Select Committee on Education and Skills Minutes of Evidence

Memorandum from the Learning and Skills Council (ILA 31)



  1.  This memorandum splits into three sections:

  a.  ("the history") outlines briefly the involvement of LSC's predecessor bodies (notably Training and Enterprise Councils and the Further Education Funding Council) with pilot ILA schemes in the period 1998-2000 before the national scheme superseded them.

  b.  ("the present") notes actions which LSC has taken since suspension and withdrawal of the national scheme.

  c.  ("the future") outlines why LSC supports the principles and concepts of learning accounts, in particular to support demand by individuals and employers for effective workforce development. This section sets out some criteria which might underpin future national arrangements for learning accounts.


  2.  The 1997 Labour manifesto committed the new Government to establish one million Individual Learning Accounts (ILAs), to drive up demand for lifelong learning through a subsidy towards learning and training costs, triggered by a contribution from the individual. In the period 1998-2000 the Training and Enterprise Councils (TECs), and in 2000 the Further Education Funding Council (FEFC), the two main predecessor systems of the Learning and Skills Council (LSC), were actively involved. In September 2000 the Government decided to institute a national scheme, the tender for which was won by Capita, and the TEC and FEFC pilots were wound down. It is worth noting the key points of these pilots.


  3.  The 1997 manifesto commitment, confirmed in the Government's Green Paper "The Learning Age" in 1998, led to an invitation to TECs to bid for development funding to run projects to develop learning accounts at local level. From 1998 to 2000 over 200,000 TEC-based learning accounts were opened locally through participating TECs and benefited from the initial discounts. Once the new national scheme was instituted, unspent balances in individuals' accounts held with TECs were transferred into the Capita-based scheme.

  4.  13 pilot projects were run by TECs between 1998 and 2000. They used a variety of models, from actual financial accounts with banks and credit unions, to TEC-run virtual accounts involving voucher-type systems. Some of this work had begun prior to 1998, funded through other budgets and TEC reserves. The pilots focused on working with different partners and groups to engage new learners. Three are worth highlighting:

    —  "Gloucestershire TEC: a partnership with HSBC, using a re-branded savings account. Account holders saved by regular standing order, typically from their current account, and the contribution was matched by the TEC (paid to the learning provider rather than into the bank account) up to a ceiling of, 150 (ie enabling a total expenditure of £300 at 50 per cent). Although the learning was not limited to TEC-approved providers, no problems with quality assurance were encountered. The account remained live after the discount ceiling was reached, encouraging the learner to continue saving through the standing order. The accounts were promoted as a package of benefits for account holders, offering discounts both on courses, and on peripherals eg books purchased through local retail outlets. The Bank reported a steady growth in learners opening and maintaining accounts, so that in total 6,000 accounts were open and regularly topped up by learner contributions by the time the TEC ceased supporting the scheme in September 2000. Some of these accounts remain active.

    —  Hereford and Worcester TEC—a credit union model, working with local credit unions and community groups; also adopted in NW London. Borrowing, saving and immediate purchase of learning were all permitted. There was involvement of trades union and others. This model was particularly successful in promoting community regeneration and combating social exclusion.

    —  Birmingham Learning Exchange (Birmingham and Solihull TEC): this model was an active partnership between the TEC, local colleges, local authority, careers service, university and Chamber of Commerce, all of whom committed core funding; the TEC added from its balances up to £150 per pilot account holder. Accounts could be held collectively rather than individually, allowing larger or smaller sums than £150 to be committed, via loans or cash. Learning supported included fee subsidies for professional training, interest-free loans for people lacking Level 2 qualifications, and much else. The scheme was managed by the TEC, but accounts were held with HSBC Bank which provided professional advice on a pro bono basis. A feature of the scheme was the active involvement of employer development managers, trades unions, clubs, police, health and other community groups. The scheme was able to cater for sectoral and occupational needs (developing specific provision for childcare and other training), and for local needs. The Birmingham Learning Exchange wound up in February 2000—the last of all the pre-Capita pilots—and was handed over with all resources to the local colleges to form the local UfI/Learndirect hub. Some 8,500 learners had benefited from its work.

  5.  There is useful experience available from these pilots, most of which has transferred into LSC (often in the same locations). In LSC's view, this experience should inform any "mark 2" version of a national framework.


  6.  In November 1999 DfEE asked FEFC to set aside some of its funding for 1999-2000 to implement two sets of ILA pilots:

    —  the "Pathfinder ILA" initiative: 30 projects, mainly led by a Local Learning Partnership in conjunction with at least one FEFC college, attracted in total 1,900 individuals who opened ILAs. This was a disappointing result against the original target of over 9,000 ILAs and it underspent its allocation, but useful lessons were learned for the design of future systems.

    —  the "fee discount ILA" initiative: this provided discounts of 80 per cent of fees for Level 1 and 2 Information and communications technology (ICT) qualifications, and 100% discount on entry level qualifications, but only between April and August 2000. The scheme was targeted towards low-income learners not able to claim fee remission or discounts under other headings. From August 2000 no further funds could be claimed, but learners could migrate to the Government Capita-based scheme. The discounts were taken up by 23,181 learners at a cost of just under £1 million (£41 per head). Not all these were "new" or "additional" learners, since many might have undertaken similar courses, taking up other discounts where available. The courses were eligible for FEFC funding of some £170 per learner, and hence the total public cost of the learning would have been around £4 million.

  7.  Evaluation reports about both these schemes were published by the Further Education Funding Council in February 2001 and can be made available.


  8.  These two FEFC reports, and the available evaluations of the TEC-based pilots, make interesting reading. Overall they suggest that fee discounts can be a significant incentive to draw in additional learners. However they also suggest that any such incentives need to be well integrated into a coherent national policy on fees, discounts and qualifications. For example:

    —  The FEFC ILA discount scheme, although targeted at people on the lowest incomes, did not attract learners from the most deprived areas—probably because, under other widening participation schemes, learners in such areas could access similar courses which were already free or heavily discounted.

    —  Overall, fees make up only a small proportion of colleges' income and they are free to cross-subsidise. Hence ILA fee discounts, spent in the publicly-subsidised sector, were discounts on already discounted fees. The learner would not have been aware of the total cost of the learning (which in the example above was at least four times the "undiscounted" fee), nor therefore of the value of the total discount (ILA plus existing subsidy) on offer.

    —  These two effects probably reduced the impact of the ILA pilots run by the predecessor bodies, and of the national scheme which succeeded them.

  9.  It is worth repeating that these pilots were successful. They benefited up to quarter of a million learners, at low unit cost. The "virtual accounts" used existing TEC or FEFC administrative, audit and accounting arrangements; the "real accounts" involved banks, and were successful. No evidence of fraud or mis-selling was reported. In most pilots the training providers were already covered by the dual quality assurance processes of publicly-funded FE (external inspection of providers, and assessment by the qualifications awarding body). Clearly not all the learners were "additional", but colleges reported that many were, and of these, many were encouraged by the accounts to go on to other courses. Although they ran for only one term, the FEFC schemes generated new ICT capacity in colleges, which was largely maintained. This fed into the 2001 "Bite-Sized Learning" campaign, which LSC proposes to run again.

  10.  Against this, it is fair to say that the pilots suffered from being specific to a TEC area. An ILA holder moving between TEC areas could not easily carry across any unspent balance. The national system had the merit of being universal.

  11.  A final point concerns qualifications and modules. Most though not all the pre-2000 pilots were targeted at whole qualifications, or defined steps towards one. £150 (up to £200 for ICT) was too little to draw many new learners onto long courses, but it was seen as a good discount on taster courses. Given the very short time scales, learners wanted short courses offering rapid progress. Some learners would have found any form of end-assessment daunting; but others welcomed a final certificate signalling steps achieved towards a larger qualification. Similar views were expressed by learners in the "Bite-Sized" programme mentioned above.

  12.  This suggests that LSC could link a re-introduced ILA framework to a more systematic approach to modularisation of vocational qualifications. Unlike FEFC, LSC is not bound by a fixed statutory list of approved qualifications for adults. In its Corporate Plan[1] LSC has committed itself to "track individuals' progress below the threshold of a full qualification" (page 9), and to "take a close interest in learning not leading to formal qualifications"—yet also to "continue to place a premium on transferable qualifications, which guarantee consistency and (in the case of vocational qualifications) meet employer-defined occupational standards". LSC needs to engage new learners on the first stage of a journey which can, and increasingly will, lead to a full transferable qualification, but not necessarily all in one episode. ILAs can help provide the incentive for that first episode, which will have a clearer value as a module of a larger qualification.


  13.  On 24 October 2001 following Government suspension of the national scheme LSC issued a statement. The key points were:

    —  LSC supported the Government's action in suspending access to ILAs by new learners in the light of evidence of mis-selling;

    —  LSC reaffirmed support for the principle of ILAs which had successfully attracted many new learners;

    —  LSC locally and nationally, and our funded providers, would ensure that existing ILA account holders were able to complete successfully the programmes of learning they had signed up for.

    —  LSC "remains passionate about extending lifelong learning opportunities. The suspension of this particular incentive does not change that in any way. LSC brings together substantial budgets for post-16 learning, and can use them creatively to extend access to learning. We are confident of getting much higher participation and achievement, towards achievement of our ambitious targets for 2004 and 2010".

  14.  During the ensuing weeks, and particularly on the withdrawal of the scheme with immediate effect from 23 November rather than 7 December as previously scheduled, local and national LSCs handled a large number of calls from learners and providers. While many could simply be referred to the national helpline, others came from providers anxious to secure alternative funding for provision which had been mainly funded by ILAs. Inevitably, our focus has been on the 2,000 or so LSC-approved training providers—rather than the approximately 8,000 training providers registered with Capita, of whom most are not on LSC lists. It is worth noting that, to our knowledge, no LSC-approved provider is involved in current investigations into misuse of ILAs.

  15.  In early December LSC national office asked all local LSCs to review known provision in that category, and to consider whether other locally-available funding could substitute for access to ILA discounts. We had in mind that local LSCs might be able to steer providers towards public funding programmes such as the European Social Fund, Single Regeneration Budget, or other central or local government programmes (eg Employment Service/New Deal); or toward sectorally or employer-funded programmes; or to use available resources from within their own Local Initiative Fund budgets. About 25 per cent of LLSCs responded and most had not encountered serious problems in sustaining provision managed by LSC-approved providers. There may however be issues with private providers who built up businesses largely dependent on ILA funding.

  16.  To sum up: LSC has done its best to help with the transitional problems, and to preserve the interests of ILA holders and ILA training providers. We do not see the problems as insuperable. While our particular focus is on LSC-approved training providers, we are open to applications from new providers able to meet our quality thresholds.


  17.  LSC supports the concept of learning accounts to expand demand for learning by adults and employers. We agree with the Cabinet Office's Performance and Innovation Unit[2] (PIU) that individual learning accounts (and their sisters, company learning accounts) could help to deliver a more demand-led system of funding adult skills for employability and competitiveness, in other words for workforce development.

  18.  The withdrawal of the national ILA scheme offers an opportunity to reconsider options—and ideally, to improve on that scheme, rather than merely replicate it with fewer risks. We are at a very early stage in developing our own policies on learning accounts and funding, but we offer below initial thoughts on criteria which might underpin future national arrangements.

    a.  There should be a coherent national framework, but this does not require a single national offer of subsidy. We recognise why the national scheme adopted a simple universal model of a capped subsidy, but learning accounts might be developed further to become a flexible mechanism for financing learning, available to all but in some cases entirely unsubsidised. Any subsidies could be targeted mainly towards the hardest to reach—meaning people starting from the lowest level of learning, rather than the poorest. Since this is a sophisticated judgement, some local discretion would not be incompatible with a national framework.

    b.  Again recognising the difficulties of achieving it, ideally a learning account should be dynamic. While capable of funding a single episode of learning, it should also encourage further investment for learning (by individuals, employers, and the community) over a sustained period. Contributions might be held either as cash or as "learning miles", a concept which has proved to have greater longevity than at first expected—and avoids some of the risks of cash transactions.

    c.  Learning accounts should integrate into wider strategies to implement the PIU report's proposals for a demand-led funding system for adult skills, and for greater employer engagement in workforce development. Funding for ILAs of over £270 million cannot be seen in isolation from the main budget for adult further education held by LSC (£2 billion), which effectively targets similar groups and provides a similar benefit, namely subsidised learning. Hence learning accounts will work best within a coherent national FE fees policy. The radical option would be to move over time to a norm of near full-cost fees, discounted to draw in targeted groups—rather than the current norm of heavily subsidised fees for all learners, where an ILA offers only a small further discount. Such an approach would help to level the playing-field between public and private providers, and incidentally make it less likely that ILA holders would take up poor-quality provision in any sector merely because of the discount. However LSC has not taken any decision to implement such a policy and would only do so with Ministers' support.

    d.  There should be a link between the extent of subsidy and the quality assurance and audit regimes put in place. Any system funded mainly with public money will need closer protection than one where the individual is funding a substantial proportion. In any learning account regime managed by LSC we would expect to require training providers to meet our normal quality assurance threshold and to be subject to external inspection. By contrast a lighter touch, consonant with encouraging a healthy and innovative training market, might be appropriate for training funded by learning accounts with a low or zero public subsidy.

    e.  Alongside quality assurance and audit, a pre-requisite of an effective scheme of learning accounts is to improve information, advice and guidance (IAG) to potential learners. LSC is actively considering what steps it can take, with IAG partnerships, Connexions and employers, to improve what is on offer.

    f.  Learning accounts should help individuals pursue learning for personal and social development, and also to gain productive skills for employability, progression and workforce development. These objectives will be pursued within the LSC workforce development strategy now being developed.


  19.  LSC recognises the case for a simple national scheme of virtual accounts administered by a single institution, to channel Government discounts to providers. However an alternative model—which could be developed alongside it—would enable some individuals, particularly those supported by their employer, to save into a financial account, as in the Gloucestershire TEC pilot and some international models. The account balance would be drawn down to deliver agreed learning. The account could be held by a single individual, or pooled by the employer (as in the Centre for Enterprise model) or a community partnership (the Birmingham model), and drawn down by mutual agreement. Accounts of this kind could attract tax concessions; and additional subsidies could be targeted towards specific groups, eg those with low learning achievement.

  20.  While in theory public agencies (such as local LSCs) could hold such accounts, the natural home would be those financial institutions which hold individuals' and employers' other financial assets and liabilities—namely banks and building societies. The Government tried in 1997-2000 to engage them in the national scheme, but at the time they were unwilling. LSC considers it worth exploring again whether banks and building societies might show interest in a new programme of learning accounts. We think the key to engaging banks' interest would be to show how learning accounts could develop beyond the transaction of one-off vouchers or cash payments to providers, and engage with the wider financial affairs of their customers (individuals, employers and the wider community).


  21.  In the LSC view, there is critical value in the ILA "brand". We judge that this has been damaged by recent events but remains strong with the UK public and with learners. It can be successfully re-built, so long as any new arrangements are well prepared and fully effective from the outset. On the substance, we hope that some at least of the principles set out above can be incorporated. On timing, there could be advantages in introducing new arrangements at the start of a financial year (April).

  22.  On the relationship between learning accounts and wider workforce development policies, the next event on the horizon is the preparation of the draft LSC Workforce Development strategy. This will address all the main proposals of the PIU report, including funding issues.

  23.  Under transitional arrangements, responsibility for ILAs is planned to transfer in due course from DfES to LSC. No timetable for this transfer has been set; it was always agreed that the date would be no earlier than April 2003. Any decision to transfer responsibility at a particular date would be a matter for Ministers.

  24.  Meanwhile LSC will continue to work closely with the Department and to feed in our thoughts on how a successor learning account regime might best be shaped and managed. LSC is drawing together information from a range of sources about which models of learning account are working best. There is a growing body of international as well as local experience, in particular the OECD evaluation framework for co-financing learning, and the Council is currently playing a leading part in this programme of work.

Learning and Skills Council

5 February 2002

1   LSC: Strategic Framework to 2004 (July 2001). Back

2   Cabinet Office (PIU) report: In Demand-Adult Skills in the 21st Century (December 2001)-Executive Summary, paragraph 19. Back

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