Select Committee on Education and Skills Minutes of Evidence

Examination of Witness (Questions 519-539)




  519. Good morning, minister, welcome back and a happy new year to you. We hope you had a good rest over Christmas.
  (John Healey) Good morning, Chairman. Thank you very much.

  520. I think you will remember very well that because the Individual Learning Accounts took up all the time at our last meeting, we did ask you to come back, and thank you for agreeing to come back so quickly. We do not want to have the same thing happen again, so I am going to suggest to you, if this is agreeable, that we will spend 15 minutes talking about Individual Learning Accounts and then we will shift to your broader responsibilities, and a fascinating range of responsibilities they are. The Clerk will keep us on track in terms of time. We will open straight away where we left off in terms of ILAs. May I open by saying there is a certain amount of unhappiness, certainly on my part and that of some members of the Committee, at seeing the Financial Times articles this morning. You did comment, minister, that you would let us know. In a sense, we were trying to track forensically what happened in terms of the ILAs, when the decisions were made, when the concern first arose, and short the process was. If you compare the Financial Times story this morning and your letter to us, the worry that we have is that the meeting that the FT refers to on 18 October is not actually included in your letter. I wonder if you could inform the Committee why that is. Was there a meeting on 18 October? Who was represented at the meeting. Was the Treasury there? Did the meeting discuss the fraud allegations or just the problems of the overspend?

  (John Healey) There was a meeting that week, on the 18th. It was entirely a DfES meeting. The two ministers responsible, myself and Estelle Morris, were there. The permanent secretary of the DfES was there and several of the key officials who have an interest or a responsibility in this policy area. It was solely a DfES meeting. That was the meeting at which we examined the evidence. We looked at the problem and we took the decision in principle then that we had no other option but to withdraw the ILA scheme. We took the decision then that we needed to give and we should give a reasonable period of notice, both to be fair to Individual Learning Accounts account holders, to give those that had not used their discount the chance to do so, and of course with legal advice to make sure that as a government in those circumstances we were acting reasonably and therefore would not potentially be open to any judicial review or proceedings for the action and decisions we took. It was after that meeting, after the decision was taken, that we did some more work on the logistics of what would be required to close the scheme within that six-week period. It was at that point that we informed ministerial colleagues in other departments, including No 10 and in the Treasury, and it was on the Monday of the following week that I personally also made calls to make sure that my counterparts in the devolved administrations, who were obviously affected by this decision that we were taking for England, were fully informed of the steps we planned to take. And then, of course, as you know, Chairman, Estelle Morris announced it on Wednesday of that following week, the 24 October.

  521. Can I just press you on one point. Who called the meeting?
  (John Healey) I called the meeting essentially. Having worked closely with the officials responsible over particularly the previous couple of weeks to make sure that I felt we had sufficient data on which to marshall a decision, having of course during that period kept the Secretary of State's office informed, this was clearly a discussion and a decision that in the end had to be taken with and by the Secretary of State.

  522. When you called the meeting, was your concern the fact that the scheme was running out of control in terms of expenditure and the cost and did fraud come later? What was the reason for the meeting?
  (John Healey) As I certainly tried to explain at our last session before Christmas, we had two things. We had evidence from the summer of a mounting volume of complaints, including just over a fifth of the complaints at that time that were about the misuse of the system; in other words, activities of learning providers, which, if they were substantiated, meant that they were misusing and breaching/not complying with the system.

  523. When you called the meeting, was it fraud that was uppermost in your mind or was it the overspend?
  (John Healey) Chairman, if you will forgive me and allow me to finish, it was two things. It was the combination of the two that really put us in the position where we had no other option but to decide to withdraw the scheme. One was the increasing volume of complaints, including serious complaints about a minority of providers. The second thing was increasing volumes of claims in particular patterns from some of these learning providers about which we were getting the most complaints and were starting to have the most serious concerns. I think, Chairman, that pattern, if you like, has become even clearer since we took that decision. In the letter that I sent you and the members of the Committee yesterday, you will see that very clearly in the pay claims, the claims for payment the learning providers had filed that we were able to assess before Christmas. That last week of the full operation of the scheme up to 21 November, you will see from the letter there that nine per cent of those learning providers about whom we had concerns and from whom we had withheld payment were responsible for 76 per cent of the amount that had been claimed in that week. In other words, you have the problem with a minority of learning providers about whom we were getting increasing numbers of complaints who nevertheless were filing an increasing volume of claims, and therefore it was the combination of the two in the context of having taken a number of steps over the summer and the early autumn to try to tighten up the operation of the scheme which clearly had not stopped this problem which led us then to the decision that really the only step that we could take to protect the interests of individual learners and to protect the proper use of public funds was in fact to withdraw the scheme. We made that decision in principle at that meeting on 18 October and announced that decision on 24 October. That was a discussion and a decision we had entirely internally to the DfES and then, having made that decision, we informed colleagues both within government, in Whitehall, and the devolved administrations.

Mr Baron

  524. Minister, can I just ask you to clarify this a little bit. You tell us that when you were before us last time, just before Christmas, you indicated that you were talking about a small number of players that were causing the problem. From that I asked the question "Why did you not then just close down that small number of providers ...?" and I did not feel I got a satisfactory response. What you are now saying is that although it is a small number of providers they were causing an increasing amount of problems and claiming an increasing amount of money illegally and so forth. Surely that information was available to you at our last meeting. Why this apparent move from saying, "It is a small number of providers," when we last met, to now saying, "Although it was a small number of providers, they were causing an increasing amount of fraud within the system."
  (John Healey) With respect, when we last met I was able to give you figures that took us to about mid November. I think the picture has become even clearer with the data that subsequently I have been able to collate and the analysis that we have been able to do and that I provided to you in the letter yesterday.

  525. Can I come back to my original question: Why, having identified the small number of providers and bearing in mind the inconvenience you have caused to a large number of people on this issue, both providers and those subscribing to the system, did you not just close down that small number of providers? Because that would also have dealt with the increasing amount of claims they were making. If you had closed down the small number of providers that were fraudulent, you would not have had an increasing number of claims.
  (John Healey) With respect, you may remember the conversation we had on this at our last meeting, and I explained some of the steps that we had taken over the summer and early autumn to tighten up the system. We were in a situation where we made moves to investigate and challenge and cross-question some of these learning providers where we had concerns, indeed we suspended some of them during that period, but, quite frankly, despite the changes that we made, including a new registration process for learning providers, the rules and the robustness of the scheme simply was not sufficient to allow us to close down the misuse and at the margins the outright abuse and some fraud that clearly was creeping into the system.

  526. So what you are saying is that not enough thought had been given to this subject of potential fraudulent providers and how you would deal with them.
  (John Healey) What I am saying is in the light of the experience of a year of operation in the ILA system, what became clear was that, whilst the vast majority of learning providers were seizing it in order to deliver learning that a lot of people were finding met their needs and to bring into learning a lot of people who had not learned for a long time, there were a minority who saw it as a fast track to cash from the Government and that they were creative in the way that they tried to misuse that scheme.

  527. Sure, I am not disagreeing with you on that, but what we are agreeing, I think, is that you did not have the systems in place to deal adequately with fraudulent providers.
  (John Healey) The design of the ILA system, in the end the decision to which we came, was not sufficiently strong to allow us to stamp this out.

  528. I think we are agreeing.
  (John Healey) But clearly within the system what it did allow us to do was to take these concerns, trigger inquiries from our own investigations, and in the end, of course, gave us the grounds clearly and the evidence that we needed to make what, I would repeat to the Committee, was a very difficult decision because we were conscious of the disappointment that would cause to so many learning providers and indeed learners as well.


  529. Did the Treasury press you to keep the scheme going despite all the problems?
  (John Healey) No. There was concern from a number of quarters that the ILA scheme, that was, you will know better than anyone, Chairman, a flagship of the sort of bid to bring new people into learning and to boost levels of interest and demand for learning, there was concern that what was a flagship, cross-government scheme that the DfES was responsible for appeared to be in such problems that there was no other alternative but to withdraw it in England. They, the Treasury and others, quite rightly, as we had asked ourselves, considered the very question Mr Baron asked, "Is there no other option for doing this?" and "Should it not be continued?" Having looked at those questions very carefully ourselves within the DfES and come to that judgment and decision that there was no other option but to withdraw it, we clearly explained that. That settled any questions that others within the government might have and we proceeded, as we and the DfES had decided to do, to withdraw the scheme with effect from December 7. Then of course the second issue arose that forced the decision to withdraw the scheme with immediate effect in November, on the 23rd.

Mr Shaw

  530. Minister, in November I asked you how much the programmes had overspent by. At that time you told me, looking at the transcript, that you were not in a position to be able to tell the Committee. According to the report in the FT, in October the department knew that you had overspent by £30 million. Why did you not tell us in November that you had overspent by £30 million? Was it that you wanted to avoid a total calamity or were officials not providing you with that information? Or, rather than conspiracy, which I am suggesting, was it just more cock-up?
  (John Healey) Mr Shaw, I would advise you first of all not to believe everything you read in newspapers, even the Financial Times. The situation was, as I have explained earlier, that we were aware of course there was a budget overspend. It was very difficult to make any calculation with any certainty at all about what that would be. I explained that to the Committee when we met in November. We had not done the sort of calculations with the certainty I was able to do after we met and, when we were able to do that, with a clearer picture I then informed the Committee as soon as I could that the overspend to the point that we could calculate it with certainty in those circumstances, which I think was November 23, was at that point £58.8 million against the budget that we had over two years. Subsequently, of course, having made some further payments against claims that had been submitted to the Capita centre before it was closed down on the 23rd, that now is £62.9 million.

  531. So this £30 million, that information that is reported in the paper, was not known by the department in October or it was not accurate enough, is that what you are saying, in order to bring it to the Committee?
  (John Healey) Any figure like that, at that stage, with the degree of uncertainty that was there about the activity and the degree to which we were exposed, would inevitably have lacked accuracy and certainty. I would not set any store by a figure such as that that the Financial Times might have got hold of.

Paul Holmes

  532. Initially the department said that they were going to suspend the scheme on 7 December and then suddenly on Friday 23 November they said it was suspended from that day. There are a number of companies around the country, including one in my constituency that I have written to you about, who were working towards the date of 7 December—their monthly accountancy procedures would fall in the week after 23 November. The company I have written to you about have about 150/200 people on the books, but because they had not registered them by Friday 23 November, because they were aiming for the date of 7 December, it would now appear from the various correspondence they have had from you that they are not going to get consideration for payment, although you are, subject to validation, paying everybody up to 23 November. Does your department propose to do anything for those companies who have not got legitimate registration in by the 23 November because they were working to your initial date of 7 December?
  (John Healey) Mr Holmes, I appreciate the position the company in your constituency is in, and there are a number like that which have contacted the department, but, if you pause and think, we simply could not do anything other than say we would honour the claims that had been properly made at the point that we closed down the system. We could not possibly have closed down the scheme and the system and then had an arrangement where people could have said, "Ah, but next week we were planning to file another 600 claims, you have got to take these into account." The circumstances with which we were faced on 23 November were so serious and so severe that we really had no other option but to close that scheme down with immediate effect. I hope the further details that I have been able to provide to the Committee in my letter to the Chairman yesterday explain the nature of that and explain the decision that we took and really, I hope, explain that really that was the only decision we could have taken in those circumstances.

  533. I accept that you may have had to move very quickly on 23 November. Nonetheless, if companies can provide you with their company accounts, their details, the written letters from people involved, all of which show that they are valid, legitimate claims but that they did not file them by your emergency close-down date because they were aiming at the date you told them to aim for, surely there should be some leeway there for legitimate companies who, as I say, have got the paperwork. I can send you some of the paperwork for this particular company, to show that they are legitimate claims.
  (John Healey) We can only accept as valid and legitimate claims that were actually filed in the system before we closed it down. To do anything other is impracticable and would not be something that we really could or should do.

  534. Surely in private business, if a company said, "We will pay you out by a certain date" and then they brought it forward two weeks, they would not be allowed in a court of law to get away with that.
  (John Healey) No, of course, but the circumstances you are describing there would be circumstances where the two companies had a contract between them. What I have explained to the Committee and said in the House at other times is that under the ILA system the Government had no contract with learning providers that were registered to draw down discounts under the scheme.

Mr Chaytor

  535. In your letter of 18 December, minister, you say that there would be in January and February a systematic consultation with providers, learners and other stakeholders about the way forward to establishing a replacement scheme. Has that consultation started?
  (John Healey) Yes, that has started. We have got a company working with us to conduct that consultation. The 400 or so learning providers who have already offered to help us in redesigning a successor scheme will be contacted first. All the other registered learning providers and other organisations that have an interest in the scheme will have an opportunity also to comment and offer us their views. We will do a survey of some of the Individual Learning Accounts account holders as well, as part of the groundwork and consultation we think we need to do to try and get both the design of the successor policy and the design of the successor system sorted out.

  536. Is there a deadline for an innovation on that consultation?
  (John Healey) I am looking for an interim report on that in February and I am looking for that to be completed probably by early April.

  537. In retrospect, what are the main conclusions that you have drawn to date about the policy and implementation failures that led to the collapse of the scheme?
  (John Healey) With respect, Mr Chaytor, we covered some of this at our last session and my views have not changed since then. I can go over them now ...

  Mr Chaytor: It would be useful if you could.


  538. Briefly, minister.
  (John Healey) Briefly. Policy. Innovative, radically new scheme. Seized the imagination of learners in a way that nobody anticipated and to an extent that nobody anticipated, therefore hitting our one million ILA holders nearly a year early, drawing many—I think it is around one in six—who were new to return to learning, encouraging new providers and new provision to be offered. However, as a universal offer, also one that was taken up by some—probably our best crude guess might be up to about a half—who say that they would not have needed the ILA discount in order to pay for their course. Whether or not they would have taken the course and paid for it anyway is another matter, because, if you like, there is both the financial support aspect to the contribution and of course the incentive contribution as well.

  Chairman: The last word to Andrew Turner, as long as he does not take more than a minute.

Mr Turner

  539. The message seems to be to providers—and this applies in some other aspects of government as well: "Don't do anything on the Government's say so, wait until you have got a contract in writing." Is that correct?
  (John Healey) No, I would not say that at all. It was clear from the outset of this scheme, and no learning provider that decided that they wanted to take advantage of ILAs had any contract at any point with the Government on this—and that is different from some of the arrangements for the delivery of other learning programmes, but that is the nature of the ILA system. So it is tough but it is a reality of the situation that they were faced with and that we are in now, which is that the decisions that any learning provider took to build ILAs into any of their business planning was a matter for them. Our first and principal relationship as a Government was with the individual learners that we wanted to encourage to use the ILA to take up learning for themselves.

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