The Government was forced to suspend its £150m Individual Learning Account (ILA) programme, which was set up as part of its manifesto promise to increase the skills of the workforce, after it emerged that the scheme had been the victim of widespread fraud and mis-selling.
The Department for Education and Skills (DFES) is investigating 270 training providers, and 30 people have been arrested following complaints made by the public to trading standards organisations across the UK.
The scheme's closure has raised concerns that legitimate IT training programmes will now be forced to close and that smaller employers will find it more difficult and expensive to train their staff in IT skills.
The ILA scheme was set up with few controls or checks on the companies offering training, opening the way for hundreds of new training companies with little or no track record to tout IT training courses.
To apply for the scheme, which paid up to £150 for each worker that registered, training companies had simply to fill in an application form and provide evidence of their health and safety compliance and public
"You did not have to submit any course materials or have any sort of accreditation," said Simon Cripwell, information officer at Warwickshire trading standards department, which initiated the investigation.
The DFES admitted that controls on the scheme, which was administered for the Government by IT services group Capita, as part of a £50m, five-year contract, were lax.
"Part of the problem has been that [the training providers signing up for grants] have not had to show very much. There have not been any quality checks.
That is why have run into difficulties," said a DFES spokesman. There was no way of checking all 8,500 learning providers, he added.
Karen Price, chief executive of the E-skills National Training Organisation, said, "The ILAs have encouraged companies that would not have thought about training staff to offer IT training. They have been encouraged by both small and large employers."
However, training was often of poor quality or non-existent. "There were often no exams, no formal training, nothing that you could imagine in a normal course, or even a distance learning course," said Cripwell.
Capita said that it simply followed the quality control procedures laid down in its contract with the Government and expects to be paid in full for the contract.