Memorandum from the Learning and Skills
Council (ILA 31)
INDIVIDUAL LEARNING ACCOUNTS
1. This memorandum splits into three sections:
a. ("the history") outlines briefly
the involvement of LSC's predecessor bodies (notably Training
and Enterprise Councils and the Further Education Funding Council)
with pilot ILA schemes in the period 1998-2000 before the national
scheme superseded them.
b. ("the present") notes actions
which LSC has taken since suspension and withdrawal of the national
c. ("the future") outlines why
LSC supports the principles and concepts of learning accounts,
in particular to support demand by individuals and employers for
effective workforce development. This section sets out some criteria
which might underpin future national arrangements for learning
A. THE HISTORY:
2. The 1997 Labour manifesto committed the
new Government to establish one million Individual Learning Accounts
(ILAs), to drive up demand for lifelong learning through a subsidy
towards learning and training costs, triggered by a contribution
from the individual. In the period 1998-2000 the Training and
Enterprise Councils (TECs), and in 2000 the Further Education
Funding Council (FEFC), the two main predecessor systems of the
Learning and Skills Council (LSC), were actively involved. In
September 2000 the Government decided to institute a national
scheme, the tender for which was won by Capita, and the TEC and
FEFC pilots were wound down. It is worth noting the key points
of these pilots.
3. The 1997 manifesto commitment, confirmed
in the Government's Green Paper "The Learning Age" in
1998, led to an invitation to TECs to bid for development funding
to run projects to develop learning accounts at local level. From
1998 to 2000 over 200,000 TEC-based learning accounts were opened
locally through participating TECs and benefited from the initial
discounts. Once the new national scheme was instituted, unspent
balances in individuals' accounts held with TECs were transferred
into the Capita-based scheme.
4. 13 pilot projects were run by TECs between
1998 and 2000. They used a variety of models, from actual financial
accounts with banks and credit unions, to TEC-run virtual accounts
involving voucher-type systems. Some of this work had begun prior
to 1998, funded through other budgets and TEC reserves. The pilots
focused on working with different partners and groups to engage
new learners. Three are worth highlighting:
"Gloucestershire TEC: a partnership
with HSBC, using a re-branded savings account. Account holders
saved by regular standing order, typically from their current
account, and the contribution was matched by the TEC (paid to
the learning provider rather than into the bank account) up to
a ceiling of, 150 (ie enabling a total expenditure of £300
at 50 per cent). Although the learning was not limited to TEC-approved
providers, no problems with quality assurance were encountered.
The account remained live after the discount ceiling was reached,
encouraging the learner to continue saving through the standing
order. The accounts were promoted as a package of benefits for
account holders, offering discounts both on courses, and on peripherals
eg books purchased through local retail outlets. The Bank reported
a steady growth in learners opening and maintaining accounts,
so that in total 6,000 accounts were open and regularly topped
up by learner contributions by the time the TEC ceased supporting
the scheme in September 2000. Some of these accounts remain active.
Hereford and Worcester TECa
credit union model, working with local credit unions and community
groups; also adopted in NW London. Borrowing, saving and immediate
purchase of learning were all permitted. There was involvement
of trades union and others. This model was particularly successful
in promoting community regeneration and combating social exclusion.
Birmingham Learning Exchange (Birmingham
and Solihull TEC): this model was an active partnership between
the TEC, local colleges, local authority, careers service, university
and Chamber of Commerce, all of whom committed core funding; the
TEC added from its balances up to £150 per pilot account
holder. Accounts could be held collectively rather than individually,
allowing larger or smaller sums than £150 to be committed,
via loans or cash. Learning supported included fee subsidies for
professional training, interest-free loans for people lacking
Level 2 qualifications, and much else. The scheme was managed
by the TEC, but accounts were held with HSBC Bank which provided
professional advice on a pro bono basis. A feature of the scheme
was the active involvement of employer development managers, trades
unions, clubs, police, health and other community groups. The
scheme was able to cater for sectoral and occupational needs (developing
specific provision for childcare and other training), and for
local needs. The Birmingham Learning Exchange wound up in February
2000the last of all the pre-Capita pilotsand was
handed over with all resources to the local colleges to form the
local UfI/Learndirect hub. Some 8,500 learners had benefited from
5. There is useful experience available
from these pilots, most of which has transferred into LSC (often
in the same locations). In LSC's view, this experience should
inform any "mark 2" version of a national framework.
6. In November 1999 DfEE asked FEFC to set
aside some of its funding for 1999-2000 to implement two sets
of ILA pilots:
the "Pathfinder ILA" initiative:
30 projects, mainly led by a Local Learning Partnership in conjunction
with at least one FEFC college, attracted in total 1,900 individuals
who opened ILAs. This was a disappointing result against the original
target of over 9,000 ILAs and it underspent its allocation, but
useful lessons were learned for the design of future systems.
the "fee discount ILA"
initiative: this provided discounts of 80 per cent of fees for
Level 1 and 2 Information and communications technology (ICT)
qualifications, and 100% discount on entry level qualifications,
but only between April and August 2000. The scheme was targeted
towards low-income learners not able to claim fee remission or
discounts under other headings. From August 2000 no further funds
could be claimed, but learners could migrate to the Government
Capita-based scheme. The discounts were taken up by 23,181 learners
at a cost of just under £1 million (£41 per head). Not
all these were "new" or "additional" learners,
since many might have undertaken similar courses, taking up other
discounts where available. The courses were eligible for FEFC
funding of some £170 per learner, and hence the total public
cost of the learning would have been around £4 million.
7. Evaluation reports about both these schemes
were published by the Further Education Funding Council in February
2001 and can be made available.
8. These two FEFC reports, and the available
evaluations of the TEC-based pilots, make interesting reading.
Overall they suggest that fee discounts can be a significant incentive
to draw in additional learners. However they also suggest that
any such incentives need to be well integrated into a coherent
national policy on fees, discounts and qualifications. For example:
The FEFC ILA discount scheme, although
targeted at people on the lowest incomes, did not attract learners
from the most deprived areasprobably because, under other
widening participation schemes, learners in such areas could access
similar courses which were already free or heavily discounted.
Overall, fees make up only a small
proportion of colleges' income and they are free to cross-subsidise.
Hence ILA fee discounts, spent in the publicly-subsidised sector,
were discounts on already discounted fees. The learner would not
have been aware of the total cost of the learning (which in the
example above was at least four times the "undiscounted"
fee), nor therefore of the value of the total discount (ILA plus
existing subsidy) on offer.
These two effects probably reduced
the impact of the ILA pilots run by the predecessor bodies, and
of the national scheme which succeeded them.
9. It is worth repeating that these pilots
were successful. They benefited up to quarter of a million learners,
at low unit cost. The "virtual accounts" used existing
TEC or FEFC administrative, audit and accounting arrangements;
the "real accounts" involved banks, and were successful.
No evidence of fraud or mis-selling was reported. In most pilots
the training providers were already covered by the dual quality
assurance processes of publicly-funded FE (external inspection
of providers, and assessment by the qualifications awarding body).
Clearly not all the learners were "additional", but
colleges reported that many were, and of these, many were encouraged
by the accounts to go on to other courses. Although they ran for
only one term, the FEFC schemes generated new ICT capacity in
colleges, which was largely maintained. This fed into the 2001
"Bite-Sized Learning" campaign, which LSC proposes to
10. Against this, it is fair to say that
the pilots suffered from being specific to a TEC area. An ILA
holder moving between TEC areas could not easily carry across
any unspent balance. The national system had the merit of being
11. A final point concerns qualifications
and modules. Most though not all the pre-2000 pilots were
targeted at whole qualifications, or defined steps towards one.
£150 (up to £200 for ICT) was too little to draw many
new learners onto long courses, but it was seen as a good discount
on taster courses. Given the very short time scales, learners
wanted short courses offering rapid progress. Some learners would
have found any form of end-assessment daunting; but others welcomed
a final certificate signalling steps achieved towards a larger
qualification. Similar views were expressed by learners in the
"Bite-Sized" programme mentioned above.
12. This suggests that LSC could link a
re-introduced ILA framework to a more systematic approach to modularisation
of vocational qualifications. Unlike FEFC, LSC is not bound by
a fixed statutory list of approved qualifications for adults.
In its Corporate Plan
LSC has committed itself to "track individuals' progress
below the threshold of a full qualification" (page 9), and
to "take a close interest in learning not leading to formal
qualifications"yet also to "continue to place
a premium on transferable qualifications, which guarantee consistency
and (in the case of vocational qualifications) meet employer-defined
occupational standards". LSC needs to engage new learners
on the first stage of a journey which can, and increasingly will,
lead to a full transferable qualification, but not necessarily
all in one episode. ILAs can help provide the incentive for that
first episode, which will have a clearer value as a module of
a larger qualification.
B: THE PRESENT:
LSC ACTIONS SINCE
13. On 24 October 2001 following Government
suspension of the national scheme LSC issued a statement. The
key points were:
LSC supported the Government's action
in suspending access to ILAs by new learners in the light of evidence
LSC reaffirmed support for the principle
of ILAs which had successfully attracted many new learners;
LSC locally and nationally, and our
funded providers, would ensure that existing ILA account holders
were able to complete successfully the programmes of learning
they had signed up for.
LSC "remains passionate about
extending lifelong learning opportunities. The suspension of this
particular incentive does not change that in any way. LSC brings
together substantial budgets for post-16 learning, and can use
them creatively to extend access to learning. We are confident
of getting much higher participation and achievement, towards
achievement of our ambitious targets for 2004 and 2010".
14. During the ensuing weeks, and particularly
on the withdrawal of the scheme with immediate effect from 23
November rather than 7 December as previously scheduled, local
and national LSCs handled a large number of calls from learners
and providers. While many could simply be referred to the national
helpline, others came from providers anxious to secure alternative
funding for provision which had been mainly funded by ILAs. Inevitably,
our focus has been on the 2,000 or so LSC-approved training providersrather
than the approximately 8,000 training providers registered with
Capita, of whom most are not on LSC lists. It is worth noting
that, to our knowledge, no LSC-approved provider is involved in
current investigations into misuse of ILAs.
15. In early December LSC national office
asked all local LSCs to review known provision in that category,
and to consider whether other locally-available funding could
substitute for access to ILA discounts. We had in mind that local
LSCs might be able to steer providers towards public funding programmes
such as the European Social Fund, Single Regeneration Budget,
or other central or local government programmes (eg Employment
Service/New Deal); or toward sectorally or employer-funded programmes;
or to use available resources from within their own Local Initiative
Fund budgets. About 25 per cent of LLSCs responded and most had
not encountered serious problems in sustaining provision managed
by LSC-approved providers. There may however be issues with private
providers who built up businesses largely dependent on ILA funding.
16. To sum up: LSC has done its best to
help with the transitional problems, and to preserve the interests
of ILA holders and ILA training providers. We do not see the problems
as insuperable. While our particular focus is on LSC-approved
training providers, we are open to applications from new providers
able to meet our quality thresholds.
C. THE FUTURE:
17. LSC supports the concept of learning
accounts to expand demand for learning by adults and employers.
We agree with the Cabinet Office's Performance and Innovation
(PIU) that individual learning accounts (and their sisters, company
learning accounts) could help to deliver a more demand-led system
of funding adult skills for employability and competitiveness,
in other words for workforce development.
18. The withdrawal of the national ILA scheme
offers an opportunity to reconsider optionsand ideally,
to improve on that scheme, rather than merely replicate it with
fewer risks. We are at a very early stage in developing our own
policies on learning accounts and funding, but we offer below
initial thoughts on criteria which might underpin future national
a. There should be a coherent national framework,
but this does not require a single national offer of subsidy.
We recognise why the national scheme adopted a simple universal
model of a capped subsidy, but learning accounts might be developed
further to become a flexible mechanism for financing learning,
available to all but in some cases entirely unsubsidised.
Any subsidies could be targeted mainly towards the hardest to
reachmeaning people starting from the lowest level of learning,
rather than the poorest. Since this is a sophisticated judgement,
some local discretion would not be incompatible with a national
b. Again recognising the difficulties of
achieving it, ideally a learning account should be dynamic.
While capable of funding a single episode of learning, it should
also encourage further investment for learning (by individuals,
employers, and the community) over a sustained period. Contributions
might be held either as cash or as "learning miles",
a concept which has proved to have greater longevity than at first
expectedand avoids some of the risks of cash transactions.
c. Learning accounts should integrate into
wider strategies to implement the PIU report's proposals for a
demand-led funding system for adult skills, and for greater
employer engagement in workforce development. Funding for ILAs
of over £270 million cannot be seen in isolation from the
main budget for adult further education held by LSC (£2 billion),
which effectively targets similar groups and provides a similar
benefit, namely subsidised learning. Hence learning accounts will
work best within a coherent national FE fees policy. The radical
option would be to move over time to a norm of near full-cost
fees, discounted to draw in targeted groupsrather than
the current norm of heavily subsidised fees for all learners,
where an ILA offers only a small further discount. Such an approach
would help to level the playing-field between public and private
providers, and incidentally make it less likely that ILA holders
would take up poor-quality provision in any sector merely because
of the discount. However LSC has not taken any decision to implement
such a policy and would only do so with Ministers' support.
d. There should be a link between the extent
of subsidy and the quality assurance and audit regimes
put in place. Any system funded mainly with public money will
need closer protection than one where the individual is funding
a substantial proportion. In any learning account regime managed
by LSC we would expect to require training providers to meet our
normal quality assurance threshold and to be subject to external
inspection. By contrast a lighter touch, consonant with encouraging
a healthy and innovative training market, might be appropriate
for training funded by learning accounts with a low or zero public
e. Alongside quality assurance and audit,
a pre-requisite of an effective scheme of learning accounts is
to improve information, advice and guidance (IAG) to potential
learners. LSC is actively considering what steps it can take,
with IAG partnerships, Connexions and employers, to improve what
is on offer.
f. Learning accounts should help individuals
pursue learning for personal and social development, and
also to gain productive skills for employability, progression
and workforce development. These objectives will be pursued
within the LSC workforce development strategy now being developed.
19. LSC recognises the case for a simple
national scheme of virtual accounts administered by a single institution,
to channel Government discounts to providers. However an alternative
modelwhich could be developed alongside itwould
enable some individuals, particularly those supported by their
employer, to save into a financial account, as in the Gloucestershire
TEC pilot and some international models. The account balance would
be drawn down to deliver agreed learning. The account could be
held by a single individual, or pooled by the employer (as in
the Centre for Enterprise model) or a community partnership (the
Birmingham model), and drawn down by mutual agreement. Accounts
of this kind could attract tax concessions; and additional subsidies
could be targeted towards specific groups, eg those with low learning
20. While in theory public agencies (such
as local LSCs) could hold such accounts, the natural home would
be those financial institutions which hold individuals' and employers'
other financial assets and liabilitiesnamely banks and
building societies. The Government tried in 1997-2000 to engage
them in the national scheme, but at the time they were unwilling.
LSC considers it worth exploring again whether banks and building
societies might show interest in a new programme of learning accounts.
We think the key to engaging banks' interest would be to show
how learning accounts could develop beyond the transaction of
one-off vouchers or cash payments to providers, and engage with
the wider financial affairs of their customers (individuals, employers
and the wider community).
21. In the LSC view, there is critical value
in the ILA "brand". We judge that this has been damaged
by recent events but remains strong with the UK public and with
learners. It can be successfully re-built, so long as any new
arrangements are well prepared and fully effective from the outset.
On the substance, we hope that some at least of the principles
set out above can be incorporated. On timing, there could be advantages
in introducing new arrangements at the start of a financial year
22. On the relationship between learning
accounts and wider workforce development policies, the next event
on the horizon is the preparation of the draft LSC Workforce Development
strategy. This will address all the main proposals of the PIU
report, including funding issues.
23. Under transitional arrangements, responsibility
for ILAs is planned to transfer in due course from DfES to LSC.
No timetable for this transfer has been set; it was always agreed
that the date would be no earlier than April 2003. Any decision
to transfer responsibility at a particular date would be a matter
24. Meanwhile LSC will continue to work
closely with the Department and to feed in our thoughts on how
a successor learning account regime might best be shaped and managed.
LSC is drawing together information from a range of sources about
which models of learning account are working best. There is a
growing body of international as well as local experience, in
particular the OECD evaluation framework for co-financing learning,
and the Council is currently playing a leading part in this programme
Learning and Skills Council
5 February 2002
1 LSC: Strategic Framework to 2004 (July 2001). Back
Cabinet Office (PIU) report: In Demand-Adult Skills in the
21st Century (December 2001)-Executive Summary, paragraph