Education watchdogs are to make an urgent inquiry into the collapse of individual learning accounts - the pound;260 million flagship training scheme which the Government pulled in December.

This week John Healey, the adult skills minister, was called back by the education select committee to be grilled again about what had gone wrong with the training subsidy scheme.

MPs are still unclear as to whether it was allegations of fraud and theft against training providers, or Treasury concern about the cost of the scheme - a million learners had signed up a year ahead of target - which caused the collapse.

The scheme was closed abruptly on November 24, with ministers alleging fraud and theft. Colleges and private training providers have lost thousands of pounds, and some of the latter have lost their businesses. A complaint has gone to the Parliamentary Ombudsman.

Barry Sheerman, chair of the select committee, this week announced an inquiry which will take place in the next few days. It will look at the lessons to be learned from the closure of the scheme, with particular reference to its management, and plans for a replacement.

Mr Healey insisted that he had called the meeting with the Education Secretary (by video) and the permanent secretary, David Normington, and officials to discuss the future of the scheme.

Once the decision to close the scheme had been made, the Prime Minister, the Chancellor of the Exchequer and other ministers were informed. He had been unable to tell MPs before how big the overspend had been, but now things were clearer. He said a minority of private training providers had seen the scheme as a “fast track to take cash from the Government”.

Up to November 23, the ILA overspend was pound;58.8m. By the end of the year it had risen to pound;62.9m.

In a letter to the MPs, Mr Healey said that 91 per cent of claims for the subsidy, covering almost 1,400 training organisations, had been paid. But 136 organisations’ claims with a total value of pound;11.3m had not been paid. “These are being held while complaints and concerns about the learning delivered are investigated.”

On November 21 an approach was made to the Department for Education and Skills by an ILA provider alleging that a third party offered to sell them a large number of ILA account holders.

The department’s special investigations unit was given a computer disk by the third party. This contained full names, addresses, contact details and ILA numbers - exactly as they would have appeared on the ILA record.

Evidence was confirmed, said the minister, that ILA numbers had been obtained from the central database, and the allegation was that large numbers of account details were being offered for sale.

The minister said that the department was examining 82 learning providers. Of these the police were already investigating 13, and the special investigations unit was discussing a further 42 cases. He said the police had made 39 arrests in connection with cases involving two providers..

* Sylvia Iwuagwu, 25, of no fixed abode, pleaded guilty to fraud against the ILA system on Wednesday. Appearing at Southwark Crown Court in London, she admitted five charges of obtaining money with deception from the DFES, to a total value of pound;9,396. She is due to appear for sentencing on February 6.