Damning report prompts about-turn on failed training scheme.
The government is to offer compensation to IT training companies that took part in its ill-fated Individual Learning Account programme, following a damning report by the Parliamentary Ombudsman.
The report, due to be published in the next few weeks, accuses the government of "serious maladministration" in creating and setting up the scheme, which aimed to help people to improve their IT and other work-related skills.
The ILA scheme, one of the Labour Party's flagship election promises, was suspended by the government at the end of 2001 after running massively over budget amid allegations of fraud and abuse by unscrupulous firms.
The sudden closure of the ILA scheme is believed to have forced hundreds of legitimate IT training companies out of business and led to thousands of job losses in the training sector.
The government has always refused to consider compensation but, in a major policy u-turn, it told the Ombudsman it plans to write to 200 learning providers before Easter and another 3,200 by June, offering reimbursements.
It has also promised to review the cases of 5,000 members of the public who made official complaints that their ILAs were fraudulently used by other people, with a view to considering compensation.
The about-turn follows an Ombudsman's investigation which criticised the Department for Education and Skills and IT services company Capita for designing the ILA scheme around a website that lacked basic security measures.
"There was serious maladministration by DfES in setting up and managing the scheme, and a failure by DfES and Capita to work effectively together to make sure there were adequate safeguards," it said.
The DfES failed to take "basic steps" to ensure that the personal data of people who had signed up to the scheme could only be accessed by authorised users. As a result, some 20,000 learners were unable to complete their courses because their accounts, worth £150 a time, had been used by unscrupulous companies without their consent.
The DfES failed to ensure that Capita complied with the e-envoy's guidelines on security for government services, and failed to allocate responsibility for controlling security risks.
The report also criticised the department's poor record keeping and said it failed to keep records of key government policy decisions.
Its findings cast doubt on previous claims by the government that the scheme was closed down solely because of fraud and abuse, suggesting that the main reason was cost overruns.
No hurry to introduce new ILA scheme
The government is in no hurry to introduce a replacement for the Individual Learning Account scheme, Charles Clark, secretary of state for education and skills, said last week.
The minister, speaking at the launch of the E-Skills UK sector skills council, said the government had suffered "a real bloody nose" over the affair, and warned it would take time to develop a robust replacement. "We think it is critical to develop a good and reliable programme that is capable and will work. We are thinking it through actively and looking at the options," he said.
Although the government is not in a position to announce a definite timescale, Clark said the creation of an "ILA part two" is a "high priority" and details should be available by June at the latest.