I've heard on the street ... Ferrari Nick is supposed to be one of the leading people

Geoff Hall, Learning and Skills Council

They say there is a need to protect training funding from scam merchants who exploit loopholes in the system to make a lot of money very quickly.

Officials from the Learning and Skills Council were giving evidence to the Commons education select committee's inquiry into the collapse of the Individual Learning Accounts (ILA) scheme.

They said they warned the Department for Education that the scheme was open to abuse in May 2000 - four months before it was launched.

The advice was based on their experience in the then Further Education Funding Council of previous problems with other schemes.

Verbal warnings

Geoff Hall, the councils' director of learning programmes, said he had given the advice at a meeting at which he was told how the planned ILA scheme was going to operate.

There seemed to be a group of people ... who spot the opportunity for very quick and substantial earnings

But - answering MPs' questions - he said there had been no written advice of the "I hereby give notice" type.

"That's not how life is, is it?" he said.

But he and others had drawn attention to their concerns "at the highest level" in the Department for Education.

The concerns were borne out as the ILA scheme unfolded and allegations of abuses emerged - culminating in its sudden halting in December 2001, first in England then across the UK.

Scams rather than fraud

He said he would not use the word fraud.

"There have only been one or two prosecutions for fraud arising from what generally we refer to in the vernacular as 'scams', and that was when quite deliberately no students existed and enrolment registers had been forged in order to draw down money.

"In most of the so-called scams something happens, and the question is whether it was eligible for public funding ... whether it's of any value whatsoever."

He was asked when he gave his warnings.

"I would have to answer a committee of Parliament and say that we advised of the risk of abuse in May 2000," he said.

'Interpol' needed

The ILA scheme was launched formally in September 2000, providing people over 19 with discounts on certain training courses, eventually worth up to �200.

Experience since had borne out his concerns.

"There seemed to be a group of people who had a profound understanding of funding," he said.

"Who spot the opportunity for very quick and substantial earnings."

"I don't think they're the people everybody wants to help us widen participation," said Mr Hall.

His recommendation was that there needed to be "a kind of Interpol" that could cross funding "frontiers" - because each new official body that came along was surprised by the rapidity of the operation.

Too many excellent training providers - in the private sector or colleges - were "besmirched" by what had happened.

Need for action

Committee chairman, Barry Sheerman, said: "We're talking about entrepreneurs aren't we, really - of a certain type?"

"I've heard on the street ... Ferrari Nick is supposed to be one of the leading people," Mr Hall replied.

"If someone can get an epithet like that ... that's when you have to take concerted action," he said.

After the committee hearing, the Shadow Minister for Lifelong Learning, Alistair Burt, demanded to know why "clear warnings of likely abuse" had been ignored.

"It was mounting evidence of 'scams' which closed the ILA scheme prematurely, losing learning providers millions of pounds and leaving students frustrated and without anticipated courses.

"Such scams, using smart knowledge of how to deliver 'quick earners' that may not amount to fraud, were clearly pointed out to government before the scheme began," he said.

"Why were these warnings ignored? Failure to take heed has cost the country millions of pounds and damaged a good idea to promote learning."