“The Department for Education and Skills cut almost all the corners it could,” said Edward Leigh, the committee’s chairman, after reading the National Audit Office report into how the scheme was managed by ministers.

“There was no proper financial planning or business model,” he said.

“So many things went wrong that it is hard to single one out for special mention. I will be looking for absolute assurance from the department that it will learn these very serious lessons when devising any successor scheme.”

When ILAs were launched in 2000, people opening ILA accounts were offered pound;150 subsidies towards training of their choice. The accounts were scrapped in November 2001, amid controversy over poor-quality provision and allegations of fraud.

By then, the scheme had cost the DfES pound;273.4 million against a budget of pound;199m. The target of one million account holders had been reached by September 2001 The report says data collected about ILA account holders was so sparse that the DfES was unable to monitor directly the numbers of people from target groups who had actually signed up. Research was later commissioned in an attempt to fill the gaps but, the report says, “the department does not have comprehensive data showing to what extent the scheme reached target groups”.

There was no risk analysis and no strategy to prevent fraud, it says, and the DfES decided not to implement quality assurance systems, instead leaving it up to account holders to make sure they got value for money.

“But those who the department wanted to attract through its targeted marketing were probably among those least likely to be able to compare different providers,” says the report.

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