For the past year, a national centre run by Capita has been administering the scheme, which pays for learning. The first million people who signed up got a loyalty card worth pound;150. This could be used to buy a course at a college or training provider. The million mark was passed in June. From now on, the account gives a 20 per cent government grant towards fees: a maximum of pound;100 for normal courses and pound;400 for IT.

Judged by the schemes they replaced, ILAs are a success. Vocational tax relief was paper-based, poorly-publicised and skewed to richer learners paying higher fees. By contrast, the ILA system works, makes better use of technology and offers something for everyone.

However, judged by the visionary promises that are sometimes used to sell learning accounts, it’s a bit of a disappointment. The card itself is like a library card because the banks weren’t interested in paying for anything smarter. But you can use library cards on the day you apply for them, whereas you have to wait a week before you can use an ILA. And once you get it, there’s the problem of size. The 20 per cent fee discount with a maximum pound;100 annual allowance is rather irrelevant when some courses cost thousands while others are offered free with government support. Colleges and trade unions found creative ways around the size problem in the pilots when they pooled accounts to create purchasing power. The bureaucracy of the national system makes this difficult. The Department for Education and Skills has been coy about releasing statistics on ILA but it is likely that the main users of the accounts have been clued-up insiders.

Given all this, one option for learning accounts would be to make them more valuable. This option has influential advocates and could attract the Learning and Skills Council if it is given responsibility for the system.

Another option would be to use the learning account system to organise the fee subsidies currently included in LSC funding. This would be an expensive way forward. Learning accounts in their current form are flat-rate fee subsidies and go to many who might have paid for the course anyway.

In the short term, the future of learning accounts is a sideshow to decisions about the larger LSC budget. The council is about to issue a circular outlining its funding plans for 2002-3. These include the delicate task of dismantling the FEFC funding system and replacing it with a model in which colleges are given cash in return for meeting student number targets.

The planned changes to programme costs and weightings will create winners and losers, which is why the circular will set out a transition period and safety nets. But the big issue in the move to a new system will be whether it helps the LSC meet its own targets. The council has a tough agenda, made more complicated by a possible UK recession and the Government’s emphasis on delivery.

Over the next nine months, all parts of government will be under intense scrutiny to see how they are performing and how they can contribute to the big picture. This process - the third round of the comprehensive spending review - ends next July and sets the public sector budget for 2003 to 2006. Funding growth for the next two years is assured but a recession and competing priorities could vary the budgets after that. The challenge for the learning and skills sector will be to show that it is already making progress in delivering the new plan.

The pressure on the LSC to make a difference will be seen in other areas apart from funding this autumn. The new inspection rounds are already producing the first moves towards plan-led rationalisation and there are likely to be more. The competition in December for colleges that want to host centres of excellence is likely to be intense. The pace of curriculum change is likely to increase. This year more than most is likely to see a race between the quick and the dead.

Julian Gravatt is director of finance at the City Lit, London