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A Department for Education and Skills spokesperson said:
"This is an important report from the National Audit Office (NAO). It is clear that mistakes were made and lessons have been learned.
"We remain committed to the principles of the Individual Learning Account (ILA) scheme. As the NAO report says, this was an innovative programme which helped hundreds of thousands get back into learning. But as soon as the Department became aware of the potential for serious fraud we acted on police advice and closed the programme down immediately.
"The NAO report will play an important part in helping us to ensure that the successor scheme is robust and builds on the successes of the original programme, ensuring that the failures of the first scheme are not repeated.
"The Government is developing a groundbreaking new National Skills Strategy. Central to this is a fundamental review of the way adult learning is funded in this country. The aim of this review is to ensure that the £2 billion spent on adult learning every year is used to maximum effect.
"After careful examination, we have decided that it would not make sense to go ahead with the full design and implementation of the new ILA scheme in isolation from that wider review. We must ensure that the successor programme is fully integrated within decisions about our future approach to funding adult learning. It will therefore be appropriate to announce the details of the successor scheme as an integral part of that strategy.
"The review will be completed, and its conclusions set out, in the Skills Strategy and delivery plan to be published in June 2003. Having made this decision, it is now appropriate to proceed on a different basis in taking forward the ILA successor scheme. As such, we have agreed with Capita that our joint work with them on the development of a successor scheme is now complete. We are grateful for the partnership approach that Capita have adopted to the wind-down of the ILA scheme and the development of a successor scheme.
"The National Skills Strategy gives us a once in a generation opportunity to ensure the provision of education and training is aligned to the skills needs of our economy. The principles underpinning ILAs will be a key element in supporting the achievement of this objective."