Dozens of training providers may sue the government for breach of contract over its decision to axe the individual learning account scheme, writes Tony Tysome.
Heads of ILA-registered training companies, who gathered for a lobby of MPs at the House of Commons this week, said that their firms were likely to go bust after Christmas as a result of the decision to pull the plug on the scheme last month, in the face of fraud allegations that have led to the arrest of 39 people.
The heads have resolved to seek legal advice on taking action against the government if it reneges on a promise to pay the firms for ILA training already undertaken or signed up for before the scheme was shut down.
The scheme had overspent by nearly £59 million out of a total spend of £260 million by November 23 this year.
The figures were revealed as part of evidence to the Commons' education select committee by Conservative MP and committee member Roger Bacon, who is also a member of the public accounts committee.
The PAC's audit arm, the National Audit Office, is to investigate the government handling of the ILA scheme, following representations from Conservative education leaders.
It is expected that the total overspend figure will be significantly higher. The government has yet to estimate how much it owes training providers and how many people applied for ILAs at the last minute.
Conservative education spokesman Damian Green said he suspected that the government's motivation for axeing ILAs may have had as much to do with overspending as with fraud.
"It may be that the whole fraud thing is a smokescreen for the fact that the Treasury pulled the plug on this," he said.
A spokesman for the Department for Education and Skills said there was "a greater take up than planned for", but added "this was categorically not the reason we withdrew the scheme".
The government has yet to make an announcement on any plans for a replacement scheme.