Examination of Witnesses (Questions 560
TUESDAY 26 FEBRUARY 2002
560. You had a system?
(Mr Lauener) 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 stressand I think rightlyon
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.
561. 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?
(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 Ltd to produce the really quite interesting
evaluation results with the very positive results that John Healey
referred to earlier.
562. 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 providegetting down
to the nitty-gritty of how this scam and abuse occurred?
(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 a 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.
563. 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?
(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.
564. 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 Resultsa
Strategy to 2006" that said it was the intention to expand
ILA accounts. Is there some competing demand here?
(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 "In
Demand: Adult Skills in the 21st Century" they published
in December, 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 to 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.
565. 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?
(John Healey) The 2.5 million was the number of accounts
openedin 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
566. 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?
(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 found, 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.
567. 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?
(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 November, 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?
568. I really want to move on to looking at
the future scheme and we are running out of time.
(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, and 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 related
to providers where we have withheld the money already or where
those providers have
Chairman: A brief question and a brief answer.
569. 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?
(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.
570. 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?
(John Healey) Yes.
571. 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?
(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.
572. 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 holdersthe alleged accounts holderswho
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
(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
573. 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?
(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.
574. 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?
(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.
575. When will we get that? When will we see
sight of your internal audit?
(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.
576. ETA on that?
(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
577. 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
(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 bemay bea 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.
578. 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?
(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 I 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.
579. 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?
(John Healey) No. We have some anecdotes and some
individual cases that have 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.