Dick Evans looks at the problems and possibilities of Individual Learning Accounts (ILAs).
Individual Learning Accounts (ILAs) are one of the major elements of this Government’s campaign to develop a culture of lifelong learning.
The national framework for ILAs will be launched in April 2000 and will operate UK wide, covering England, Scotland, Wales and Northern Ireland. Between April 2000 and March 2002 the focus of the ILA national framework will be on the world of work with a potential coverage of 27 million individuals (but,it is important to note, not the unemployed) and approximately 3 million employers. During this initial period the national framework will not be involved with the funding of higher education. It could be that higher education will be embraced in the second term of the Labour Government.
The Green Paper “The Learning Age” (l) set out a challenging agenda to develop and encourage a culture of lifelong learning. The document stressed, quite rightly, that learning throughout life would create human capital by encouraging the acquisition of skills, understanding and knowledge and this in turn would enhance creativity and imagination within society and add significant value to the workforce. In order to realise these worthy aims, the ‘Learning Age’ advocated new approaches for supporting learners and continually stressed that the investment in learning benefits everyone and as such must be a shared responsibility.
Learning improves an individual’s employability, professional competence and earnings potential whilst employers will improve their companies’ performance and competitiveness by making greater investment in their workforces’ competence and qualification levels. Thus the Government seeks to encourage individuals and employers to take more control of their learning and make more direct investment in it. One of the main mechanisms for bringing this about is the establishment of a national system of voluntary learning accounts, or as they are now known, Individual Learning Accounts (ILAs). In fact the development of ILAs is one of the most challenging of the central themes of the ‘Learning Age’, but one that carries with it at present a great deal of uncertainty about how they will be operated. ILAs are basically a financial mechanism to pay for learning and are to be based on the tripartite model of investment arising from contributions from the learner, the employer and the state.
Therefore ILAs could comprise these three key elements: the savings element, a borrowing element and contributions from third parties, for example employers, the state.
The first two elements of the account would involve ‘real’ cash/money, either directly contributed by the individuals and/or obtained by them by loans/borrowing/gifts. The third element could be realised by way of ‘promises to pay’, ‘third party contributions’ or ‘credits’ and this element of the account does not strictly contain ‘real’ money/ cash, but a credit and as a result of this is becoming known as a Virtual account’.
As one unpacks, explores and analyses these elements, one begins to realise why the concept of the ILA is still problematical. Many issues still need to be resolved and the twelve national pilots that are currently being operated have not really provided a clear and workable framework; although what they have highlighted is the multitude of complexities associated with the ILA and its introduction and operation.
Bearing in mind that the concept becomes a reality in April 2000, many organisations are asking that the Government should be more precise about what exactly an ILA is, its purpose and its functions.
Questions need to be answered about the short, medium and long term aspects of this important development. One short term issue that immediately becomes manifest is the release of the £150M to kick start a national system. The monies have been taken from TEC resources and are intended to help subsidise the first 1,000,000 ILAs. The £150M will be spent in two stages. The first stage, during 1999/2000 will contribute to 100,000 ILAs whilst the remainder will fund the national framework from April 2000. This funding is, by definition, a one-off contribution and will be identified with the third element of the account; but once spent it then begs fundamental questions about the medium and long term sustainability of ILAs and the Government’s true commitment to the concept of lifelong learning and its associated funding.
There are also a number of issues about how ILAs relate to other initiatives that are currently in existence or are being developed, for example Ufl, Modern Apprenticeship (MA) and the New Deal (ND). Each of these comprise different learner populations that reflect different elements of the Government’s agenda on widening participation and lifelong learning. Nevertheless the funding of learning must have some relationship to these existing initiatives. Ufl is seen to be inextricably linked with ILAs. Much of the literature that has already been published talks about Ufl being the catalyst for spending on lifelong learning.
Further Education colleges will inevitably be very involved with the development of ILAs and are committed to making them work, seeing them as a crucial and critical element in the lifelong learning agenda. The FE sector and its constituent colleges hopefully will lead the crusade for lifelong learning.
The sector has been set three major priorities which are as follows:
- Widening Participation.
- The Skills Agenda.
Clearly ILAs will support the endeavours to widen participation but most certainly in the initial stages will be very much focussed on the skills agenda. This is where it connects significantly with the University for Industry’s agenda. FE colleges hopefully will be centre stage in helping to raise the capability of the workforce. Colleges have welcomed the fact that the Further Education Funding Council (FEFC) has been asked to run a number of pilots during 1999/2000 to complement the earlier twelve pilots operated by the TECs. The pilots must place the learning process at the centre of their work and not become too preoccupied with the development of bureaucratic and complex financial mechanisms. After all it is the learning that is all important in this initiative. Obviously it must be supported and facilitated by a funding mechanism which possesses simplicity and does not involve complex bureaucratic accountability regimes.
It is when one begins to analyse the basic assumptions that underpin ILAs that one finds the associated complexities and challenges. The main focus of ILAs is the individual and a large number of concerns still persist about how the account will be created and maintained by the various stakeholders.
The creation of the ILA comes at a time of unprecedented change and uncertainty in people’s lives. Major transformations are occurring in the way the Government wants individuals to invest and prepare for their old age. Over the next two or three years the Government, in addition to introducing ILAs, is bringing in Individual Savings Accounts (ISAs) and stakeholder pensions. All of these initiatives will have a significant impact on how people will manage and prioritise their finances, particularly their savings. The vast majority of people will see their pensions and their savings which could be used to help them to care for themselves in their old age as far more important than opening an account for their learning. This raises fundamental issues that involve cultural views of the value of learning and qualifications. The ILA framework must address these fundamental issues if lifelong learning is to become a reality. People will not readily invest in their own learning when faced with other much longer term and essential elements of their savings and pensions for old age.
In addition, there has been some interesting research indicating that individuals would be more ready to invest in their children’s learning as opposed to their own. There therefore seems to be an interesting inter-generational issue here that needs to be highlighted, recognised and managed. Another issue that is most certainly highlighted in any discussion on Individual Learning Accounts and lifelong learning is the assumption that all people want to learn throughout their lives. The whole lifelong learning movement is predicated on this assumption, but is it true? There are many people in society who, when given learning opportunities in the past, have not taken them. Their lifestyles, their whole view of life, does not include an acceptance that lifelong learning as an essential part of their existence. The national framework must recognise this and not make assumptions that everyone will wish to take part in learning throughout their lives and this will be a major factor in developing and managing the widening participation agenda.
Another issue that requires attention is the growing inherited debts that younger people have, following their further and higher education studies, particularly the new higher education tuition fees. Already many graduates have very large debts with them throughout their twenties and possibly into their thirties and many arguments already exist that some graduates will not be able to get rid of their inherited debts until well into their working lives, bearing in mind that many workers of the future will have a whole series of careers, very often through a large number of contracts, which cannot offer any high degree of security. Another element, clearly, in ILAs is how contract workers will be able to create their accounts. Their employers will certainly not be prepared to make a contribution to staff who are on short-term contracts.
However, the skills agenda does look more promising if this country wishes to become more competitive within the global economy. Workforces must continually improve their skills, understanding and knowledge bases. Employers must also play an increasing part in this movement. One of the essential characteristics of a world-class organisation is that they are committed to investing in the training of their workforces. Therefore it would seem that both Individual Learning Accounts and the University for Industry can play a major part in this whole area around the skills agenda and the employability themes.
However, even with this, there are some interesting tensions. Participants, mainly employers, who attended a number of recent consultations about ILAs and Ufl felt that there was an inevitable tension that existed between whether the ILA was a mechanism to realise the personal development needs of an individual or their training and development needs in the workplace. It is a tension that has always existed, particularly in the education business sector, where staff wished to study for higher degrees and the institutions have to make a decision about the balance between professional and personal development. In the consultations, employer representatives argued that it would be very difficult to distinguish between these different contexts and as a result would make it difficult for them to decide whether to make a contribution to the account.
ILAs obviously could be a catalyst for national economic success, but they will only work if incentives are given to employers and individuals by way of more enlightened taxation arrangements. The Chancellor of the Exchequer, at the last Budget, recognised that the existing tax reliefs available for individuals to pay for their own training were poorly targeted and needed to be refocused. As a consequence he announced the abolition of the current reliefs on vocational training (VTRs) with a view to replacing them with more measured provision. Mention was made of ILAs and how they would reflect other new tax saving measures that the Government have been introducing since 1997.
In the past tax relief was given at source on qualifying courses with individuals being able to claim higher rate relief on their tax returns. Whilst relief at source will continue during 1999/2000, higher tax relief will disappear from 6th April 1999 to make way for the first wave of ILAs. It is intended that initially, when an individual contributes a minimum of £25 to an ILA, then the Government will contribute an extra £150. This is the third element, the ‘promise to pay’ part of the account.
Once the ILA scheme is up and running, from April 2000, everybody will be able to obtain a discount of 20% on qualifying courses costing up to £500, with key courses, particularly in the areas of information technology possibly attracting discounts of up to 80%. The new scheme will also encourage employers to contribute to individual accounts in a way which will give them tax relief and be tax free in the hands of the employees. Clearly there needs to be much more detail attached to these initial pronouncements by the Chancellor in this year’s Budget statement. There are still a large number of unanswered questions but hopefully the FEFC pilots and the results of the TEC pilots will offer mo.re substantial statements about what the framework will look like and how the accounts will be managed and operated over the short, medium and long term.
If the Government’s agenda on lifelong learning is to succeed, the way ILAs are managed and sustained needs to be more clearly articulated.
(1) “The Learning Age – a Renaissance for a New Britain”. – DfEE – Feb. 98.