WEDNESDAY 28 NOVEMBER 2001

__________

Members present:

Mr Barry Sheerman, in the Chair
Mr John Baron
Mr David Chaytor
Valerie Davey
Jeff Ennis
Paul Holmes
Mr Kerry Pollard
Mr Jonathan R Shaw
Mr Andrew Turner

__________

JOHN HEALEY, a Member of the House, Parliamentary Under Secretary of State for Adult Skills, examined.

Chairman

  1. Minister, may I welcome you to our session. You are the fifth of six ministers coming before the Committee, so you are coming in as tail end batter as it were.
  2. (John Healey) You are working your way down them.

  3. We are very much looking forward to this session. You will know the purpose of these sessions is really to get to know ministers as close as we can to the start of the Parliament, to get the relationship with the Department on a new basis, so we rather thought, given the Government is quite keen on baseline assessments and performance reviews for teachers and other education staff, it was the responsibility of this Committee to do something in parallel with the ministerial team. I think the word is coming back that ministers seem to enjoy it, in a fashion, and we certainly do, and we are learning a lot. The way we approach this is we invite you as the minister to open the batting with a short statement.
  4. (John Healey) Chairman, thank you very much. I must say it is good to be with the Committee again, albeit on the other side of the table from before. By way of opening, if I may, and I appreciate the invitation to join the Committee, can I say in a sense the challenge for me was defined by one of our colleagues a few days after I was appointed. It was in the tea room and one of our colleagues came up to me and said, "John, I hear you've got a job", I said, "Yes, I am very lucky". "What is it?", he said, and I said, "It is adult skills", and he said, "That's very interesting" in a way which was entirely devoid of conviction and with an expression on his face such that he was desperate to find somebody else to talk to. So I think my principal job as Minister for Adult Skills is, if I cannot convince people to see adult skills as interesting, I have to get them to see it as important. By way of introduction, perhaps I can say a few things about how I approach the job rather than run through my particular areas of responsibility and, if you like, the general perspective I try to bring to every policy area. The first starting point for me is, if adult skills is simply seen as an education issue of concern to the Department for Education and Skills, we will fail to have the impact, we will fail to have the importance, we need attached to this policy area. Skills, for me, is also a productivity issue, it is also an employability issue, a business competitiveness issue, an economic regeneration issue, and it is also a social exclusion issue. You can begin to see, Chairman, in some of the policy decisions and developments I have taken in the first five months, some of those hallmarks, so the proposals which were launched in October for the reform of the Sector Skills network, the new Sector Skills Centres, very much bear that stamp. The Performance and Innovation Unit's report to the Prime Minister, which was published yesterday, for which I am sponsoring minister, very much makes those links as well. Indeed the eight pages of the Pre-Budget Report which was published yesterday dealing with skills, located it firmly in the chapter about meeting the productivity challenge. So that is the first thing. The second thing is this, in the DfES we have a very tight ministerial team, a very clear focused team, I think a consolidation in fact from the previous days of the Department for Education and Employment, and helpfully so. Within the Department we are very conscious of strengthening the links between the different parts of the education system, very conscious of the way that activities in one part of the system can reinforce what we are trying to do in others, and smooth the way for learners if we are successful. So at one end of the spectrum, the commitment to Sure Start is a way of giving kids from the poorest areas and the poorest families a proper start when they get to primary, at the other end, the contribution to further education as a way of achieving our ambitions for higher education is absolutely essential, and in the middle, at the heart of it, particularly in relation to my areas of responsibility, the proposals we are developing for the reform of the 14 to 19 curriculum will give a reinforced value to vocational learning, more opportunities for learners to move through the system. But beyond the Department, and this is my second point, part of my job is also to clear the ground for other departments. I have one of the most junior jobs in Government but I believe the case for skills is so strong that I do not expect this to stop me from being able to carry arguments with other ministerial colleagues, and I do not expect it to stop me forging very good working links with other colleagues in other departments. So, for instance, the successor to the New Deal Taskforce, the National Employment Panel, has set up for the first time a sub-group reporting to me which deals with skills. The union learning representatives will be given a statutory underpinning as part of the DTI's Employment Bill, which had its Second Reading in the House yesterday. Adult basic skills is an area where joint work is not just an advantage, it is essential. Adult basic skills was the number one of 25 pledges we made in the manifesto in June, it is and will remain my number one priority as a minister. I have responsibility for meeting that target but restricted control over being able to do so, because delivering that will depend on what the new Job Centre Plus does, the Prison Service does, the Army does, the NHS does. So working links in that area are very important for my brief. Third, if it is the case, Chairman, that skills do impact on productivity, do have a crucial influence on employability, it seems to me the needs and demands of individuals and particularly employers must drive and define provision much more powerfully than they have in the past. This is a case, for instance, made very clearly in the PIU Report. It underpins our policy initiative on Centres of Vocational Excellence in further education; it underpins the proposals and the attention we are giving to reforming occupational standards and qualifications; it informed the Individual Learning Accounts policy if not the system of delivering it, and it informed also the Learn Direct, bite-size learning, to try to tempt people into continuing learning ICT skills. Fourth and finally, I have a two-fold concern, first for the quality of learning and secondly for equity of access. I try to make those two things the touchstone of everything I do in every policy area, whether it is ICT, workforce development, adult basic skills or indeed further education. If I may end this short opening statement, Chairman, just by mentioning the Individual Learning Accounts. I am the minister who is now responsible for Individual Learning Accounts. As members of the Committee will know and recall, we took the decision and announced the decision to withdraw the scheme in England on 24 October. A difficult decision but one we had to take in the interest of individual learners who were putting money into the ILA system, and also to protect the proper use of public funds. On Wednesday last week the Department received new information about serious and sustained allegations of fraud and theft. On Thursday last week our special investigations unit confirmed the strength of those allegations. On Friday, 23 November, Estelle Morris and I were informed during the afternoon, we had a video conference meeting, we called in the police, we closed the programme with immediate effect from 6.30 on Friday evening and we confirmed that in a press notice at about 6 o'clock that evening. I had written to all MPs when we decided to withdraw the ILA programme at the end of October because with 2.5 million ILA account holders there is obviously a very strong constituency interest for us all, so yesterday I wrote again to explain the latest move. The investigations are being conducted by the Durham Police, working very closely with our own special investigations unit, and with Capita, the company running the ILA processing centre, and with the national police high-tech crime unit. Chairman, I hope you will understand I cannot give you any further details about the investigations without risking compromising the conduct of those investigations. I did want the Committee, however, to know the latest position and I hope members will find that useful.

  5. Minister, we have the ability to go into private session in this Committee but we do not intend to do that because in our pre-public session we decided we would press you on a range of questions about ILAs but with no specific reference which could be of any embarrassment, so my intention would not be to go into private session. It is more general issues, non-specific issues, we will be probing. Of course, the Committee remembers this very well because it was the first session of these sessions when the Secretary of State came here and came a little late because of problems with the ILAs. Thank you for that introduction, and we want to get started. Minister, I think you have children?
  6. (John Healey) I do have one, aged 61/2 , a little lad called Alex.

  7. You come from a very privileged educational background at Cambridge University and so on. One of the things I was going to probe is, does that give you cause for such self-satisfaction you are not doing any continuous learning yourself? Are you training to do anything else in your professional life at the moment, or is that it?
  8. (John Healey) I am continuously learning. I am not training towards any sort of qualification but I am only five months into the job so you would expect me to be learning as I go along, largely making it up as I go along! I am not pursuing formal learning towards any formal qualification. I would like to, I do not have the time at present. I used to be an Open University Business School tutor, part time, so I know the value that some of that type of learning can bring to people in their everyday work if they can find the time and the capacity to do so.

    Chairman: I remember the Prime Minister confessed to the nation that he had very poor IT skills and declared he was going to learn. I do not know if you are keeping an eye on him and whether he has passed the European computer driver's licence or any other qualification but it might be a good example to us all if you could check on that and perhaps look at some of your colleagues in this Parliament in terms of the levels of skills.

    Mr Pollard: Individual ILAs might be appropriate, Chairman.

    Chairman

  9. Absolutely.
  10. (John Healey) Perhaps I can take that as a representation for the redesign work we are doing on the ILA policy.

  11. You take the point about leading by example, and in your particular role it might be something you could consider. However, let us press on. Your ministerial responsibilities are pretty sharp but where do you overlap with the Minister for Higher Education and with the Parliamentary Under-Secretary who met us last week? There are elements of your job which overlap, how do you handle those and what are they?
  12. (John Healey) The principal areas of overlap with the Minister of State really rest within the further education field and the Learning and Skills Councils. Much of the work in this field we conduct together. I tend to lead in the Commons on issues which relate to further education and Margaret in the Commons tends to lead on issues relating to higher education. With the Parliamentary Under-Secretary, Ivan Lewis, he has clear areas of the education system which I have a strong policy interest in and so does he, and they tend to be in the 16 to 19 age, including provisions such as modern apprenticeships, which she leads on and I am interested in, further education, sixth form colleges which we both have an interest in, and then there is also an overlap with Baroness Ashton where jointly we do much of the work on the Department's information communications technology strategy.

  13. I now want to clear the way, if you like, by looking at some of the issues surrounding the Individual Learning Accounts. It was with a certain surprise when I looked at the Cabinet Office Report, In Demand: Adult Skills in the 21st century, and turned to paragraph 19 where it says, "There are a number of different mechanisms which could be effective at increasing individual's demand; for example, placing more purchasing power in the hands of individuals. One option would be a form of individual learning account." In light of that, can you explain to us really the story of the suspension? When the Secretary of State came to this Committee, she said it was being suspended or frozen, you have used very different language and the language has changed over the weeks. It was being frozen, suspended, now it is at an end. There were two elements mentioned. The main one was over-subscription, too much demand and someone had said, "Hey, we must control this level of expenditure." You were PPS to the Chancellor of the Exchequer - and maybe it is of some concern to this Committee there are now so many former Treasury people in the Department for Education and Skills, that may be a comfort or a worry, I do not know - so you will know exactly how the system works in that regard. Was it the Treasury saying, "Hey, this is getting out of hand"? As time went on, there was more suggestion it was really a fraud element. Which was it?
  14. (John Healey) It was not the Treasury saying the spending was getting out of hand, it was a decision that Estelle Morris and I took within the DfES and informed colleagues within Government, including the Treasury, and it was not a budgetary pressure. It was first and foremost a concern about the misuse of the ILA system and the danger at one end of that of a degree of fraud. So therefore it was a move first of all to protect the interests of individuals who were also investing some of their own money in the ILA support for learning, and it was principally to protect the proper use of public funds.

  15. Minister, I am sorry, but if you look at the transcript of the words given to us by the Secretary of State, this Committee - certainly I and members of the Committee - got the very strong message from her that it was about demand, not the fraud. The fraud element came much later as the situation unravelled.
  16. (John Healey) It is true that this was a scheme which was more successful than any of us anticipated. We had a target to try and get 1 million ILA accounts open by March next year, and we hit that a year early. By the end of October there were 2.5 million ILA account holders, so it had exceeded its capacity and exceeded our expectations. The problem, however, was this, that from this summer onwards we started to get an increasing number of complaints, and our concerns about the operation of a small minority of learning providers registered under the scheme became heightened. We took a number of steps from July onwards to try and tighten up the operation of the scheme and the rules by which the learning providers had to operate. We were not able to do that sufficiently to stamp out what we saw as the problem of misuse. There were increasing volumes of business and therefore payments from the public purse as well, but our principal concern was that we did not have within the system the capacity to stamp out what was increasing evidence of misuse by a small minority of providers. That was the reason we took the step to withdraw the scheme as of 7 December. I think if you check the public statements, if you check the letter I wrote to Members of Parliament, there was no doubt about it, we were withdrawing the scheme as of 7 December.

  17. Minister, does that mean from what you have just said, once you have sorted out what you believe is the misuse or fraud, the scheme will come back on stream?
  18. (John Healey) What it means is that there has been a lot which is important and innovative about the Individual Learning Accounts, they have unleashed a huge appetite for learning, which is evidenced by both the number of accounts opened and the way in which they have been used. They have stimulated adult learning, including amongst those with no qualifications (16 per cent of those who have used ILAs have no qualifications at all) and they have encouraged people to learn (50 per cent of the people who have used ILAs say they would not have been able to pay for their training if it had not been for the ILA), so in policy terms the ILA has been a way of stimulating individual interest and investment in learning and also stimulating business and provision from learning providers. That is the reason why you see in the PIU Report the confirmation that here is a mechanism which really has proved in policy terms to be very successful. We had to withdraw the scheme, we made that decision for England. Northern Ireland decided to take the same steps as us, in Scotland they have continued the scheme and in Wales they have continued the scheme as well beyond that end of October decision we made. Our commitment, because this has been important and it has been innovative, is to reintroduce an ILA-style scheme. We need to redesign it in order to learn the lessons of what has been flawed in the way it has been delivered but also build on what is clearly great potential in this concept. So the commitment to reintroducing a successor scheme is there and that may have led the Committee and others to a position where there was a degree of confusion about whether this was a suspension of the current scheme or whether it was a withdrawal with a commitment that we wanted to reintroduce something that was an ILA-style scheme subsequently when we have been able to do that work.

  19. What is the ETA of the replacement scheme?
  20. (John Healey) Frankly, it is too early to be able to tell at the moment. We have started work on the policy design and some of the discussions with, I have to say, a very wide range of organisations who want to see a successor to the ILA programme, but you will understand, particularly in the light of the most recent developments, following that 24 October announcement, much of the attention I have given and the officials have given has been to deal with the managed planned closure of the programme and then of course this more serious problem which arose at the end of last week which meant we had to close down this scheme with immediate effect, in effect two weeks earlier than previously announced or planned.

    Mr Pollard

  21. Minister, in my constituency we have a critical shortage of skills, particularly IT skills, and one of the trainers in my constituency, Pitmans, were providing much useful and necessary training using the ILAs which were very, very popular. They are bitter now that has been stopped and it will certainly affect our local economy very quickly and will have a knock-on effect. They believe the form itself, one page, was far too simple. We are all for simplicity but they have suggested going through established providers rather than registered providers might be a way forward. Can you comment on that?
  22. (John Healey) I am aware of the concerns Pitmans have, they are a franchise group of companies with outlets right across the country. I am also aware they have taken a close interest in Individual Learning Accounts from the start and have made great use of them. They have been a very valuable source for their business, clearly, and the franchisees they have got. Clearly, one of the policy developments we are looking very hard at is whether or not the requirements for registration for learning providers to qualify as an Individual Learning Account learning provider should be different. In Scotland, for instance, they approached it differently from England. They did not set up all the bureaucracy and administration which would have been involved in having an ILA register of providers, what they did was to use the Scottish University for Industries' list and accreditation process for learning providers, and they chose to operate their system slightly differently in that way. Clearly that is something which bears much closer examination as a possible way we could redesign such a scheme in the future.

    Mr Turner

  23. I think, Minister, there are two points which I would like to address on this. One is the smokescreen and was that what it was intended to be. You said a moment ago that it was not budgetary pressure, your principal concern was evidence of misuse, and I take it you are referring there to the decisions around 24 October. Yet the press release said the programme had to be suspended as it, "... exceeded the Government's expectations in encouraging very large numbers of people to take a new interest in learning, and has quickly expanded beyond its capacity. The Government is also concerned by evidence that some ILAs have been exploited by companies providing poor value for money. To tackle these concerns, the Government has decided to suspend its .... programme." If you told us that was a smokescreen so the crooks did not know they had been sussed, I might be prepared to believe you, but that is not what you said.
  24. (John Healey) It is very clear, Mr Turner, there are two elements to the decision. I have already explained those. The principal concern was the number of complaints about evidence of misselling, aggressive marketing, breach of the rules of the ILA scheme, poor quality learning and poor value for money, plus a small element of alleged fraud. We tried a number of moves to tighten up this scheme within the terms in which it was set up, and they included ending the 150 introductory offer at the end of July, new information for ILA account holders, a new learning provider agreement that we introduced over the summer which led to dropping 700 learning providers from our register, stopping the acceptance of new learning provider registrations in September, and stopping also the use of application forms from providers in September as well. That helped to control the situation, but it simply did not stop what we were concerned about, which was principally the evidence of misuse, improper abuse of the ILA system and, from that, associated with the activities of that small minority of learning providers, high volumes of public money were being paid out to those learning providers. So of course there was that dual element but it was in that order, and those dual concerns led us to that decision to withdraw the scheme as of 7 December. In terms of the support for the concept of the scheme itself and a wish to see this scheme succeed, I have to tell you beyond the DfES there was no greater supporter in Government than the Chancellor of the Exchequer and the Treasury.

  25. Clearly the scheme, this sort of voucher scheme, was a success. I am just wondering why it was the Secretary of State when she came before us, and whoever approved this press release, managed to put these two elements in exactly the reverse order to the ones you have just said are important. My other question is about the damage to private confidence both among providers and among users of the scheme. Obviously you had to take urgent action once you were aware of the details, but what I find difficult to understand is why you were not able at the same time to develop a replacement scheme, why you only now appear to have got to the stage of redesign. Pitmans told us, "I take no pleasure in saying that Pitman Training Group warned officials of these failings even before the launch of the initiative". That was in their letter to the Committee. That authoritative newspaper, the News of the World ran a story on 6 May 2001, the Mirror exposed it on 13 July, and there were continuous stories after that. Obviously you have to investigate whether these allegations are true, but the damage which has been done to the private providers and to the customers stems from your not having taken action to replace the scheme sufficiently quickly. So there are people, frankly, with money invested and no return and they are going to go bust.
  26. (John Healey) First of all, I welcome the acknowledgement from Mr Turner of the success of the scheme. Secondly, in the run-up to the national launch in September last year, we had a great number of conversations and in fact we had several workshops for training providers from the private sector and others to contribute to the sort of thinking involved in this. It is perfectly true that Mr James O'Brien from Pitmans wrote to us before the scheme was launched and he raised a number of points, including contesting that the cap we wanted to put on the limit for the 80 per cent ICT discount was set too low at 200 and should be 5,000. That was advice we had and that was advice we rejected as it happens. I think it is easy, Chairman, to be wise after the event. There have been one or two newspaper articles. The News of the World has done a particularly good job in exposing some of the small number of providers who have been misusing the scheme over the last few months. I have to say there was not widespread evidence of complaints or problems, there was not a widespread perception that there were difficulties. In fact since the election, before the announcement of the withdrawal of the scheme, there was only one Parliamentary Question about Individual Learning Accounts from members of the Conservative Party and that asked about the number of ILA accounts which had been opened. In terms of providers and the damage to their business, I recognise this is putting some of the business plans of some learning providers under a lot of pressure, but I have to say the decisions those learning providers took to use the ILAs as part of their business planning and their revenue streams was a decision entirely for them. Our principal concern has to be, first, for the public purse and, secondly, our responsibilities to the individual learning providers, and it is to them we owe the first duty. We are not a party to the business decisions any individual learning provider might make based on the ILA scheme. In terms of redesigning the scheme, the other point Mr Turner made, I think it is important to appreciate just how complex and large the operation of this scheme is and to appreciate the number of changes I outlined in the space of a few months since July we made to the operation of the scheme whilst it was running. If it had been possible to redesign it as it was running in a way which would have allowed us to introduce the sort of robust controls we found we needed to deal with this small minority of rogue providers, then we would have done so. It was not possible. That led us to what was a very difficult decision, fully conscious of the consequences there were for individual learners and the learning providers, that we had in England to take the step of withdrawing the scheme, and that is what we did.

  27. In fact of the 6,000 complaints made, 3,000 were made before 31 July 2001, were they not?
  28. (John Healey) They were. There were 3,096 complaints by 31 July, that was after ten months of running a national scheme, on which there were 1.5 million account holders. Complaints to account holders was in a ratio of 0.19 per cent. It is important also to recognise that proportion of complaints did increase in the months from the summer, and I mentioned that earlier, so that by the end of October we had 2.5 million ILA account holders and the complaints had reached 8,448, which is still a very low proportion in such a large scheme. But the important thing to recognise about the complaints figures is that it was only just over a quarter of those complaints which related to any suggestion of misuse, misselling, abuse of the system. Also in those complaints totals were so-called complaints which might have been about the discount regime, the operation of the ILA Centre, and indeed any other comment or criticism that callers might have made about the scheme. So it is important to get it in proper perspective. Our concern was clearly that the number of complaints was increasing, the concerns about those complaints was increasing, we were unable to stop what we saw as misselling and malpractice by the changes we had made within the terms of the scheme, and that is why we took the decision to withdraw it.

  29. It is not only big training providers which are hit by this, it is small training providers as well, and although of course you are not responsible for the decisions they have taken about investment, it does seem that if you cannot provide consistency then people are not going to make the kind of investment you would like them to make in the future, and you are going to need to be very clear in any new scheme that it does provide confidence for both the provider and the customer.
  30. (John Healey) I think Mr Turner is absolutely right, the degree of confidence and certainty that we can have as ministers responsible and accountable for this scheme or any scheme in the future is important, and so it must be also for individual learners and providers who are involved. You are absolutely right, if I may say so, it is not just big commercial learning providers who have been hit by this, there may be effects on some of our UK on-line centres and we are looking at that at the moment. There will be effects also on the work of union learning representatives and union learning funds, and we are at the moment trying to analyse that, and there will be an effect also on certain college programmes and smaller learning providers, as you say. As I have said earlier, Chairman, it was a very difficult decision, and one I really regretted having to make because what was in very large part a very successful scheme, benefiting both learners and providers, was undermined eventually and brought down by the actions of what remains a minority of those registered as learning providers who were simply abusing the system we had set up.

    Chairman: Minister, I think the Committee has yet to be convinced about that. David Chaytor.

    Mr Chaytor

  31. Minister, you said that 60 per cent of the 2.5 million ILAs were from people who would not have otherwise been able to afford their training and, therefore, at least 40 per cent of ILAs were people who would have been buying that training anyway. Now, at 150 per ILA my calculation is 150 million was given to people who would have been prepared to pay for their training anyway. How does that fit with the Government's attempt to redirect their resources into widening participation?
  32. (John Healey) Two things, Mr Chaytor, if I may say so. First of all, to think back about 15 months and try and remember just how radical, just how innovative, just how new this approach was. It was something we simply did not know how it might work and what its impact would be. That was behind the decision to make it a universal offer by way of introduction. The speed with which we hit our one million ILA account holders target I think is testimony to that.

  33. In retrospect, would it not have been tighter to limit it to those with no more than level two qualifications already?
  34. (John Healey) The wisdom of hindsight is wonderful and I think the important point about this is -

  35. This was pointed out to the Secretary of State at the time.
  36. (John Healey) If I may say so, having seen the programme operating, having been able to analyse the take-up and the use people made of their individual learning accounts, clearly one of the factors for us now in looking to redesign a successor scheme is the question of whether or not it remains a universal offer or whether, indeed, it should be more tightly targeted on the groups of learners, potential learners, that we are most concerned about. Mr Chaytor is absolutely right, there are those who tend to be broadly qualified already, those who do not have access to training and have not taken training in recent times, those who in other ways are disadvantaged and find it difficult to get on that learning ladder, if you like.

  37. What are the lessons to be learnt about the regulation of the quality of private training providers and also the monitoring of the capacity of private contractors, such as Capita, to deliver public services in this way?
  38. (John Healey) I do not draw any lessons at this stage about the question of the capacity of contractors like Capita to deliver such a complex large scale programme. It is something that we will need to look at in terms of designing and then putting in place the delivery frameworks for future schemes. In terms of the quality of learning provision, we have discussed already in relation to the question raised by Mr Pollard the issue of whether or not registered learning providers for an ILA style scheme might best be accredited in some way and any system of accreditation that is being developed now or is in place comes with a system also - whether it is run by the Learning and Skills Council or by the University for Industry for instance - of quality assurance. Particularly with the new inspection regimes that we are putting in place, the combination of post 16 Ofsted and the Adult Learning Inspectorate, these are inspection regimes which will help us, first of all, guarantee quality and then improve quality right across the range, including private sector work based learning providers who are involved in training that draws down public money. I am pretty confident that we have got in place, and it is fairly recent, it has to be said, inspection regimes and possible accreditation systems that would allow us, if we chose to do so, to fit in an ILA system.

  39. Therefore, the final question is, in the redesigning of the ILA system will you choose to require accreditation of private training providers?
  40. (John Healey) I think I have made that clear.

    Chairman

  41. In the Radio 4 interview it was like buyer beware. I remember you saying on File on 4, the clear message you gave was it is up to the consumer to decide whether it was a dodgy car salesman or a reputable car salesman. You are saying you have changed your mind and now you want quality assurance built into the scheme?
  42. (John Healey) I think, Chairman, with respect, you may be confusing two things. The first is whether or not the learning provider generally should be accredited. I think I made it quite clear that is one issue that we are considering very closely as we look at the redesign. The second is the principle which surely must remain because it becomes impractical to think of anything else that in the end where you are looking to liberate the interest and demand for learning from individuals, it has to be the individuals who ultimately decide what learning is appropriate for them and where they want to get that from. Now the difference in the two propositions would be that you would have a register of learning providers who simply had a different set of requirements for the provider to meet before being registered. I do not anticipate, and it has not proved the case in Scotland, that it will restrict the individual's range of choice about the sort of learning that might be available for them and eligible for ILA support or constrain the decisions that ultimately are those for the individual because the deal or transaction or contract has got to remain between the individual and the learning provider themselves.

    Paul Holmes

  43. You said earlier that Scotland and Wales are continuing with the scheme, they organised it differently and do not feel they need to suspend it. Does that raise a question of who in England is responsible for taking the wrong decisions and not organising the scheme in a way which was better scrutinised and more accountable?
  44. (John Healey) There are two things there, if I may, Mr Holmes. In England, it means that I am responsible for accounting for the decisions that we are taking and the action we have to put in place and then the work that needs to be done on any redesign scheme. A point of clarification. When we announced in England the withdrawal of the scheme as of 7th December, as I explained earlier, they took the decision in Scotland because it is a devolved function and they took the same decision in Wales that they would continue with their ILA scheme. Northern Ireland, they took the same decision as we did. Now with the fresh serious allegations of fraud and theft that led us to the decision to stop the programme and to stop the operation of the ILA centre, the consequences for now are that in Scotland there is no ILA provision at present because Scotland ran its scheme through the Capita run ILA centre. In Wales the programme is continuing because that is administered through the old Tec network. Just for a point of clarification I hope that is helpful.

  45. In reviewing what went wrong with the initial scheme and presumably setting up a better scheme to replace it, what advice are you taking? For example, as recently as yesterday the Association of Computer Trainers have asked how will the DfES consult with the legitimate training industry to learn from the experts how funded training can and should operate and when will that consultation process begin. Now that seems to imply, if that is correct, that you did not consult with the training industry when the scheme was set up and up to now they do not think you have consulted with them on how to improve the scheme?
  46. (John Healey) I did point out to the Committee earlier on that we consulted very widely, including staging several workshops, to which commercial providers were invited in the run up to the design and launch of the scheme last year. I did explain, also, that I think the Committee will appreciate the first and overriding priority for us in this recent period has been to manage the planned closure of the programme and then respond to the difficulties which arose at the end of last week. However, I can tell Mr Holmes and the Committee that we have already had discussions with some learning providers. We have already encouraged those that have expressed an interest in commenting on and helping us with the redesign of the scheme to let us have their details. We have got quite a large list of the commercial providers and a range of other organisations who want to help us on that task and we plan a programme to involve them over the next few months. I have to concede we have not yet finalised the detail of how we will do that but we will do that.

  47. When you say over the next few months, that brings us back to the question that is particularly affecting the smaller training providers, those we talked about earlier, I can think of one in my constituency, an excellent programme and they may well go to the wall because of this. What is the timescale for reintroducing a new system, an improved system, a radically changed system or whatever it is so that the smaller training providers know what scale they are operating on as to whether money will come back on stream?
  48. (John Healey) It is simply too early to give you a firm answer on that. The scale of the policy work, the degree of consultation that you are encouraging us to undertake, means that we have got a lot of work to do. The implications of the current problems that we are dealing with and the lessons that we will need to learn from that also may have a bearing. I regret it but I am simply unable to give you a firm timescale on when we believe, first of all, we can redesign and, secondly, reintroduce a successor scheme to the current individual learning accounts.

  49. It could be many months, well into next year?
  50. (John Healey) I simply cannot give you a firm timetable, if I could I would.

    Chairman

  51. This is concerning the Committee, Minister. Here is a flagship project of the new Labour Government backed by the Chancellor and here it is stranded on a rig and we have got no idea whether it will be refloated or whether it will be sold for scrap. It is worrying to this Committee that this is a very important core of your responsibility and of the Government's education policy. I am getting a feeling that we are not getting a feeling of urgency on the part of the Department.
  52. (John Healey) I think the Committee, Chair, is right to be very concerned about this and to be scrutinising it very closely. If I may say so, I am in the same position. I think the Committee should not be left with doubt that there is a strong commitment. The Secretary of State in the Commons Chamber described the cast iron commitment to the future funding and reintroduction of a successor scheme. I think her commitment in the Chamber, and I think the commitment that I think I have repeated today, ought to give you at least a certainty that is what we are working on. In terms of urgency, I have to say the sort of response and the effort that officials in the Department have been putting in to dealing with the difficulties that we have to deal with, and at the same time pursuing the work that we have to plan in order to redesign before we can relaunch any scheme is heroic. I really would contest the idea that somehow we are failing to act on any front in this territory without urgency.

    Mr Shaw

  53. My first point is about the infrastructure in the private sector, which is absolutely vital if the Government is going to deliver on increased skills and training. I understand that the ILA centre has closed now. A website has a message on saying it is closed and there is a message on the answer phone saying it is closed. Who do training providers contact? You are responsible, do you provide them with a phone number? Can they ring you?
  54. (John Healey) You are right, Mr Shaw, the ILA centre is closed. There is the latest information we are able to provide on the website and that was updated yesterday. The call centre, which unlike the ILA operating centre, is based in Coventry is open for business. We opened that yesterday. Clearly the information they can give out is limited as well but that is operating. That is principally a service for individual learning account holders but learning providers are also contacting it. As soon as I am able I will write directly to all learning providers, as I have done before, to update them as fully as I can about where we are. Because the ILA centre is closed and their operations at the moment are closed, I cannot get access to the registered list of learning providers in order to write to them personally which is what I will do as soon as I can.

  55. You will understand the frustration of many providers.
  56. (John Healey) Yes.

  57. They want to remain in the market place for any future programme. Do you agree a number of these organisations have expanded on the basis of ILAs. You said earlier "This is business". If I was a training provider and I went to my bank manager and said "This is my business plan, we are going to use ILA" I would have thought that was a fairly reasonable and sound source of revenue. Any business plan has to demonstrate its source of revenue and you were rather dismissive of it.
  58. (John Healey) I did not mean to be or to sound dismissive. The contribution that the vast majority of good learning providers in the public and private sector and voluntary sector too have made to the success of this scheme is enormous. They really have used this to reach learners that have not come near learning for many years. If I was strong in statements earlier it is because I want to be clear. I do not want to mislead any learning provider that might be either listening to the Committee's proceedings or subsequently to read a transcript of the proceedings and them to be under any impression that somehow there is provision that we can make to support their business as a result and in the immediate aftermath of having to withdraw the scheme. If I have been tough about that it is because I do not want anyone to mistake what I have said or to be misled that somehow it can be a lifebelt of public money which will continue to support their operations.

  59. One of the reasons on 24th October the Secretary of State announced the accounts were going to be suspended was because the programme had exceeded the Government's expectations, that was one of the key factors at that point. In the document published, Delivering Results, one of the milestones by 2002 was to expand the individual learning accounts. I wonder what is happening here? Are there two different offices: "Let us go, let us have more." "No, no, no, we have got too many". Perhaps you can answer that point. I think the key issue then is what were the original costings for the individual learning accounts and when and if it exceeded that? Was that the point of saying it had been too successful? You came from the Treasury "We have blown the budget, guv". In someone else's writing "Well, let's expand it" and perhaps when you arrived you said "I have got the figures. Gordon says we can spend this much". Can you see the contradiction here?
  60. (John Healey) Three things there, Mr Shaw. The budget for the ILA scheme last year was 56 million, this year it is 71 million. Clearly, because it was a scheme that was innovative, we simply did not know how it was going to work. It was not capped in any way, we did not know how it was going to go. I can go over this ground again but I think I have dealt with this issue of the fact that our principal reason was the concern about misuse. There was a budgetary element to that as well, particularly where the two combined because the volume of the small minority of providers we were worried about in the business that they were conducting, and the public funds they were drawing down during that period, particularly September/October, was such that the cost to the public purse and the concern that this was money misspent was such that it made us take that route.

  61. Has the budget been exceeded?
  62. (John Healey) The budget has been exceeded.

  63. By how much?
  64. (John Healey) The budget has been exceeded because -

  65. By how much?
  66. (John Healey) We are certainly not in a position to say that at the moment because we are still processing payments. People are still able to claim their discounts, as you will know. You can claim your discount for learning up to six months after it has been booked.

  67. You do not know how much the budget has been exceeded by but at the same time you have written a booklet here that you want to expand?
  68. (John Healey) There is no contradiction, if I may say so, Mr Shaw, between that booklet which sets the long term aim and the place that such a scheme has in our ambitions to develop life long learning and opening up opportunities for individual learners who simply are not taking up learning at present. With the decision that we had to take and the action we had to take to deal with the problems which are in the system at the moment, that long term commitment is the context within which I have given you the undertaking and the Secretary of State has given you the undertaking that there will be a successor scheme. In terms of the budget, implications of both the misuse and the overrun of activity against what might have been anticipated is such that we simply at this stage cannot know for certain what that would be. We are tracking it very carefully but our scheme was designed and the budgets were set in order to reach one million ILA account holders in March 2002. We hit that a year early. At the end of October there were 2.5 million and I have made it clear to the Committee that the budget was not the principal problem.

    Chairman

  69. Minister, what you are being asked by Jonathan Shaw surely is there must have been an estimate of how much this would cost year on year, an estimate. He is just asking what sort of level of overshoot is there? You have said a million and you went through two and a half million much faster than you thought. What are the ballpark figures you are knocking around the Department on this?
  70. (John Healey) I have explained the budget allocation against the anticipated activity which was obviously set before the scheme was launched in September last year nationally. I am sorry to give you an answer that you feel is frustrating as a Committee. At the moment because of the uncertain number of individual learning account discount payments we are going to have to pay we simply cannot give you a sense, even a ballpark I regret to say, of what the possible overspends are going to be.

  71. Minister, in the Department of Education it is our job to check you are looking after public money in a careful and proper way. You are going to get a bigger grilling on this from the Public Accounts Committee than we are ever going to give you. The fact is you are saying in the Department you did not know how much money you were spending on this and it was getting out of control. Then you fall back and say "The reason we pulled the plug was not because the spending was out of control" you are saying it was because of fraud.
  72. (John Healey) Chair, I know how much as a Government we were paying out during the course of those months in September and October. What I cannot answer is the question Mr Shaw asked which is how much are we overspent by.

    Mr Shaw

  73. When will you know?
  74. (John Healey) If I may suggest a way forward. I am conscious of the proper role of this Committee, I am conscious of the proper role of the Public Accounts Committee in asking those questions. If I may suggest a way forward, I will go back to the Department and I will work through what we have got as activity data at the moment, our best anticipation of the sort of payments that are in the pipeline that we have undertaken that we will honour and I will do my best to let the Committee have some indication of the sort of overspend on the budget that was originally allocated. I must stress the degree of uncertainty and envelope for variation there is quite wide. If the Committee will accept that caveat to those figures I will get that work done and submitted to you.

    Chairman: Thank you, Minister.

    Mr Shaw

  75. Just one final question. Is the person who is responsible for checking the financial regularity of the ILAs still working in the Department?
  76. (John Healey) There are checks on the regularity of the system at all points right through the ILA centre run by Capita and beyond. There is not one person who ticks or signs off the payments in that way. With a system as complex and large scale as this I do not think you can isolate that to one person.

  77. You do not know how much you have overshot by, you do not know who is responsible, am I being too crude here? You are saying it is very complex, does the problem lie there, nobody knows what is going on? It seems to stumble from chaos to disaster.
  78. (John Healey) No. To look for an individual who is responsible for signing off the financial payments is not possible in this system. To look for one person who is responsible for the way it is being managed and the action that is being taken is very clear, that is me. If you are not satisfied with that then I will have to answer to you and to others for that.

    Valerie Davey

  79. Can I change the slant in as much as of course reconstructing business plans and refinancing business is going to be a huge problem but how are we going to rebuild the confidence of those many ILA holders who have come back to learning in their forties and fifties for the very first time? Last week there were representatives from trade unions, education officers in this building explaining, literally with tears in their eyes, how people had come in through the door in the premises where they had been working for years with inadequate skills, with no interest in education and for the first time ever they had started on a course which is now being pulled. That personal dilemma is to me as important as all the very significant issues which have been raised in this Committee today. How are we as a Government going to apologise to those people and I agree we have now got a guarantee there will in time be other courses, how will we restore that confidence, that knock that has been given to people in their forties and fifties especially who for the first time thought this Government was going to give them something they never dreamt they would ever have?
  80. (John Healey) If I may say so, I think it is one of the big challenges we face in trying to reconstruct an ILA style scheme and reintroduce it. The question of confidence in the system which has also been made for providers as well as individuals is significant. It is not the only support that is available, even to older learners. It is not the only source of information and funding support either. If you are in a position where you are having to advise individuals, including constituents on this, a good first point of call for them is the national learning direct information and advice line. They will be able in the interim to give individuals information about the sort of courses that might suit them and possible sources of funding to support that learning.

  81. That is useful. How do we get it to those people urgently, people who have never been able to take that individual initiative? We were told, for example, in a firm that up to now something like 10 or 20 people might have in individual ways made progress with their learning. Now 300 after work in the same building together are appreciating the potential that they might have. Are there any ways of interim support for a group like that via a trade union? If you are saying to me, as I think you said fairly bluntly, there is no Government money in the interim, then I think they need to be told. Is there any way of you as a Minister getting through, one letter to such people with an apology. I think they would be overwhelmed almost to say somebody in the Government was apologising for the position they are now in and assuring them, not with a date, but at some stage this will be reconstructed?
  82. (John Healey) To some extent we may have covered that ground. I am not sure if Ms Davey is aware that at the end of October we wrote to 2.5 million ILA account holders. We explained the decision we had to take to NV schemes. We gave them information about how up until December 7th they could still draw down the discounts. We made it clear also how difficult and regretfully we made that decision. In terms of rebuilding confidence and knowledge of any future scheme when we are in a position to launch that we will inform them. I think what you draw my attention to is really a significant part of what we need to plan for which is a proper promotion of any successor scheme and possibly a special exercise to contact those who have held ILA accounts to date to explain what we have got in mind. We do not propose at this point to do another letter to all 2.5 million, it was an exercise which was three weeks, as you will appreciate and a substantial cost to get out but at that time I took the decision it was something we should do.

    Valerie Davey: Can I thank you very much. I did not know the individuals had had that letter, I appreciate that enormously. I think that is well done. I would urge you to keep those very people in mind as you are intimating as these schemes are reconstructed because they are the very ones who need that reassurance.

    Chairman

  83. Minister, you will know, because you will remember as a distinguished member of this Select Committee in a slightly different form, that we have the power to request papers. I wonder if you would accede to a request of this Committee to have a record of any meetings that you had or your Department had with any other Department on ILAs. In other words what we particularly want to know is when you had the first meeting or any meeting with the Treasury to discuss the ILA. Would you be able to do that?
  84. (John Healey) Chair, I am more content to prepare for the Committee a schedule of the points at which we consider we took particular decisions and in particular to identify the points at which any discussions or notifications were made to the Treasury in advance of that decision we announced on 24th October.

    Mr Baron

  85. Minister, just coming back to the professional management of the ILA scheme in its entirety. What has concerned a number of us on the Committee is the fact that there is a deadweight factor, some would argue. We had Chris Hughes, the Chief Executive of the Learning and Skills Development Agency, tell the Committee ILAs were enormously popular but there was inevitably a deadweight factor in that they were going to people who were already involved in the system. Has any assessment been undertaken with regard to how many people were not in some form of structural educational training and has there been any assessment of the deadweight factor and take up of ILAs? I suppose the point is this, has this been getting to those people it should be getting to?
  86. (John Healey) I think there are two aspects, Mr Baron, to your question. The first short answer is yes we have done quite a significant study of people who have opened ILA accounts and those who have used them. Just over one fifth who opened the accounts and used them said they had not participated in any learning in any form for at least 12 months. One in six of those who use their ILAs - one in six - had no previous qualifications whatsoever. That is an indication of the degree of targeting that has been achieved through the ILA policy and scheme as a universal offer and links to the discussion we had earlier on about whether or not there is a case for redefining that universal offer to one that is more tightly targeted. The question of deadweight is I think less a question of who it goes to and more a question of - perhaps, Chair, I can just lay my Treasury background here - would those learners have covered the cost of that learning anyway and done that learning without the offer of the ILA account? That is I think the most important working definition of deadweight. In one of our evaluation exercises we asked users to comment on a proposition with an ILA I would not have been able to pay for my learning. 44 per cent either fairly or strongly disagreed with that so in other words it gives you a hypothetical feel for perhaps 40 per cent of those who have used ILAs who would have pursued, or certainly could have afforded to pursue the learning that they undertook without an ILA support. 50 per cent, however, agreed they would not have been able to do their learning with the financial help of the ILA account.

  87. Does that not suggest there should be more careful targeting with regard to who we offer these ILA accounts to in order to ensure they are those who most need it.
  88. (John Healey) Yes.

  89. Is that going to be a factor or criteria you use in any sort of replacement scheme?
  90. (John Healey) It is one area, as I have explained I think to the Committee, we are looking at very clearly and carefully as part of the work we are having to do in terms of redesigning the policy for a prospective relaunch.

  91. In any replacement scheme that is going to come forward, I know it is very early days but having said that you must be thinking about a replacement or you should be. How are you going to move us forward? How are you going to target any replacement scheme to ensure it is aimed at those people who most need the help?
  92. (John Healey) You are right, Mr Baron, it is too early to tell you that because we have not weighed up and looked very carefully at what we can do. Just as an illustration. The current scheme was devised and introduced in England being eligible for anyone over 19 as long as they had not got a higher education degree. Sorry, it was designed in England for training which excluded higher education learning. In Scotland, Wales and Northern Ireland, they took a slightly different criteria for eligibility which shows the flexibility of the concept itself. Their cut off age was 18 and they allowed learning to be funded by ILA accounts for part-time higher education study. In other words, there was an element of different decisions about targeting in the four different areas. It is a very flexible concept. The decisions that we need to make on how we design it and how we target it, it is really, frankly, at the moment, as you suggest, too early to give you a definite answer on.

  93. It is going to be an intention in the future that anything like this we are going to target more?
  94. (John Healey) It is one of the areas for the redesign of the policy that we are looking very closely at.

    Chairman

  95. Minister, in terms of the overall picture, what this Committee I think is trying to probe is, on the one hand, I think every Member of this Committee is delighted about the whole concept of individual learning accounts and all the measures that show they were successfully taken up. We have our reservations that - I do not know why it is called the deadweight factor - the people you really want to put in ILAs, not enough of those are being brought in by the scheme and of course that makes it difficult for you in terms of meeting other targets in terms of tackling adult literacy and skills. In a sense what we are finding difficult, not just from your officers but from the Department's officers, is here is a scheme and all schemes are prototypes in a sense and you have to learn from them and if something goes dreadfully wrong you go back to the drawing board and you get it right and you manage again. What seems to be worrying the Committee, it is certainly worrying me as Chairman, is this change in the view of why it happened. I do not see what is wrong with the Department saying "Look, it is an interesting prototype. It was wildly too popular. It did not quite hit the target that was agreed in the original vision. It was costing a lot of money and on the margin there was a bit of fraud". I do not understand the two voices coming from the Government about this. If you put your cards on the table and state "These are the problems, as a Select Committee understand that." I think the Committee would understand it. We are getting a very strange message from the Department. We are sitting here, you used to sit on this side, we train some good people here, there is a potential one sitting behind you smiling at the moment. The fact of the matter is can you not see why you have had a session here dominated by the ILA because we are discontent with the sort of answers not just from you but from the Government on this flagship policy?
  96. (John Healey) I completely understand and, if I may say so, I think you are right to give this such close attention but what I hope I have been able to explain is that there were twin concerns at the time of the decision to withdraw the programme but the principal concern was about the protection of the proper use of public money, the protection of individuals who were putting some of their own money into their ILA supported learning and the fact that the steps we had taken clearly were not stopping the minority of providers that were frankly not just abusing and misusing the system but drawing down increasing amounts of public money by doing so. That seemed to me the proper basis for the steps we took. I have tried to explain how the two concerns perhaps combine but that is the principal and proper overriding concern, the misuse of the system by a small number of providers and the amount of public money that they were drawing down as a result of their activity.

  97. Minister, you can understand that the Committee is concerned, quite rightly, about the individual learning accounts such that it has really dominated the whole session. I have made a suggestion to the Committee, and I think we all agree, that we will continue only on this subject today and we will invite you back in the New Year to discuss the other aspects of your brief. Is that acceptable?
  98. (John Healey) I would be delighted to do that.

    Chairman: Right. We have another 15 minutes.

    Mr Pollard

  99. I watched some trainees who are returning, these are mums bringing up families they were going back. They were keyed up by this opportunity, there is no question about that. It provided a useful skill to come back part-time. There was competence and confidence being pulled in. That competence has taken a knock, certainly locally, and I would guess nationally, how will we get that back? The second question, you have been very shy about saying when the son or daughter of ILA might come on stream. You must have an ambition or aspiration that you would like to see it back and that would send out a stronger message than you have been sending out already. Yes, it will come back, cast iron guarantee, at some time. The Forth Bridge is being continually repainted, we do not want to get into that in the future, so far in the distance it is of little consequence.
  100. (John Healey) I want to see this reintroduced as soon as we can. That is the reason why despite the very heavy pressure on the Department to deal with the current situation we are facing I have insisted that some of our officials in this territory continue to work on the plans and the development of policy for a future ILA style scheme. The reason for that is just as you say, Mr Pollard, this is actually a programme which has helped people with their skills and knowledge. From the evaluations that we did 84 per cent said as a result of using their ILA it has improved their knowledge and 59 per cent said it has helped them grow in confidence which was the other element. You placed quite proper stress on this. In a sense it is almost ironic, the confidence that here is a policy with a very important and positive impact which is actually growing through this period of operational difficulty as we hear more from a range of providers and a range of individuals including constituents through Members of Parliament actually we are getting a much better idea of the impact that their the scheme has been having than perhaps we had a month ago.

    Jeff Ennis

  101. I do not have to tell you, Minister, the importance of a flourishing FE sector in places like South Yorkshire, which we both represent, in terms of future regeneration of South Yorkshire, particularly in light of the fact we have some of the highest levels of poor adult literacy and numeracy skills. Looking specifically at how the ILA scheme has operated, what proportion of ILA account holders were pursuing courses of basic adult literacy and numeracy, do we have statistics on that?
  102. (John Healey) At the end of October of the 2.5 million ILA account holders in England just around about 1.3 million at that point had drawn down the discounts in order to pursue learning. That was in part why when we took the decision and announced it on October 24th we did not stop the scheme in its tracks at that point because we wanted to give those other learners who had opened their ILA account some opportunity to sign up for training in order to be able to take advantage of their ILA account before we had to end the scheme on December 7th. We gave them that notice period. For ILA account holders they had until then to register with a provider, decide what training they wanted to pursue, register with a provider and make sure that provider booked that learning with an ILA centre. It did not matter whether or not they had started that learning because they could start it at any point within six months from December 7th and still be able to draw down that discount.

  103. Do we know what the success rate of pursuing that particular policy has been in terms of the continuing learning?
  104. (John Healey) In what terms?

  105. In terms of the number that are actually transferred?
  106. (John Healey) I cannot give you figures for the number following October 24th that have signed up or redeemed their ILA account off the top of my head but we could find that information out for you. I am happy to provide that.

    Chairman

  107. Thank you.
  108. (John Healey) We will be able to work on that as soon as the operation of the ILA centre is restored.

    Jeff Ennis

  109. Just one further point in terms of the pursuance of basic adult literacy and numeracy skill courses. I guess there will be the regional variation details in terms of the take up of the type of course. I guess for South Yorkshire it is probably higher than the national average. Do we have any regional stats on that?
  110. (John Healey) No, we do not, but for adult literacy and numeracy, the adult basic skills that quite rightly you identify as a big problem generally but tending to be even more concentrated in areas like South Yorkshire where there is economic and social disadvantage, the ending of the current ILA programme will not affect provision of adult literacy and numeracy. That is an entirely separate strategy and an entirely separate programme which is fully funded and does not require the individual to contribute at all to the costs of learning and does not require the application of an ILA style top up in order to be able to pursue it.

    Mr Baron

  111. Can I just come back very briefly to this issue about fraud within the system. You stated to us this morning that basically you were aware there was a small number of providers abusing the system. Why did you not then just close down that small number of providers and allow the majority, who were obviously providing a very good job, as judged by the enormous popularity, to carry on? Why did you throw the baby out with the bathwater?
  112. (John Healey) We had tried that approach during the course of the summer. The first learning provider we suspended as a result of allegations and an investigation into fraud was in June. What we found was that we simply did not have the wherewithal to be able to take strong enough action to stop them simply by applying the rules of the scheme as it was devised and undertaking that course of action.

  113. Can I come back to that? Surely if you had evidence that there was fraud, why did you not have the wherewithal to address those providers with the evidence that you had? I am still unclear why you had to close down the whole scheme. How was closing down the whole scheme going to provide that?
  114. (John Healey) Let me try to help by getting a sense of proportion and perspective. At the end of October, when I said that we had 2.5 million account holders, we had received, up to that point, 8,448 complaints just over a quarter of which were about misuse of the system. Those 8,448 complaints related to 404 providers. Of those 404 providers the vast majority had maybe one complaint raised against them and only a quarter of those complaints were about misuse of the system. I am giving examples of the other sorts of abuse that were registered. Those were the providers of principal concern. By November 17 that list of providers for whom there had been some complaint raised was 565 off the back of just over 10,000 complaints. Those within that category where either there were a number of complaints raised against them or for which the nature of those complaints meant that we had serious concerns number 86, and 60 of those were already investigated, five of them referred to the police, the others we are preparing to investigate, and of the cases of alleged fraud where we involved the police in helping us investigate, during the entire operation of the scheme for more than a year, that amounts to 39 arrests connected with three learning providers, with one person charged. So you have a span of activity which is an important context for this, I think, which is the run-of-the-mill sort of complaints you get from punters of any system or programme that you have; you have a proportion that is just over a quarter of those complaints that essentially are about non-compliance with the system, misuse of the system, and then you have a very small extreme end where you have serious allegations of fraud. This of course is all a description of the position before the end of last week. We simply were not able to control the activities, conduct the investigations, protect the proper use of public funds and the interests of individual learning account holders, by working within the system we had set up. It was a regrettable conclusion we came to. We tried the measures that we thought we could take during the course of the summer and early autumn. We came therefore to the conclusion that we had no other alternative than actually to withdraw the programme, which is what we announced on October 24.

    Mr Baron: I am conscious that time is ticking on, but perhaps I can ask a question about, that very quickly, Minister. As you were providing a lot of finance for all this, why could you not have sent a simple letter explaining to those providers that you had a serious doubt about that you were withholding finance until you had time to undertake a further investigation? That would have allowed the vast majority of providers who were obviously doing a good job to carry on and not cause the maximum disruption that this has caused. You had the power to do that, because you were not implying guilt, you were providing the finance, you had the power to say, "We're going to cut off finance for the time being until, in your best interest," you could have worded the letter, "these allegations are resolved."

    Chairman

  115. Could you come back briefly on that?
  116. (John Healey) Yes. Those were precisely the preliminary steps - an inquiry, investigation - that we took with providers that we were concerned about during the course of this summer. It did not allow us to close down their operations sufficiently within the way the system operates. We did precisely that, and it proved to be not strong enough action to allow us to control the situation.

    Mr Baron

  117. Even though you were supplying the money?
  118. (John Healey) Yes.

    Mr Chaytor

  119. Minister, had there been no allegations of fraud, would you have suspended the scheme?
  120. (John Healey) No, we would not have taken the decision to withdraw the scheme if we had not had the increasing concerns and increasing evidence of activity that was frankly a misuse of the system and an improper use of public funds.

  121. There were 10,000 complaints the overwhelming majority of which were nothing to do with fraud?
  122. (John Healey) Yes.

  123. Indicating serious flaws in the design and the operation of the scheme. So what steps were being considered to deal with the issues brought out by these 10,000 complaints.
  124. (John Healey) No, the 10,000 complaints, if I may be clear, were not necessarily indicating flaws in the design of the scheme. These were simply the sorts of customer complaints.

  125. It is a high number of complaints, is it not?
  126. (John Healey) Just over a quarter related to activity that suggested non-compliance with the rules of the scheme and therefore grounds for closer examination and investigation because there could have been misuse.

  127. But there were 7,500 complaints. That is a very large number.
  128. (John Healey) 2.5 million punters. I would suggest to you that that is really a rather small proportion of what is a very large programme. Had we had no evidence of misuse, had we not had a problem with this small minority of ILA providers that were mis-selling ILAs, misrepresenting the Department, frankly offering bogus training propositions to individual account providers, we would not have withdrawn anybody's support, we would not have withdrawn the scheme. If we had been dealing with the issue of overspending the original budget allocations, that is something we would have dealt with as a discussion within the DfES about where we should locate any priorities for additional spending, and I probably would have been through the Chancellor's door to argue for support to continue what would have been a very successful scheme as it was, but one in very different circumstances without the flaws and abuse that unfortunately crept into it.

  129. Quite apart from the overspend - and the overspend is significant, 2.5 million against 1.1 million ILAs predicted, and an amount that has been paid out in discounts that is impossible to calculate at the moment - quite apart from that, do you not accept that there were flaws in the original design of the scheme that led to so much of the budget being allocated to people who would already have been prepared to buy that training? This is what I am interested in getting at, which is the flaws in the original design of the scheme. Do you think there were flaws, or were you content with the original scheme? Could I make a supplementary before you answer the first question, in order to clarify this? We hold you accountable, and we do not envy you, having come into this post at this time, to be held accountable, but I am curious as to where the responsibility lies. We do not hold you responsible, but I think it is important, if the Committee and the Department are going to learn the lessons in designing a new scheme, that we find out who was responsible for the flaws in the original scheme and what are considered to be the flaws in the original scheme.
  130. (John Healey) I am concerned to assess the flaws in the scheme. I am also concerned to rethink and redesign the policy. If I may say so, I think you are returning to the territory that you were enquiring about before, which is less to do with the flaws in the scheme, the operation of the scheme, and more to do with question-marks over whether making it a universal offer was the right policy approach. I would argue that at that time to introduce something that simply was innovative and a total departure from anything that we had introduced before, that we did not know how it was going to operate, was quite a reasonable decision to take at that time. Now we are in a position to learn significant lessons both about the design of the policy for any future scheme and indeed to deal with flaws in the scheme itself and the system for delivering it.

    Chairman: Minister, we are running out of time. I promised three colleagues very brief questions.

    Paul Holmes

  131. We are going to introduce the ILAs. They were a runaway success partly because of the training schemes investing millions of pounds in marketing and recruiting people onto these schemes. They have now lost quite a lot of that investment because of the Government's sudden decision to withdraw the whole scheme. Will there be any compensation for legitimate losses incurred as a result of the Government's decision?
  132. (John Healey) No, not in those terms.

    Valerie Davey

  133. The good news this morning is that you have got people in the Department planning the new scheme. Are they different people from the people who planned the last one?
  134. (John Healey) The official who is leading the development of the policy work was not involved and did not do this job 18 months ago when the previous programme was designed. Had he been in that position, I do not think that would necessarily have disqualified him from doing the job he needs to do now. You could argue that actually he might be in a better position than anyone to do the job now.

    Chairman: It is said that the best person to invest in is someone who is in their mid-30s and has been bankrupt three times!

    Valerie Davey

  135. Very quickly, you are clearly going to take advice from our own experience, from Scotland, from Wales and from Northern Ireland. Is there anywhere else in the world that has a similar scheme that we could look to to get some good ideas to restart our scheme, very literally yes or no?
  136. (John Healey) Very literally and very briefly, there is some similar experience in Europe. We are in fact leading a group that is trying to connect up the experience in that. We have had more experience than any other European countries in this, but they are just as interested as we are in what the sort of future of this type of policy and scheme could be.

    Mr Turner

  137. Lots of government schemes are abused. You do not close the housing benefit system because it is abused. What is the proportion that you think in financial terms has been misspent, or might have been misspent, of this scheme?
  138. (John Healey) I cannot give you a financial answer to that, but it will be based on the proportions and perspectives that I have already explained about the breakdown of complaints that relate to misuse and breakdown of providers. We do, after all, have more than 8,500 registered providers under this scheme - the breakdown of providers about whom we have got serious concerns. Until we, frankly, have investigated any concerns and allegations and then done all sorts of financial background work on that, it is simply impossible to give you an answer on that.

    Chairman

  139. Minister, this has been a very valuable session for this Committee, and I thank you for your patience. The good news is that because we have not covered most of the topics, we are looking forward to seeing you again. Thank you for your attendance.

(John Healey) I am very much looking forward to seeing you as well.