Select Committee on Education and Skills Minutes of Evidence


Examination of Witnesses (Questions 520 - 539)

TUESDAY 26 FEBRUARY 2002

JOHN HEALEY AND MR PETER LAUENER

  520. Can I say, we are very happy for you to do that, but it is not going to be a verbal run right through the memorandum?
  (John Healey) It absolutely is not. I wanted, first of all, to introduce Peter Lauener who is Director of Learning Delivery and Standards whom the Committee has met before. Peter Lauener and I have worked very closely together over the last few months, both in dealing with problems that we have had to manage in winding up the first ILA scheme, and in developing options for what will be the successor scheme. I really wanted to say, Chairman, I have been incredibly impressed at how hard and under such pressure Peter and his team of civil servants have worked. I have been particularly impressed by how self-critically, honestly and openly they have approached this task; and in some ways we have tried to reflect that in terms of our information to and our discussions with the Committee: in part because there are some very important lessons for us to learn in relation to any successor ILA scheme; in part because there are some important lessons for the Department as a whole; and I think there are also some important lessons for us across Government from the experience we have had of this scheme. We have been conscious throughout, and I have been particularly conscious, of the impact that the decision we have taken has had on learners and learning providers. My priorities in recent months have been: firstly, to make sure we have been able to pay as quickly as we can legitimate claims from learning providers, where they have incurred those costs; secondly, to investigate the complaints and concerns that have been raised by learners and others so we get to the bottom of the problems we have encountered; and, thirdly, to draw the lessons we must learn for the second scheme. It is clear, as we have discussed before, that this has been an important initiative, Individual Learning Accounts; and the one encouraging, almost universal, feature that has come out of the difficulties we have faced has been the degree of support there has been right across the board (including from the Committee, Chairman) for the concept and general policy of Individual Learning Accounts. As I did when you announced it, I welcome the Committee's inquiry; I look forward to the report you are due to produce, and I hope you will be able to do that in good time so that it can help inform decisions we need to make in terms of the successor scheme. Let me return to the question you posed at the start. I had no discussions at all with predecessor ministers about the scheme. I think the Election was on 7 June, so I must have got to my desk on 12-13 June the following week, after I was fortunate enough to be appointed. Within two weeks I had had two meetings with officials on Individual Learning Accounts, both to look, firstly, at the question of ending the £150 incentive and, secondly, at the concerns that were starting to emerge about mis-selling and inappropriate behaviour of some learning providers. I had detailed discussions and asked for detailed information about budgets, costings, verification procedures, options of clamping down on learning providers and also about making sure that learning providers knew about the action we were taking in order to try and be tough at that point. That was the immediate context I faced. I had no discussions at all with any of my predecessors who were ministers who may have been involved in the decisions and determination of the policy.

  521. Is that a question of protocol, or just a question in this particular case?
  (John Healey) I think there is no established procedure when ministerial positions and responsibilities change. Where discussions such as that do take place, they tend to be ad hoc and on a personal basis. My priority really was to get to the bottom of the situation we were facing. There was a team of officials that had been working very hard on the scheme and could provide most of that information. My principal concern at that time was getting to grips with what we faced, making decisions that would help us tighten up the rules of schemes we did over the summer, and manage the situation rather than, at that point, going back nine months, 12 months, and in some case 24 months, with what might have been the discussions and decisions that led to the design of the scheme we were running.

  522. Minister, you had known quite a bit about the scheme, had you not, because you were PPS to the Chancellor of the Exchequer—and most people recognise the ILAs were very much the Chancellor's inspiration? You would have been picking up, surely, in the Treasury concerns in the Treasury about the cost of the ILAs?
  (John Healey) No, not the case in fact. My job as PPS to the Chancellor is very much the job of any Parliamentary Private Secretary, which is over in Westminster, and very much the political intelligence, the eyes and the ears of a Minister who, by dint of the responsibilities they have, cannot be in Westminster among MPs and others as much as they want. I was not involved in detailed policy monitoring or discussions on the whole that went on in the Treasury. I have made this clear to the Committee before. The concerns were dealt with and managed within the Department. The decision we arrived at, that we had no option but to withdraw the scheme, (we originally took that decision on 18 October, and announced on 24 October that it would wound up on 7 December) was a decision that was taken within the Department. Estelle Morris and I, with senior officials, having taken that decision then informed colleagues in other parts of Government, including the Treasury. That was the order that the communication took place. That was the locus of the decision-making.

  523. Minister, why is it that this Committee, some members of the Committee and certainly as Chairman of the Committee, hears time and time again that the Treasury always had a very close interest in this scheme? Whatever that role was, first of all we know it was, as I have said, the inspiration of the Chancellor of the Exchequer, and very good inspiration—many of us believe the ILAs are a very great flagship of the Government—and we know the Chancellor's concern and interest in this programme; but we also hear, from usually good sources, that even in terms of the lack of a quality element in the original planning of the scheme that came from the Treasury. We hear the Department of Education and Skills wanted a quality assurance built into the scheme, and it was the Treasury who said, "No, we want it open-ended and very accessible". Is that the case, or would you not know?
  (John Healey) In a sense, you have answered the first part of the question yourself, Chairman, in that the concept and policy was very much inspired by the Chancellor; and, therefore, he took a close interest in its development. I have to say, in terms of the policy, one of the strengths for me as the Minister now responsible for it has been the degree of support and commitment there is to it in Number 10 and Number 11 because that has been very clear throughout. In terms of the decisions that were taken about the design of the scheme and the way it was set up, there were widespread consultations and widespread discussions, as the Committee has heard, from a number of external stakeholders and organisations that were involved in that. There were discussions too within Government, but essentially this was an operational matter where it was the responsibility of the Department to make decisions, and that is the way it was conceived, determined and then introduced.

Mr Turner

  524. What were the aims of the scheme?
  (John Healey) I hope, Mr Turner, you will find the memorandum useful to refer to in this instance, because paragraphs 4, 5 and 6 in particular give pointers to the sort of aims and thinking that underpin decisions we took over the design and launch of the scheme. We were looking principally for a form of contribution to the costs of learning that would be seen and felt by individuals as theirs and, therefore , radically different from anything we had in the system before. We were looking for a scheme that was simple to access from the individual's point of view; relatively free of red tape from the point of view of providers and, therefore, flexible and capable of the sort of innovation we have seen across the board. We had in mind particularly this as a way of emphasising the importance of life-long learning; and, within that, as you may recall from the early years of the Labour Government post-1997, that concept of life-long learning laid great emphasis on certain groups that generally were left out of the learning system. Paragraph 6 of the memorandum indicates where, within what was a universal scheme, there were target groups that, through particular marketing, we were anxious to try and encourage to take up ILAs.

  525. With reference specifically to the target groups, how were those target groups translated into specific incentives, targets or performance indicators either for the Department, i.e. by ministers for officials, or by the Department for Capita?
  (John Healey) They were not translated into hard and fast targets. One of the characteristics of the scheme was that it was universal if you were over 19 in England and were not looking to take up HE-related education; and it was designed in a way that allowed considerable scope for learning providers that wanted to make use of the incentives to develop learning and offer it in ways that were non-standard and we would not have seen, for instance, through the Further Education scheme in the past. It offered scope for colleges as well; it offered scope for trade union learning representatives; and even offered scope for some groups of small firms to use in a very flexible way. I think it would have been a mistake at that stage to try and tie down with the sort of traditional targets and delivery systems we tend to see in other forms of learning programmes for the ILAs. The purpose was to be flexible; the purpose was to be innovative, and then to see what impact it had. In terms of the impact, I have reproduced in the memorandum under paragraph 34 some of the headline results of the evaluations of impact of ILAs. 91 per cent of ILA learning met or exceeded the expectations of the individuals taking it; 85 per cent said the ILA had increased the learning options open to them, that might not have been the case had we gone down the route you have suggested; more than half said they had little or no prior knowledge of the ILA subjects they took before they did the learning; one in six had no previous qualifications; and nearly one in four had not done any learning in the previous 12 months. Returning to the point in paragraph 6, these groups that we were keen to see emphasised and targeted, 27 per cent of the ILA users were in those groups, either returning to the labour market, non-teaching school staff, young people under 30 with no qualifications or self-employed.

  526. The only target we have been able to discover is the 1 million target. Were there any other numerical targets?
  (John Healey) That was our numerical target; that was our headline target; and that was our manifesto pledge.

  527. Were there any other targets in terms of quality of experience of the learners?
  (John Healey) There were not targets for that, but clearly those were areas we emphasised in the evaluation work we did in customer research; therefore, that is what has come out of the York Consulting Ltd Evaluation of ILAs and other studies done on the impact and take-up of Individual Learning Accounts.

  528. I was not suggesting any particular model; I was merely comparing what is here with other possible models. You have relied, you say, on marketing to achieve the target audiences, the target consumers, you are aiming for. Is it not inevitable that, if you place most of the marketing responsibility in the hands of the providers, they will go for the easier consumers, not the target consumers?
  (John Healey) There may be a temptation but the vast majority of learning providers who have been part of the scheme have set out to work within the spirit of the scheme as well as within the terms of the rules of the scheme, and have played a big part in bringing in just the sort of groups I have talked about. It is by no means inevitable that that should be the case. What clearly happened over the summer was that we started to get evidence of complaints about the sort of activities and learning providers that were very much after a quick buck, very much subverting the spirit and breaking the rules of the scheme, and they were the problem for us. They were the problem for the learning providers that were playing by the rules of the scheme and delivering good learning for individuals; and they were the problem for the 2.5 million ILA account holders because, in the end, that was the reason we had to withdraw the scheme as from 7 December.

  529. Can we distinguish between those who were subverting the rules of the scheme? I think at the moment you only owe money to 154 providers. Do you owe money not only to people who may have committed some fraud but also to people who, in your opinion, have not played by the spirit of the scheme?
  (John Healey) I will give you some figures which I think paint the full picture in a moment. To answer the question directly, we are withholding at the moment payments to providers where we have serious complaints about the activities they have undertaken. Some of those, if substantiated, would fall into the category of outright fraud—and I am thinking here, for instance, of claims from almost 5,900 individuals that money has been taken from their Individual Learning Account without their knowledge. Some will be complaints about activities that are essentially about misusing or abusing the scheme that may stop short of outright fraud. For instance, claiming ILA discounts without ensuring that they get a contribution from the individual concerned; mis-selling of ILA accounts; provision of training which hardly qualifies for the name. In that category of overall complaints we now would have perhaps between a quarter and one-third of the overall number of complaints that would fall into that category. Annex 1 to my memorandum is, I think, probably one of the clearest ways of demonstrating the situation that we were in. Members of the Committee will see here, Chairman, in the first column month by month the number of Individual Learning Accounts opened accelerated—particularly from July onwards. Members of the Committee will also see in a similar period the number of complaints received, both in total and as a percentage of the total number of ILA account holders, began to escalate as well. I am looking here at the third and fourth column from the left. Members will see the number of learning providers during that time, July, August and September, accelerating quite dramatically too, and then a stop where we stopped taking any fresh registrations. Of course, the impact on cumulative expenditure will also be clear, particularly for that July, August and September period. You had escalating ILA provision and activity; an increasing number of complaints, including an increasing number of serious complaints and concerns. That combination, as I have tried to explain to the Committee before, of an increasing number of concerns and more serious concerns about the activities of this minority of providers, plus an increasing volume of public money committed to the scheme. The combination of the two led us to the decision that, having made a number of moves over the summer to tighten up the scheme (and I have detailed those in my memorandum to you in paragraph 20) and clearly having not stamped out the practice and the problems we were left really with the only decision we could take, which was to withdraw the scheme.

Mr Shaw

  530. In reply to Mr Turner, Minister, you said you are withholding payments from those where the provision of training "hardly qualifies for the name". Could you tell us what you mean by that?
  (John Healey) An example I have come across, and members of the Committee might have come across, might be the promise of ICT training realised by a CD arriving in the post alone, sometimes to people who do not have a computer at home; but with a full discount drawn down up to the limit of 80 per cent at £200.

  531. That is a scam rather than fraud.
  (John Healey) Absolutely; precisely.

  532. Technically they are not doing anything wrong. That person has entered into an arrangement, "Here's your book; here's your CD", what is wrong with that within rules?
  (John Healey) Precisely the point I was making to Mr Turner—a distinction between misuse and abuse of the spirit and the rules of the scheme and outright fraud. There is an arguable case whether delivery like that breaks the trade descriptions, consumer protection legislation. That is an example where you have got practice from a learning provider that clearly does not meet the requirements, the rules and the spirit of the scheme. Members of the Committee have had a copy of the ILA Provider Agreement. If you look at that, it is only a one page document, you will see clearly that sort of so-called delivery of training contravenes the rules of the scheme and any value for money criterion we might want to apply to such a scheme.

  533. Are you not retrospectively introducing quality assurance? Are you confident that you can withhold this money? I agree with you, Minister, that is not what we want to see, what you have just described; but you are confident you can withhold that money irrespective of the fact there is no fraud, it is someone perhaps taking advantage of the fact there was not quality assurance in the first place?
  (John Healey) We are withholding payments for claims from 153 learning providers at present. We are doing that because we have got good grounds, we believe, for doing so. We believe we have a duty to do so, because the nature and the volume of complaints about these learning providers and the learning they have been providing is such that, if substantiated, does not warrant payment for the discounts that have been claimed. We are acting, we believe, on very strong and proper grounds for withholding payment.

Chairman

  534. Minister, one great criticism of this is actually when we look at this in an historic way—what happened to a flagship project of the Government - that it was a very good scheme, with quite a small percentage (and your Annex 1 still says 0.61) of complaints, reasonably small; active prosecutions do not seem to be that large a number; that many people out there may have lost their businesses; a very negative effect on the market for new providers; a lot of people disillusioned who were ILA account holders, or prospective ILA account holders; that criticism of the Government really, and your Department in particular, is that it could have been fixed, and could have been fixed rather than cancelled. Your own figures show it is quite a small percentage. When we talked to Capita one gets the feeling if Capita had been more on their mettle that this could have been fixed rather than cancelled. The damage that has now been done to the reputation of the ILA will take a long time to put right.
  (John Healey) Chairman, would that we were not in this position and would that we could have fixed it. Clearly paragraph 20 sets out the steps we took after I took over to try and tighten up the rules so that we could sustain the scheme.

  535. That was in July. They did not have time to bite—any of those.
  (John Healey) July, August and September.

  536. But in October you—
  (John Healey) 18 October we took the decision and announced it on 24 October. When you consider that we are currently withholding £13.7 million in payments claimed—I think that is a substantial amount of public money that we really have a duty to ensure is properly validated before we pay it. To allow the scheme to have run on (when we clearly had not been able to stamp out the sort of abuse that was going on) with escalating on the evidence of the number and seriousness of complaints, and the volume of business that some of these learning providers were transacting, then I think we would have failed in our duty. As a Minister I do not find these sessions easy, but I would find it even more difficult to come before the Committee and justify not having taken this decision.

  537. Minister, what we were saying, having heard from Peter Lauener, having heard from Capita and from a wide range of other witnesses what seemed eminently possible is that you could have frozen the ones you had doubts about, that you had complaints about, which is a very small percentage of providers, and let the good providers carry on doing the good work they were already doing. It seemed to us with the money you were paying Capita they should have been providing enough information for you to have frozen out the people that had a question mark over their reputation?
  (John Healey) Perhaps I must apologise. In terms of trying to explain the steps in paragraph 20 which we took, it included suspension of a large number, a significant number of providers—17 of whom are still suspended, and 17 of whom we are still withholding payments from. Others were suspended and then reinstated when we got the undertakings we required that they were then going to abide by the rules of the scheme. All I can say is, we took these steps, they were not sufficient to stamp out the sort of abuse and misuse that was going on. We were worried about the increasing volume and seriousness of complaints. We were worried about the amounts that were being dispersed from the public purse to some of these providers who were emerging as having these serious complaints against them. In those circumstances, we tightened up the scheme as far as we were able over the summer. We had not stopped the abuse and, therefore, really the only responsible decision, the only decision we could have taken, we took and that was to close down the scheme.
  (Mr Lauener) If I could just add one point, Chairman, our Special Investigations Unit (and I think the figures are in the memorandum) are following up 97 learning providers. Of these there are nine police forces already investigating 16 learning providers. Our Special Investigations Unit is discussing a further 54 with the police. I do not welcome it, but these are some of the largest numbers of investigations we have had to take forward with the police related to programmes that I can recall. I think that does illustrate the seriousness of the issues that arose from the programme. One final point, because we acted so quickly at the end of November, there is an amount of money withheld there. Had it been paid over to those providers, and if further investigations show that we were right to withhold that money, I am not at all confident if the money had gone to providers we would have then been able to get it back as easily as withholding it.

  Chairman: We will come back to that. What we are trying to get at is why they could not have been frozen out and let the rest carry on.

Ms Munn

  538. I would like to move on and talk a bit about the delivery model. We heard a couple of weeks ago from Capita about the intended involvement of learndirect at the outset. I wonder if you could tell us a bit more about what their intended contribution was when the scheme was originally conceived?
  (John Healey) Part of the discussions that went on before we finalised design of the scheme included a look at the potential for learndirect (which is, of course a brand name for the University for Industry, which itself was still relatively new) in providing two things: first of all, trying to mesh it with the ILA scheme to make sure that Individual Learning Account holders got information and advice about the sort of learning that might be available; and, second, which was a consolidation of that aspiration, was looking at the possibility of making sure that learndirect had a full database of all accredited ILA learning providers. In other words, any caller to learndirect could get access via learndirect to information about the ILA registered providers. In the event, we just were not able to pull those two systems together. When the scheme was launched it did not have that mesh that originally we explored. I think that is probably what Capita would have been referring to when they gave evidence.
  (Mr Lauener) Just to add one point to that, I think that is more about ensuring compatibility of registration between the ILA scheme and the learndirect scheme, so that the systems could speak to each other, and people could get information through either system. I do not think that is so much about quality assurance. There is always a slight danger of confusing quality assurance arrangements with registration arrangements.

  539. I want to explore that. The Minister just used two different terms, accredited ILA providers and registered providers. You are probably aware that a lot of our discussion has focussed around the quality assurance of providers, and probably a fair amount of criticism about the fact that it was only for the ILA scheme; it was only a one-page form that people had to fill in; and, from what we have been given to understand, there was relatively little (none at all) quality assurance from that. Those providers registered with learndirect, were they subjected to any quality assurance?
  (John Healey) If I referred to them as "accredited ILA providers" then that was a slip of the tongue, because we have been over this territory before together in the Committee. The registration process, as you rightly point out, was essentially an administrative system requiring name, address, bank account details, provision of public liability insurance and a health and safety certificate.


 
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