Examination of Witnesses (Questions 520
TUESDAY 26 FEBRUARY 2002
520. Can I say, we are very happy for you to
do that, but it is not going to be a verbal run right through
(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 7 June,
so I must have got to my desk on 12-13 June 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.
521. Is that a question of protocol, or just
a question in this particular case?
(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 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.
522. Minister, you had known quite a bit about
the scheme, had you not, because you were PPS to the Chancellor
of the Exchequerand 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?
(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 18 October, and
announced on 24 October that it would wound up on 7 December)
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.
523. 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 inspirationmany
of us believe the ILAs are a very great flagship of the Governmentand
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, we want
it open-ended and very accessible". Is that the case, or
would you not know?
(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
524. What were the aims of the scheme?
(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 we 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 be 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.
525. 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?
(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 prior 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.
526. The only target we have been able to discover
is the 1 million target. Were there any other numerical targets?
(John Healey) That was our numerical target; that
was our headline target; and that was our manifesto pledge.
527. Were there any other targets in terms of
quality of experience of the learners?
(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 has come
out of the York Consulting Ltd Evaluation of ILAs and other studies
done on the impact and take-up of Individual Learning Accounts.
528. 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?
(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 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 7 December.
529. 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?
(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 fraudand 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 acceleratedparticularly
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. The 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.
530. 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?
(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 at £200.
531. That is a scam rather than fraud.
(John Healey) Absolutely; precisely.
532. 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
(John Healey) Precisely the point I was making to
Mr Turnera distinction between misuse and 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.
533. 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?
(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
534. Minister, one great criticism of this is
actually when we look at this in an historic waywhat 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.
(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.
535. That was in July. They did not have time
to biteany of those.
(John Healey) July, August and September.
536. But in October you
(John Healey) 18 October we took the decision and
announced it on 24 October. When you consider that we are currently
withholding £13.7 million in payments claimedI 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) with 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.
537. 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
(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
providers17 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 related to 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, there is an 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.
538. 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
(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.
539. 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?
(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.