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6.13 pm

Jonathan Shaw (Chatham and Aylesford): I am grateful for the opportunity to make a contribution to the debate. I begin by referring to the former Under-Secretary of State for Education and Skills, now the Economic Secretary to the Treasury, my hon. Friend the Member for Wentworth (John Healey). Perhaps, last June, when my hon. Friend received the call from Downing street summoning him to see the Prime Minister, he did not know that ILAs were reaching boiling point. I do not know whether the Prime Minister said, "Look John, we've got the ILAs, they're a good idea and they are popular, but we think they might go belly up and you'll be in the firing line". My hon. Friend has left the Chamber, so we shall probably never know.

I pay tribute to my hon. Friend, however. He continually came to the Committee, providing us with all the detail that we wanted. He went beyond what one might reasonably expect of a Minister and a Department in the provision of the information that we needed to complete our inquiry. Now that he is at the Treasury, I am sure that he is forging a good relationship with the Under-Secretary of State for Education and Skills, my hon. Friend the Member for Bury, South (Mr. Lewis)—I am pleased to see him on the Front Bench.

I am sure that when the new ILA scheme is introduced, my hon. Friend the Economic Secretary will ensure that there are no overspends, as occurred in the past. However, he did a good job, and it should be recognised that it was not an easy thing to confront as a new Minister, which is to his credit.

We need a new ILA, and we look forward to hearing from the Minister about when that is likely to happen. My hon. Friend the Member for Bristol, West (Valerie Davey) gave an excellent example in referring to the trade unions. The Select Committee on Education and Skills has been provided with example after example of people who were not learning and who had the opportunity to learn. The system opened up the market for people to be entrepreneurial and to provide a new way to learn to meet the demands of modern living.

Regrettably, the safeguards were inadequate, as we all know. That is why we are in the current position, and it is why the Select Committee needed to undertake

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the inquiry. I pay tribute to its Chairman, my hon. Friend the Member for Huddersfield (Mr. Sheerman), who steered us through this fast-track inquiry. [Interruption.] Does my hon. Friend want to intervene?

Mr. Sheerman indicated dissent.

Jonathan Shaw: There were early warnings. Not just the Department for Education and Skills, but all Departments have to take account of the reports that are written. The hon. Member for South Norfolk (Mr. Bacon) referred to a plethora of reports. He made a very good speech. He has clearly done a great deal of research on the many reports that have flagged up the dangers. If reports are written for Ministers and senior civil servants but no one looks at them, we will find ourselves in a similar position again.

The warnings in the report need to be heeded not only in the Department for Education and Skills, but right across the Government. Information technology provides us with enormous opportunities to learn, but it also provides enormous opportunities for crooks. As the pace of technological change increases, we have to keep account of the likelihood of fraud. One of the Department's own civil servants, Mr. Hall from the Learning and Skills Council, told the Select Committee that he had warned the Department as early as June 2000 that the safeguards in the proposed system were inadequate.

The Government responded by saying in paragraph 10 on page 11 that they did not want an over-bureaucratic system with lots of red tape. Of course such an approach is right, but simply saying that is not good enough. The infrastructure was in place, with the Learning and Skills Council and other agencies, to give accreditation. Too often, we heard about scams involving CDs and cold calling, and the complaints system was inadequate not just for ILA holders. If someone knocks at the door and says, "This is a CD to learn to type and the Government are paying for it", the person who answers might say, "Well, I've never heard of ILAs, but that's very nice. I'll sign up. Thank you very much." Why would anyone complain if they did not know?

There was no proper complaints system for the good providers who were angry about being ripped off by cowboys, as the hon. Member for Chesterfield (Paul Holmes) said, but they were infuriated when neither Capita nor the Government listened to them. That shows the quality of the complaints system.

There was also fraud, and we have heard how people could gain access to accounts. When the hon. Member for Isle of Wight (Mr. Turner) questioned Paddy Doyle, Capita's group board director, about one of his constituents whose account had clearly been opened fraudulently—she had not signed any piece of paper to say that she wanted to open an account—Mr. Doyle said:

One thing that we can certainly conclude from that is that it happened.

Inadequate safeguards were in place. That has been borne out by the Cap Gemini Ernst & Young report and by the internal audit. There are lessons not just for the

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Department for Education and Skills but for all Departments. As a consequence, the Government and Capita have had a tendency to blame one another. That is perhaps a manifestation of a problem—when one is in a bind, one starts to look around for people to blame. Both the Government and Capita are at fault, as has been acknowledged.

As for the future, the Government are committed to learning—not just through the individual learning account system but through a whole range of different opportunities for people who have not accessed learning before and who can now take advantage of the many different schemes available. The ILA concept is a good one, but appropriate accreditation is needed. We need to use the infrastructure that is available, and, most importantly, we need to reward those who target groups who have not traditionally accessed learning. The ILA has had some success in targeting those groups, but the majority of people who were taking advantage of individual learning accounts had accessed learning before. That needs to be a priority. In response to the report, I hope that, when we see the new scheme, adequate measures will be in place to encourage learning providers to target that group.

It has been a pleasure to take part in the inquiry. I hope that we have made an important contribution.

6.22 pm

Mr. John Baron (Billericay): I am grateful to be called to speak in this important debate. It is a pleasure to follow the thoughtful contribution of the hon. Member for Chatham and Aylesford (Jonathan Shaw). I concur with others in paying tribute to the hon. Member for Huddersfield (Mr. Sheerman) for his incisive, professional and objective chairmanship of the Committee that led directly to this report.

As a member of the Education and Skills Committee, I welcome this opportunity to address a particularly important aspect of the affair on which other Members have touched—the failure of the Government to compensate learning providers for the accelerated closure of the scheme and the implications thereof. As a Committee, we deliberated long and hard on this issue. We reached the following conclusion:

We felt that it is was wrong for a Government simply to turn their back on the large number of learning providers who had invested in good faith in a Government-inspired programme but who now faced financial loss, and, in some cases, ruin, as a result of mistakes made by the Government. It is wrong for a number of reasons.

First, an agreement existed between the Government and learning providers that, in my view, introduced reciprocal obligations between its signatories. Meanwhile, it is wrong because it is unfair. The Government and Capita can move on with minimal adverse effects—the then Minister even admitted that Capita was still in the running for major new contracts. The little people in this affair, however—the learning providers and the individual learning account holders—have suffered through no fault of their own. If there is any doubt about whose fault this debacle was, it may be worth briefly highlighting the twists and turns, especially towards the end of this unfortunate affair.

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On 24 October, the Secretary of State for Education and Skills announced the suspension of the £200 million ILA programme from 7 December 2001. She said that the programme

However, on 23 November, another press release suddenly announced the immediate closure of ILAs two weeks earlier than planned. No notice was given. Training providers were neither consulted nor warned.

Even now we do not know whether the decision was taken because of fraud or because the scheme was so popular and over budget that the Government pulled the plug. However, as the report clearly states, the Select Committee is sure that Capita and the Department for Education and Skills were equally to blame for the fiasco.

The little people have suffered. For example, Roger Tuckett of Henley Community Online estimated that the closure of the ILA scheme would result in 2,000 to 5,000 job losses. Mr. James O'Brien of Pitman Training Group plc and the Association of Computer Trainers told the Committee that up to 5,000 people could be squeezed out from IT training centres. He stressed that the most important thing was that

The National Extension College was

In addition, as the hon. Member for Chesterfield (Paul Holmes) has already pointed out, a survey of 84 colleges found that they expected to suffer a loss of income amounting to more than £1.2 million as a result of the early closure of the scheme. The loss of that money will be deeply felt by the colleges in question,

There are many more examples of losses being incurred by learning providers. However, despite all the evidence, the Government refuse to compensate learning providers. The Government's argument is that there was no contract between the Department and learning providers, and hence that they are not obliged to compensate the providers. They are splitting legal hairs so that they can run away from their obligations. There may have been no contract, but there certainly was an agreement between the Department and learning providers, and that agreement introduced reciprocal obligations between the signatories.

The Government should honour their obligations to individuals and to organisations, particularly as they unexpectedly accelerated the closure of the scheme. Many learning providers who entered the agreement in good faith must now wonder whether they can afford again to take the Government at their word. As the Committee report put it:

Mrs. Sammy Betson of Ipswich ITeC summed the problem up very well. She told the Committee that her cash flow had taken a serious knock and added:

The Government's unwillingness to compensate learning providers for the early closure of the scheme in the two weeks in question is wrong for a number of

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reasons. It is wrong because there was an agreement that involved obligations on all the parties concerned. It is wrong because the decision is unfair. The Government and Capita can move on, but many small learning providers, who face financial loss and in some cases ruin, cannot. It is also wrong because learning providers will think twice before participating in any successor scheme. The parliamentary ombudsman is investigating several individual complaints and we await the findings with interest.

It is great shame that this good initiative has been so badly handled by the Government. What makes it worse is that they refuse to honour their obligations by compensating those learning providers who have suffered financial loss as a result of the accelerated closure of the scheme. It is a very high-handed approach, and some would suggest even an arrogant one. The Government must not underestimate the importance of trust in these matters. At present, very many learning providers, who will be essential to the success of any successor scheme, believe that they cannot trust the Government. I therefore ask the Government, even at this late stage, to reconsider their position and to honour their commitment to learning providers.

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