BANKS will not be holding Individual Learning Accounts, after the Government failed to find a financial institution willing to administer them.

Under the original plans, trainees would have put pound;25 into a “special bank account” topped up with a pound;150 government contribution, which they could then have drawn on to pay for courses.

But this plan has been dropped in favour of an account “with government”, according to a briefing newsletter from the Department for Education and Employment.

Banks and building societies are thought to have been put off by the cost of running up to a million accounts - most with less than pound;200 in them. The Government hopes to have the accounts open by April 2002.

Opening and servicing the “low deposit, high turnover” accounts would have cost banks an estimated pound;40 to pound;50 a year - making them commercially unattractive.

The winning tender for the ILA “customer service centre” - a combined information, administration and account-holding service - will be decided later this month but none of the companies on the shortlist is understood to be a bank or building society.

A spokesman for the DFEE said: “Research in developing ILAs found that opening a bank account is a big disincentive, so we are looking at other ways of delivering learning credits. There needs to be a simpler way of doing this than opening a bank account.”

The likely option is some kind of “virtual” account which would channel the government subsidy to the course-provider directly when the learner makes their contribution.

David Robertson, director of public policy and education at Liverpool John Moores University and a close adviser to government, said the accounts had been aimed “at the wrong end of the market” and should have targeted people in colleges and universities who ere used to dealing with banks and already persuaded of the benefits of learning.

In contrast, the DFEE’s own research suggested that under-25s with little or no qualifications, women returners, the self-employed, ethnic minorities and non-teaching school staff would be early adopters of the accounts.

However many from these groups are among the 1.7 million households nationally who do not have bank accounts.

Professor Robertson said: “What they thought they could do was use the accounts to stimulate learning among those who haven’t got bank accounts - but that is probably the wrong way around.

“High-street banks were dead keen to administer the accounts for potential high income earners like university students but were never going to touch them on an anyone-can-have-them basis.”

He also said ILAs were “almost certainly the way to go” but called for extra investment.

“What they need is serious money, not pound;150.”

One education consultant told The TES that in order for the accounts to work they should be a “big concept not an initiative” and that in their present form they were a “fancy form of voucher”. He said: “They have really backtracked on this one.”

The newsletter, sent out to colleges and other interested parties, said that, following extensive consultation and the piloting of 100,000 accounts, the Government had “refined the learning account model”.

It added: “Our discussions and research with learners suggest that a separate bank account is unnecessary...

“In particular, the target groups we want to reach are not attracted to having a dedicated account for learning.”

The accounts will still include a “smart card” offering discounts on educational products and an annual “learning record” stating what learning or training the individual has undertaken.

A new look for the learning accounts will be unveiled in April before the accounts are finally launched nationally this autumn.