The Government’s claim that fraud and abuse were the reasons for scrapping the pound;202 million ILA scheme has so far failed to convince MP Barry Sheerman who is leading an inquiry into its closure.

“I am still undecided,” he said, “and I am sure many of my colleagues are, as to whether evidence of fraud or Treasury concern over the escalating and uncapped cost of ILAs were really at the root of the decision to pull the plug.”

Mr Sheerman’s education and skills select committee is to report to Parliament next month.

Twelve people appeared at Northampton Crown Court charged with ILA fraud last week. The National Crime Squad says the total value of their crimes is estimated at around pound;40,000. The only person to be convicted, Nigerian Sylvia Iwuagwu, admitted pound;9,000 worth of fraud in a separate case at Southwark Crown Court, London.

“These are the only cases to come to court so far, but inquiries are continuing,” a Department for Education and Skills spokesman said, stressing there have been 44 arrests and more could follow.

Fraud, along with other forms of abuse, such as mis-selling and poor-quality provision, was given as the original reason for the decision to close the scheme. But the closure, which had been due on December 7, was abruptly brought forward to November 23, because of “new information about serious and sustained allegations of theft and fraud”, John Healey, adult skills minister, told the committee on November 28. Cheshire confirmed this week it is still to decide whether these “serious and sustained allegations” warrant a criminal investigation.

The DFES has also passed information about millions of pounds worth of possible fraud involving 50 learning providers to the West Midlands police. Acting chief inspector David Churchill of the West Midlands fraud squad, said: “We are in the process of examining paperwork in relation to these learning providers to assess whether or not there are any offences of fraud that have been committed.”

Paul Holmes, a Lib Dem member of the select committee, said the value of the crimes for which prosecutions have been brought did not support the notion of widespread fraud. “This is a big difference from what the Government said at the start,” he said. “There was no quality control. The problems are of the department’s own making, which makes it doubly outrageous that people have lost out on training, lost their jobs and gone bankrupt.”

The budget of pound;202.1m over two years was overspent by more than pound;60m, but the DFES insists it was not the Treasury which ordered the death of ILAs. The scheme is believed to have had the support of Chancellor Gordon Brown.

Mr Healey said: “The ILA programme ended following growing volumes of complaints about mis-selling, aggressive marketing, poor learning, poor value for money and alleged fraud.

“The DFES continues to deal with serious allegations of fraud in respect of 103 learning providers. Sixty-six of those providers are now being considered by the police and we are discussing a further 11.”