Just 12 months ago, colleges and training providers could not give Train to Gain places away. Now, instead of being Pounds 200 million underspent, demand has surged to add nearly Pounds 500m to its costs and overstretch even an expanded budget.
There are a number of possible causes for the sudden leap, but the discovery that some providers were misusing the cash to give unauthorised incentives to employers adds a further suspect.
To some, the spike in demand was not a surprise. In his report on the capital funding crisis, Sir Andrew Foster said new initiatives in the public sector often had a couple of years of slow demand before taking off rapidly. Exactly this pattern occurred with Train to Gain: an underspend of Pounds 100m in the first year, Pounds 200m below target in the second, and then this year's tidal wave of demand.
Flexibilities that providers have wanted since the scheme's inception, such as the right to retrain people who already have a level 2 (GCSE- level) qualification, were introduced in response to fears about the low take-up and must have played a part in boosting demand. But how much impact did those providers who have been caught misusing funds make on the overstretched budget?
Keith Smith, director of skills for employers at the Learning and Skills Council, said only one provider is definitely known to have made cash payments as an incentive to sign up. Its case is under review and potentially it could have to repay the money.
The other practices the funding body warned against were providers creating jobs with no real work and manufacturing volunteer posts in order to use Train to Gain funding, which is intended to meet valid training needs for employers.
Mr Smith said these had been "grey areas" that had been exploited by some providers and for which the LSC has issued clearer guidelines to prevent similar abuses. If providers continue to claim funds in this way, they could risk losing their contracts, it warned.
But Mr Smith said the issues the LSC had uncovered were normal ones of "management and control" in a system of this kind.
David Pullein, director of finance at Leeds College of Building and chair of the College Finance Directors' Group, said he was not aware of any such practices among colleges. But he admitted there was no evidence to support colleges' assumption that the LSC's warning was meant for independent providers.
The Association of Learning Providers has condemned the use of inappropriate incentives and welcomed the LSC taking action, but it said it took a "dim view" of any attempt to blame private training firms.
The sudden shortage of cash for the Train to Gain scheme explains why the issue has become so emotive, Mr Pullein said.
"The LSC does not know how big this is and I think it is, to an extent, using this as a smokescreen. Train to Gain has been massively overspent, and it is good to blame people for doing things wrong rather than accepting the budget has not been monitored very well."
Next year, funding per student will be 3 per cent lower than originally expected, and contract values are to be capped.
"I know one or two colleges that have signed two- or three-year training deals with major employers, on which they may now have to renege," Mr Pullein said.
The episode has recalled the individual learning accounts (ILA) fiasco. These were scrapped after they went more than Pounds 93m over the two-year Pounds 199m budget amid widespread allegations of fraud.
Nick Linford, director of planning and performance at Lewisham College, in south-east London, said: "The history with this type of contact arrangement and payment method is not good.
"Like with the ILAs, there are lots of new private providers, and it's just a case of uploading data online and next month your bank account is credited.
"Now, as providers clamour to earn the money before it runs out, I would have thought there is an increasing and very high risk of fraud, or at best questionable or `innovative' practices."
However, as Julian Gravatt, the associate chief executive of the Association of Colleges, recalled, Train to Gain would have to get a lot worse to match the ILA troubles. "The defining point of ILAs came when a senior civil servant from the Department for Education and Skills was outside a London Tube station and coerced into signing an ILA form," he said.
Laying down the law
What an LSC briefing note in April told Train to Gain providers.
"We would be concerned if providers were using significant amounts of LSC funding for purposes other than providing training which resulted in the quality of the training suffering."
"We also expect both the LSC and providers to consider their public reputations and not take any action that could damage their own reputation as an LSC provider or the reputation of the LSC itself."
"Providers should not be using LSC funds to make payments to employers that may be regarded as inducements to secure business."
"The LSC does not see that `signing up' or `start' payments should be made to a learner or their employer under any circumstances."
"Learners are not eligible for employer-responsive provision where they are in employment which has been created specifically to access that funding."