Will we be able to bank on learning accounts?

October 10, 1997

INDIVIDUAL learning accounts, an idea that took up just two pages of the main Dearing higher education report, now appears to have moved to the top of the student support agenda.

Policy advisors, educationists, finance and banking experts, and heads of institutions, have been rapidly drawn into a consultation exercise that looks set to make learning accounts a priority in the lifelong learning white paper.

The concept of individual learning accounts is simple and is widely supported. The key principle is that contributions from students, their families, employers, and the state should be brought together in a single account held by individuals to help cover the cost of learning throughout their lives.

But as even the most enthusiastic supporters of the idea admit the devil is in the detail.

David Robertson, director of public policy and education atLiverpool John Moores University, reviewed some of the "formidable" obstacles standing in the way of a full-blown learning accounts system, in a paper that became Report 13 of the Dearing report.

The first hurdle is overcoming the technical and administrative problems of handling many millions of accounts.

If the scheme was to replace the student support system, Professor Robertson estimates there could be ten million accounts in use within five years, and nearly 20 million within a decade.

He suggests a public authority, known as the Learning Bank, should be set up to manage the learning accounts system, but that banks and other financial institutions could handle transactions and supply services to account holders, such as tax-efficient savings schemes linked to higher education and lifelong learning.

Banks are already deeply involved in discussions about the practicalities of such a proposal. Brian Stevens, director of the consultancy group Finance and Education Services Ltd, who is working with the Department for Education and Employment on developing the learning accounts idea, has been holding talks with representatives of banks over the past few months.

"The general view seems to be that learning accounts are a good mechanism for bringing about a change in which people begin to take responsibility for personal development," he said.

As well as Professor Robertson's model, the consultation group is considering a paper written by Andrea Spurling and Jim Smith, former DFEE assistant secretary, and published earlier this year by consultants Bamford Taggs. The paper proposes that the saving, borrowing and state and employer contributions elements of learning accounts could all be loaded on to a smart card, which could be swiped whenever an individual wished to pay for a course.

According to Mike Killingley, senior manager of executive training for Midland Bank, much of the technology needed to make this a reality already exists.

The Mondex swipe card scheme being run by Midland Bank, NatWest and BT at Exeter, York, Sheffield Hallam and Nottingham universities could be a prototype. "It is that sort of technology that might give us a head start," he said.

The Bamford Taggs proposals have won praise from the Training and Enterprise Council national council in a discussion paper that in turn has the support of the civil servants drafting the white paper.

However, there are also some influential opponents. Alan Tuckett, director of the National Institute for Adult and Continuing Education and a member of the white paper advisory group, is wary of involving the high street banks.

"The most important criticism is that it may do little to reach the people who are hardest to reach. For those who do not have bank accounts or who have difficulties with debt management, the banking system may not be the best vehicle for learning accounts," he said.

Quentin Thompson, a consultant for Coopers and Lybrand who worked with the Dearing committee on funding issues, described the Bamford Taggs model as "extremely ill thought-out".

He said: "The problem is that the ways of funding post-16 education and the regulations necessary to ensure that the money is spent properly are difficult to transfer to the concept of learning accounts."

Professor Robertson's paper points to other potential problems, including the need to build incentives such as tax breaks into the scheme to encourage individuals and employers to take part; balancing the impact of students' ability to choose institutions while maintaining institutions' financial stability; and difficult decisions about the roles of a Learning Bank, the Student Loans Company, funding councils, and the private sector.

But Professor Robertson's greatest concern is that the government's plans to experiment with learning accounts by making one million accounts worth Pounds 150 each available for adult training will fail because the initiative will have started in the hardest market.

For learning accounts to succeed, he argues, they must become "an essential feature of higher education", where there will be more demand.

"By beginning with the weakest market the government may end up making the same mistake that the previous administration made with training credits," he warned.


An individual, in person or through a parent, could opena learning account at anytime before the age of 18. Tax breaks or other incentives might be provided toencourage saving.

At 18 years, each person would have a learning account, whether or not they had already saved in one. The account could be used for the immediate or future purchase of education and training, including higher education.

For students entering higher education, the accounts would act as the means by which public funds for maintenance and tuition were deposited. Grants, loan facilities, tuition fees and possibly an element of recurrent grants for institutions, could all beincluded.

Learning accounts couldcontain any privateinvestments from families,individuals or employers. During the lifetime of an account, an individual could incur an overdraft. For higher education students, repayment would be made on anincome-contingent basis.

The accounts would bemanaged within a Learning Bank, but transactions could be handled by commercial banks.


Individual lifelong learning accounts would have three interlocking functions:

* Save to Learn: an account collects savings amassed by an individual, including interest

* Borrow to Learn: a loan is available to help fund learning-related spending

* Credit to Learn: the account allows an individual to hold a "promise to pay" from another party, which may be redeemed to pay for learning costs. The "promiser" will often be the state, but it could be an employer, another individual, or a learning supplier offering "loyalty points".

Everyone should be entitledto take out an overall account, offering all three functions.

The account would operate through the use of amultifunctional smart card, called the Learning Card.Each account holder would use the card as a secure personal key to make learning transactions and secure tax relief.The card could also be used to record qualifications andacademic "points" gained. The opening of an account at acertain age might trigger an appointment with careers guidance services.

* See Opinion, page 16

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