Individual Learning Accounts

Part of the debate – in the House of Commons at 6:07 pm on 27 June 2002.

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Photo of Hugo Swire Hugo Swire Conservative, East Devon 6:07, 27 June 2002

I am most grateful to have the opportunity to speak in this debate. I am not a member of the Select Committee, but I congratulate Mr. Sheerman on an excellent report. I also congratulate my hon. Friend Mr. Bacon on an extremely good speech; I agreed with almost everything that he said.

I corresponded on a number of occasions with the Minister's predecessor about an ILA provider in my constituency, the Open College for Distance Learning, which was forced into receivership on 23 March this year. The company owed more than £120,000, and although much of that was owed to the Inland Revenue, a significant amount was owed to local companies—office suppliers, accountants, local newspapers which had taken the advertising, the landlord of their office premises, and so forth. Ironically, the company was—and still is—owed approximately £140,000 from ILA schemes in England and Wales, if they had been operated properly. Incidentally, I am not sure why Education and Learning Wales, which always maintained that there was no fraud in Wales, closed its scheme, but no doubt the Minister will enlighten us.

The Open College for Distance Learning had 786 students who were enrolled before the schemes were scrapped. Of those, 100 had had their ILA accounts raided by the fraudsters, and the remaining 686 never received their membership numbers before the deadline was brought forward to 23 November because Capita was too slow. In other words, a perfectly good company has been brought to its knees through no fault of its own because of a combination of fraud and incompetence. Who is taking responsibility? After this afternoon's speeches, I am no wiser. Where does the buck stop? What plans, if any, does the Minister have to resolve this case, of which his Department has knowledge, in a way that will allow the Open College for Distance Learning to be brought out of receivership and to pay off its creditors?

East Devon—particularly Exmouth, in which the company operated—is not an area with a lot of big businesses, and the company was becoming a significant local player. Formed in April 2001, it achieved a gross turnover of £782,422 in its first financial year. In April 2001, it enrolled 166 people, and that figure increased every month until October, when the scheme was shut down without warning. The founders told me that they first heard about the closure on the 5 o'clock news.

The founders of the college, Mr. Simon Hall and Mr. Andrew Demetre, ran a good company. They employed qualified, experienced tutors and kept accurate records of their students' progress and achievements. They did that not least because they expected to be audited and inspected by the ILA scheme operators.

Who is the winner from this fiasco? It is not the local creditors or, indeed, the Inland Revenue—we have already established that. It is not the 93 people made redundant by the company, many of whom are struggling to find employment six months later. It is not the taxpayer—the company received more than £500,000 of taxpayers' money. It is not the 3,000 people who lost their money.

Almost 119,000 people registered for individual learning accounts in the south-west. The great majority of those who registered at the Open College for Distance Learning were aged between 25 and 35—just too old to have been taught IT skills in depth at school.

In a written reply, the former Under-Secretary for Education and Skills, now the Economic Secretary to the Treasury, stated:

"We are developing future plans for a successor ILA-style scheme which build on the successful elements of the ILA programme."—[Hansard, 17 December 2001; Vol. 377, c. 57W.]

As my hon. Friend Mr. Turner pointed out, that repeated promise has had a negative effect on genuine providers; people are waiting to register in the expectation that, at any moment, their training will be provided free.

Companies still struggling to operate in the sector continue to lose. As we have heard this afternoon, there is still no successor, so we have ended up with the worst of all worlds.

I understand that ILAs were originally a Liberal Democrat brain-wave, but a Labour Government implemented them and must take responsibility for the fiasco. There has been an almost unique combination of incompetence and inaction in which everyone is the loser.

The Select Committee's excellent report repeated the points made at paragraph 127 again in paragraph 25 of its conclusions and recommendations. I, too, believe that the Government should be proactive in offering compensation to the companies and people who entered into arrangements in good faith. I urge the Government to address that matter. As we all know, ILA is dead, so before continuity ILA is born—before the Government embark on a new scheme—the Minister, the Government and all those responsible should give some hope to the people who have lost their livelihood and their companies. There is not much to hope for in the Government's reply to date.