Charles Clarke, the Education Secretary, and funding chief Mark Haysom face questions in Parliament as learndirect runs into fresh difficulties this week.

Mersey Hub, the company that distributes cash to private course providers in Greater Merseyside, has gone into voluntary liquidation. The University for Industry (Ufi), which runs learndirect’s national chain of online learning centres, is taking control in Merseyside until a new operating company can be found.

Barry Sheerman, chairman of Parliament’s education select committee, said:

“It seems like madness. They (the providers) see Ufi has got plenty of money and they are not being paid. My sympathy is with the providers. There ought to be some redress.

“I shall be asking Charles Clarke about this situation in a couple of weeks.

“It looks like a pretty awful system and people have been hurt who don’t deserve to be hurt.”

He says the committee will also question Mr Haysom, chief executive of the Learning and Skills Council.

Judith Norrington, director of learning and quality at the Association of Colleges, said there is too much bureaucracy in the way learndirect is funded.

She said: “Whenever you put extra links in the chain you have to remember that a chain is as strong as its weakest link and you are providing more opportunities for things not to run smoothly.”

Mr Clarke is due before the committee on December 1.

Mersey Hub took over responsibility for 250 learndirect courses being run by 60 training providers in August last year. The pound;3.5 million business was expected to grow.

Michelle Lofthouse, head of Ufi in the North-west, which oversees three hubs, said: “We agreed a budget for 20034.

“Mersey exceeded that budget. They had told people to go ahead and continue recruiting learners which they did not have the funds to cover.”

Ufi is giving training companies advance payments against this year’s contracts to help with their cashflow. It is also refunding some of the costs of the training which they have not been paid for during 20034.

While this will not fully compensate all providers, it is hoped it will prevent them from going out of business.

One company claims it is owed nearly pound;200,000 by Mersey Hub.

Changes were made in the way Ufilearndirect is funded after the Learning and Skills Council’s annual report last year revealed that the organisation was underperforming.

The national LSC now provides all of Ufi’s funding - for both courses and administrative costs.

The money is paid to the national Ufi, which distributes it to its regional offices. The regions, in turn, pay the hubs - companies in charge of commissioning training at a local level. The hubs pay the learning providers - colleges or companies - to run the training courses.

But learndirect had not attracted the interest it had anticipated from colleges in the North-west and had relied heavily on private training firms to run the courses.

Wally Brown, principal of Liverpool community college, said: “I could not see the need for another layer of bureaucracy.”

The LSC is anxious to see training firms survive because many are responsible for other areas of work, such as work-based learning, which it funds directly.

Paul Warner, of the Association of Learning Providers, said: “Although we have some concerns about how the situation was allowed to develop, we have been encouraged by recent indications from Ufi that it appreciates the resulting difficulties.”

Mersey Hub appointed insolvency specialists on Friday. Geoffrey O’Donoghue, its former chief executive, refused to comment.

The National Audit Office starts a national value-for-money study of learndirect in January.

The LSC refused to comment.