TUESDAY 26 FEBRUARY 2002

__________

Members present:

Mr Barry Sheerman, in the Chair
Valerie Davey

Jeff Ennis
Paul Holmes
Ms Meg Munn
Mr Kerry Pollard
Mr Jonathan Shaw
Mr Mark Simmonds
Mr Andrew Turner

__________

Memorandum submitted by the Department for Education and Skills

Examination of Witnesses

JOHN HEALEY, a Member of the House, Parliamentary Under Secretary of State for Adult Skills, and MR PETER LAUENER, Director of Learning Delivery and Standards Group, Department for Education and Skills, re-examined.

Chairman

  1. Minister, could I welcome you again.
  2. (John Healey) Thank you. It is a pleasure to be back.

  3. May I say, everyone on the Committee valued very much the very comprehensive memorandum that you submitted to the Committee in advance. The memorandum submitted by the Minister is available to the press, ILA 53. May I compliment you, Minister, on the thoroughness of the memorandum. We do not often compliment ministers on anything in this Committee, which gives us a poor reputation! Minister, may I welcome you for the third time and open the questioning by saying that we have had some very interesting evidence given to the Committee from a whole range of people; both large and small providers; we also had Capita in last week and they are coming back. Although the memorandum was very persuasive and very interesting, one of the things that does not come out, and this is a problem for a select committee, a lot of the early decisions on this whole process were made by colleagues who had your job before you and they have moved on to different departments; indeed, some of them are no longer in the ministerial team. How much of a conversation did you, as an incoming minister responsible for ILAs, have with the ministers who were responsible before you?
  4. (John Healey) Chairman, if I may, could I just make one or two opening comments if you do not mind?

  5. Absolutely. No-one indicated to me you wanted to make an opening statement.
  6. (John Healey) That is probably my oversight, because I did not indicate to anybody else that I wanted to do that.

  7. Can I say, we are very happy for you to do that, but it is not going to be a verbal run right through the memorandum?
  8. (John Healey) It absolutely is not. I wanted, first of all, to introduce Peter Lauener who is Director of Learning Delivery and Standards whom the Committee has met before. Peter Lauener and I have worked very closely together over the last few months, both in dealing with problems that we have had to manage in winding up the first ILA scheme, and in developing options for what will be the successor scheme. I really wanted to say, Chairman, I have been incredibly impressed at how hard and under such pressure Peter and his team of civil servants have worked. I have been particularly impressed by how self-critically, honestly and openly they have approached this task; and in some ways we have tried to reflect that in terms of our information to and our discussions with the Committee: in part because there are some very important lessons for us to learn in relation to any successor ILA scheme; in part because there are some important lessons for the Department as a whole; and I think there are also some important lessons for us across Government from the experience we have had of this scheme. We have been conscious throughout, and I have been particularly conscious, of the impact that the decision we have taken has had on learners and learning providers. My priorities in recent months have been: firstly, to make sure we have been able to pay as quickly as we can legitimate claims from learning providers, where they have incurred those costs; secondly, to investigate the complaints and concerns that have been raised by learners and others so we get to the bottom of the problems we have encountered; and, thirdly, to draw the lessons we must learn for the second scheme. It is clear, as we have discussed before, that this has been an important initiative, Individual Learning Accounts; and the one encouraging, almost universal, feature that has come out of the difficulties we have faced has been the degree of support there has been right across the board (including from the Committee, Chairman) for the concept and general policy of Individual Learning Accounts. As I did when you announced it, I welcome the Committee's inquiry; I look forward to the report you are due to produce, and I hope you will be able to do that in good time so that it can help inform decisions we need to make in terms of the successor scheme. Let me return to the question you posed at the start. I had no discussions at all with predecessor ministers about the scheme. I think the Election was on June 8th, so I must have got to my desk on June13/14th the following week, after I was fortunate enough to be appointed. Within two weeks I had had two meetings with officials on Individual Learning Accounts, both to look, firstly, at the question of ending the 150 incentive and, secondly, at the concerns that were starting to emerge about mis-selling and inappropriate behaviour of some learning providers. I had detailed discussions and asked for detailed information about budgets, costings, verification procedures, options of clamping down on learning providers and also about making sure that learning providers knew about the action we were taking in order to try and be tough at that point. That was the immediate context I faced. I had no discussions at all with any of my predecessors who were ministers who may have been involved in the decisions and determination of the policy.

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

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

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

    Mr Turner

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

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

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

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

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

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

    Mr Shaw

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

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

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

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

    Chairman

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

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

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

  41. Minister, what we were saying, having heard from Peter Lauener, having heard from Capita and from a wide range of other witnesses what seemed eminently possible is that you could have frozen the ones you had doubts about, that you had complaints about, which is a very small percentage of providers, and let the good providers carry on doing the good work they were already doing. It seemed to us with the money you were paying Capita they should have been providing enough information for you to have frozen out the people that had a question mark over their reputation?
  42. (John Healey) Perhaps I must apologise. In terms of trying to explain the steps in paragraph 20 which we took, it included suspension of a large number, a significant number of providers - 17 of whom are still suspended, and 17 of whom we are still withholding payments from. Others were suspended and then reinstated when we got the undertakings we required that they were then going to abide by the rules of the scheme. All I can say is, we took these steps, they were not sufficient to stamp out the sort of abuse and misuse that was going on. We were worried about the increasing volume and seriousness of complaints. We were worried about the amounts that were being dispersed from the public purse to some of these providers who were emerging as having these serious complaints against them. In those circumstances, we tightened up the scheme as far as we were able over the summer. We had not stopped the abuse and, therefore, really the only responsible decision, the only decision we could have taken, we took and that was to close down the scheme.

    (Mr Lauener) If I could just add one point, Chairman, our Special Investigations Unit (and I think the figures are in the memorandum) are following up 97 learning providers. Of these there are nine police forces already investigating 16 learning providers. Our Special Investigations Unit is discussing a further 54 with the police. I do not welcome it, but these are some of the largest numbers of investigations we have had to take forward with the police out of programmes that I can recall. I think that does illustrate the seriousness of the issues that arose from the programme. One final point, because we acted so quickly at the end of November, the amount of money withheld there had it been paid over to those providers, and if further investigations show that we were right to withhold that money, I am not at all confident if the money had gone to providers we would have then been able to get it back as easily as withholding it.

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

    Ms Munn

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

    (Mr Lauener) Just to add one point to that, I think that is more about ensuring compatibility of registration between the ILA scheme and the learndirect scheme, so that the systems could speak to each other, and people could get information through either system. I do not think that is so much about quality assurance. There is always a slight danger of confusing quality assurance arrangements with registration arrangements.

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

    Chairman

  47. This was for learndirect?
  48. (John Healey) This was for the Individual Learning Accounts. For learndirect the system is different. To be absolutely clear, for the ILA scheme they were registered providers and not accredited providers, if that is indeed what I said earlier.

    Ms Munn

  49. I listened very carefully, I can assure you! For learndirect, the providers registered with that, are there quality assurance and standards they have to meet before they can register with learndirect?
  50. (Mr Lauener) Certainly when learndirect set up their learning hubs they went through a limitation and contracting process, and there was a quality assurance process around that. If the Committee is interested we can send details of that. Indeed, under the remit of the Adult Learning Inspectorate, the Inspectorate is inspecting learndirect provision. That process has started and, indeed, the first results of those inspections will be available shortly.

  51. Certainly from my perspective, and I do not know about the rest of the Committee, the reason obviously you are interested in this, it was mentioned by Capita and they explained the difficulties about the actual technical problems of systems talking to each other. Where our interest would be is around the whole quality assurance issue. We looked at the fact that in the pilot stage, what we have been told by yourselves from the Department, that TECs tended to use providers whom they were familiar with; and, therefore, there was, if you like, if not a written down quality assurance, some inbuilt quality assurance because they were known providers. The scheme was set up to widen the number of providers and we are obviously concerned about the quality assurance issue; the fact that a lot of people coming into learn were people who were not used to learning, and to expect them to do quality assurance, in my view, was unrealistic. If there had been a view that learndirect would be one way of actually getting providers who had some quality assurance and standards there already as part of the thinking of setting up the process, then that is one thing. Are you saying, in fact, it was just incidental that learndirect people had particular standards and that there would be other providers who would be registered. Where are their standards?
  52. (John Healey) It is not incidental. learndirect is a learning provision system which is set up specifically to infield, online and distance learning; and it has the quality checks in terms of its internal contract. It also has the external checks with the Adult Learning Inspectorate . The link-up we were unable to make in the design of the scheme. You say Capita told you about getting the data systems to mesh with each other. You are pursuing quite an interesting point. I am sure the Committee knows but might be interested just to be reminded that in Scotland there is a link-up with the Scottish University for Industry. In these terms, to be a registered ILA provider for Scotland you have to be a registered Scottish UFI provider. In order to be a registered Scottish UFI provider you either have to have or you have to be working towards certain quality standards, such as the quality management system, and that is largely about internal processes. So there is that link there, though not the meshing of the data sets and the sort of benefits I originally talked about. It was the Scottish University for Industry's responsibility to investigate any complaints that arose about ILA-related provision, or ILA-related learning material. There is something of a link-up in Scotland, although it does not introduce the sort of quality assurance concerns that you have, and certainly in terms of the experience we have had with the ILA scheme, that we share and will need to design into any successor scheme really a much stronger provision than before.

  53. In a sense the point I am getting at is, did the requirement for some sort of quality assurance go out of the window when technical systems did not mesh?
  54. (John Healey) No, because learndirect was not about providing quality assurance, as Peter Lauener said. It was about, first, trying to link up the information so the individual was better equipped with information about the options available to them; and, second, to provide a link-up so that any caller to learndirect could link through into the ILA registered provider system. It was not about quality assurance - that attempt to explore the link-up before the launch of the scheme.

    Paul Holmes

  55. There seems to be a clear contradiction in what you are saying and what Capita told us. Capita said that their software system etc was designed on the assumption that the learning providers register would be authenticated, accredited and so forth. They said because of that that is why it was relatively easy for the rogue trader to get access to the numbers they should not have had, and this is how this disk could come onto the market in November. They said the reason they produced their software was because they were working from the start on the assumption that all learning providers would be accredited. They gave us the clear impression, because we were asking about it in quite some detail, just as the scheme was about to go live effectively they discovered that the software systems could talk to each other; that, therefore, anybody could register with their name, address and bank account number. Capita were quite clearly saying that the scheme was fairly open to abuse by training providers who turned out not to be legitimate, and it had actually been designed to be relatively light on security because all along they worked on the assumption, right up to when they started, that training providers would be accredited.
  56. (Mr Lauener) I think there are two separate points mixed up in that. The first is that there was a very clear decision, as we have said, that there was a light touch issue and very little quality assurances to make the market work. The reason for that is that we expected that there would be a lot of providers brought into the system, as there were, and we expected that they would be fairly low value in terms of transactions, and that therefore to apply the more traditional quality assurance mechanisms on top of that would be a very high on-cost on what we expected to be low-value transactions. That is one issue. We were quite clear on this memorandum issue that in a successor scheme we needed stronger quality assurance arrangements. That is the first issue. The second issue is about getting the systems talking to each other. I think there was perhaps a bit of confusion in the way that Capita described the process, the original expectation that we might be able to get the Learning Direct information system and the ILA system talking to each other. That was in the original contract specification that was signed in November 2000, but that proved not to be possible. I do not think that had that proven to be possible, that would have been the answer on quality assurance, because that would not have brought the quality assurance on its own, we would still have needed to design a quality assurance. So the problem is not that the systems did not speak to each other; the problem is the decision on the light-touch quality assurance, which brought benefits - benefits which we want to retain - but also brought some problems.

  57. Can I also ask you the question we put to Capita as well on this? Capital were chosen as an expert company to design and deliver this system. It says in the memorandum here from the Minister that Capita were tasked to provide a robust and functional system and then to operate it. We said to Capita that this system was clearly not robust or functionally stopping abuse, scams, fraud, whatever, and so forth. We said to Capita, "Why didn't you say to the Minister, to the Department, right at the start, 'Yes, we can run this system the way you told us to, but it will be wide open to abuse'?" We said that Capita should certainly have spotted that, because they were telling us in their prospectus which we have that they run housing benefit schemes for various local authorities, so they would be very, very much up on the idea of the fact that people out there will try to defraud this sort of scheme. Capita came back essentially to the point, as I said at the start, that they thought that the learning providers would be accredited, would be legitimate, would be honest, and that is why their system was so open to abuse. If you chose Capita and paid them 50 million because they are so good and they are so cheap, did not somebody fall down there? Why did not Capita say to you, "This scheme is wide open to abuse"?
  58. (Mr Lauener) Again, in the "Lessons to Learn" bit of the memorandum we have drawn out some points about security in the system. We are quite clear about this, and in fact this is a point we have discussed with Capita in preparing the memorandum. We wanted to make sure that we agreed about the way that this was described in the memorandum. We are quite clear that any future programme will require stronger security measures, both in terms of specification and in terms of the architecture and then in terms of the management of security once a system is up and running. So we were quite clear that it needs to be better. Whatever the quality assurance arrangements, we need stronger security. There is certainly a balance and a bit of a trade-off, but it is not that you get much stronger quality assurance which could run with the same kind of security architecture; you need both in any programme.

  59. So everybody is accepting now that this has to be built into the next scheme, but surely when this scheme was designed, why did not (a) your Department take notice of Treasury publications on fraud, electronic fraud, etcetera, why did not you spot that it was wide open to abuse, and why did not (b) Capita, an expert firm that you paid 50 million to provide a robust and functional system, say to you, "Look, this is open to being ripped off"?
  60. (Mr Lauener) It is very easy looking back now and saying we can all see the problems which have happened and we can all see some of the things that we should have done to prevent them.

    Chairman

  61. No, Mr Lauener, it is not easy looking back.
  62. (Mr Lauener) It is much easier looking back than looking forward.

  63. The question my colleague is asking is that we all know that in the service provider agreement with Capita originally there was going to be quality assurance. You took that up because they could not meet the deadline and you wanted to get the programme up and running. We understand that, and that was the decision, but in terms of security, my colleague is absolutely right, one would have expected the contract price for Capita, and we are fascinated by all this because many of us on this Committee want to see these public/private sector agreements work and work well, but in this case, certainly in terms of the security, you would have expected Capita to have given better advice in terms of how to make the system secure, would you not?
  64. (Mr Lauener) Perhaps I can make three points on that. The first is that the point I was going to come on to in relation to security is that there are a whole nexus of points in "Lessons to Learn". The other one that I would draw attention to here is the definition of "business model". Had we drawn out the business model, not just defining the processes as we did, but defining the responsibility of different partners and the role of different partners as the business process worked through, then I think we would have been able to test better the programme that we developed in order to develop the possible security problems and then to develop countermeasures. Looking back, I can say that that was not done, and that is one of the lessons that we need to build into a future programme. That will allow a better definition of both countermeasures and management of information. On top of that, I am quite clear that the system, in terms of access to providers to navigate around the system, needs to be tighter than it was in the specification.

  65. So as a consumer you are perfectly happy with the level of service and the quality of service you got from Capita?
  66. (Mr Lauener) What I have described is a system that did not deliver the level of security that you wanted.

  67. No, Mr Lauener, you are the consumer, you were spending a lot of our constituents' money on this process. Were you happy with the service and the quality of service which you got from Capita?
  68. (John Healey) Let me answer that and be blunt. No. There were shortcomings in the security of the ILA system, shortcomings in the specification, which is certainly the Department's responsibility, drawing, I have to remind the Committee, on external expert advice, on the guidance internally from Government as well as some policy specialism that our officials brought to it as well. So there were problems with the specification, but there were also problems and shortcomings, in my view, in the provision of security and the management of security once the system was up and running. That is a matter between the Department and Capita, but clearly Capita were the expert technical specialists that we hired in this partnership to deliver the system, and I have to say, on a very positive note, that we have worked very closely and very constructively with Capita to try to get to the bottom of what was going on. We are talking very constructively with them also about the lessons that we need to draw from this, and we are exploring with them, as we are with, for instance, the Learning and Skills Council, options that we might have for the delivery of any successor scheme.

    Mr Pollard

  69. Two weeks ago I asked Capita - who are coming to see us again tomorrow - about their expertise in housing benefit. This follows on from what my colleague Paul Holmes said about housing benefit procedures. There is great expertise in this all over the place. I know from my work with local councils over the years that with housing benefit there is a lot of fraud there, massive forms to fill in and all that, yet on this particular scheme a one-page form only to get access to the money. My question to Capita was that with their expertise in all of this, they should have realised that this scheme was absolutely wide open to abuse of all sorts. That seemed to be the case if you look at your Annex 1 which said that in one month the number of complaints doubled and the proportion doubled as well. That clearly was a time when you said, "Well bugger this, we've got to draw the line under here and stop this." I understand all this. Who designed the form? Capita said, "We just did what we were told" virtually last week when I asked them. Therefore, was the contract wrong? Was it too sloppy? Who designed the form, and did you approve the one-page form at the end of the day?
  70. (Mr Lauener) I am not sure whether I can say in detail who ----

    Mr Pollard: I do not want the name or anything like that. Was it your department or was it them?

    Chairman

  71. Or was it KPMG?
  72. (Mr Lauener) I think - but I would have to check - Capita designed the form against the specification because they designed the business processes that would make the ILA programme work. I would have to take that away and confirm that, and I will do that in a note. Again, we are clear that the set of systems and processes that need to be put in place need to be more robust in future, and that is the start point to end point. What we must not do is just default to the set of systems and processes that are in use for what are generally much larger volume and value contracts, because that would result in too heavy an on-cost on the programme and make it much more difficult to achieve the involvement of new, small-scale niche providers, many of whom have done an excellent job on this. So we do need to find a new balance on this but we do need more robust systems and processes across the piece.

    (John Healey) I quite understand the Committee's desire to, in a sense, get to the bottom of this and be able to point a finger at, perhaps, one party or even one individual, but the nature of the development work, as I have examined it and understand it to have gone on, was very intense, was very much developed between the department and Capita, with other advice and guidance. So, in a sense, who designed the form is perhaps not the question. It was clearly an effort that would have been done between the department and Capita. The two questions that are relevant, if I may suggest, is who is responsible for it and then, I think, I would have to say the department would have signed off that form. Second, whose expertise was drawn on in developing that form in order to provide data to service the design of the operating systems. Clearly, whilst that was, again, jointly determined we were drawing very heavily on Capita because they were clearly our specialist technical suppliers and they were responsible for the operational design and then the operational management of the ILA system.

    Mr Pollard

  73. I would have expected Capita, with their vast experience - where I started from - to say to the department "Look, this system is open to abuse." It is where I started from. Did they ever say "Hang on a minute, look at housing benefit, look at the trouble we had there."? I accept the point you made that you have got to be careful, this is 200, not 200 a week, it is a one-off 200, so you do not want a system that costs 5 million to administer, you want it to be reasonable and proportionate. I accept all of that. Did they draw to your attention that this was potentially open to abuse and then come back to you in the last month and say, tongue in cheek, "Well, we told you so, didn't we"?
  74. (Mr Lauener) In the design stages we were, as John Healey has explained, in it together and neither of us said to each other "We are designing a system that is going to be wide open to abuse". If we had done that the chances are we would not be here today quite in this way. In the subsequent monitoring and management of the programme, we sent some supplementary notes with minutes of various meetings between Capita and the department, which are quite hard to follow because they are all out of context, but they are designed to give a flavour for the way we discussed and managed things together during the programme. There were several times when we were discussing problems together and we discussed some of the earlier problems when there was no cap on the 80 per cent discount and what we should do about that, and the information that was coming through. From about June onwards we were in almost daily discussion about how we could design out the problems and Capita made a number of very good suggestions about how we could tighten things up, and we implemented a lot of these in July and over the summer. Despite going through all that, we then reached the point in the Autumn when we thought that this was a series of sticking plasters we had been putting on a programme that was fundamentally flawed. Indeed, there were a number of providers who, as quick as we were moving to try and clamp down, were moving quickly to get round the things we put in place. That is why we felt we had to stop and get precisely to the bottom of the problems, go through all the investigations and discussion with the police where we thought there was fraud and abuse, and redesign the programme. So we were very actively involved in sharing information and perceptions from the early summer onwards, as evidence began to accumulate.

    Mr Simmonds

  75. I would like to follow up from Mr Pollard's comments. The Minister, particularly, seems unhappy with some of the performance of Capita in various areas. I wonder whether you could give an assurance to the Committee that Capita will not be involved in any successor scheme because of their lack of performance during the previous scheme? If you are not prepared to give that assurance, why not?
  76. (John Healey) I am not able and I am not prepared to give that assurance. I will come back to that. I am unhappy not specifically with Capita but I am unhappy at the situation in which we find ourselves, with a scheme that was devised and designed to be so innovative in the early months and had demonstrated its value. I am deeply unhappy that it unravelled. I think responsibility for that rests across the piece rather than just with Capita as our Public Private Partnership provider. In terms of the successor scheme that we are committed to introducing, one option, clearly, is for us to tighten up the rules of the scheme, introduce the quality assurance that we now, I think, are agreed is required and to tighten up also the security in the operation systems, and, therefore, to continue with our partnership with Capita in order to deliver a secure and successful second scheme. That is not our only option, because as I mentioned earlier on we are looking at the role that the Learning and Skills Councils, certainly in England, could play in the successor scheme, but it is clearly an option and to rule it out at the moment would be a mistake and would make it much more difficult potentially to deliver a new scheme.

  77. It is something you are prepared to look at, because obviously Capita were one of the problem areas. I accept there was more than one problem area, but it is something you would look at.
  78. (John Healey) I am prepared to look at it. In part I am prepared to look at it because Capita are prepared to look at it so constructively as well. I have said earlier on that as these problems emerged over the summer, and facing the difficulties that we have had in winding down and ending the scheme, and then the investigations to get to the bottom of the problem, I cannot fault the degree to which Capita have worked with us closely. Clearly, we are also beginning discussions about whether we can get over the sort of problems we have had and, if so, that could be the basis for launching a successful successor scheme.

    Chairman: We do want to get on to that quite quickly.

    Valerie Davey

  79. Very quickly, Capita informed us that they were not giving you education advice and that that whole area was not their remit. So they were suggesting that you needed another group to give you advice; the DFES needed advice on education monitoring provision. The whole of the Capita material that we have had seems to be very much this whole process. For example, the telephone calls they got on complaints - and you listed the numbers - seems to be a number-crunching exercise: how quickly could they respond to complaints, not anything about the nature of those complaints. It is this dysfunction between them progressing something which was your original specification, whereas, as the Minister indicated, the specification was the problem. So if the specification is the problem, how are you actually then going to input to that specification educational quality in terms of both the provider and what the individual learner receives?
  80. (Mr Lauener) A couple of thoughts on that at this stage. I think we need to be absolutely clear, we did not commission Capita to be experts on training quality, training provision ----

  81. Despite all their experience in that area?
  82. (Mr Lauener) Their expertise is in providing systems to make things happen; to provide support systems. They are not policy analysts, policy designers, and I do not think they would claim to be.

    (John Healey) We felt we had that expertise.

  83. Exactly.
  84. (John Healey) Which indeed we do.

    (Mr Lauener) At that very broad level we are clear in what we asked Capita to do. The figures that you talked about are actually very important. I do not think it is right just to view this as a data-churning process. One of the things we wanted, very clearly, from Capita was a good customer service interface; we wanted people to be able to 'phone up and get an efficient service that they would recognise as a service. That was actually about changing the nature of the way people related with the learning system. So it was very important that when people 'phoned up they got a good service, and a lot of the figures you refer to are about monitoring the quality of that.

  85. Hold on, were the complaints trivial and of the nature of "The money has not come through", or whatever, or are they more serious about "The education I am getting does not lead anywhere. I have spent the last three months ----"?
  86. (Mr Lauener) They covered both, and we did have a system for analysing the nature of the complaints coming back.

  87. You had a system?
  88. (Mr Lauener) No, we got some analysis from Capita of the nature of the complaints coming back, and then the front end, where there were serious complaints coming back, we would take into our formal investigation process, but it was our responsibility to take it through our special investigations unit and, if necessary, on to the police. There is one other point I would like to flag up: you place quite a lot of stress - and I think rightly - on monitoring complaints, because that is a very important indicator, but we also place a lot of stress, regardless of whether there were complaints or not, on Capita providing an efficient and speedy response service to people who did not complain but were just 'phoning up to find out information. We wanted that dealt with effectively and efficiently, and Capita's expertise is precisely in providing that kind of service.

  89. Does that not indicate, again, exactly that this is a processing point, and if anyone had an educational argument or a difficult with their provider, they were not the people to answer that?
  90. (Mr Lauener) I think that touches on another point that the Select Committee looked at before, when I appeared with my colleague Derek Grover, which is the importance of information, advice and guidance, which I think is certainly an issue that needs to be looked at. I also think, if I can say, that as well as monitoring the things that I have described that we monitored through the Capita contract we also thought it very important to evaluate some of these educational outcomes and the sense in which the policy objectives were being achieved. That is why we commissioned York Consulting to produce the really quite interesting evaluation results with the very positive results that John Healey referred to earlier.

    Mr Shaw

  91. You said earlier that when you were designing the system you did not ask yourselves "How can we create a system that is wide open to abuse?". It seems from all the evidence that what you should have been asking yourself is "Is our system open to abuse?" I think you could have only made one conclusion. We have heard from yourselves and from Capita "in hindsight", "with the benefit of hindsight", but I think it is reasonable for us to hold you to account, saying "What were you doing?" I wonder, Minister, when you arrived at your office in June and you were told by officials that there were concerns about ILA, did they show you the 12 bullet-point form that was required to be filled in by providers? Were you ever aware of the sparse nature of this form? When did you become aware of exactly what people had to provide - getting down to the nitty-gritty of how this scam and abuse occurred?
  92. (John Healey) You may be aware, if you look at the chronology, that that provider agreement was introduced after I took up my post. It was one of those series of measures that we introduced in late June, July, August and September that I detailed in paragraph 20 of our memorandum. Within the overall design of the scheme, those were the measures that we were able to take. In fact, one page as that might be, that significantly reinforced our grounds for, first of all, suspending providers who were contravening those and, second, moving to withhold payments or recoup payments that were made for learning and activities that contravened those. So in terms of tightening up the rules of the scheme, I do not think one should always look for a hefty volume. You look at the dimensions of the learning providers that actually agree to that agreement, it covers many of the areas that we were concerned about. It was not tough enough in the end, it did not toughen up the scheme sufficiently for us to stamp out the abuse, but that is not necessarily the problem of the product simply being a one-page agreement.

    Mr Shaw: I think that people might take the view that there is quite a big difference between this and a hefty volume, and that somewhere inbetween is what we want to ensure safeguards. Moving on, as you mentioned, Minister, to the chronology of events, last autumn -----

    Chairman: Could I ask you to hold that for a second, because Paul Holmes wants a quick supplementary on performance.

    Paul Holmes

  93. In all the various meetings you have put a lot of emphasis on how few complaints were actually received about the total scheme, and right at the end it was still only 0.61 per cent of the total. Are you confident that that is an accurate picture? The Committee has had quite a lot of written evidence and some oral evidence from learning providers who have said that it was very difficult to get hold of Capita to log complaints with them. In fact one of the written pieces of evidence from one set of providers said that of all the help lines they have ever had to use professionally Capita's was the worst they have ever come across, there seemed to be no complaints procedure and you could not get your complaints logged. So are you confident that the low level of complaints which you were receiving on the problems actually does reflect the amount of complaints which people were trying to log with Capita but, from what they are saying, they could not log with Capita?
  94. (John Healey) In terms of heavy traffic and heavy pressure, we are aware that the Capita system sometimes struggled in logging on, and transacting the business that learning providers wanted to do was sometimes difficult. There is an element I would just caution Mr Holmes to think about. In many ways there is something of a "scapegoating" of Capita in the Department just at present in terms of the retrospective review of how the system operated. In terms of your specific question, this is the data that we have, this is what we have to go on. It is impossible to tell whether or not there may be additional complaints that would have been logged if people were able to get on the telephone or the website the first time round. Whether or not these are an under-reckoning of the complaints, though, the nature and the volume, in my judgement, was sufficiently serious for us to have the concerns about the scheme and take the action we took to try to deal with them.

    (Mr Lauener) Perhaps I could add one point very quickly on that. We do still plan some further follow-up of individuals. Particularly where we are carrying out investigations of particular providers, we think part of the investigation we make will have to be to contact some individuals and be clear whether they have had the learning that the learning provider is claiming, or whether they have made a contribution. So we are certainly not leaving it just there, but I have to say, particularly with the pattern of build-up, that I regard these figures, even if they may be understated, as showing quite a rapid build-of serious complaints.

    Chairman: We have to move on. Jonathan Shaw wants to talk about chronology.

    Mr Shaw

  95. Last autumn, when you became concerned about fraud, at the same time there were the spiralling costs, the 62.9 million overspend, and at the same time we had the success of 2.5 million account holders. Also at the same time the Department published the document "Delivering Results - a Strategy to 2006" that said it was the intention to expand ILA accounts. Is there some competing demand here?
  96. (John Healey) No, I would not describe it as "competing demand". In a sense, there is a difference between long-term policy aim and immediate challenges. By that long-term policy aim I mean if you consider the work of the Performance Innovation Unit, for instance, the work of that unit and the report they published at the end of November, alongside the Chancellor's pre-Budget Report, you will see that very much across Government there is the same sort of policy aspiration as you see in that document there; that placing more of the power to determine learning appropriated by individuals is an aspiration which is likely first to increase the interest that people take in their own learning, secondly to give us a vehicle where the individual is likely to invest more in their own training, and thirdly likely to produce a system where the providers of training are more responsive to what the individual is really needing and wanting. So in the long term the mechanism of an individual learning account could become very much more than it is at the moment. At the moment it is a relatively small-scale discount scheme to try to hook new learners into new learning. Let us get a sense of proportion. 70 million is roughly the annual budget of the ILA scheme. We fund adult learners to more than 2 billion, for instance, through the further education system. This is a drop in the ocean in terms of overall funding, but a very important new mechanism for hooking new individuals in and giving them a stronger sense that it is they who are making the decisions and can determine the learning. So in terms of long-term aim, if we are able to meet the short-term challenge, which is now mop up the problems we have had on the first scheme, launch a successor scheme that can be secure and successful and, if you like, rebuild the confidence in the credibility and confidence in the policy itself, then after that, but only after that, we may be in a position where we can pursue the sort of aspirations that you have seen in the document there to expand and develop the concept of the ILA further.

  97. It is a milestone. I am not sure a milestone is an aspiration, but clearly it is a milestone as it is laid down in this document. Is there a target beyond 2.5 million?
  98. (John Healey) The 2.5 million was the number of accounts opened - in fact about 2.6 million when we closed down the scheme. The redesign of the successor scheme will redefine the targets numerically and in terms of the sort of learners and the sort of learning we do wish to encourage through the Individual Learning Accounts.

  99. The Chairman mentioned at the beginning of the session about asking questions about the relationship between the Treasury and the Department. You made it clear that it was a decision that the Department made internally and then advised Number Ten and Number Eleven. What is going to happen about this 62 million overspend? Are you going to have to recover those costs? I am thinking, for example, that if, say, a college of further education overspent by this amount of money or equivalent proportion and Ofsted went in, they would clobber them, would they not? They certainly would not say that they were good value for money, would they?
  100. (John Healey) No. The overspend as at 31 January was 66.7 million. That is overspending on the 202.1 million two-year budget that we had. That will be theirs, I think we have now made clear, within the existing departmental resources, In fact, it is very much as a college would; if they have a similar sort of scale of overspend on their budget, they expect to be able to manage those sorts of variations and fluctuations within their overall programme. So that is what the Department has done. That is how the overspend on these two years of the programme will be covered. In terms of funding for a relaunched successor scheme, our budget for the next financial year for individual learning accounts is about 70 million. The Treasury and Number 10 are very keen still on the concept and the policy of individual learning accounts, I am delighted to say. We have looked quite carefully at the sort of plans that we might want to put in place, because in a way we have very much got a point to prove, as the Minister responsible I now have a point to prove that we can design, devise and deliver successfully a secure ILA II scheme and rebuild the confidence and credibility that we would like to have seen from the first scheme that in the end was corrupted and undermined by the activities of that minority of providers that abused it.

  101. Can I ask one question on the disk that was provided to the Department with the names and addresses of account holders. How many people are we talking about?
  102. (John Healey) When our Special Investigations Unit went to see the learning provider that had contacted us on Wednesday 21 November, they were handed on Thursday 22 November a disk. It was explained to them it was a sample of the data that was apparently being offered for sale and this disk had details of almost 1,000 individual learning account holders, names, addresses, contact numbers, UK residency status and ILA account numbers. The Special Investigations Unit returned that to the office, ran a check on it and the vast bulk of that individual data was demonstrated to be live, in other words ILA accounts which had not been activated with the exception of a few that had been drawn down in the previous few days. Alongside that were rumours circulating (and they were just stories at that time) that there were many thousands of such individual learning account data available and being offered for sale. It is in those circumstances, having confirmed what were potentially very serious allegations of potential fraud and theft, that we took that decision on Friday 23, when Estelle Morris and I were briefed on this, that day to close down the scheme. That was the nature of the evidence described to you.

    Mr Shaw: Have you any idea at the moment of how many thousands you are talking about?

    Chairman

  103. I really want to move on to looking at the future scheme and we are running out of time.
  104. (Mr Lauener) We cannot say for certain because we are following up a great number of loan providers that I have referred to earlier and the figures that are given in Annex 2 sum up the amounts of money that we have withheld from providers where they are under investigation, the claims that are still to follow for learning accounts in dispute, so there is quite some millions of pounds in the value of these claims, either in providers where we have withheld the money already or where those providers have -

    Chairman: A brief question and a brief answer.

    Mr Shaw

  105. Is there any link between those people you are holding back payment for and the names and addresses you have got on the disk, any link between those providers?
  106. (Mr Lauener) Our investigations have shown a number of providers that were linked to the names on the disk and they are included in our follow-up investigations.

    Mr Holmes

  107. Moving on to the launch of ILA II, in doing that you are going to need the help of the legitimate learning providers. Again, we have had various evidence presented to us of learning providers who have gone bankrupt as well as some non-profit making groups and some community groups. We have heard from Preston College that they have lost 300,000 because of the way the scheme was closed, that was the single biggest amount, and yet you say you have got no contract with them and you will pay no compensation. Is that still the case?
  108. (John Healey) Yes.

  109. Going on to an area we have asked you about before, some of the companies who provided training were working to their normal accountancy procedure of doing their accounts at the end of the month. You sent out a letter to all two and a half million account holders saying you were going to close the scheme on 7 December. In that letter that you wrote to all those account holders, you said, "Don't panic. Don't be rushed into signing up for something quickly, you have got until 7 December." Training providers, reading that letter, assumed that you were promising they had got until 7 December. As a result, some training providers, like one in my constituency where there were 196 people on their account, have lost all that money because they were following in good faith what you told them and the letter that you sent to two and a half million account holders saying "don't panic, don't rush". Do you not feel that you have any obligation at all to these people and these companies?
  110. (John Healey) I deeply regret what we had to do but, to be quite honest, the evidence of the disk that Mr Shaw has asked us about emerging on 23 November changed circumstances. It meant that we had no other option, and it was a reasonable and proper decision to take, in my view, that we closed down the scheme with immediate effect, in effect, I readily recognise, cutting by two weeks the time by which we had planned to wind up the scheme and there were inevitably individuals that would have lost out and learning providers that would have lost out, individuals whose learning providers would have been planning to book that learning on the system or make the claims for that learning after 23 November but before 7 December. We have had this conversation before. Closed for us had to mean closed. We had to freeze the system. We did so to protect the possibility of significant public funds being drawn from the system once we knew the nature of the data which was circulating. We did so on police advice and we froze the operation of the system. We isolated physically the sites where there data was kept. We therefore were not able to operate the system beyond 23 November and in those circumstances, those very particular circumstances we are faced with, we had to alter our plans, alter the decision we had taken which was to wind it up on 7 December and, despite being very conscious of the impact of a lot of individual learners and learning providers, we simply cannot operate some sort of scheme where people are saying we would have booked this learning or made this claim if you had not taken that action on 23 November. So logistically, as we have discussed Mr Holmes, that would not be feasible. It would not be the right course of action for us either.

  111. Where an organisation like Preston College, for example, or like a training company in my constituency have lost money, they have actually delivered this training because they felt honour-bound to go through with the training, they can prove they have delivered it, they have all the records, they have the account holders - the alleged accounts holders - who actually got the training; where they can prove that they actually delivered this training, but did not register because they took your letter of 23 November at face value, why cannot you still authenticate that training that was provided by legitimate companies and colleges?
  112. (John Healey) All I can say and repeat here is that the circumstances we faced on 23 November entirely changed the decision that we had to take and therefore the steps that we had to take to wind up the scheme. We closed it. We had to draw the line then. In practical terms it would have been very difficult to do otherwise, and in terms of public expenditure and the protection of that, which is part of my duty and Peter Lauener's duty, we simply had no other option.

    Chairman: I think we hear you on that. Valerie Davey.

    Valerie Davey

  113. Improved security for the future will depend on the Cap Gemini study and report, no doubt. When will we be able to see that report?
  114. (John Healey) I think I have undertaken in my memorandum to let the Committee have the main findings of that report. I expect to receive that report next month. You are right, Ms Davey, that will be an important part of making the judgement that we will have to make about how we look to design and then deliver any policy decisions we have to take for a successor scheme.

  115. I know why you want to go on with this in more detail, but very broadly, then, given that you are talking about next month and the following month, have you any idea when the date that we are all looking forward to will be announced when this will be redrawn? Have you any idea at all?
  116. (John Healey) I shall do it as soon as I possibly can. The elements of the future evidence that I think I need to be in a position to make a proper judgement about, as to when it is realistic to relaunch the ILA scheme, include the Cap Gemini report, as you rightly say. We have an internal audit going on in the Department as well.

    Chairman

  117. When will we get that? When will we see sight of your internal audit?
  118. (John Healey) I am happy to let you have the main findings of that as well, in a similar way as with the Cap Gemini report when that is available.

  119. ETA on that?
  120. (John Healey) I am expecting that and the Cap Gemini report next month. If I may finish, the comprehensive consultation which we are undertaking at the moment, on which I supply details in the memorandum, will be completed by the end of next month as well. I am looking for the work that we are doing in discussion with Capita and the Learning and Skills Council on the possible design features of any new programme for delivering that to be coming to me on a similar timescale next month, and although this is obviously a matter for the Committee, I very much hope that the fifth element of the evidence that I have to drawn on will be the report and the conclusions of this Committee. If that is again delivered next month, that can form an important part of our thinking.

    Jeff Ennis

  121. Continuing on the memorandum and the section of the memorandum to do with lessons to be learned from the existing scheme, you quite rightly say that a balance has to be struck between openness and security, but what sort of level of verification checks will have to be brought into the new system without wanting to put off new learners? Who will have overall responsibility this time for making sure that the verification checks are carried out?
  122. (John Healey) I think the principal verification quality assurance needs to be around the learning provider that is registered, in order to deliver training or learning that we will be prepared to offer some support to through an ILA scheme. That is going to be the principal check. Whether or not we also try to introduce systematic quality assurance at the other end, if you like, in terms of the learning that is actually delivered, is quite an open policy point for us at the moment which would clearly have implications for the design and the delivery of any scheme that we introduce. What is emerging is that Members of the Committee will be aware that our first stage of consultation was a telephone interview with 400 learning providers that have offered to help us design a new scheme. One of the features that has come through very clearly there is strong support for withholding an element of the ILA payment until after completion of the learning. That may be - may be - a way that we can introduce some sort of check on the delivery of learning, without necessarily having a complex or comprehensive system for somehow accrediting the actual nature of the learning.

    Chairman

  123. Minister, one thing that worries us is that if this was in the private sector I think your boss would say to you, "We've had a substantial setback in this. We want to relaunch. I'm telling you, Minister," - or "young Healey," - that we want this by now, by that date, by this date, a specific date," to give you a target, to energise you. It seems to me, reading your material coming out of the Department and listening to you, that you can consult forever. What people out there, both providers and potential ILA customers, want is a date. Can I say that Budget Day will be the relaunch, or is that too early?
  124. (John Healey) I am certainly not so young, Mr Chairman! I understand the sort of agitation to have some announcement about when we expect to be able to relaunch the scheme. I will make that announcement, or I will be able to advise the Secretary of State, as undoubtedly she will want to make that announcement just as soon as we can. It is absolutely not a question of stretching consultation out ad infinitem. I have referred you to one of the interim findings that we have had already. We have several others. That consultation will be completed next month and that will form a part, but only a part, as I have explained, of the sort of evidence and the analysis that we need in order to make those decisions. In terms of the Secretary of State, I think she may like a date, but I think what she would like more than that is actually a certainty that when we announce when we propose to relaunch the scheme, we will be able to do so on that timescale. I think that we will be able to relaunch a scheme that builds on the lessons and all the mistakes that we have had in the first scheme. So I think that if you were to be speaking to the Secretary of State, that would be her first priority.

    Mr Turner

  125. I have two questions. Do you have any idea of the number of jobs lost, the amount of financial loss, the number of businesses closed, the number of bankruptcies that have resulted from this decision?
  126. (John Healey) No. We have some anecdotes and some individual cases that come to our attention, but the decisions that learning providers are taking in these circumstances, just as they took when the scheme was operational, really are a matter for them; we are not involved in those decisions, therefore we do not have a systematic way of gathering that sort of data.

  127. Secondly, you have talked about abuse ranging from fraud to scams - or other people have used the word "scams".
  128. (John Healey) Fraud, scams and simply - and this is the majority - complaints about how the system is operating, they cannot get through to Capita, disagreeing with the discontinuation of the 150 discount.

  129. Setting aside the latter group, because there may be problems, but nobody is alleging that anything wrong has been done, I am very unclear - and I do not think this learning provider agreement helps you very much - on what is legitimate. I can recognise fraud when I see it, but I am not clear whether, for instance, supermarket selling or door-to-door selling is "inappropriate marketing", in your words. Are you clear what is inappropriate and what is appropriate? If you are not, how can the providers have been clear?
  130. (John Healey) Yes, I am quite clear that door-to-door selling of learning is not appropriate.

  131. It is not appropriate?
  132. (John Healey) It is not appropriate. What is appropriate is the sort of provision that 91 per cent of the ILA account holders said met or exceeded their expectations. There is some interesting evidence, if you will bear with me, from York Consulting, in which they found that 31 per cent of a group of people who had used their ILA were not aware that they had got the ILA. Most of them were aware that they were getting government support for the training, but it had not been put to them by the learning providers that here was a mechanism that was the Individual Learning Account, it gave them individual decisions. I think that in any successor scheme we need to try to tease that out and emphasise that more strongly, because if we are going to realise the policy ambition of this, then the individuals involved, taking out the accounts and then taking up the learning helped by the account, need to understand more clearly the sort of mechanism that they are using.

    Chairman

  133. Minister, surely door-to-door, knocking on doors, is appropriate? After all, we all, as politicians in this room, are experts in door-to-door sales techniques - or we should be. In a sense, one of the things that most of us really dislike about the evidence we have had is when people talk about deadweight, because there is one bit of it that says, "We really want the culture of education and training in our country to change", and if you do that, of course there are a lot of people who could afford, or might have afforded or whatever, to come back into education and training, and we want to encourage that as well as the people who have had no training. One of the things that we might find is that some of this supermarket selling and knocking on doors is actually a rather good way to get through and expand the 16 per cent who have never had any training. So I would not throw out that baby with the bathwater. As long as the quality assurance is there, I certainly would not mind, and many of our colleagues would not mind, a knock on the door that reaches people in a way that other techniques do not reach them.
  134. (John Healey) You may be right to caution me not to reject it out of hand. There may not be that much difference between selling learning and selling a politician. I think that both involve not just contact but actually the quality of the information and understanding the same strategy. If that sort of relationship is established and that sort of clarity is established, then perhaps there may be a role for us in some form of door-to-door canvassing.

  135. Minister, I was driving on a wet Sunday afternoon when I heard you on File on Four, when I knew that there would be an investigation by this Committee as I heard your words on the programme. One of the things that I very much admired in what you said on that day was that you said that at the end of the day people are intelligent enough to be trusted to make choices in their life about big choices - insurance policies, mortgages, tens of thousands of pounds decisions - so why should we not trust them to judge whether the quality of what they buy in education and training is up to them, why do we not trust them? So I hope, again coming out of our evidence, that we are not going to throw that away, and that at the end of the day, do you not agree, to some extent we have to trust people to make their own choices in life?
  136. (John Healey) I do agree with that and I do intend to hang onto that as a core principle within the scheme, because in the end it has to be the individual who is best placed to make decisions about what learning is best for them. That was in part what was so fresh about the concept of the ILA, and that is one of the features, I think, that is special about the scheme and that we certainly do not want to lose; albeit it needs to be balanced with the sort of quality assurance that we have discussed this morning, we certainly do not want to lose that in any successor scheme.

  137. To finish, can we take you back to how we started. One of the areas of concern might be how, when ministerial jobs change, there is not enough transition that actually seems to be seen. It did seem to some members of the Committee - certainly to myself when I heard you say you never spoke to the previous Minister at doing your job - that that came as a slight concern that there is not that sort of historic memory. If you cannot provide it as a Minister or as a ministerial team, one wonders if the Civil Service do that job well enough, because as we were reminded by some of the written evidence we have had, these kinds of scams, fraud and problems with programmes are not new to the Department, and only a very short time ago we had disenfranchising, and many of the accusations about the rather slipshod approach by the Department in respect of Individual Learning Accounts apply equally to franchising. In terms of that historic memory, do you not think it is a concern that there was a very similar sort of case and perhaps we did not learn the lessons and it was not transmitted through time in the Department?
  138. (John Healey) Clearly, in the nature of our Constitution and the Executive, the principal historic repository for the memory is the Civil Service. I came new, as a fresh Minister, into this job. One of the lessons I draw from that is that if I were ever offered any other ministerial job, then one of the first things I would do is try to tap the historical political memory to set alongside any Civil Service memory. The other thing I will do, whatever happens to me, will be to make sure that any successor of mine I seek out and offer them the opportunity of some reflections and experience that I have had and have been lucky enough to have had so far in this job. It is a very serious point actually that I know you are making. I am being rather light-hearted about it, but handover, induction, I think does need something of a collective political dimension as well as the sort of Executive policy dimension that the Civil Service is pretty good at providing.

    (Mr Lauener) Perhaps I could add one sentence to that.

  139. The historic memory!
  140. (Mr Lauener) It sounded like a bit of a cue, did it not? On the subject of the condition with a new set of Ministers, the Civil Service does try to deal as well as we can with that. I think there is also a longer-term point about accumulating memory and understanding which again we have alluded to in "Lessons to Learn". We do feel that we need to take further steps to share across Government the lessons that we have learnt and, I think, also to establish a bit more of a standing mechanism to share lessons about individual providers across government departments, because there are a number of government departments, it is not just a matter of the Department for Education and Skills and its related agencies like the Learning and Skills Council, there are other Departments with a very considerable interest, like the Department of Work and Pensions and government offices.

    Mr Shaw: I wonder if Martin Sixsmith will be of use to the Civil Service in this!

    Chairman

  141. I think that is outside our terms of reference. Can I conclude by thanking the Minister and Peter Lauener for their attendance. Can I also say that I wish them bon voyage, because I know that John Healey and the Secretary of State are off to Paris, I believe, for a British Council piece of work. Will you please tell anyone you meet there that the Select Committee will be following you shortly and hope we will be accorded all the usual civilities. Can I also tell you that I know that because Robert Rees, who has been our researcher on this Committee for four years, is now retiring, we shall be saying goodnight to him and goodbye to him this evening at a little reception, and that that is the reason why you cannot attend. So bon voyage to Paris.

(John Healey) As it happens, Mr Chairman, I am now unable to go to Paris, but I am able to attend your reception if the invitation is still there.

Chairman: The invitation is still there. Thank you.