MPs voice New Deal fraud fears

May 1, 1998

Fraudulent and incorrect payments to training providers could threaten the government's Pounds 3.5 billion New Deal for the young unemployed, MPs warned this week.

In a tense session with the Department for Education and Employment's permanent secretary, Michael Bichard, the Commons' Public Accounts Committee said that the DFEE's poor record in combatting training fraud could damage the scheme's training and education provision.

Mr Bichard conceded that Pounds 14.6 million was spent on "incorrect and uncertain" payments to training providers through training and enterprise councils last year. This was up from about Pounds 6 million in 1994 and was "an increasing cause for concern".

Fraudulent and incorrect payments represented 1.2 per cent of the expenditure on training, said Phil Hope, Labour MP for Corby.

Committee chairman David Davis asked Mr Bichard how he could ensure that the present irregularities in the system did not arise under the New Deal, for which Pounds 700 million has been earmarked for education and training.

Mr Bichard said: "We have put in place just about every possible system I can think of to try to bring the figure down."

He said that there would be a report on best practice in June, and the Employment Service, which administers the scheme, would undertake a risk assessment of all training providers awarded contracts. And at the start of the New Deal, 100 per cent of invoices would be checked.

But Mr Bichard refused to guarantee a reduction in "incorrect and uncertain" payments next year, despite investing Pounds 10 million to tackle the problem.

More than 15 per cent of the 72 training and enterprise councils, he said, were considered to be a financial risk, and risked losing their licence. He said the department has logged 106 complaints about provision, in which training providers claim money for non-existent students, or award certificates for students who do not meet the required standards. He said the police had been called to investigate 20 cases, with a further 16 pending. "It is unlikely that there will be a significant improvement in the next report you receive," he said, "but I hope the action will have an impact thereafter."

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