeed we have in some cases already sought and secured the recovery of public money where the individual contribution was not made.

Chairman: This is a very useful line of inquiry, but we are running out of time.

Paul Holmes

37. You said that when the TECs piloted the ILAs, they stuck to existing training providers because they knew the quality and I think you said that Scotland continued to do that, whereas England went down this route. Is that correct?
(Mr Grover) Scotland, as I understand it, had a different system, but what they did was use in effect a list of providers which was held by the Scottish University for Industry. It is a proxy list of providers funded through Scottish University for Industry. That is my understanding anyway.

38. So Scotland went down a safe route. Are there any comparative figures as yet of (a) how many allegations of fraud there are coming from Scotland compared to England and (b) how successful the Scottish scheme was in bringing in a wider range of new learners compared to the English system?
(Mr Grover) I am afraid I do not have those figures immediately available, although, as you may recall, the Scottish Executive decided to close down the scheme in Scotland as from the 20 December because they were concerned about the risk to learners and some of the issues which had been raised were worries about the risk to the public purse, so I cannot answer for the Scottish Executive, but it seems that they have similar worries about the way in which the scheme is run and so they took that decision.

39. But presumably you would look for figures like that in comparison because if you had such a lax system in England because you wanted to expand into new trainer providers and in turn bring people into education who would not normally go back into it, if Scotland managed to do that without having so much fraud, that would obviously have taught you some important lessons?
(Mr Grover) Of course, Chairman, we would very much want to look at the way in which the Scottish system ran and see whether lessons could be learned from it, yes, certainly.

  40. When you were setting the scheme up, how far did you look to advice and good practice from departments like the Department of Social Security and the Treasury who of course deal with systematic fraud on an everyday basis and they have already got checks and balances in to try and avoid this? Did you look at their experience to see whether you could learn from that before you started this scheme?
  (Mr Grover) I cannot recall specific discussions about that issue with other departments. Of course in designing the scheme we drew on some of our own experience, and Mr Holmes' question implies there is some experience on which to draw. We looked at that and arrived at the decision we did, balancing the different objectives of the scheme, but no, I cannot recall any specific discussions with other departments.
  (Mr Lauener) We also had advice from KPMG who were advising us throughout the development phase of the national framework, so there was a lot of advice and indeed a lot of ongoing consultation at that point.

Chairman

41. They are not the people who were advising Enron, are they?
(Mr Lauener) No, they are not.

Paul Holmes

42. Have you got any observations yet on how far the balance in fraud allegations is down to training providers, et cetera, around the country and how far it is down to any lapse of security with Capita and their central computer?
(Mr Lauener) Well, I think what is becoming clear is that the cause of the more recent problems is the unauthorised access by unscrupulous providers to the system, those providers already having access in respect of any of their own learners that they had that they were working with and providers then going beyond that to get access using their user ID into other parts of the system. We do not yet have a full story and, as I said earlier, we are absolutely determined to get a complete account of exactly how patterns of access happened. We are following systematically all the complaints back to providers and then looking at patterns of access and we are working with Capita and Cap Gemini Ernst & Young really to build that complete story of what happened in the couple of months, October and November in particular, but in the period before that as well.

Mr Shaw

43. In your answer to my colleague Mr Holmes in respect of fraud, you used your own experience. I wonder, it is perhaps a shame that you did not have a look at the 1998 Audit Commission Report called Ghost in the Machine. They said at the time in relation to IT fraud and abuse, and this was undertaken by the Audit Commission, "Computer crime is on the increase. While key risk areas remain, new dangers are emerging." How true that was. I wonder perhaps there could be further reading as well. This is published by the Treasury and available to all departments and other reading is The Fraud Report, Inside Fraud, Fighting Fraud, Accounting Irregularities and Finance Fraud, and the list goes on. If you had only relied on your own experiences, I think this Committee is extremely concerned that there was all this money coming from the Treasury and yet the reports that are available right across all government departments were not looked at and clearly there were new dangers emerging and the new dangers were these ILAs.
(Mr Grover) If I may, Chairman, when I said "our own experience", it does of course include material that we can get from reports of that sort which you have just referred to. Clearly we were alert to issues around IT security. That was very much built into the contract discussions with Capita. We took expert external advice on those issues and of course, as Peter Lauener has said, we are still investigating what the cause of unauthorised access to numbers was. We do not know whether that was an IT problem or some other sort of problem and that is precisely why we need to work to look at that, but the sorts of issues that are raised are certainly ones that we had been aware of and we would have looked at in the contracting process.

44. The Chairman asked you why could you not just have fixed the issue with the fraud in order that the system could carry on. Is it not the case that basically the fraud was out of control and you had no choice? This was a virus which had spread really and you had no antidote for it and the system had to stop. I wonder, now that you have uncovered the fraud and the inadequate systems that were put in place, whether there has also been some soul-searching in the Department and in fact you are not hitting the targets in terms of people and particular groups of society who have not accessed learning in the past and the majority is going to people who have been to college before and have professional qualifications and the reason why is because it is an unwieldy arrangement where there are not proper checks and balances as to who is a good provider, who is not a good provider and there is no local knowledge, and that clearly if we had followed the TEC route, then perhaps we would not be in this mess in the first place?
(Mr Lauener) On your first point, our concern was certainly, as I explained before, that just taking some providers out or suspending them where we had already had allegations might have been a short-term fix, but we did not have sufficient assurance that that would have sorted the problem there and then.

45. You had not antidote to solve this particular virus?
(Mr Lauener) We think the antidote was a larger-scale review than could have been managed with a short-term suspension, some sticking plaster and some new arrangements on top of what was already there. We needed to break through this with a fundamental analysis of what went wrong and since November 23 —that is nearly two months—although, I have to say, we have been working extremely hard to get the whole story. We do not yet have the whole story, but we have got much more of the story than we had on November 23, though we have got a bit to go still. On your second point, I can tell you that we are absolutely determined to learn the lessons. Ministers have also made it quite clear that there will be a successor programme and the reason we are determined to learn the lessons is because of some of the very encouraging things, not only the total number of learners, but, for example, the 16 per cent of those who had no previous qualifications. If you apply that to over a million learners, that is very encouraging. There are some very good things that we need to build into the new programme and make sure are not lost.

46. In the document Delivering the Results: A Strategy for 2006, one of the milestones for 2002 is to expand Individual Learning Accounts. Have Ministers advised you that this document is going to be revised or does it remain policy for the Department?
(Mr Lauener) Well, the Strategic Framework covers the whole range of the Department's programmes. In relation to Individual Learning Accounts, Ministers have made it quite clear that they do expect, and have a very firm intention, to introduce a new programme once we have sorted the problems and once we are clear on the way ahead, so there will be a new ILA programme

47. Expansion?
(Mr Lauener) Like all of these things, it depends on the base that you take.

Mr Shaw: Individual Learning Accounts, so I take that as a case to expand.

Chairman

48. That means more than there are now.
(Mr Lauener) You have made your point eloquently. There were clearly more Individual Learning Accounts in 2001 than there were in 2000. We do not know what the capacity of a new programme might be until the new programme is designed.

49. When do you think that new programme will be introduced?
(Mr Lauener) It is too early to say. Until we have got this full account of what happened and until we have got to the bottom of all the problems that there have been, I do not think we can put a date on that.

50. For this Committee, that is the least satisfactory answer that you have given. There are a lot of people out there going out of employment and going out of business. This is not Enron, I have to say. I made a joke about Enron, but this is not Enron. This is a relatively modest scheme and surely you can sort the problems and get the show back on the road relatively quickly if we are interested in expanding individual learning. Surely the imperative is with you to get the show back on the road. Why is there absolutely no indication from what you have said, except deep pessimism of even further inquiries.
(Mr Lauener) There is absolutely a determination to get the show back on the road, as you put it, to develop and launch a successful programme. But I think the Committee will be highly likely to criticise the Department in the future if we said that the scheme would be introduced at a particular point and were then unable to do so because we had not, when we said that, understood the full nature of the problems that we were grappling with on the first programme. So we do feel we need to get absolutely to the bottom of those problems and we are doing that absolutely as quickly as we can and then we will develop the new programme in the light of that.

Jeff Ennis

51. Over the course of last summer we saw a massive expansion, which you have already indicated, of ILAs. In May we had one million and by July it was 1½ million and then by October it had even increased to 2½million. A learning provider wrote to the Department mid-June and someone actually indicated that a learning provider was creating fraud in mid-June and that learning provider was suspended at the end of June, and yet we did not actually suspend the provision for new learning providers until the end of September. Why? Why did it take over three months actually to suspend the registration of new providers?
(Mr Grover) What we were trying to do was to put in place the mechanisms that I have described in answer to Mr Simmonds in an attempt, I think, to do what one or two Members of the Committee have suggested we should have done, which was to try and keep the show on the road and mend things as we went along. That was what we tried to do, to mend things as the problems began to emerge and, as Peter Lauener has explained, it became apparent that the fix needed to be more fundamental and more radical, which was why we had to suspend the programme. We believed from June onwards that we could put in place some additional measures that would help us tackle that, but it became apparent, with the sort of run of figures that you are talking about and, more importantly I think, with a worrying rise in the level of complaints, that we were not going to be able to do it while keeping the scheme going, so that is why there was that period between June and the decision in October to suspend the scheme.

52. So the fact that it occurred over the summer recess or that we had a new team of Ministers in did not come into the equation to delay the suspension of the new providers?
(Mr Grover) No.

53. According to the statistics, has there been any sort of regional variation in the level of fraud in particular regions? The only reason I am asking is that I notice that in the statistics which have been provided the West Midlands have by far and away the highest number of ILA holders.
(Mr Lauener) I was going to make the same point, that the number of account holders in the West Midlands as a proportion of the population is certainly significantly higher and all the other regions seem about the same level and in the West Midlands it is certainly higher. We are not in a position to judge whether the incidence of fraud and problems is higher in the West Midlands or not, but there is certainly a number of cases that we are discussing with the West Midlands police and there are probably more cases in the West Midlands than in other parts of the country.

Mr Baron

54. Can I just return to this issue of why has it taken so long now to find out what went wrong and to put new structures in place. You have said that it was a small number of providers exploiting the system and the structures were not in place, so you then had to close the whole system down which has caused a lot of suffering for a lot of people. Knowing all of this, why has it now taken the best part of two months up to this point actually to put a new system in place so that we can move this initiative forward?
(Mr Lauener) I think the answer to that is that it is a small number in relation to the 8,900 providers registered, but there is still a sufficient number where we have concerns and a lot of complaints that we are following through. If you look at the figures that John Healey gave for the payment run for the week ending 21 November, for that week we paid 1,400 providers and the total value of their claims was £3.5 million. There were 136 providers in that week's run that we did not pay, but the total value of the claims that we did not pay while we are investigating them is £11.3 million.

55. If you do not mind the suggestion, you are not quite answering the question in the sense that it is not the number of providers, and you have said relatively that they are small, but it is the fact that you did not have specific structures in place to allow the providers to get away with exploiting the system. Why did you not put new structures in place to make sure this does not happen again and to move this initiative forward?
(Mr Lauener) I think the issue there for us or at least one of the issues, as we have talked about already, is what quality assurance arrangements should apply and there are different models that we could develop. The Scottish model is one that we have already looked at. I think there are other aspects of this, such as whether we would, under the new arrangement, want to have even then an open-door policy subject to some new quality assurance arrangements or whether actually we would want to select providers in some way. So I think we still need to understand exactly what has happened and understand more about, for example, those 136 providers, we would want to look at the kind of complaints we have had and the way that relates to the pattern of database use by those providers and then ask ourselves the question, "Would new quality assurance arrangements be the answer or do we need to refocus the scheme, invite providers and then run a tendering exercise for providers?" Then there are all sorts of other policy issues which need to be addressed in a new programme as well.

Mr Turner

56. You were presented with a Manifesto commitment and you have focused on delivering that commitment. I assume that you asked for guidance and had said on occasion, "But, Minister . . .", or "But, Professor Barber, the previous Government decided not to do it this way because . . .". Did you ask those sort of questions? Did you ask what the deadline was for the implementation of that Manifesto commitment? Did you ask what the formal outcome targets were?
(Mr Grover) Clearly we had a Manifesto commitment and it was made clear that the intention was to have one million account holders by 2002. The policy background, as I have described it in previous answers, was also clearly an intention to get new learners back into learning. It is worth saying, I think, that one of the things that has always been clear about this policy is that in a sense there are two elements to Individual Learning Accounts: there is the universal offer of an Individual Learning Account; and then there is also a targeted element to it. Getting the balance between those two of course is one of the things that we tried to get right this time and would want to address in producing a new policy, but those were of course the issues that we addressed in designing how to deliver against the Manifesto commitment.

57. I am trying to establish, did you appraise the practicality of implementation and the value-for-money implications and look at minimising the deadweight cost or was the overriding objective to get one million people into the scheme?
(Mr Grover) We did of course look at the practicalities of implementation and we took a lot of advice on those and we did our best to work through them in the way we set up the framework and the way in which we let the contract. The policy objective was the policy objective that I have already summarised, to get one million account holders and to target those accounts on people returning to learning as well as making a universal offer. That was the commitment and of course we tried to design a system that enabled us to meet that commitment while at the same time delivering good value for public investment. That was the intention.

Chairman

58. Thank you, Mr Glover. Obviously the Committee was very keen to ask a lot of questions. We may have to have you back at the end of our deliberations with our other witnesses, but we are running late. Thank you very much for your attendance and for your care in answering our questions.
(Mr Lauener) Thank you. We would be very happy to come back.

1   Note by witness:
  There were actually five additional elements in total. So extra to the two mentioned we also:
     -  Established a compliance unit;
     -  Stopped registering new providers; and
     -  Required all new ILA applicants to register via the ILA Website or telephone helpine. Back

Memorandum from the Association of Computer Trainers (ILA 13)

1. The Association of Computer Trainers (ACT) has been invited to give evidence to the Education & Skills Select Committee enquiry into the Individual Learning Accounts (ILA) programme. ACT represents a broad cross section of IT learning providers and was founded by Pitman Training Group, Internet Exchange and Best Training. James O'Brien, Managing Director of Pitman Training Group, will represent ACT at the Select Committee.

2. ACT are also submitting this evidence on behalf of its clients—Individual Learning Account holders—who have, along with training industry employees, personally suffered from the collapse of the ILA scheme.

EXECUTIVE SUMMARY

3. ACT encloses a chronological view of the introduction and subsequent abandonment of the ILA programme. This shows that the ILA scheme, whilst laudable in its aims, was fundamentally flawed in its structure and its lack of a credible regulatory framework. Predictably, the programme also unwittingly permitted a range of individuals and organisations—almost all with no prior connection to the legitimate training industry—to exploit obvious loopholes in the scheme's inadequate guidelines.

4. The shortcomings of the scheme, which were preventable and avoidable, have understandably attracted considerable media attention. This has severely damaged the reputation of the legitimate training industry, with many potential learners now believing that all training providers are fraudulent. This is having a severe impact on the industry and does not bode well for the future of private sector training providers that are part of the essential spectrum of choice for individual learners. (See Annex 1)

5. ACT agrees that action had to be taken by DfES to prevent the misuse of public funds and offered practical solutions to government that would have saved the ILA programme, whilst protecting public money. However, it does believe that the actions taken by the DfES in October/November 2001 have disadvantaged both learners and legitimate providers. Many learners are now unable to access learning due to cost barriers—the first time since 1992 that no funding is available from government towards the cost of vocational learning. Providers are threatened with downsizing and closure due to the vacuum created by the closure of the ILA programme.

6. The success of the scheme relied on the good efforts of learning providers: marketing ILAs; paperwork completion, submission and evidencing; on-line information transfer; delivery of training in all areas of the community; and finally the acceptance of payments from DfES made "in arrears". Reputable training organisations, some having been established for many years, worked to promote the scheme within the guidelines available and relied upon DfES to use their best efforts to remove rogue traders. They were sadly disappointed by the failure of DfES to take the appropriate action at an earlier stage.

7. The impact of ILAs on the training market has been both positive and negative. Positive, in that the scheme has encouraged individuals to recommence learning and has improved the awareness of access to local learning. Negative in that the DfES has, within 15 months, introduced and withdrawn a scheme in a highly respected sector that was operating professionally and successfully. The DfES has now departed the scene leaving the market in a state of great uncertainty.

8. Learning Providers and their clients (Individual Learning Account holders) at no time believed that the DfES would renege on their promise to accept legitimate training arranged prior to 7 December 2001 by closing the website early. As responsible and professional businesses, many providers have honoured the contracts entered into with clients to deliver subsidised training for those holding a valid Individual Learning Account, at great cost to the financial viability of their business.

9. ACT believes that a successor to ILA can be reintroduced swiftly by:

— Accreditation of learning providers and/or training materials through acceptance of the independent accreditations (including from government agencies) held by all legitimate providers.

— Involvement of local Learning & Skills Councils, who know the local market and who know the learning providers in the area.

— An adequate regulatory and compliance framework, to ensure correct controls are in place, without making the scheme unworkable.

— Provision of clear and unambiguous guidelines for learning providers, with version numbers for clarity and understanding.

10. A swift re-introduction will bring confidence back to the training market and will ensure that individuals have a choice of where and when to learn. Continued delay will erode that choice as the market contracts: ACT believes that unannounced delays in a successor to ILA will cause many learning providers, small and large in communities, towns and cities, to cease trading, thereby decreasing the opportunities available for learners to train locally.

ILA CHRONOLOGY

1999-2000

All ACT members were involved in "pilot" schemes of ILAs delivered through the Training & Enterprise Councils (TECs). The TECs worked with trusted and known training providers to ensure that there was a guarantee of quality.

Ahead of the national rollout of ILAs, there was a lack of information provided on the guidance/rules of the scheme. ACT member, and other Learning Providers (LPs) attended roadshow events in the summer of 2000, but these were factual presentations rather than consultative and interactive forums.

Due to the patience and persistence of ACT members, possibly not afforded to other LPs, we were able to get some information from the DfES policy unit to ensure that sufficient communication was passed to our members on the guidelines and planned operation of the scheme.

Summer 2000

Trusted LPs—referred by the TECs—were invited by the ILA Centre to apply to register to deliver ILA training. A copy of the letter of invitation and initial "outline" guidelines, Learning Provider Registration Form and approval letter is attached. (See Annex 2) (Not printed)

No full and formal guidelines (other than the "initial" guidelines issued in June 2000) were issued to LPs ahead of the national rollout.

Capita appeared to be poorly briefed on the ILA scheme. Advice and guidance was patchy and ACT members were only confident of guidance given when the same guidance had been verbally given consistently three times, as written guidance was rare.

September 2000

Vocational Training Relief (VTR) was withdrawn in September 2000. In order to remain competitive, LPs in both the private and public sector had to become involved in ILAs; to remain outside the scheme was not a viable alternative.

4 September 2000

ILAs were rolled out to the public and applications for new LPs were taken by the ILA Centre in Darlington.

For training in IT the ILA afforded 80 per cent funding with no upper limit. Pitman Training Group (PTG) asked for clarification that if the cost of a relevant training course was £20,000, the ILA would fund 80 per cent—£16,000—the answer, ludicrously, was yes.

6 September 2000

PTG sent their internal guidelines to DfES to advise that they were following these guidelines (See Annex 3) (Not printed).

20 September 2000

PTG wrote to the Secretary of State expressing concerns with recommendations to introduce a "cap". Subsequently the DfES introduced a cap. (See Annex 4)

20 October 2000

The DfES introduced a cap of £200 (80 per cent of £250) as an interim measure whilst consultation on the level of the cap was reviewed.

2000-2001

PWC were engaged by DfES to undertake an evaluation of the scheme and to review the level of the cap. ACT members were involved in these consultations however as far as we are aware there has never been a report on this activity, its outcomes and recommendations. ACT members also met with DfES officials and were to be invited to discuss the scheme further during early 2001. No invites were forthcoming.

Throughout the fifteen month period of ILAs, application forms were lost, delayed, and all too often misread by OCR software (Optical Character Recognition) used to scan in applications; many had "their" funds withdrawn without authorisation; and at the end, their options for embarking on training were pulled without notice and contrary to the "official" information that had been issued.

February 2001

Street traders started increasing in numbers in various locations around the country. Initially they were largely unnoticed but over the following few months they started to have a significant impact on the legitimate training industry and the ILA scheme.

ACT members and other LPs notified the DfES of more than 200 individuals/companies they considered were promoting ILAs against the guidelines of the scheme. None of those reported were training companies that had been in existence prior to the introduction of ILA, ie they had been established in order to exploit the loopholes of the ILA scheme. It is not known if these reports were ever followed: we believe that the DfES Compliance Unit for ILAs consisted of 2 people and hence workloads were under pressure and it is unlikely that follow up could be made.

June 2001

The DfES announced a re-registration of suppliers. All LPs were invited to resubmit their application by a specific date, and those that did not lost their ILA registration as LPs. It has been stated that approximately 800 LPs were de-listed; however, it is not known whether these were a result of the DfES taking action, or the providers' failure to complete the form.

Abuse of the ILA scheme intensified with street traders in most towns and cities across the UK, blatantly flouting application procedures. ACT members urged DfES to introduce tighter LP controls to minimise damage. It is believed that the DfES could have contained the damage by introducing an accreditation process to ensure that only legitimate LPs were registered.

August 2001

New LP registrations were frozen.

September 2001

ILA applications could only be made via the web or by telephone call.

The DfES prepared revised guidelines for LPs that were to be introduced on 1 November 2001. ACT members were invited to consult on these revised guidelines and were surprised and disappointed that important issues surrounding accreditation of LPs had been omitted (See Annex 5).

16 October 2001

The BBC radio programme File on Four raised issues regarding ILA-related fraud.

18 October 2001

The DfES met to discuss ILAs.

24 October 2001

Estelle Morris announced that the ILA scheme was to be suspended from 7 December.

29 October 2001

The DfES wrote (at an apparent cost >£750,000) to all ILA account holders advising them to book their learning on or before 7 December.

Week commencing 19 November 2001

ACT members and other LPs had difficulty accessing the ILA web-site, in many cases being completely unable to register training bookings. The site appeared to have been jammed.

23 November 2001

The DfES closed the ILA scheme without notice and two weeks ahead of the date advised to LPs and ILA account holders.

November 2001

ACT was invited to put forward views on ILA scheme problems (see Annex 6) and meetings were held with DfES (Hugh Tollyfield) during November 2001.

24 November—7 December 2001

LPs mitigate their losses by accepting students with valid ILA membership cards in order not to disillusion learners and to honour the written commitment from DfES to accept learners until 7 December. Costs of learning for ACT members in excess of £1M.

4 December 2001

ACT had a meeting scheduled with John Healey, however this was cancelled at short notice. ACT were then invited to submit a proposal to John Healey and Hugh Tollyfield on an alternative short term scheme ahead of the successor to ILA, to meet the demand of individuals left without access to learning. (See Appendix 7). No response or acknowledgement to this proposal has been received.

18 December 2001

ACT solicitors wrote to Estelle Morris requesting a response to concerns. No response or acknowledgement to this letter has been received.

DfES wrote to LPs advising that some payments would be made w/c 18 December. To date full payments are outstanding and many smaller providers face closure due to cashflow funds being withheld by DfES.

DfES advised LPs on 18 December that they would introduce validation checks for LPs that have not received payment. To date no instruction on validation checks has been received by LPs.

December 2001

ACT members made first redundancies.

15 January 2002

ACT sought advice from leading counsel and is considering applying for a judicial review.

January 2002

County Court proceedings being issued by LPs to reclaim outstanding fees, interest and costs from DfES for non-payment.

January 2002

ACT members have seen training centres closing and new investment withheld.

ANNEX 1

Preliminary Survey of ICT Learning Centres in wake of abandonment of ILA Scheme, January 2002

In the aftermath of the government's sudden withdrawal of the Individual Learning Account scheme, reputable training providers have found their industry devastated.

The Association of Computer Trainers (ACT) has conducted a preliminary survey of 250 training centres* throughout the UK. The survey exposes the dire situation that the industry is now in.

KEY SURVEY RESULTS**

— Year on year bookings are down approximately 70 per cent

— 19 per cent of respondents believe that they will have to make redundancies and/or may face closure in the next month

— 48 per cent of respondents believe that they will have to make redundancies and/or may face closure in the next 3 months

— 74 per cent of respondents believe that they will have to make redundancies and/or may face closure in the next 6 months

(*ACT members and non members)

(**Figures are approximations)

ANNEX 4

INDIVIDUAL LEARNING ACCOUNTS

As one of the UK's leading providers of IT and office skills training to individuals, Pitman Training Group has been closely involved in the evolution of Individual Learning Accounts (ILAs) since the earliest pilot programmes. Many of the one hundred and twenty thousand courses delivered in our seventy-four training centres in England have been part-funded by "starter" ILAs and we have taken a close interest in the introduction of the national scheme in recent months.

As more details of the scheme have emerged, 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.

We now understand from your officials that such abuse has, indeed, been identified and that as a result ministers now propose to put a "cap" on the value of training that will in future attract the 80 per cent funding band. We also understand that it is the Department's intention to publish detailed guidance to providers.

We warmly welcome the detailed guidance. Indeed, we provided a copy of our own guidance notes on ILAs to officials at Moorfoot for comment shortly after the introduction of the programme and look forward to seeing the official version.

We also fully understand the desire to control abuse through the introduction of a "cap". We do, however, urge ministers to give serious consideration to the level of such a "cap", and the negative effects on the impact of the ILA initiative of setting that level too low.

The ILA programme rightly directs maximum funding towards IT training mapped to NVQ levels 1 and 2. The qualifications contained in the inclusive list provide the essential IT workplace skills for the majority of individuals and it is essential that the 80 per cent discount funds the full provision of such training to encourage maximum take-up and high levels of both completion and qualification.

To put the funding requirement into perspective, one of the key qualifications, and one which will be of increasing importance over the coming years, is the European Computer Driving Licence (ECDL). The British Computer Society, which operates the ECDL programme in the UK recommends one-hundred and twenty-five hours' training to complete the syllabus. Ministers have already accepted that an hourly rate of between £13.00 and £15.00 is reasonable for high quality IT skills training on schemes such as UK OnLine.

We hope that individuals seeking to invest in their own future will continue to aspire to ECDL, and many of the other qualifications on the schedule. We therefore urge ministers to set the limit for training funded by the 80 per cent discount band at no less than the £1750.00 needed for this important programme.

Neither the individual seeking improvement, nor the training sector as a whole should be penalised for the abuse of the system by a handful of maverick providers. With a sensible "cap" which still allows quality skills training to take place, and a detailed set of guidelines, ILAs can still be the engine that drives up the UK's IT skills base.

We look forward to hearing the results of your deliberations. If any of the Pitman Training management team can help in the consultation process we would be delighted to do so.

James O'Brien

Managing Director

ANNEX 5

ILA POLICY UNIT

Thank you for the opportunity to have sight of the draft "Guide for Learning Providers" and the opportunity to make some observations on the new regulations. My colleagues and I have studied the document in some detail and, bearing in mind the shortness of time to make major changes, have put forward four substantive points that we feel will strengthen the ILA process without penalising the legitimate providers. The points are as follows:

1. Quality Assurance for Providers

We have believed from the beginning of the ILA scheme that there should be some simple, but effective, method of ensuring that providers meet minimum quality standards. This has been seen as difficult to achieve by DfES because of the large numbers of specialist providers operating on a very small scale.

However, most of the changes brought in recently and in this revised Guide are needed solely because of the activities of businesses that have little connection with training delivery, other than a sense of opportunism. There is, we believe, a quick and effective remedy.

Most of the providers who would be negatively affected claim discounts at 20 per cent or, if claiming 80 per cent, will mainly be training in Mathematics. If quality barriers were introduced only to IT provision—at 80 per cent—very few legitimate providers would be affected, whilst the minority of dubious providers causing such difficulty over recent months would be taken out of the system overnight.

The system would be very simple to operate and would rely on the prior acceptance of the provider into schemes operated by Government departments or independent agencies that already demand minimum quality levels from trainers. Examples of this would include (amongst others):

— Employment Service Approved Provider status

— LearnDirect Centre

— ECDL Testing Centre

— UK OnLine Centre

— OCR Centre

In the very rare examples that a legitimate provider did not have any such recognition, they could very easily and inexpensively seek approval form one of the above or, perhaps, get a written reference from their local Learning & Skills Council. The street traders, with no training background would be unable to comply.

2. Payment of Personal Contribution

We fully understand the desire to tighten up in this area; although we are also confident that acceptance of Item 1 above would lessen the need to do so by removing the root cause of the problem. However, we feel that there is one new rule that will actually lead to greater drop-out of individuals before starting their training.

In the Guide you state that: "the personal contribution....should be made after the individual has become a member of the national framework of Individual Learning Accounts, and on or after the date they enrol on their course". This is clearly intended to prevent street traders and others collecting money without ever intending to provide training. However, it will have a significant negative effect on legitimate providers.

The time period between the individual recognising the opportunity afforded by an Individual Learning Account and the start of training is crucial in maintaining motivation. Our own experience over the past twelve months has shown clearly that the longer the delay, the greater the drop-out. By taking a deposit from the individual, the drop-out rate is reduced significantly and the motivation is maintained. Provided the deposit taken is properly receipted and is refundable under clearly defined terms, we can see no objection to this being done by a legitimate provider.

3. Start Certificates

We welcome the switch from Enrolment Forms to Start Certificates as a way of tightening up on fraudulent or inappropriate use of the system. However, we see a difficulty in the insistence (as we interpret the wording) that the provider must claim the funding within seven days of the individual signing the form.

The difficulty will arise in the distance learning sector, where the provider will be reliant on the individual's prompt posting of the document and the reliability of the postal service. Experience shows that seven days is too narrow a window; we would strongly urge you to extend this period to 14, or even 21 days.

We have a second potential problem with the use of Start Certificates for distance learners. The Enrolment forms come in books, rather than individual loose forms. Clearly, the book cannot be sent to the student, nor should forms be detached from the book. We suggest, therefore, that the certificates are supplied as individual, numbered, duplicate sheets.

4. Deferred Payments

We feel the DfES would be well advised to introduce a rule on deferred payments. It is absolutely right that individuals should be offered time to pay their contributions; however, a loophole exists whereby the individual could, for example, be invited to pay a few pence per month over many years. This diminishes the value and purpose of the personal contribution and is sure (to continue) to be looked at as "free" training.

In summary, we believe that the fundamental problem with Individual Learning Accounts lies with the misuse of the system by businesses with little connection with training, that are exploiting loopholes in the rules. This new Guide will go some way towards closing these loopholes, though at a cost to legitimate providers.

We strongly urge you to look at our first substantive point on quality: do that and the rest will fall into place. We look forward to meeting you shortly to discuss this and other matters. We would be very happy to host the meeting at Wetherby, or in any of our training centres if that would be helpful to you.

October 2001

ANNEX 6

THE FUTURE OF THE INDIVIDUAL LEARNING ACCOUNT INITIATIVE

A DISCUSSION DOCUMENT FROM PITMAN TRAINING GROUP PLC

INTRODUCTION

Pitman Training Group is the UK and Ireland's leading provider of IT, Office & Business skills training. Operating out of 89 franchised training centres—79 of which deliver ILA-funded learning, 76 in England—the Group has lobbied consistently for a coherent and workable ILA model.

Pitman Training has been involved with the ILA programme since the earliest pilot stage. The company and its franchises worked with TECs across the country to help develop workable models. The Pitman Training network has also delivered training extensively on programmes such as New Deal, Work Based Learning for Adults, UK OnLine, and many others.

Following the suspension of the ILA scheme, Pitman Training are anxious to contribute to the process of finding a workable, targeted and timely restoration or replacement.

STRUCTURAL PROBLEMS WITH THE ILA INITIATIVE

Pitman Training has consistently made constructive criticism of the initiative's shortcomings, offering suggestions as to how the rules could be changed to improve the outcome and to reduce the potential for abuse. We make no apology for repeating the main points now: it is essential that the lessons of ILAs are learned.

The points we have raised in the past include:

— Breadth of Scope

The DfEE's admirable intentions in introducing a scheme that would encompass both the sole trader delivering training in aromatherapy and the large-scale provider of IT training, proved unworkable. Rules designed to facilitate the work of the former, meant inadequate supervision of the latter. The result was the entry into the IT training market of opportunistic businesses with little or no connection with training, seeking to exploit the inadequate framework of regulations.

— Insufficient Regulation

By attempting to broaden the appeal of the programme, DfEE elected to keep regulations to a minimum. However, this was taken too far. At the time of the introduction of the initiative to private sector providers in September 2000, there was no written guidance available to providers. Indeed, this company produced the first comprehensive set of written guidelines and submitted them to the DfEE ILA Policy Unit for comment on 6 September 2000. A detailed set of regulations would have prevented many of the difficulties encountered in recent months.

— Lack of Cap

The problems deriving from the initial failure to put a limit on spending under the scheme have been well documented. Suffice it to say that consultation with private providers would have produced a sensible middle-ground and avoided the need for the £200.00 cap on the 80 per cent band, which so limited the opportunities for worthwhile training for many career aspirants.

— Absence of Provider Approval

Pitman Training Group has expressed their concern on this issue to ministers and officials on several occasions since before the launch of the programme. Without minimum standards, anyone has been able to set up in business as a "training provider", with the consequences that have become so apparent over the past few months. It is most unfortunate that the DfEE/DfES chose to take no action on this, particularly since there is such an obvious and easily implemented solution, as detailed later in this paper.

— No Completion Threshold

The failure to tie part of the payment to providers to the individual's completion of their learning programme has created the opportunity for the unscrupulous operators to take the money without showing any care for the individual's learning experience.

— Poor Support & Administration

The performance of Capita in operating the ILA Centre has been woeful. The grasp of their advisors of the details of the initiative is extremely poor: this company took a policy decision at the very launch of the Centre to wait until we had received three consecutive, identical answers to a question before accepting that as likely to be authoritative. We have had no reason to change that view.

Likewise, the processing of applications has never been smooth and all but collapsed as numbers increased.

Fortunately, Pitman Training Group were able to get direct access to DfEE/DfES officials in the ILA Policy Unit; other, smaller providers were not so lucky.

THE CURRENT SITUATION

— Vacuum in the Training Market

The decision to "suspend" the ILA programme with trails of a likely solution "soon" or "in a couple of months" is likely to have a serious and damaging effect on private training providers. Anyone without a valid PIN seeking training at the moment is likely to put off any decision until the government's policy becomes clear. Providers are already seeing a collapse in enquiries from this section of the market.

It is essential that the DfES give clear direction on what it intends to do after December 7. Clarity and speed are essential to prevent the collapse of some legitimate providers: if the intention is to abandon ILAs, government should say so immediately and announce what is to take its place. A return to Vocational Training Relief from 8 December until the replacement scheme is rolled out would be a simple, short-term expedient.

SOLUTIONS GOING FORWARD

In putting forward our solutions to the current situation, we are conscious of the realities facing DfES ministers and officials. Our proposals, therefore, make certain assumptions:

— There is unlikely to be any support for ideas demanding a substantial increase in the bureaucracy behind the initiative.

— DfES is still keen to make vocational training opportunities available to a wide cross-section of the adult population, with minimum barriers to entry.

— IT skills remain a key area and may be extended to support of high-level training for IT Professionals.

Our proposals, therefore, as are follows:

— Isolate IT Training

All the major difficulties within the ILA initiative have come in the area of IT. This is easily explained: IT is the major skills sector within the scope of the initiative, and attracts the higher-level funding.

The feedback we have from officials suggests that there are few problems at the 20 per cent discount level or with the specialist mathematics learning providers. Imposing more stringent rules in the area of IT training would solve many of the problems and would be widely welcomed by bona fide IT training providers.

— Provider Approval

This is the key to the recovery of the ILA initiative, or to any replacement that may be considered. When Pitman Training Group were invited recently to comment upon the proposed Guidance to Providers, which would have been introduced on November 1, we were dismayed that this key issue had not been addressed. All the new rules were simply introduced to put up barriers to make the "rogue traders" lives more difficult. This was an opportunity missed to take them out of the market place completely.

Our official response forwarded to the ILA Policy Unit on October 18 included the following passage:

"QUALITY ASSURANCE FOR PROVIDERS

Most of the providers who would be negatively affected by quality thresholds claim discounts at 20 per cent or, if claiming 80 per cent, will mainly be training in Mathematics. If quality barriers were introduced only to IT provision—at 80 per cent—very few legitimate providers would be affected, whilst the minority of dubious providers causing such difficulty over recent months would be taken out of the system overnight.

The process would be very simple to operate and would rely on the prior acceptance of the provider into schemes operated by Government departments or independent agencies that already demand minimum quality levels from trainers. Examples of this would include (amongst others):

— Employment Service Approved Provider status

— LearnDirect Centre

— ECDL Testing Centre

— UK OnLine Centre

In the very rare examples that a legitimate provider did not have any such recognition, they could very easily and inexpensively seek approval from one of the above or, perhaps, get a written reference from their Local Learning & Skills Council. The street traders, with no training background, would be unable to comply."

We fully understand the laudable intentions of brining in a simple scheme with a light touch, giving the individual learner maximum choice. The reality is, however, as has been so clearly demonstrated, that a lack of Quality Assurance simply opens the door to the unscrupulous. DfES should focus on developing the availability of ILA-funded IT training through approved providers only. A switch to this policy would be a quick, targeted and cost-effective answer to all but a tiny percentage of the ILA initiative's problems. We urge DfES to give it early and serious consideration.

— Outcome Related Payment Regime

By making the whole of the payment to providers dependent on just the start of the learning programme, the initiatives invites abuse. A qualification outcome is not appropriate under this initiative, but it would be simple to hold back a proportion of the payment—we would suggest thirty percent—until the ILA holder certifies that they have completed their programme by signing a completion form.

This would greatly improve the completion rate amongst learners, ensuring that government money would be used in a far more appropriate manner than hitherto.

— Uplifting of the Cap

Pitman Training expressed surprise and concern once it became clear that there was to be no ceiling on payments under the original ILA scheme. Our predictions of abuse were, unfortunately, accurate. However, the cap once introduced was at too low a level to maximise significant learning opportunities for individualS looking to make a real difference to their career aspirations.

Once the problems surrounding "rogue traders" are eliminated, there should be no reason why the cap should not be raised to a level that would make that difference. The money wasted by the problems can be channelled into improving the average learning experience.

We would recommend a revised cap of £500.00, with special arrangements for training of IT Professionals (see below).

— IT Professional Training

A major misjudgement in the availability of learning under the Individual Learning Account initiative was the failure to include training for IT Professionals. The major skills gap identified in the UK is for people with these very skills: the government's own statistics clearly show the low take up of job opportunities in this sector due to the absence of appropriate training and qualifications. Changes should be made to the scheme to make funding available towards this training and a special capping level introduced to recognise the high costs of such intensive training for qualifications such as A+ and MCSE.

— Improved Support & Administration

It is essential that Capita staff receive much more—and better—training on the scheme. Many of the detailed problems that have beset providers stem from inaccurate, misleading or ambiguous advice.

Capita should be targeted on performance in the turn round of applications: there is a significant and clearly documented fall out in individuals coming forward for training once applications are delayed by more then 10 days: quite simply, the motivation evaporates.

— Consultation with Providers

It is essential that DfES includes the major private training providers in its planning of the re-introduction of ILAs or any proposed replacement. Pitman Training Group begged for a voice in July/August 2000, even offering to act as an unpaid consultant, but was ignored. This should not happen again.

The private sector provides high-quality, cost effective training and is expert in tailoring vocational learning solutions to career aspirations—the very heart of the ILA initiative.

Pitman Training Group plc is an active, founding member of The Association of Computer Trainers (ACT), representing the legitimate IT training industry. ACT should be involved closely in the planning process for this, and any future, initiatives involving funded training programmes.

SUMMARY

Pitman Training Group has a rare and valuable perspective on Individual Learning Accounts. Having responsibility for the activities of 79 ILA providers across each of the four national schemes, we are able to see both the flaws in the initiative and the opportunities that still remain should ILAs be reinstated.

We firmly believe that Individual Learning Accounts (or their successors) have a future. The difficulties that have arisen are almost entirely due to the activities of a very small number of "providers", with tenuous links to the legitimate training industry. These rogue providers have taken advantage of a misguided regime of regulation.

Our proposals solve almost all the current problems instantly, at little or no cost to the public purse, enabling the Individual Learning Account initiative to fulfil its promise to increase public access to high quality vocational training.

Pitman Training Group plc

November 2001

ANNEX 7

PROPOSAL FOR INTERIM FUNDED TRAINING PROGRAMME

The Association of Computer Trainers (ACT) has consistently sought to provide solutions to the problems surrounding the Individual Learning Account (ILA) scheme and its withdrawal. The present situation—with no funding for vocational training for the first time since 1992—is unsustainable for both learners and providers. The government is also now unable to meet its objectives and commitments in the field of lifelong learning.

A replacement ILA programme is a priority for all parties. But it seems clear from our members' bilateral meetings with officials that it will be some months before any such scheme can come on line. To help address this vacuum, ACT has developed a proposal for an interim funded programme that will go some way towards meeting the requirements of all the parties involved.

The proposed programme has clear benefits:

— It shares many of the strengths of an earlier funded programme (UK OnLine), that have been proven to be effective and easily managed.

— It will make available once more funded learning for individuals seeking career opportunities currently denied them by inadequate skills in a key sector.

— It will focus on clear, targeted groups within the community that are suffering most by the cancellation of the ILA programme.

— It will re-establish momentum in the crucial IT training sector, that is so important to future well being of the UK economy.

— It will have the necessary safeguards for the use of public money that were lacking in the ILA scheme.

— It will enable government to demonstrate clearly to its critics that it understands the needs of both learners and providers, and is putting in place a realistic interim programme.

— It has provision for a transparent, independent audit programme, funded by the training industry.

The programme offers government an immediate opportunity to take action, without prejudicing the long-term future of funded training. We strongly urge you to give urgent consideration to the enclosed proposal and look forward to discussing the detail with you at our upcoming meeting.

Sub-Annex

PROPOSAL FOR INTERIM FUNDED TRAINING PROGRAMME

THE ASSOCIATION OF COMPUTER TRAINERS

The Association of Computer Trainers (ACT) represents the leaders of the UK IT training industry. Its members conform to the highest standards of quality, learner support and learning materials. To qualify for membership, applicants must meet the following criteria:

— Each member must have a minimum of twenty-five (25) operational training centres.

— Each member must have training centres operating in a minimum of four Government Office/RDA regions.

— Each member's training centres must have at least one nationally recognised independent IT Training or IT Testing accreditation eg: ECDL, MOUS, OCR, BTEC.

— Each member's principal activities are training centre-based and must have a minimum of five years' track record in the training industry.

Together, the members of ACT operate almost 200 IT training centres, employ 800 training and learning support staff, and train over 80,000 individuals each year.

The centres are experienced in the delivery of government-funded training, having played major roles in the delivery of training under programmes such as:

— New Deal.

— Work Based Training for Adults.

— European Social Fund.

— UK OnLine (ICT for Employability).

— Individual Learning Accounts.

The Association is currently working on the design of an accreditation process to allow the extension of full or associate membership to those independent training providers who meet the rigorous standards met by the Associations founding members. This will then allow the introduction of a self-regulatory mechanism for the industry as a whole.

BACKGROUND TO PROPOSAL

The breakdown of the Individual Learning Account initiative in October/November 2001 has left a vacuum in the funded training provision for the individual seeking life-changing skills. Not since the introduction of Vocational Training Relief in 1992 has the individual been denied funding in support of his or her own commitment to learning.

The current situation satisfies none of the interested parties:

— Learners are deprived of much-needed help towards obtaining the skills needed to take them forward in the workplace.

— Learning providers are threatened by the current vacuum as their potential clients await the outcome of the government's promised re-introduction of an "ILA-style" programme at some ill-defined time in the medium term future. Providers are also being damaged by the wrongful implication that they have behaved improperly over ILAs.

— Government is unable to deliver its promised commitment to lifelong learning and faces continued criticism until a replacement programme is put in place.

The purpose of the following proposal by the Association is to put forward an interim funding regime, which has a number of clearly defined benefits to all the interested parties:

— It will make available once more funded learning for individuals seeking career opportunities currently denied them by inadequate skills in a key sector.

— It will focus on clear, targeted groups within the community that are suffering most by the cancellation of the ILA programme.

— It will re-establish momentum in the crucial IT training sector, that is so important to future well being of the UK economy.

— It will have the necessary safeguards for the use of public money that were lacking in the ILA scheme.

— It will enable government to demonstrate clearly to its critics that it understands the needs of both learners and providers, and is putting in place a realistic interim programme.

INTRODUCTION TO PROPOSED LEARNING PROGRAMME

The proposed programme will be designed to reach individuals within the community who lack fundamental Information and Communications Technology (ICT) skills, or whose ICT skills levels are insufficient to make them attractive to potential employers. The objective is to create increased employability for key sectors within the community.

Whilst very different in a number of key features, the proposed programme draws heavily on the experience of the IT training sector in the delivery of the DfEE's ICT for Employability programme (later re-named UK OnLine) in 2000-01. This was a similarly targeted programme, providing appropriate, high-quality learning across many sectors, with an inexpensive, but effective regulatory regime. ACT believes such a programme could provide a swift and workable solution to the current difficulties.

QUALITY ASSURANCE

All parties agree that the problems associated with the ILA programme stem mainly from the failure—for laudable reasons of extended choice—to impose quality thresholds on training providers (and others) able to draw down funding under the scheme.

ACT has drawn up clear membership criteria for current and future members that ensure that training centres so approved meet the highest standards of quality and probity. ACT urges government to accept ACT membership as sufficient accreditation for involvement in this and future programmes. ACT will shortly produce a paper for government outlining its plans for self-regulation within the IT training industry.

For those providers that choose not, at this stage, to become members of ACT, it is proposed that government rely on Employment Service Approved Provider Status or the Adult Learning Inspectorate as a clear indication that the provider has successfully passed a rigorous inspection process.

Other accreditation may be added in due course.

This proposal concentrates on ACT members' ability to deliver the programme. ACT accepts that other providers could, and should, be involved once the necessary accreditation is determined.

TARGET GROUPS

The target groups are those most in need of such skills to overcome their current disadvantage in the job market. These groups would include:

— Those in receipt of Job Seekers' Allowance.

— Those in receipt of Income Support.

— Those on Incapacity Benefit.

— The adult dependants of the above groups.

— Returners looking to re-enter the job market after a gap of more than three years.

— Other disadvantaged groups that may be especially targeted to meet government objectives on employability.

OUTREACH AND MARKETING

The providers of learning working on this programme cannot operate in isolation. It will be necessary to work closely with those involved in the management of resources and opportunities for these disadvantaged groups. Relationships will need to be in place with bodies such as:

— Employment Service.

— Learning & Skills Councils.

— Benefits Agency.

— Lifelong Learning Partnerships.

Members of ACT already have close working relationships with the above throughout the United Kingdom.

However, to reach out to these groups will require a more pro-active approach. Providers will need to use their professional marketing skills and resources to create awareness of the learning opportunities.

Members of ACT have extensive marketing resources that have already been applied successfully to take government-funded programmes to target groups. This was no better illustrated than in the DfEE's UK OnLine programme in 2000-01.

This programme, ultimately very successful, was greatly assisted by the ability of the best of the private sector learning providers to make contact with the target groups through its pro-active marketing activity. As a result, ACT members not only successfully completed their UK OnLine contracts well within the prescribed period, but were invited to take up supplementary contracts to help DfEE overcome the inability of other contracted providers—mainly in the FE sector—who lacked the necessary outreach skills.

ACT members delivered more learning under the UK OnLine programme than any other contractors.

LOCATIONS

All ACT members' training centres are in locations easily accessed by the general public and, in particular, by members of the targeted disadvantaged groups. All centres are in town or city-centre locations, close to public transport and shopping. A number are located in public buildings such as libraries.

COURSE PROVISION

The programme will deliver 30 hours of high-quality ICT training to the learner, designed to provide the individual with the specific ICT skills to improve their employability. The course content will be agreed with the learner in the form of a Personal Training Plan. This will follow a Training Needs Analysis, conducted by the provider and designed to assess the learners' current skills level. The plan will then map the skills set needed to meet the requirements of the job market.

The foundation ICT skills considered essential for employability would include:

— Ability to use the Windows platform.

— Word Processing.

— Spreadsheet.

— Database.

— Internet & e-mail.

ARRANGEMENTS FOR ADVICE, INFORMATION ETC.

Potential trainees will be invited to visit the Training Centre for an initial half-hour assessment following which a full induction session can take place. This session would involve a taster session, providing hands-on experience on a PC with an experienced trainer, using the actual training programme materials. At the end of the induction, an outline individual training plan will be agreed with the trainee. The induction should last one to two hours, after which the trainee should be able to commence their chosen training.

CONTENT

The tailored programmes would deliver 30 hours' learning on the topics listed above to the standard appropriate to the prior understanding of the learner. The course material would map to the syllabus of the following recognised qualifications:

— ECDL

— CLAIT

— MOUS

— NVQ Level 2

Or their agreed equivalents.

PROPOSED TUTOR: TRAINEE RATIO

ACT Training Centres will operate the programme on a Tutor to Trainee ratio of at least 1:8. Trainees assessed as needing increased levels of support following their basic skills assessment will be given closer attention, including 1:1 support where applicable.

FUNDING

The successful UK Online programme recognised the worth of high-quality ICT training at a rate of up to £500.00 for 30 hours' training, based on successful completion of the study programme and gaining a relevant qualification. ACT believes that this figure reflects the true value of the learning experience and the costs to providers of delivering a quality training programme, tailored to individual trainee needs.

ACT believes it is important that the payment structure includes (as part of the £500.00 maximum entitlement) a payment for completion, thus avoiding some of the potential for abuse.

VALIDATION OF INDIVIDUALS' ENTITLEMENT

The validation of an individual's entitlement to enter the scheme is, necessarily, an issue that will exercise government. If the categories proposed are accepted, most will have a clear, identifying document as part of their claim for benefit that can be noted by the provider against some other form of identification. Where such a document is not commonly available, a simple but effective process will need to be drawn up in consultation with all parties.

AUDIT PROCESS

The lack of an on-going audit process was a factor in the abuse of the ILA programme. The ability to fund a major audit team by DfES is thought unlikely. However, ACT believe that an audit process is vital to give confidence to government that the scheme is working effectively and without problem, and that such a process will help restore the image of the training industry.

ACT is, therefore, prepared to fund a random audit of providers under the proposed scheme. The audits would be carried out on the instructions of the DfES by a prominent firm of Chartered Accountants. The timing, scope and chosen providers in such a process would be determined entirely by the DfES, subject to prior agreement on the budget.

SUMMARY

ACT firmly believe the following:

— There is a pressing need on behalf of learners, providers and government for an interim scheme to remove the uncertainty, restore confidence, and allow learners to once again have access to life-changing skills.

— The proposed programme is largely proven through the ICT for Employability initiative.

— The proposed programme is capable of early launch, stable management and regulated use of public funds.

— Such a scheme may provide pointers to the design and scope of a successor programme to ILAs.

We welcome the opportunity to present our proposals to government.

Association of Computer Trainers

Memorandum from Hairnet (ILA 10)

OVERVIEW OF HAIRNET BUSINESS

In order for you to understand the effect of ILAs and their unanticipated suspension on our business, you should understand our basic revenue streams. We have two training arms: Business training and Domestic training.

— Business training (on-site training for companies) did/does not generally make use of ILAs and does not really come into this debate at all.

— Domestic training—by that we mean home-visit training delivered to the general adult population on an individual basis by outreach Hairnet trainers. This side of the business made extensive use of the ILA Scheme. From January 2001 to October 2001 1,856 Hairnet students gained IT skills with an ILA.

— The Domestic training operates through a "licence scheme." People over 50 (and talented younger applicants) selected on strength of CV; then interviewed; then Police Access cleared; then vouched for by references, are trained by Hairnet to become trainers. They pay us to join and for their initial induction training. They pay to use our materials. They pay us a set fee every month to stay in our network. We support, monitor and evaluate them. We update their training, for example, to get them accredited to teach and test ECDL. They benefit from the association with the Hairnet brand and from our reputation as decent trainers. Hairnet trainers make all the money from their training: they do not pass a percentage back to us.

— Hairnet was begun in 1997.

— Hairnet was accepted as a learning provider to ILA Scheme in January 2001.

1. HAIRNET'S OPINION OF ILA SCHEME

In a word, excellent. It gave adults "learning currency" to spend as they saw fit. Specifically:

— While the financial incentive was obvious, there was also a huge psychological incentive—older learners were pleased that the Government wanted to include them in the "information age." People felt encouraged to better their skills and acquire new ones. People "approved" of the DfES's commitment to lifelong learning for people of all ages and backgrounds.

— ILAs enabled Hairnet to get 1-2-1, home-visit IT training to those who for physical, psychological, geographical, social or economic reasons would not have been able to have IT training.

— 90 per cent of those Hairnet students who used ILAs did more learning than they would have done without one.

— We cannot tell you with great accuracy what percentage of students would never have learnt if they had not had an ILA because this was not data we ever thought to collate. We would, having studied our records which include feedback from each students about their training, estimate that the figure could be as high as 70 per cent.

2. HAIRNET'S OPINION OF MANAGEMENT/RUNNING OF ILA SCHEME

Hairnet head office managed all ILA transactions. Hairnet trainers would send their students' signed ILA enrolment forms to us and we would put the details through the ILA website. We would then pay "back" the trainer for the training. Pre collapse of the scheme, ILA centre staff generally helpful and efficient. Website for processing numbers easy to use. We had one member of office staff dedicated to the processing of ILAs.

23 October 2001—December 7 set as end date

— We increased staff hours so that all outstanding ILA registrations would be complete by start December.

— ILA website slows down dramatically—taking some 30-40 minutes to process just one claim (which previously took 2/3 minutes).

— ILA website crashes often and is therefore completely out of action.

24 November 2001—December 7 deadline abandoned

— We have 392 enrolments we were unable to process by the original 7 December deadline, which equates to about £25,000 of lost training.

— This equates to over £13,000 of training already or since delivered.

— Losses incurred directly by Hairnet trainers.

22 January 2002

— We still have not been paid over £13,000 for training delivered up to 23 November.

— The above losses are incurred directly by Hairnet trainers, who have long since actually delivered the training and are out of pocket.

3. NET EFFECT OF ILA SCHEME ON HAIRNET TRAINING BUSINESS

On Students

1. January 2002—70 per cent down on student enrolments from September 2001.

2. Note that January is usually a very good month in the training business, which is seasonal; it has the impetus of back to school/start of the new year feelings.

On Trainers

1. January 2002—Hairnet recruitment of new trainers, which take place every month, down 20 per cent in January and 50 per cent February onwards.

2. Over the last year, 70 per cent of those joining Hairnet as a new trainer used ILAs to fund their induction training.

3. Over the last year, 95 per cent of established Hairnet trainers who chose to do their ECDL training did so using an ILA to cover some of the costs.

4. ADDITIONAL EFFECTS OF THE UNTIMELY DEMISE OF ILAS

(a) Hairnet head office Managing lack of news October/November 2001

— We have no quarrel with a non-functioning system being closed down and cleaned up. But news about end dates, changed end dates, new schemes, monies owed is so lacking, or so unclear, as to make it useless. Because we were trying to feed back news to the rest of our network, who were all anxious and who all lost money. It put a huge strain on our head office staff.

— To the end of December 2001 we estimate managing the news and non-news surrounding the ILA Debacle cost us 3.5 months of staff time.

5. PLANING AHEAD—IMPOSSIBLE

— To October 2001, ILAs increased our annual turnover by about 40 per cent from same period in 2000. We predicted that increase would rise again in 2002 inflating our turnover even further. Three years worth of business plans were built around predictions made on past performance and relying on market conditions resulting from ILAs. These plans are now pretty worthless.

— The situation would be much more manageable if we knew when and how the much talked about—but hitherto fantasy—successor scheme is to be introduced. The lack of plan with dates and timetable compounds the tension and difficulty for training businesses. The term "cast iron" (as in the oft-repeated "cast-iron" promise given by DfES spokespersons) is not recognised by most spreadsheet applications.

— Given these facts, it is absolutely infuriating and more than that insulting to be told that what has happened and what is not happening to our balance sheets is nothing to do with the Government but wholly our responsibility as learning providers who decided to join the Scheme.

6. DAMAGE: CONFIDENCE, FAITH, ENERGY?

— ILAs changed ideas about the value of IT training. Before ILAs, adult learners choosing Hairnet training knew that home-visit 1-2-1 training would have a cost that exceeded that of learning at local college's subsidised classes. Learners made that choice. ILAs distorted the price issue because 10 hours training in your own home could actually cost as little as £25. The public's perception of value has therefore been distorted and in that regard Hairnet is worse off than before ILAs, although providing a much needed service!

— The reputation of IT learning providers has suffered: because the ILA story is so complicated and the general public is under the impression that IT trainers are a motley bunch, fraudulent and untrustworthy. While DfES will say it has sent letters to all ILA holders explaining the situation, we still took calls from people who thought we had somehow stolen their money for learning grants.

— As a rather different IT training company whose business is to take training to people and places others can't reach, we have lost some faith in the Government's (1) genuine commitment to lifelong learning and (2) ability to actually deliver, (3) ability to stick to its promises. Working with Government to reach Government objectives should not be a gamble.

— As a small business, and as entrepreneurs, we have lost some faith in the Government's commitment to stimulating and supporting home-grown business. We don't expect Government handouts, but neither do we expect to be duped when working with Government.

HAIRNET STAFF

Hairnet was founded and is fronted by Emma Solomon (31) and Caroline Lambie (28). Emma and Caroline manage all aspects of the company but their main focus is on the development and evolution of the training services.

Emma studied modern languages at Corpus Christi, Oxford and previously worked as an editor in Madrid and as a copywriter for a web design agency in London.

Caroline studied Art History at the Courtauld Institute of Art and previously worked with a web design agency and as the part time Internet editor for Dazed & Confused magazine.

Both Emma and Caroline have also been freelance trainers for various IT training companies and been involved with the development of course materials.

The two began working together in 1995 and built websites for many Arts and Heritage organisations. They also continued to teach IT, in particular in a local college, and wrote materials and courses together. The idea for Hairnet was born in May 1997 when Emma and Caroline realised that many older people wanted to "catch up" with IT and that IT training and associated services focused on this niche market could become a popular and successful business.

Five years later, both continue to interview and train all Hairnet trainers and are actively involved with the management of the trainer network believing that their personal participation and leadership is key to maintaining high standards and stimulating energy and creativity.

As key staff members they are also engaged in raising the profile of the company, speaking at lectures and seminars, running workshops, giving press interviews and writing for other publications and organisations.

Hairnet offices are also staffed by Peter Head, Gill Adams and Shirley Anderson—all over 50 themselves. Peter manages the network of Hairnet trainers; Gill manages publicity and builds public awareness of Hairnet within sectors such as local government, and Shirley contributes to the website as well as undertaking research activities.

Hairnet

January 2002

Memorandum from Mr Roger Tuckett, Henley Community Online (ILA 09)

PERSONAL BACKGROUND

Earlier career in IT and telecoms industry. Ran own business consultancy company 1997-2000. Focussed on pan-European public policy and regulatory development, and impact on business planning and market development, mainly in the telecoms sector. Previously worked at European Commission in 1994-95 on policy development for Information Society.

INITIATIVE IN HENLEY

Put mainstream career to one side to establish non-profit-making community organisation to bring the Information Society to Henley (population 10,000). Initial focus was supporting those using computers (or going online) for the first time. Start-up support for local sponsors, but no Governmental support other than ILA scheme. Equipped and opened ICT centre in the middle of the town (18 PCs, high-speed internet access, £30k capital investment)

Launched in June 2001. Appointed UK Online Centre; Accredited as ECDL testing centre. In four months, 220 learners signed up for learning (using computer-based training material with tutor support). 2 per cent of the town's population. Average age about 60.

ASSESSMENT OF ILAS

— Good: Flexibility. Low bureaucracy. Formal qualifications not a required outcome.

— Bad: Capita administration. Delays in payments. Failure to define the rules. Closure with no alternative scheme. Absence of co-ordination with UK Online, learndirect, LSC funding etc.

IMPACT OF ILA SUSPENSION IN HENLEY

Catastrophic. Revenue steam stopped at end October. Insolvent by end December. Substantial unpaid salary for myself. No alternative revenue streams. No Government support. Centre closed at Christmas. Six jobs lost. Many learners lost their learning. Community lost a valuable asset.

Using my existing contacts, I took up the matter with my MP, and contacted others in the industry, with whom I have discussed their concerns. I organised a lobby of Westminster on 11 December, at which I called for the Select Committee enquiry. No formal organisation has yet been established, although the way we see ourselves representing independent IT training providers, mainly commercial. We estimated that 80 per cent of training centres (roughly 1,500 open today) are independently run.

IMPACT ON LEARNING PROVIDER MARKET

— Almost every learning provider affected is laying off staff now.

— Between 25 per cent and 60 per cent of ICT training centres are likely to close within 6 months, with 2,000 to 5,000 job losses.

— Confidence and trust between learning providers, learners and Government has been shattered.

— Installed base of training centres able to deliver the digital society objectives has been savaged. Traditional colleges are unlikely to have the capacity to deliver a growing need.

ONGOING CONCERNS

— No statement on proportion of ILA funds applied to basic IT skills training (believed very high).

— Minimal linkages between ILA closure and delivery of Digital Society objectives.

— No concern or responsibility by DfES to independent learning providers (community or commercial) as partner organisations.

— No market analysis and impact assessment yet undertaken. DfES and/or e-Envoy should do this.

Roger Tuckett

Chief Executive, Henley Community Online (now closed)

January 2002

MR JAMES O'BRIEN, MS EMMA SOLOMON, MS CAROLINE LAMBIE AND MR ROGER TUCKETT

Chairman

59. Can I thank you very much for joining us. It is a pleasure to have you here and thank you for taking time to do this for us. Sorry to take you all at once, but we will try to give you as much attention as we possibly can and hear what you have to say. Can I ask you an opening question and that is that you have been sitting there, listening to the two most senior civil servants responsible for this programme in the Department for Education and Skills, and I do not want a long monologue on this, but what is your reaction to what we have heard this morning? Caroline?

(Ms Lambie) I think the thing that is the most shocking is the lack of vetting procedures for learning providers and, as a legitimate training company, we just assumed that those vetting procedures would be in place. One thing I might recommend for the next system is for them to look at maybe a handling company like the British Computer Society to decide which organisation should offer qualifications. They could actually come round to look at you, your premises, what you are offering and how the system works. That seems to be one of the most logical ways of actually vetting people.

60. So a trade association would act as a filter. Emma Solomon, can you give your reaction to what you heard this morning?
(Ms Solomon) I think, as someone who did what the Government wanted us to do, which was to take and train people who were hard to reach and follow the rules, it is quite distressing to sit there and listen to people say, "We didn't really think very clearly about who would deliver that training, whether or not that was going to be a quality training experience", and I think your questions from the Committee really highlighted that. To spend so much money is kind of worrying, but what we also wanted to say was that ILAs in our opinion were a fantastic idea and I think we still stand by that and with the right kind of examination of people who would deliver the training in place, it would have been a great success, but I think the concern for us is that it was a numbers issue. The other thing to say is that talking about 2.5 million account holders means absolutely nothing because of that number, X per cent were people just hacking the system. What does that prove, to be honest? It seems to be common sense and our concern is not really understanding the kind of training business sufficiently and quality control and monitoring people's experiences, whether they were happy with what they got and not understanding IT systems sufficiently because anyone will tell you that a database can count, if there is one thing it can do, that is count, and to say, "We couldn't close it down, we couldn't block people", I find it worrying.

61. We will come back to that. Roger Tuckett, what is your initial feeling?
(Mr Tuckett) I agree with what has been said, but the main thing that strikes me is a lack of concern about the impact on learning providers. It was interesting to hear it said that one of the primary intentions of the scheme was to encourage a broader range of learning providers in and yet I lost my job at Christmas. My centre went bankrupt. I do not have a job now, I do not have a salary. There seems to be little concern or care about that. I have gained a broader perspective by helping others in the industry in campaigning in recent weeks, but I have not yet earned any money from this. There was a lot of talk about the learning-provider agreements and yet John Healey has repeatedly said that there is no contract between the learning provider and the Government and I find it very difficult to reconcile that. Once upon a time I was a lawyer and contracts and agreements were virtually the same thing. The tenet seems to be that everything will be looked at for the future on the basis of traditional civil servant timescales. For traditional college and educational establishment there is an unwritten rule that no public institution will go bankrupt, yet I know full well through my contacts with other companies in the industry that hundreds, if not thousands, of people have already lost their jobs and for every week, every month that goes on either because clear information is not given about the payment of money that is due or else clear information is not given about a successor scheme, a particular sector of the training industry has been decimated. There seems to be no consideration whatsoever, unless I have not heard it, about the connection between this group of learning providers who have been decimated and the provision of what I used to call the information society, now called the digital economy, I think, where surely the sorts of learning providers who have been savaged by this are just the sort of people whom another part of the Government ought to be nurturing in order to deliver those targets. It seems depressing that the civil servants seem more concerned about doing things in a traditional way over nine, 12, 18 months rather than setting some urgency about a sector which has been decimated in order to get them activated in order to deliver these public policy objectives.

  62. I take it we will be coming back to that. James O'Brien, you were one of the earliest whistle blowers, as I understand it, that things were going wrong. What is your view in terms both of what you have heard this morning and what you have heard so far?
  (Mr O'Brien) What I had hoped to hear this morning was information on really what would be planned to work because we deal in certainty and at the moment we are looking at uncertain times. There is no information on what is going to happen. All of the events which have taken place over the last 15 or 16 months in our view did not need to happen and they were avoidable and nothing which has been said today has really given me any indication that the future is any clearer than the past was. What I would like to say is about some information which came out and I would like to clarify and correct the point so that Members of the Committee do understand, which is that to us the biggest issue which came out is looking at the lack of quality assurance. We believe that that could have been corrected very, very easily. The Department found it within themselves to write to 2½ million account holders, yet they did not write and ask the 8,000 or so learning providers to go and make themselves known to the Learning Skills Councils, for example. It would have been very easy to do and, as Emma indicated, they could have been deleted from the database and certainly suspended from the database, so that accreditation was quite important to us. There was reference made to the Scottish system and I would like to point out that although the Scottish system, to our knowledge, is a much lengthier process, yet there is still a lack of quality assurance. They are looking to introduce that through the Scottish Quality Management System, but it was no more a difficult process and I think the Committee has actually seen evidence and sight of the application form that learning providers were required to submit, which is meaningless. The Department also mentioned that a lot of consultation took place, but a lot of it was telling rather than consulting. There was also reference made to the fact that lots of information and advice was being given to learners, yet all those learners were pointed to one advice line which was learndirect which is relatively self-promoting and a contradiction in terms as the DfES wanted to encourage new providers, we would really challenge that to one particular route, which was not particularly helpful to the learning industry at all. We also take objection, I believe, to the fact that the reference was made to the training industry and learning providers making fraudulent claims. These people that the Department will discover or know about already, they were not learning providers and I think what will come out at the end is that none of these people were in existence prior to the ILA scheme being found, so we object to them being called training providers because they are putting a slur on our industry.
  (Ms Solomon) I think on the back of that as well, which is kind of tied up, is John Healey, or everyone has said it really, basically saying, "If, as a learning provider, you participated, now it is actually your fault that you are now in a bit of mess", which for genuine training providers, who are not the people that James is referring to, is pretty hard coming on the back of the mess that has already been created.

Mr Turner

63. Mr O'Brien, you have a lot of experience of providing training. Have you participated in schemes in the past where the bulk of the payment for training does not come from the consumer and do you see a relationship between personal cash and, shall I say, caveat emptor?
(Mr O'Brien) Yes, we have been involved in traditionally funded programmes through the Employment Service or through the Training and Enterprise Councils where often it is disadvantaged groups or individuals who are being funded to put them through training. That training takes place. We are not a main provider in that area. There are lots of very good companies out there delivering that training as well, so yes, we have some experience of those. Where an individual is both in the employed situation and also being sponsored and funded through the government programme and has not made much of a personal contribution, we find that their ownership of that particular learning experience is limited because they have not paid for it and they have not lost anything if they do not achieve it, so we have certainly found that the more that an individual contributes to the scheme, the greater their ownership and the greater their desire actually to complete that course and complete that experience.

64. Therefore, one would expect a higher level of quality assurance to be provided initially where the consumers were not making a significant personal financial contribution?
(Mr O'Brien) Indeed. We were astounded that the lack of quality accreditation was so great. It did not exist and that led to much of the problems advised to DfES in terms of the whistle blowing reference, and that led to it being very apparent to all training providers, not just ourselves, that it was open to abuse from day one and indeed the scheme was abused from day one when it was in an uncapped period when you could achieve 80 per cent funding of whatever the amount was. That was capped pretty soon after the opening which led to a lull until unscrupulous organisations and individuals found a way around the new loopholes, which indeed they did.

65. Mr Tuckett, could I ask you what information you have been able to gather to back up your suggestion that large numbers of individuals have gone bankrupt or lost their jobs and that huge amounts of money are owed by the Government to training providers? Could you put some figures around those assertions?
(Mr Tuckett) Taking the last point first, I do not have detailed figures. I am certain the Department for Education and Skills would. I have talked to a large number of people and many of them are concerned about, "If I don't get paid within the next week, I will have to lay off staff". I would say that the majority of them typically who employ four, five, six people have laid off two or three members of staff already. I would say with the majority that has happened and it is a question of can they survive in business. Survival depends either on shifting to other areas of training, which maybe is open to some and it is not open to others. It depends on whether it is being run by an individual who can afford not to pay himself for two, three or four months. Whether the organisation goes out of business depends on quite a lot of the lease commitments and how many reserves they have, so there is no detailed survey which has been carried out. There is a lot of soft data, if you like, but the people I have talked to do suggest that 30, 40, 50 per cent of learning providers will go out of business. It is very difficult to get information on the size of the market, but I am assuming about 1,500 IT training centres employing maybe 5, 6, 8, 10,000 people and of that sector 20, 30, 50 per cent will be squeezed out and either lose their jobs or they will be forced to move into other areas of training.

Mr Pollard

66. Mr O'Brien, you said that this was avoidable and you have made great play about that. You have not said how it could have been avoidable. There is also the question of, "We told you so", but what did you tell them? Did you actually tell the Department and have you been asked since for your views so that this situation could be avoided? You also mentioned lack of quality assurance and what we can do there, that the scheme is simple and attractive, but finally, Mr O'Brien, is it recoverable, this enthusiasm that was about? I have lots of women returners in my constituency who came along and said, "Wow! This is excellent", completely computer illiterate, for example, and suddenly the whole thing opens up to them and it is a new world, personal development, all of that. We can lose that and I am most anxious that we should get on and I think you are absolutely right about timing, so would you take us through that?
(Mr O'Brien) In terms of why I mean it was avoidable, in our opinion putting in place some quality assurance checks that could piggy-back off systems which were in place, not to create a bureaucratic nightmare and increase the costs of running the scheme, and that is why we believe in terms of training providers that were known in the industry and known in the local environment and known in the local community through what were the TECs and are now the Learning Skills Councils, then it would have been very easy for the Department to actually accredit through that situation, so if the training provider was known, then that was stage one of the process, not without its flaws, but stage one. That would not have prevented new providers coming into the industry who could then make themselves aware to the Learning Skills Council, in this case, so that was stage one. Stage two of the accreditation process would be again to piggy-back off other bodies. Emma mentioned the British Computer Society as one and there are many others out there who do put in place and do have a system to check that the training given through an establishment, through an organisation, whether it is a training centre, distance learning, and there are lots of distance learning bodies which are very successful, there are lots of areas where the quality accreditation could have fed off those schemes again rather than actually going out there and creating a new scheme.

67. So a slower approach and not concentrated on pure numbers, but a more qualitative approach and more gradual?
(Mr O'Brien) Get the quality right and the numbers will follow. Quality is very important to learners because they need to feel that where they are going will actually achieve what they are aiming to do and we know through experience and with hindsight that a lot of the learners which have been through the experience actually have not had a very good experience and that is very important. We believe that through having an accredited system, it would have opened it up to a much broader section of people, and people we have mentioned in terms of returning to the work market have found that this is an ideal way to help them get back into the learning environment. It was not just that section, but that was one section which certainly found it appealing.

68. Is it recoverable?
(Mr O'Brien) The longer it goes on, the less likely it becomes in our opinion because the training industry is suffering. Roger has mentioned people and we have got evidence of that. We have conducted a survey which we have released now which you have sight of which says that the longer this goes on, there is a problem. It is recoverable and it is for the Government to create brand awareness of the scheme called Individual Learning Accounts. We have actually met with the Department, with Hugh Tollyfield, and actually discussed our views and concerns over the programme and in that we have also stated, "The quicker you do something, the quicker you can recover it. Don't throw the baby out with the bath water". Individual Learning Accounts is a scheme which is well known and it would be a shame to replace that and call it something else. It is recoverable if it is done quickly. I mentioned earlier the certainty required and what training providers need is that certainty to say when the new scheme is coming. If we get that certainty and if it is April, if it is June, if it is September, we can deal with certainty. What we cannot deal with is an uncertain, "We are reviewing it. We will let you know when it is coming", because by the time it has arrived, the spectrum of choice for learners to go to training providers will have diminished in their local community because training providers will have gone out of business. As Roger stated, he knows companies and we know companies. We have personal experience where some of our training centres are either having to withhold future investment or actually withdraw from the training market altogether and that is not good.

Mr Chaytor

  69. Could I ask my question to Mr Tuckett and Ms Solomon. In terms of your own companies, did your companies exist before the establishment of ILAs?
  (Ms Solomon) Yes, we started in 1997.
  (Mr Tuckett) In my case, no. I set up less than 12 months ago, really not with the idea of being a training company, but with a view to establishing a non-profit-making organisation within the community to avail it of the information society.

70. My second point is in terms of quality assurance, whether a trade association or some other mechanism, in terms of the monitoring of quality once the activity has started and once the company has been accepted as a bona fide learning provider, what kind of monitoring do you think you ought to be subject to and would you have been involved with ILAs if the funding had been output related and not entirely input related.
(Ms Lambie) I think one of the things which could have been done, every student that had to sign up for a course signed an enrolment statement which had their details on it, and a number and I assumed that after sort of three or four months of using the scheme, we would get a visit and someone would check those enrolment statements and maybe would do spot-checks on some of the people listed on those enrolment statements and ask them what their learning experience had been like and that was one of the definite ways they could have checked whether people had had a satisfactory experience.

  71. In terms of returns to Capita, there is no further return needed once the original enrolment was given.
  (Ms Lambie) They perhaps would check that the enrolment statement had been completed. We have got them all in the office and there is no other return to Capita in any other way at all.
  (Ms Solomon) I think there is also an issue here of re-inventing the wheel as well which ties into what James said about going through bodies which have already put their rubber stamp on training organisations and recognising people where they exist. The same sort of mechanisms can actually be relevant to the feedback of students. For example, for five years we get feedback from every single student who goes through Hairnet and we make sure we know and are perfectly satisfied that they have learnt something. It is not tied in with qualifications, but it is about quality of training and I think the DfES have got slightly tongue-tied about that. We are not saying everyone has to come out with a qualification, but they have to think they have had good value for money and they have learnt something. If you then have a raft of training providers involved with the new scheme who do their own quality control, because if they are not doing it anyway they are pretty poor training providers, and then, as Caroline says, spot check, assess that, you would have a scheme you could monitor without huge amounts of bureaucracy that would be quite straight forward.

Chairman: Would you name who are asking questions to?

Mr Chaytor: Yes, I did that. I put it to all three of them.

Chairman

72. That is the last time you get away with that.
(Mr Tuckett) I think the question was would I have set this up if there was output related controls. I would be delighted with output related controls. I would be uncomfortable if those were required to be formal qualifications because the average age of our learners was about 58 to 60, some of them were into their eighties even. I think there are other means of setting and measuring those with an auditing process. There might be cash flow problems if payment for the learning was dependent on completion of all the paperwork, which would need to be looked at. Yes, the application form to become a learning provider was ridiculously short. In fact, I went on to become a UK online centre and also to become an ECDL testing centre. The latter of those involved a visit to my site looking at health and safety concerns but not one iota of that was done for ILAs. For those who have not seen the learning provider application form, it is name, address, telephone number, bank account and I promise to follow the rules.

Mr Shaw

73. In your written evidence to us, Mr Tuckett, you talk about the replacement scheme and you say that the effective monopoly of LSC funding to colleges and their franchisees needs to be examined. Do you think that a regional or sub-regional administrative or commissioning body, such as the LSCs, would be better placed to target where the need is greatest and also to provide quality assurance, which we have heard so much about? It is very important dealing from a centralised position to ensure that. Yourself and the other providers will be aware within their areas that they operate who is providing a good quality service and who is not providing a good quality service. I also think Government will be able to make comparisons as well.
(Mr Tuckett) The short answer is yes, yes and yes. There has been a lamentable failure, frankly, in the current arrangement, which is national. Whether or not it is the LSCs or not I get a warm feeling that the LSCs are well placed to deal with this although you do get slightly the message that LSCs do have administrative issues to deal with.

74. Twenty five million of them.
(Mr Tuckett) And they are an organisation in transition.

75. May I ask the same question of Mr O'Brien.
(Mr O'Brien) Could you repeat it, please?

76. I want to understand for the replacement of the ILA system your perspective as to whether a system organised on a regional or sub-regional basis would be a more effective way to commission to learning providers, both large and small. Not only would they ensure a better financial checking but also the quality assurance, which we have heard so much about this morning. We had the TEC pilots as well.
(Mr O'Brien) In all of our experience training for most people, particularly at this level where it is pitched at, is a local experience and, therefore, to control that locally or regionally is a far better, more effective way to ensure that it is reaching the target market. The answer has to be yes. The TECs were doing a number of pilots which were successful because they understood who they were dealing with and were, therefore, able to make sure that the learning providers were known but equally would not prevent new providers coming in. The answer has to be yes, locally to us would mean that the scheme will have a far better chance of success.

Mr Simmonds

  77. I would like to ask Ms Solomon and Mr O'Brien, one of the problems that has been alluded to already is that nobody checked whether the enrollment had actually taken place or not. Were there any other problems that you encountered with regard to Capita and their administrative systems?
  (Ms Solomon) The big one has got to be what happened when the deadlines were announced about the closure of the scheme because you will all know that those registrations took place on the website and not only slowed down but actually crashed and went out of action. Number one, when we were working to what we still thought was a December 7 deadline, because things that usually took two to three minutes per registration were taking 40, from Hairnet's point of view we had to employ people to actually come in for extra hours to do that, to process the numbers, so the whole system froze basically. When the deadline was then scrapped it was pandemonium, it was chaos. All of us have got claims we are still waiting to be paid for, so that is training delivered by our trainers from as long ago as October which they have not been paid for, so that was quite a nice way to spend Christmas for them, and claims that we would have got through before December 7 if they had not moved the goalposts.
  (Mr O'Brien) In terms of the processes that were involved, the checks were nil and, as somebody stated earlier, with it all being web related it was "yes, this person has started the course" and confirmation seven days later that they were in existence. There were no checks on the individual's contribution. The point I mentioned earlier was the greater contribution from the individual the more likely they are going to be committed to do that. There were no checks. The enrollment forms, which all training providers have, had a tick box and, again, in terms of the fraudulent use of that, tick the box and it says the money has been paid. That money will hopefully be recovered but a lot of it is long, long gone now. In terms of the closure of the scheme, the Capita database and the references that it had been closed down, because training providers or organisations had access to the Capita database, once you were into that system if you were given a password to get in there as a training provider you could go and tap in anybody's number and come out with the money being drawn down into your area. If you go back to the summer when the first announcements were that one million accounts had been opened but two and a half million had been registered, that meant you had a 60 per cent chance of hitting a number that nobody else was going to use. That happened on many occasions when learners went into a training provider, gave them their PIN number to access the system, the learning provider would then go on to the system and find that person's money had already disappeared. The problems that then came from that were that Capita would not allow the learning provider to try and interrogate that, the learner had to go and contact Capita themselves who would then tell them where the money had been withdrawn from. A lot of people could not be bothered to do that but those who did would then phone the companies, if they could get through to them, and find "I am very sorry, we must have mistyped the digits". That money was long gone. How many people did not bother following that up? That all goes into that scheme. Just one final point on that. It all comes back to the accreditation of the learning providers. If you had some accreditation then the only people going into the scheme and being given the passwords would have been approved. When you have got 8,000 or so people who have got access to a system it is open to abuse.

Chairman

78. Here you all are whingeing a bit about what has gone wrong but some of you did quite well out of it when it was running. Is it not the fact that some people would argue that you really wanted tighter control because you did not want competition to come into the system?
(Mr O'Brien) No. We believe competition is good for the market because it gives people a choice and also keeps prices competitive. I will just talk about our own organisation, the Pitman Training Group, rather than the Association of Computer Trainers I am representing. In the year prior to the introduction of ILAs when there was Vocational Training Relief, which has now gone, and then in the first year of ILAs, our business grew by five per cent. So it was not ILAs which exploited the market. Obviously a lot of ILAs were sold and a lot of the people who trained with us used ILAs as a means to fund their training whereas previously they would have used Vocational Training Relief. It was not something that said we want to keep it tightly controlled so that we will benefit and nobody else will. Bring in the competition, that is fine, it is good for the market.

Valerie Davey

  79. I would like to go back to Emma and Caroline, please, to say first of all that individual constituents have written to me and have benefited from your scheme in Bristol, so thank you for that. From your experience, what advice would you give to the Government on what those outcomes should be for the individual learner, your niche market, your older person, first of all in general terms and, secondly, to avoid perhaps Government input into those generally professional semi-retired who would very much like to get back into IT who can actually afford to pay? So two aspects, general advice and perhaps targeting their resources.
  (Ms Lambie) I think in that sense the only way you could actually vet the experience of people is not to follow their qualifications but to speak to a selection of people who have gone through training and ask them what their experience has been and what the outcome has been, or to vet the companies who have a separate criteria who are providing the training for particular age groups or particular types of people and look at what the training systems are that they have got in place. Maybe to consult companies, like us, who are particularly working with that age group. We can say on a consultancy basis before the system goes into place "these are the things that we are doing, this is what the over fifties want" and learn from our experience because I think that was the problem when the DfES actually consulted training providers to ask them how it worked or what kind of people they were training.
  (Ms Solomon) I will go for the answer what would we advise the Government. I think it would be, as I said at the opening, you have a very good scheme here and one that would not have been possible to run, and I think that is part of the stupefaction of many of us sitting here that it was not actually rocket science to put some proper checks in there for training providers and learners. I very much agree with what James said about building a brand. A lot of people know about ILAs now but, unfortunately, a lot of people know about ILAs and, therefore, bad trainers and problems, etc., etc., and this makes the whole timing issue of that relaunch even more imperative. The apples are going mouldy now, they are not just bad, it is clear the barrel out and start again. There is no reason why making amendments to the existing system could not be made quickly. It is very frustrating hearing evidence from the Department for Education and Skills, people saying "we do not how long that might take". Any other business run on that footing would be in dire trouble. That is what is alarming.

Paul Holmes

  80. A question for Roger, but possibly James as well. To go back to the question of accounts that were not registered by the 7 December deadline, because that is what training providers were working towards. When they suspended the scheme on 24 October they said categorically that you had got until 7 December. They then wrote out on 29 October, presumably to all 2.5 million account holders, saying that you had got until 7 December, do not be rushed by people pressing you to sign up quickly, just keep to the deadline, make sure it is the right course, etc. They wrote to everybody involved saying you had got until 7 December and you do not need to rush, make sure you are doing the right thing here, and yet they then pulled the plug late on a Friday two weeks before the deadline. Emma has already said they have got some people who they had not registered by the previous deadline of 7 December. There is a company in Chesterfield in my constituency with nearly 200 people who were not registered because they were working to their usual monthly accounting and that would have been the next week after 23 November. How widespread is this? How many companies are affected by losing money because they had not registered people by 23 November when they had been told quite clearly they had until 7 December? Secondly, has any legal advice been taken so far whether this is a breach of contract and the Government could effectively be sued? It seems to me absolutely outrageous. John Healey has said to me three times now "There is no way we would consider paying for anything that was not registered by 24 November" and yet it seems to be a clear breach of contract.
  (Mr Tuckett) I will go fairly light on the last question of legal action because I believe James O'Brien may have a little bit more to say on that. On the first question, it represents at the very least two lost weeks but I think a lot more than that, it represents people clearing the cupboard out in order to put everything in and make sure they have got everything in at the end, so probably it represents a lot more than two lost weeks. In my organisation's case it represents lost numbers. If you read the brochures that came from the ILA they issued numbers in seven to ten days. I wish it was seven to ten weeks. Despite seven to ten phone calls per week most people took two months, three months. I was getting numbers in a week or so before closure of the scheme which had been lodged by the learner concerned in July or August. Unlike many other centres we had let people start their learning even though the number had not actually arrived. Some people were a bit more careful. Because the scheme enabled you to, if you like, book in advance for courses starting up to six months ahead, either there were amounts left outstanding on the number or else the numbers leading to the following year. There could well have been quite a batch of people who were going to make registrations in the few days leading up to 7 December. I think it said normally in terms of Government tenders for contract very, very few are deposited in the postbox more than 12 hours or 24 hours before the deadline, so one would expect it to be a lot more than two weeks. Although there was this breach of contract, as you have said John Healey has said there was no contract, which I find very, very difficult to believe. Everybody who was regularly involved, those 1,400 people who were putting in claims on a weekly basis, that money corresponds to January's salary for staff and we are coming up to pay day. We were told this morning a little bit is going to arrive for those two missing days. Certainly the lost two weeks is a serious concern.
  (Mr O'Brien) The important thing is, as you pointed out, the timescale of events. We understand why the system had to be closed down on 23 November but it did not mean that the process had to stop, and that is what we believe could have happened. As Roger has mentioned, if you are told by the Government at the end of October you have got until 7 December and do not rush, what happens? We know if there is a sale that the last days of the sale are always the busiest. Lots of learning providers, ourselves included, promoted Individual Learning Accounts and learning providers generally were responsible for the success of the Individual Learning Accounts because it was the learning providers' money that was marketing and promoting the scheme, it was the learning providers' time and effort that was going into promoting that. In that six week period, or what was supposed to be a six week period, a lot of marketing effort was going into promoting the ILAs. What then happened with the sudden withdrawal of that was people were turning up at training centres saying "Well, fine, the Government says I can start until 7 December" and as learning providers what could we do? What we decided to do in many cases was say "Fine, you can start your learning" because we need to mitigate our loss, because it is our reputation as well as the Government's reputation. We actually accepted those people, they paid their contribution, a minimum £50 or whatever it may be, to complete their training on the expectation that the ILA would be honoured at some point in the future once it was resolved. We have taken advice to see if the contract, if you like, between the DfES and the learning providers is valid. In terms of this you can get opinions either way, the most important thing that we have discovered is that the Government had set a legitimate expectation for individuals to be able to access that learning up until 7 December and they should honour that commitment. We have done a sample and we can see names, Individual Learning Account numbers, never mind the people whose accounts never came through in time because of poor administration up in Darlington at Capita. I can supply names of 5,000 people across 200 training centres, so not a big number per centre, not as high as in your own constituency of 200, of people who want to access learning. In some cases they have started their learning and will hope to regain the fees that are due but in some cases they have prolonged it and said they are not going to commence their learning. That is a problem, that is not helping the economy agenda generally, getting people skilled, moving into the IT area. There are big issues here for us. That two week period needs resolving for those people who have started learning, or want to start learning, based on the Government's promise that they could commence their learning by 7 December.

Jeff Ennis

  81. A general question but I would be happy if you could take just one or two responses to the question, Chairman. The witnesses are indicating that they felt the system was open to abuse from day one and potential fraud was inbuilt into the system. Do any of the witnesses feel that there has been an organised element to the fraud that has been built up or is it just individual people taking advantage of a flawed system from the start?
  (Mr Tuckett) I think the first point to make is that the system is very, very flawed in its design and construction. Everybody I have talked to, even with a modicum of computer security expertise, say that it just was not built in in the first place and lots of things could be done. The fact that you could enter a single number and not even have to cross-relate it to the surname, for example, was crazy. The fact that the number was a numeric number rather than alphanumeric meant that there were ten options rather than 26 and so on. The level of computer security was pitifully low. I can also say that I have heard numerous accounts of numbers being offered for sale and numerous stories, none of them substantiated. One is that these come from the printers, secondly that these come from insider information and, thirdly, these come from people hacking into the system. I certainly have no firm, definitive information which of those it is but I always look at that in the context of a computer system put together under a £50 million contract. To me it is a very, very modest investment. I would hate to come out with a figure, but a few tens of thousands of pounds may have gone into the development of that computer system. To say simply that we should have been able to trust the 8,000 people who filled in a one page form not to misuse their capability to look at it simply does not wash water.
  (Ms Lambie) I do not know who actually commissioned the database that was running via the website but in terms of having a basic knowledge of IT and how databases work, people who typed in the wrong number three times should have been shut out of the system in the same way if you are trying to register with your online banker. People who were registering more than 1,000 students per week per centre should have been shut out of the system because there is no way any training centre could train that many people in a week. There are simple things that databases can do and it does not take an IT expert to understand that. I do not know who commissioned it or what consultancy they received on designing databases but certainly it was a very simple system.
  (Ms Solomon) You were asking was this organised. If you think about it, if someone wants to defraud the system they are not just going to take £200, are they? If they have found a way to get in they are going to take as much as they can get. It has got to be people who have decided quite seriously that is what they are going to do. As Roger said, there is an awful lot of Chinese whispers around about 80,000 numbers in Kent, all sorts of things that people cannot substantiate.

Chairman

82. Eighty thousand numbers in Kent?
(Ms Solomon) There was some story about somebody putting 80,000 ILAs through from Kent.

Chairman: Kent is well known for its enterprise.

Mr Shaw

  83. Absolutely right.
  (Ms Solomon) There are a lot of these stories. We do not have the full stories, we do not have the names, but I think all training providers could give you an example of some nutty story. The fact remains if you are going to defraud it you are not going to just take £200.
  (Ms Lambie) Just a quick point. In any new scheme that comes in there should be a number that people can call that is a fraud line and if they are unhappy with their experience there should be some place to report that. There was not anything like that. If you phoned Capita you got people in the call centre who were just there to put information into the system, they were not there to deal with any complaints. There was no complaints mechanism at all.

Mr Baron

84. A question to Mr O'Brien to give us an overview. From evidence given to us it does appear that we all agree that whilst ILAs were a very good idea the structure and the systems put in place were a complete shambles which almost beggars belief. The Department for Education and Skills seems to be wanting to exacerbate this shambles by refusing to compensate learning providers, which I think is personally scandalous and I know the Parliamentary Ombudsman will be looking into this. How do you think that decision alone is going to affect the long-term future of your industry, something that we are going to depend on very heavily if we are going to move this initiative forward?
(Mr O'Brien) That decision to compensate the learning providers is critical for the long-term survivability of small training providers as well as medium and large providers. The compensation is due in two parts. One is up until 23 November people who were registered on to the learning system, those monies are still outstanding. A payment was made for the week ending 21 December but it was a part payment and we cannot find a way to reconcile that. Secondly, those providers who have not been paid have been advised there is going to be a verification check but no timescale of when that verification check will be undertaken, no information on what that verification will comprise of, has been forthcoming. Up until 23 November, first of all, those monies are outstanding. The DfES this morning said there will be a further payment made this week for the final parts. If that is full and final payment of that, that is a step in the right direction because in small business cash flow, as in many businesses, is very, very important and those businesses will not survive. As Roger said, people are not going to be able to afford to pay their staff wages this month, and that is very important. The second issue in terms of compensation, again, is that it means people in the training industry in the longer term can reinvest and go out there and market to learners to come back into the learning environment, take up life long learning and get the skills which will help them, whether it is to get a job, get a better job or communicate with their grandchildren by e-mail in terms of training people from the ages of 18 to 88. It is very important that compensation is decided on but it has to be checked and verified and all legitimate training providers will have no issue with that. It is very important for the long-term future of the business.

Chairman

  85. We are running out of time. I want each of our witnesses to briefly say what is in store. We are hopefully going to get the ILAs back on track, what would be the characteristics that you would want the new scheme to embody? What do you want out of the new scheme?
  (Ms Lambie) A vetting system that is much tougher and people actually come and visit us, see what we are doing, talk to people that we have trained. I think that is probably the best evidence you can get. Consultancy on a new database system so that it is more secure, it can block people out more easily. They are the two main things.
  (Ms Solomon) I would add, I think, the element of personal choice in the new scheme is very important. This is something that came up for us particularly at Hairnet because what people choose to do is have personal one-to-one instruction. Many people need to do that if they are going to get into IT because they simply do not want to or cannot get to a class. If we get a new system that tends to push learners through Government favoured training organisations I think it is worse than not having a new system because that element of personal choice is very important to retain. If I can just say something on the back of what John was asking about compensation. I think if the compensation issue is not sorted out it becomes as good as the Government saying "we actively consciously now penalise you for having joined us in the ILA scheme in the first place". In terms of our faith in the Government to stick to what it says it is going to do and play fair, it is very damaging to be left in that position thinking "Okay, ILA mark 2, do we go in, do we not go in? What is going to happen this time?" I think that is tied up with the way they deal with the compensation issue. Lastly, I think we have all said here, just get on and do it. It is really imperative, as James has said, that we know we are dealing with a date. Even if they say it is April or June at least you know what you are working towards. If you do not know what you are working towards it is very difficult.
  (Mr Tuckett) Three things. One is build on the flexibility of the old scheme. The second is introduce one or both of quality assurance or monitoring of achievement. The interesting comment was made earlier that both seemed to be lacking from the first scheme. A little rider to that is in a non-bureaucratic way. The third is the question that is in vogue, joined-up Government, please. Not only join up the ILA initiative, which has primarily funded computer training, or a lot of the money has gone there, with the digital economy, digital society initiatives, join it up with that but, secondly, join it up with the whole funding of adult learning generally through the Learn Direct Scheme, through the Learning and Skills Council funding, who gets it and who does not, because it has become clear there is much disjointed thinking and disjointed initiatives and objectives that seem to conflict.
  (Mr O'Brien) I support all of the comments made and I do believe in the accreditation of learning providers but I do believe that needs to be open to all learning providers, existing and new coming into the marketplace. I would not support the comment by the DfES earlier to possibly make that open to tendering because you may get just specific groups. I think it has to be open to providers who have to go through some quality thresholds and if you pass those thresholds you should be invited into the scheme. We believe strongly, the Association of Computer Trainers, that it should be done at a local level. Use the framework that is out there already. The Learning and Skills Council is ideally suited for this, so please consider that. It needs an adequate regulatory and compliance framework but do not make it overly bureaucratic. There has to be some bureaucracy but it needs to be a simple scheme. Learning providers need clear guidelines which are unambiguous, put a version number on them so we know which one we are working to but issue those so that everybody knows what the rules are because the rules were lacking in the first instance, so make that clear.

86. Can I thank all of our witnesses for their contribution today and thank Members of my Committee who have stayed the course. I must finish with one last question, I see it is only 11.59. Why Hairnet?
(Ms Solomon) Because you would ask us that question and remember the name.

Chairman: Thank you very much.