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International Journal of LifelongEducationPublication details, including instructions for authors andsubscription information:http://www.tandfonline.com/loi/tled20

Individual Learning Accounts and othermodels of financing lifelong learningHans G. Schuetze aa University of British Columbia , CanadaPublished online: 15 Feb 2007.

To cite this article: Hans G. Schuetze (2007) Individual Learning Accounts and other modelsof financing lifelong learning, International Journal of Lifelong Education, 26:1, 5-23, DOI:10.1080/02601370601151349

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INT. J. OF LIFELONG EDUCATION, VOL. 26, NO. 1 (JANUARY-FEBRUARY 2007), 5–23

International Journal of Lifelong Education ISSN 0260-1370 print/ISSN 1464-519X online © 2007 Taylor & Francis http://www.tandf.co.uk/journals

DOI: 10.1080/02601370601151349

Individual Learning Accounts and other models of financing lifelong learning

HANS G. SCHUETZEUniversity of British Columbia, Canada

Taylor and Francis LtdTLED_A_215062.sgm10.1080/02601370601151349International Journal of Lifelong Education0260-1370 (print)/1464-519X (online)Original Article2007Taylor & Francis261000000January-February 2007HansG.Schuetzehans.schuetze@ubc.ca

To answer the question ‘Financing what?’ this article distinguishes several models of lifelonglearning as well as a variety of lifelong learning activities. Several financing methods are brieflyreviewed, however the principal focus is on Individual Learning Accounts (ILAs) which wereseen by some analysts as a promising model for financing learning for adults and an instru-ment for shifting initiative, choice and responsibility for learning to the learners themselves,for generating a market for providers of education and training, as well as making individualsand their employers share the costs of these activities. Before the backdrop of the decision bySweden and Canada to abandon their plans to introduce such ILAs prior to their actuallaunch and the negative experience of the UK where ILAs were implemented on a large scalebut later rescinded, the article tries to analyse the problems that ILAs experienced.

Introduction

Lifelong learning has prominently risen to the top of policy agendas in many coun-tries, and academic literature has focused on many aspects of a system of lifelonglearning. In spite of the abundance of articles, books and policy reports on differentaspects of lifelong learning, there was until recently a paucity of studies on how sucha system can be financed. After an initial discussion in the 1970s and early 1980s(Stoikov 1975; Levin and Schuetze 1983) the theme was not taken up until recently,when a number of economists, and one of the international organizations that hadbeen an early promoter of lifelong learning (OECD 1973) have seriously started toplough the field (Timmermann 1996; Levin 1998; Oosterbeek 1998; McPhersonand Shapiro 2000; OECD 1997, 1999, 2000, 2001). Following this revival, somenational governments have also commissioned work that looks into the issue offinancing (e.g. German Expert Commission on Financing Lifelong Learning 2004).

The renewed interest in lifelong learning is partly due to the interest by industrywhich considers lifelong learning as the appropriate skill formation strategy for the‘new economy’ (Rubenson and Schuetze 2000). This interest and the pressure fromindustry have caused policy makers to look for ways to implement and finance sucha strategy. Besides this problem, the difficulty of estimating the approximate cost oflifelong learning, the principles by which these costs are to be distributed among the

Hans G. Schuetze is based in the Centre for Policy Studies in Higher Education and Training at the Univer-sity of British Columbia, Canada. Correspondence: Centre for Policy Studies in Higher Education andTraining, Faculty of Education, University of British Columbia, 2125 Main Mall, Vancouver, BC, VGT1Z4, Canada. Email: hans.schuetze@ubc.ca

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various stakeholders, and, finally, the problem of translating these principles intoviable financing schemes, pose considerable challenges. In this paper, I shallconcentrate on the financing issue, though there will be a brief discussion of whattype and magnitude of cost needs to be financed.

‘Lifelong learning’ had a number of precursors, in particular ‘lifelong education’(Faure et al. 1972) and ‘recurrent education’ (OECD 1973), two concepts which alsopostulated the distribution of organized learning over the entire life span ratherthan its concentration during a person’s ‘formative’ years. It appears useful tobriefly revisit the literature on financing for these earlier concepts. What were theprinciples discussed for designing financing systems to implement these earlierconcepts of lifelong learning, and to what extent are they still valid in a changedpolitical and economic environment?

Besides summarizing the earlier debate about various forms of financing andtheir suitability for lifelong learning, I shall discuss a more recent model in somedetail, which focuses on lifelong learners rather than on system-wide financingmodels. Individual Learning Accounts (ILAs), which have been discussed or imple-mented on a trial basis in several countries, for example in Sweden and the UK.While different in both scope and design, these individual account models are ofinterest for a debate on lifelong learning financing as they reflect a shift from a focuson ‘education’ and educational institutions to ‘learning’ and individuals.

This paper is structured as follows. First, I shall discuss the main characteristicsand models of lifelong learning, a necessary if sometimes overlooked prerequisitefor a discussion on financing (’financing what?’). In a second section, I shall brieflypresent and analyse the main financing systems that have been suggested for a life-long learning system. In the third section I shall elaborate on the more recentlyemerged model of ILAs and discuss their potential and actual role for financing life-long learning.1.

1. Main features and models of Lifelong Learning

Main features

The concept of lifelong learning is based on three principles which break with thetraditional notion of ‘front-end’ formal education: Lifelong learning is life-long,‘life-wide’ and centred on ‘learning’ rather than on ‘education’ and educationalinstitutions.

Life-long. That lifelong learning should be life-long is seemingly a tautology, butthere is ample evidence that most of the expansion of learning opportunities in thelast forty years has occurred in the formal sector of education and at the front end.(Schuller, Schuetze and Istance 2002). Lifelong learning implies that people shouldcontinue learning throughout their lives, not just in informal ways as everybody doesanyway (‘everyday learning’), but also through organized learning in formal andnon-formal settings.1 Most writers and policy makers take this to mean further orcontinuous learning after the phase of initial (compulsory) education (which iscompulsory in all countries) and therefore concentrate on post-compulsory or post-secondary learning activities. However, there is general agreement that the extentand quality of education during the ‘formative’ years are considered of crucial

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FINANCING LIFELONG LEARNING 7

importance for the ability and motivation to engage in further leaning later in life(e.g. Hargreaves 2002). Therefore, a strategy of lifelong learning must also includethese formative years.

The lifelong aspect of learning raises questions about the structure and interre-lationships between different sectors of the educational system. Since a crucialprerequisite for lifelong education is a system that allows and promotes smoothprogression, which has multiple access and exit points, pathways and transitions,with no programmes leading to dead ends, this would require some fundamentalreforms. Transitions do not only entail pathways between different parts of theeducation system but also mechanisms for the passage from school to work as wellas, conversely, between work, and education and training.

Life-wide. Organized learning occurs not just in schools, colleges, universities andtraining institutions, but in a variety of forms and in many different settings, manyof them outside the formal educational system. In a system of ‘life-wide’ learning theassessment and recognition of knowledge learned outside the formal educationsystem become a fundamental necessity. Simple as this may appear, it poses a majorchallenge to the established hierarchy and traditional validation of different kindsof knowledge, that is both the places where, and the mode in which, knowledge hasbeen acquired. If all forms and types of know-how are treated the same way no matterwhere and how they have been acquired, mechanisms are needed for assessing andrecognizing skills and competencies (OECD 1996). These mechanisms must assessindividual knowledge and abilities, instead of formal qualifications, or the reputa-tion and quality of accredited or otherwise recognized formal educational institu-tions and their programmes. That formal qualifications and actual abilities are notidentical has been demonstrated impressively by the recent International AdultLiteracy Survey (IALS) which was designed to assess literacy levels of the adult popu-lation in various countries (OECD 1995, 1997). The surveys showed that discrepan-cies of certified and actual know-how exist on both ends of the spectrum: while arelatively sizable percentage of holders of high school or even advanced educationqualifications have only minimal levels of literacy, others with few formal qualifica-tions have demonstrated literacy competence at advanced levels. Under a lifelonglearning aspect, both groups are ill served by the present system of front end educa-tion: the former group relying on qualifications acquired during their youth whichare no longer adequate, the latter with know-how learned in non-formal settings andmodes without the formal certification required for both admission to continuousstudies in the formal system and access to good jobs in the labour market. Therefore,assessing and recognizing knowledge, which has not been learned in and certifiedby, the formal education system is a major conceptual as well as a practical problem.

From a policy perspective, the coordination of various programmes and institu-tions is a major challenge. If learning is to become ‘life-wide,’ the organization,regulation, financing and so on of learning activities do not fall exclusively into thedomain of ministers of education. They are also the responsibility of other govern-ment departments such as culture, economic and social affairs, health and employ-ment. Such a learning system requires a certain degree of consistency regardingpolicies, procedures, and standards of the various agencies concerned, and also effi-cient mechanisms of coordination. Neither is coordination required solely betweenpublic agencies. With much of non-formal learning occurring at the workplace andother places outside the formal education system, public and private responsibilities

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need to be defined and coordinated to a greater extent than in the past. It followsthat the issue of financing must also be addressed differently within a perspective oflifelong learning and a more diversified system of learning opportunities for adults.

Learning and learner-centred. The third principle of lifelong learning, the change ofperspective from ‘education’ and ‘schooling’ to ‘learning,’ entails an even more radi-cal departure from the present system than the former two. The shift of perspectivefrom ‘education’ to ‘learning’ has a couple of important consequences. The first ofthese is the recognition that in a system of lifelong learning there is little room forprescribed and rigidly structured and sequenced curricula or programmes that applyto every individual belonging to the same age group. With the exception of the earlyyears of formal learning, what is learned and when, where and how it is learned, shouldbe determined, in principle, by learners themselves – learning as a menu à la carteinstead of a fixed meal. Secondly, in a learner-based system the individuals have notonly much more choice but also a greater responsibility for taking action and makingmeaningful – often difficult – choices among the various options open to them. Theshift from a supply-led to a demand-based system also entails major changes in theway learning activities are financed (to be discussed further below).

Crucial for exercising such choice is the individual’s ability and motivation toengage in learning beyond compulsory schooling. Learners’ motivation and theircapacity for learning, which depend on a number of other factors, especially theindividual’s social-economic background, their endowment with cultural and socialcapital and the quality of their early childhood and of primary education experi-ence. From a lifelong angle, the capacity and motivation of further learning are alsoclosely related to the structure and processes of day-to-day situations, especially theworkplace (Rubenson and Schuetze 2000).

Principal models

Due to its relative vagueness, the concept of lifelong learning has been compared toa chameleon whose colours are changing according to its environment. In fact,when looking more closely at the various interpretations in the literature and policyreports there are different concepts or models using the same name while differingin essential features.

Real or potential demand for and support of lifelong learning comes from a vari-ety of sources, but mainly three: (1) an increasing number of better educated adultswho require continuous learning opportunities (2) a still large population of peoplewho lack minimal qualifications needed for qualified work and for participation incivic and cultural life and (3) the economy, i.e. the private sector which operate inenvironments where markets, technology, work organization and hence skillrequirements are frequently changing – changes related to the globalization ofmarkets and major technological change. This economic imperative seems domi-nant in today’s public discourse and is the main reason why the call for lifelonglearning is heard almost as often from employers and ministers of economic affairsas from educational leaders and ministers of education.

In summary, we can distinguish three different basic models, all sailing under thesame banner of lifelong learning while charting different courses. They envisionand advocate different models of education and learning, of work and ultimately ofsociety:

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FINANCING LIFELONG LEARNING 9

● An emancipatory or social justice model which pushes the notion of equality ofopportunity and life chances through education in a democratic society (‘Life-long learning for ALL’);

● An ‘open post-industrial society’ model in which lifelong learning is seen as anadequate learning system for citizens of developed, multicultural and demo-cratic countries (‘Lifelong learning for all who want, and are able, to participate’)

● A human capital model where lifelong learning connotes continuous work-related training and skill development to meet the needs of the economy andemployers for a qualified, flexible and adaptable workforce (‘Lifelong learningfor finding or keeping jobs in a changing labour market’).

With this variety in concept and objectives, lifelong learning could be considered as‘both a cliché and an empty theoretical label: motherhood and apple pie, all thingsto all people’ (Frost and Taylor 2001: 51). However, behind these definitional differ-ences stand concrete and diverging political agendas.

Of the models, only the first is propagating lifelong learning for all, an idealistic,normative and somewhat utopian concept. In contrast, the others are more limitedin scope, and the third particularly is most specific about which types of learningactivities, namely work and job specific, are included.

The second model does not advocate a social policy like the first: it is partlynormative in that there should be no institutional barriers to learning opportunitiesfor anyone who wants to learn. It embraces all developments that tend to eliminatesuch barriers, for example the modern information and communication technolo-gies and education and learning at a distance, especially on-line learning. Unlike thefirst model which would achieve its objectives by targeting specific populationswhich face specific barriers of a dispositional and situational nature (for the classifi-cation of barriers to adult learning, see Cross 1981), under the second model, indi-viduals are responsible for informing and availing themselves of learningopportunities.

The third model, nowadays the dominant one (see Schuetze 2006), propagateslifelong learning as a (continuing) training system appropriate for a knowledge-based economy in which a well-educated and adaptable (or ‘flexible’) workforce isseen as a principal prerequisite for industrial innovativeness and internationalcompetitiveness. In contrast to the traditional view which saw initial and continuingvocational or professional training as a responsibility of industry, the human capitalnotion of lifelong learning sees primarily individual workers as responsible foracquiring and updating their skills or for acquiring new qualifications in order toenhance their employability and career chances.

It follows from these differences in objective and scope that these models entaildifferent financing mechanisms that reflect different principles and mechanismsfor the distribution of costs among the various parties concerned, i.e. essentiallyprivate households, employers and the state.2.

2. Financing lifelong learning

In this section I shall discuss the questions of which types of learning activities arecovered by these models, which financing models have been proposed and how suit-able these are for Lifelong Learning. In the remainder of the article I shall describe

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and analyse in more detail one more recent financing model, Individual LearningAccounts (ILAs) which caught the public attention by their spectecular mismanage-ment and failure in Britain a few years ago.

Financing what?

As pointed out, lifelong learning is not just a special type of education, training orother learning activity, such as adult education or web-based learning, but coversvarious forms of formal and non-formal learning which are now largely separate andoperate in isolation from each other, including the way they are financed. Table 1shows which principal activities are a constituent part of a lifelong learning systemand how they are funded at present.

In a system of lifelong learning, the various activities, programmes, sectors andproviders would need to be more clearly defined in relation to each other. Theywould also need a certain degree of coordination to allow lifelong learners to navi-gate through the system without encountering unexpected road blocks, majordetours or dead ends that are the result of piecemeal sectoral or institutional poli-cies and regulations. In addition, it would be necessary to have a transparent systemof reliable information which would enable the lifelong learner to find out aboutavailable options and make informed decisions. The ultimate aim of this articula-tion and coordination of the existing system is the establishment of an integratedsystem of lifelong learning. Whether this is seen as a necessary or desirable corner

Table 1. Formal and non-formal learning activities and their financing

Types of non-formal education and training

Funders/financing instruments

Types of formal education and training

Funders/financing instruments

• Voluntary sector-based

• Community-based

• Workplace-based

• Organized individual

Member and user fees, state subsidies

Local taxes and user fees, state subsidies

Employers and/or parafiscal funds

Individual households

• pre-school

Compulsory schooling • primary• lower secondary• upper secondaryPost-secondary education/training • college• university• private training

institutesContinuing education/training

State

State

State and/or private households

State and/or private households

Private households

Private households, employers

articulationcoordinationintegration

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FINANCING LIFELONG LEARNING 11

stone of a future system is debatable and depends probably as much on the feasibil-ity and practicality as on the respective observer’s trust in market mechanisms andvoluntary arrangements as opposed to a coordinating role of the state or otherpublic body.

Another question is whether the present variation of financing mechanismsshould be further developed into a more comprehensive or unified system offinance for all lifelong learning activities. Presently, financing systems for thedifferent learning activities vary a great deal, depending not only on type ofprogramme or institution, but also on factors such as personal background (espe-cially age, socio-economic background, national or ethnic origin), geographicallocation and employment status. The question of whether a financing system forlifelong learning should be comprehensive in the sense that it includes all learningactivities and learners, or allow for a variety of financing schemes so long as theyare consistent and equitable, is probably more a question of practicality than ofnecessity.

Financing models

For the various concepts of lifelong learning proposed in the 1970s and 1980s, thesuitability of a number of financing models were discussed and assessed. Morerecently, the idea of individual learning accounts emerged and were embraced by anumber of countries that wanted to increase individual choice and hence motiva-tion for work-related skill development training. Seven basic models (or eight iffinancing by individuals of all their costs associated with learning is seen as a model),can be distinguished, ranging from single funder and single purpose to morecomprehensive models (see Table 2). Most of these models do not cover the wholegamut of learning activities that fall under a comprehensive lifelong learningconcept, nor do all cover the various costs incurred through learning, both thedirect ones such as tuition and other closely associated costs, and the indirect cost,primarily the cost of living while learning (and therefore not being in full timeemployment). In other words, the different models vary widely with respect to theircomprehensiveness in terms of financing of the range of learning opportunitiesthey cover. While some support only specific activities, or target specific groups (forexample labour-market training for the unemployed, or language education forimmigrants), others provide a single financing system for all lifelong learning activ-ities. Three basic types of financing models can be distinguished with respect totheir scope: (1) single financing systems for all lifelong learning activities (inte-grated model); (2) multiple systems for different activities and/or populationshowever with a certain degree of consistency and a certain level of coordination(coordinated model); and (3) single purpose or programme systems, unconnectedto and complementing others (complementary model).

Of the seven financing models, only the drawing rights model would fall underthe first whereas voucher systems would probably fall under the second, depend-ing on their design. Parafiscal funding for labour market training is an exampleof the third category. It is usual for single-employer funding to cover strictly work-related activities, mostly during working time and on employers’ premises, butnot those learning activities pursued during non-work time and not directly work-related. However, as employer-funded activities are commonly pursued during

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12 HANS G. SCHUETZE

Tab

le 2

.Fi

nanc

ing

mod

els

for

lifel

ong

lear

ning

and

thei

r co

vera

ge

Cos

ts c

over

ed

Fina

ncin

g M

odel

sC

hara

cter

istic

sSc

ope

Dir

ect*

Indi

rect

**

Self-

fund

ing

Part

icip

ants

bea

r al

l cos

ts (

pay-

as-y

ou-u

se)

Not

app

licab

leal

lal

l(s

ingl

e) e

mpl

oyer

fun

din

gO

n-th

e-jo

b-tr

ain

ing,

app

ren

tice

ship

an

d pr

ofes

sion

al

con

tain

edco

mpl

emen

tary

all o

r so

me

all

Stat

e fu

ndi

ng

Inst

itut

ion

al fu

ndi

ng

from

gen

eral

tax

reve

nue

s or

th

roug

h s

peci

fic

taxe

sco

mpl

emen

tary

all o

r so

me

som

e

Para

fisc

al fu

ndi

ng

Fun

din

g fr

om e

mpl

oyer

s’ a

nd

wor

kers

’ con

trib

utio

ns

and

publ

ic s

ubsi

dies

adm

inis

tere

d th

roug

h

auto

nom

ous

publ

ic b

odie

s

com

plem

enta

ryal

l or

som

eso

me

Inco

me

con

tin

gen

t stu

den

t loa

ns

Def

erre

d fi

nan

cin

g by

the

indi

vidu

al, h

owev

er p

artl

y su

bsid

ized

an

d ri

sk o

f non

-com

plet

ion

of s

tudi

es o

r n

ot fi

ndi

ng

a jo

b w

ith

com

men

sura

te in

com

e al

levi

ated

com

plem

enta

ryal

l or

som

en

one

Indi

vidu

al le

arn

ing

acco

unts

Tax

-frie

ndl

y in

divi

dual

sav

ings

for

the

purp

ose

of

incr

easi

ng

voca

tion

al s

kills

, aug

men

ted

by

con

trib

utio

ns

by th

e st

ate

com

plem

enta

ryal

l or

som

en

one

Indi

vidu

al e

nti

tlem

ents

Publ

ic fu

ndi

ng

give

n to

stu

den

ts/l

earn

ers

inst

ead

to

inst

itut

ion

s, m

ostl

y co

veri

ng

fees

com

plem

enta

ryal

l or

som

en

one

Indi

vidu

al ‘d

raw

ing

righ

ts’

Com

preh

ensi

ve tr

ansf

er s

yste

m o

f ext

endi

ng

soci

al

secu

rity

to c

over

all

non

-wor

k ac

tivi

ties

inte

grat

edal

lso

me

*pri

mar

ily th

e co

st o

f tui

tion

, but

als

o bo

oks

or to

ols,

an

d tr

ansp

orta

tion

**liv

ing

cost

s du

rin

g fu

ll-ti

me

educ

atio

n le

arn

ing

if le

arn

er is

not

rec

eivi

ng

inco

me

from

(fu

ll-ti

me)

wor

k

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FINANCING LIFELONG LEARNING 13

working time the workers’ wages are usually maintained in full.2 One example ispaid educational leave, in the 1970s touted as a major instrument in work-basedLifelong Learning funding, which however has not lived up to the expectations ofits proponents and has therefore remained insignificant (see Schuetze 1996).State funding for education and training institutions would cover the whole or, incountries in which public institutions charge student fees, the bulk of the tuitioncost but not, except in the case of needy students, indirect costs. This applies alsoto those forms of public funding given to students in the form of individualentitlements or vouchers: these are in most cases meant to cover tuition costs(fees) but not indirect costs (Levin 1998). In these cases, the individual learnercontributes to their learning by assuming a number of cost items from their ownsources.

Financing through collective funds which are financed by contributions fromemployers and workers, in some systems topped up by public funding, is designedfor covering workplace related skill development but usually not general education.Such collective funds exist in several countries and are either the result of legislation,or of collective bargaining agreements. Examples are the funds for continuing educa-tion and training (‘formation continue’) in France (see Merle and Lichtenberg,2001), parafiscal funds for labour market training as they exist in Germany, Austriaand the Scandinavian countries, and industry-specific levy-grant schemes as theprovided by the former Industrial Training Boards in the UK, for example in theconstruction and roofing trades.

By far the most extensive of the various financing systems proposed is the ‘draw-ing rights’ model, (Rehn 1983) an integrated financing system that would coverthe essential parts of the costs of post-compulsory learning activities over a person’slifetime. The drawing rights model is not limited to education or learning,however. It is a ‘single comprehensive system for financing all periods of voluntaryor age-determined non-work that would (not only) replace the present systems offinancing youth education, (and) adult studies (but also) vacations, old age retire-ment and other leisure periods that need income maintenance (such as) sabbati-cals, long service leave and temporary retirement’ (p. 70). Because it is built on theidea of an individual account, this model resembles the ILAs (to be discussedbelow). It is however quite different with regard to its objective and scope. Drawingrights are primarily an income maintenance financing system for all types of non-work activities, funded by contributions from the individuals themselves, but alsotheir employers, and the state. It could be used, however, for the purpose offinancing various learning activities after compulsory schooling and financialincentives could be provided within it for individuals to use their assets for thepurpose of learning.

There are other innovative systems, which were proposed and discussed, and insome instances implemented, in the late 1980s and 1990s (for an overview andassessment as to their suitablility for Lifelong Learning see Palacios, 2003). Promi-nent among these is the income contingent loans, an idea on which the AustralianHigher Education Contribution System (HECS) system is based. The Australianmodel has been emulated, or is under discussion in several other countries whichwish to shift public funding, or parts thereof, for post-secondary education fromfunding for educational institutions to more learner-centred forms of support.3

Another more recent financing model for post-secondary education and train-ing are ‘individual learning accounts’ (or alternatively ‘training’ or ‘development

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accounts’) that have been discussed or implemented on a trial basis in somecountries (see the following section). With the objective of giving the individualsmore personal choice and ownership of their learning, such individual accountsprovide learners with money to pay for their learning activities, mainly tuitionfees. In all cases where such accounts exist or are being discussed, eligible learn-ing activities are confined to participation in programmes related to skill orcompetency development.3.

3. Individual Learning Accounts

Individual learning accounts are innovative financing mechanisms that wererecently under discussion in some countries, or have been introduced, in some caseson a trial basis, in a few others. While they differ in important details, they arediscussed or implemented in these countries ‘as a means of putting flesh to thebones of the lifelong learning vision’ (OECD 2001: 122). From a political economyperspective, they are an instrument of shifting choice and responsibility of institu-tions to the potential learner, or, in economic terminology, from a supply to ademand approach. To the extent that it is primarily the savings of the learners andnot government-provided funds that replenish these accounts, it is also a shift in thedistribution of the financial burden and thus from a welfare to a market approachto (post-compulsory) education and training.

If the eligibility for such learning accounts, or the size of government contribu-tions to them, depend on the socio-economic background of the individuals, learn-ing accounts ‘are part of a general class of policies aimed at individuals, especiallyfrom a population that traditionally has not participated in such activities, toincrease their asset holdings and, with that, their ‘stake-holding’’ (OECD 2001:122), in this case in their own learning after compulsory school or, more specifically,in training towards developing their vocational skills.

Individual Learning Account (ILA) programmes in the UK, Sweden and Canada

There are three countries which have introduced leaning account programmes, orhave been planning of doing so, the UK, Sweden and Canada. They will be brieflydiscussed in the following.

The UK ILA programme

A system of Individual Learning Accounts was introduced in England in Spring2000, with similar programmes being launched in Scotland, Northern Ireland andWales. Individual Learning Accounts made available public money for individuals togain the skills they need for employment. The overall aim was to widen participationin learning and to help overcome financial barriers to learning faced by individuals(Payne 2000).

The programme in England, which started in September 2000, provided £150million (US$ 258,306,000.-) of funds from Training and Enterprise Councils(TECs). ILAs received up to £150 (US $ 258) while individuals themselves had to put

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up a much smaller contribution (£25/US$43). Employers were encouraged to makevoluntary contributions to these funds.

The ILA programme was universal; everyone aged 19 or over (subject to somenationality and residency conditions) had a right to an ILA, except those in full-timeeducation. ILAs were designed to develop in everyone a commitment to lifelonglearning and to give individuals control and freedom of choice. ILAs were individ-ual, universally available accounts but provided discounts for learning. The level ofdiscount had to be sufficient to act as an incentive to individuals to manage, planand invest in their own learning throughout their lives, whilst ensuring they retaineda personal stake through individual contributions.

Stated programme objectives were:

● to contribute to creating a better-equipped workforce;● to encourage people to have a personal stake in lifelong learning, with greater

control over their personal development;● to increase levels of private (individual and employer) investment in learning;● to increase levels of participation and achievement in learning activities partic-

ularly amongst targeted groups where levels are traditionally low by providingdiscounts on the cost of learning as incentives to encourage individuals to regis-ter for ILAs, particularly from the target groups, e.g. ethnic minorities, womenlabour market returnees, younger workers with low skills or few qualificationsaged 21–30, and self-employed people; and

● to encourage the development of wider choice and innovation in the deliveryof training and to attract new providers, particularly those operating in smallerniche markets and with new, non-traditional learners (Department of Educa-tion and Skills 2002).

The non-bureaucratic nature of the programme designed to reach non-traditionallearners was successful – 1.4 million learning activities were booked, 16% of ILAredeemers had no previous qualifications and 22% had not participated in anytraining/learning in the 12 months preceding ILA use – yet there was also some‘deadweight’ as it was estimated that over half (54%) of redeemers would have beenable to pay for their most recent ILA-supported course without their ILA.

By May 2001, the commitment to reach one million Individual LearningAccounts (964,000 in England) had been met, a year early, and an average of 3000accounts were being opened each day. Expenditure on the programme hadreached some £90m (US$ 155.-) at this point, and the majority of this was onpayments to learning providers for the introductory £150 (US$ 258.-) ILA incentiveusing recycled TEC resources. By September 2001, expenditure on the programmehad reached some £180m (US$ 309,985,000.-) and had doubled since May 2001reflecting rapid programme expansion over the period, exceeding all expectations.This development however raised serious concerns about the way the programmehad been promoted and sold particularly in the light of growing evidence that sometraining providers were abusing the system offering low value, poor quality learning(Thursfield et al. 2002).

In November 2001, less than six months later, the programme which had promi-nently figured as a major plank in the Labour Party’s educational policy platform,was suddenly suspended because of major irregularities and fraud. The Ministryannounced it would introduce a successor programme, but that the new

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programme would be part of a wider review of the funding of adult learning and askills strategy for the future. The programme was also closed down in Scotland,Wales and Northern Ireland.

As of 2006, earlier plans to revive the programme seem to have been abandoned.The new Skills Strategy White Paper that the UK government launched in Summer2003 (Department for Education and Skills 2003) made no mention of ILAs even ifit incorporates several of the successful elements of the ILA programme. Thus theWhite Paper stresses individual responsibility and choice, postulates an entitlementfor all adults to access training to increase their skills to the basic level of employabil-ity, and affirms the principle that the costs of higher level skills development mustbe shared with individuals and employers. Which form such an entitlement is goingto take is still unclear.

In Scotland where the English programme architecture had been adopted, theILAs were also shut down at the end of 2001. A report in 2004 of the AuditingCommittee to the Scottish parliament found that ‘both the planning and delivery ofthe ILA scheme in Scotland was fundamentally flawed’. As to the reasons and therepercussions of this failure the Committee had this to say:

The scheme was driven by numbers and introduced in haste to meet Ministerialcommitments without adequate management and monitoring arrangementsin place. The scheme lacked precise objectives about what it should achieveand in particular made no reference to the need to provide high quality train-ing Too little attention was paid to the management of risk, lines of account-ability were blurred, the roles and responsibilities of the key players were notclear and security systems were not fit for purpose despite repeated warningsabout their inadequacy. The result of these errors and failings was that an esti-mated £1.2 million of tax payers money was paid to cover claims which wereeither irregular or fraudulent. …However, the costs of the collapse of thescheme are not just financial. (T)he scheme was popular with genuine learn-ers and offered an excellent opportunity to engage with members of the publicwho perhaps had not previously been attracted to learning. The withdrawal ofthe scheme has meant the loss of service to thousands of individuals who couldhave benefited from it. In addition, the lack of guidance on the operation ofthe scheme and its sudden closure caused significant problems for legitimatelearning providers (Auditing Committee to the Scottish Parliamant, 2004).

Scotland launched a successor scheme to the discredited system of individual learn-ing accounts in 2004 (‘ILA Scotland’). The new scheme awards ILAs up to £200 ayear to fund a course of their choice to those on incomes of less than £15,000 a year,and £100 to those above that income level.

The Swedish ILA programme

A financing system for ‘individual competence development’ had been discussed forseveral years in Sweden, especially between employers and unions. Many reports andhearings of main stakeholders preceded the report (of December 2000) by a specialcommission set up to investigate a system of individual competence development forthe government.

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FINANCING LIFELONG LEARNING 17

Based on the recommendations of this report, the Swedish governmentpresented to the Swedish Parliament in April 2002 a so-called Guideline Bill on Indi-vidual Learning and Skills Development. The Bill provided for individual savingaccounts for which individuals can set aside a certain amount of money and receivea tax reduction for the amount saved. Withdrawals from the account could be donefor all purposes, subject to the usual income tax. However, when money would bewithdrawn for learning purposes, a so-called competence premium would begranted. The ILA system was not designed to replace the existing variety of publicsupport for adult education and training, but as a complementary system to theexisting support mechanisms for ‘competence development’.

The main purpose of the ILA scheme was to create a voluntary system that permit-ted individuals to open a ‘learning account’ on their own initiative and to determinehow the money – basically their own savings, plus a tax premium when used forlearning purposes, and possibly augmented by contributions of their employers –was to be used.

Individuals who chose to set up a learning account could put deductible savingsinto their account. These were limited to 25% of a base amount, i.e. SEK 9500(approx. US$ 1344.-) per year. The account was liable to the usual capital tax (30%),and funds withdrawn from the account to income tax. The ‘competence premium’mentioned above was not to exceed 50% of the amount withdrawn. On top of thattax premium there was a fixed amount grant (SEK 1000.- or US$ 141.-) whichapplied to learning programmes of more than five days’ duration. Employers couldmake a contriution to an individual learning account that amounted up to half thebase amount. These contributions were to be treated as salaries and are thus neutralin terms of costs (Swedish Ministry of Industry and Communications 2002).

The government expected that 10% of the labour force, or 650,000 individuals,would start a learning account during the first year and that, over the first ten years,some 30% of the workforce would have active learning accounts.

As of Winter 2004 the plan to launch such a national ILA system was abandonedwhen the government rescinded the plan in its budget proposal for 2005. Severalfactors contributed to this decision: The labour unions regarded the scheme asfavouring the already well educated and well-off. The Ministry of Finance saw ILAsas another tax-subsidized scheme similar to the existing pension saving accounts.The Education Ministry held a negative view as it had just completed a major over-haul of the regular system of student support in which the ILAs had no place. Andfinally, the Ministry of Industry and Commerce, the initial driver of ILAs, waveredon its support when a new minister came into office who had no great interest inILAs (Strömqvist 2005).

ILAs in Canada

In Canada, ILAs appeared prominently on the public agenda for the first time whenthe Liberal Party, in its 2000 programmatic platform for the election in Spring 2001,promised to create Registered Individual Learning Accounts to help Canadiansfinance their learning needs. In the Speech from the Throne (Sept 2000) it wasmade part of the programme of the newly (re)elected government: ‘The Govern-ment will also help adults who want to improve their skills, but who may face diffi-culty in finding the time or resources to do this while providing for themselves and

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18 HANS G. SCHUETZE

their families. It will create Registered Individual Learning Accounts to make iteasier for Canadians to finance their learning’.

Although the ILA scheme was announced in the party’s electoral platform andthe Speech from the Throne, there was considerable opposition to the programmewithin the newly elected government, especially from the Ministry of Finance, thesectoral councils, the unions and officials within Human Resources DevelopmentCanada (HRDC), the department which would have been responsible for the imple-mentation of the programme.

The Ministry of Finance was concerned that ILAs contained nothing novel andwere similar to Registered Retirement Savings Plans (RRSPs) or Registered Educa-tion Savings Plans (RESPs). Moreover, such a programme was seen as difficult toimplement while benefits were doubtful. Sectoral councils and the unions foundthis approach was too individualistic, arguing it would be much more effective if themoney was invested in sectoral activities in which unions could be involved, organiz-ing the needed learning and training activities.

Within HRDC there were two major concerns with regard to the objective of bene-fiting low-income Canadians to improve their skills or education. One was that thisinitiative would serve as a(nother) tax shelter programme from which only peopleof middle and upper income levels would benefit. Poorer people, who were the orig-inal target group of the initiative, would find it hard to accumulate disposable incometo be put away in ILAs. Another major concern was that if the objective was to helpadults learn, in most instances ILAs would mean that it would just take too longbefore people would be able to take up training. Thus, the project was never imple-mented. Instead it was quietly buried – without any explanation or public discussion.

However, a feasibility study and demonstration project related to the ILAsconcept was funded by HRDC, conducted by the Social Research and Demonstra-tion Corporation (SRDC). This project (called learn$ave / $avoir en banque ) willhelp, in conjunction with organizations in ten communities across Canada, morethan 3000 low-income Canadians build savings to improve their training, return toschool or learn by starting a small business. Delivering Individual DevelopmentAccounts for learning purposes, it matches the savings of low-income participants,dollar for dollar. The project, which started in Spring 2001, will be evaluated andimpacts measured throughout and for up to two years after the project is delivered(Eckel et al. 2002).

As this project was funded in 2000 for a duration of nine years, it can be arguedthat Canada is still testing the merits and feasibility of ILAs; however it seems highlyunlikely at this point that there will be any major follow-up in terms of introducingILAs on a national scale.

As can be seen from the short description and review, ILAs in the three countries,albeit similar in name, have different features. Table 3 provides an overview.

In sum, the idea of ILAs which were seen as an innovative way of financing life-long learning, has not been successful in the three countries under review here. Thethree principal reasons for its failure seem to be that they were (1) not fitting intothe system of existing financing schemes for (post-secondary) education which theywere meant to complement rather than replace, (2) too difficult to administer in away that dead weight effects and fraudulent use could be prevented; and (3) notsupported by strong political constituencies. Especially the British experience witha full-scale programme supports the view that ILAs might be of ‘honorable inten-tions, but ignoble utility’ (thus the title of the paper by Thursfield et al. 2002).

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FINANCING LIFELONG LEARNING 19

Tab

le 3

.IL

As

in C

anad

a, S

wed

en a

nd th

e U

K

Cou

ntry

Obj

ectiv

es/t

ype

of le

arni

ngC

hara

cter

istic

sA

mou

nt o

f con

trib

utio

nsSt

atus

Can

ada

N/a

N/a

N/a

Aba

ndo

ned

bef

ore

enac

ted;

smal

l pilo

t pro

ject

on

goin

gSw

eden

Adu

lt e

duca

tion

an

d tr

ain

ing

for

‘com

pete

nce

dev

elop

men

t’In

divi

dual

sav

ings

acc

oun

ts

wit

h c

ontr

ibut

ion

s fr

om th

e st

ate

and

empl

oyer

s

Savi

ngs

of u

p to

US$

136

6.- p

.a.,

tax

dedu

ctib

le w

hen

use

d fo

r ed

ucat

ion

Aba

ndo

ned

bef

ore

enac

ted

En

glan

dSk

ill tr

ain

ing

for

empl

oym

ent

Indi

vidu

al s

avin

gs a

ccou

nts

w

ith

siz

eabl

e co

ntr

ibut

ion

fr

om s

tate

Indi

vidu

al s

avin

g of

US$

47.

-, st

ate

con

trib

utio

n o

f US$

278

.-.A

ban

don

ed a

fter

inci

den

ces

of fr

aud/

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20 HANS G. SCHUETZE

There is some evidence however that the ILA idea can work if they are welldefined, locally administered and embedded in a larger legislative framework. Anexample are the US Individual Training Accounts (ITAs) which are part of the tool-box of the Workforce Investment Act of 1998. This Act4 has the objective of meetingthe needs of businesses for skilled workers and the training, education and employ-ment needs of individuals and to enable adults to obtain the training they find mostappropriate through Individual Training Accounts.

Different from the UK and Swedish ILA schemes, the ITAs have been in opera-tion for a number of years. ITAs are vouchers given to individuals (‘customers’) whoneed occupational skills training to become gainfully employed or re-employed.Individuals may use their ITAs for training in any programme on the list of eligibleprogrammes and providers. Due to the decentralized administration by individualstates, there is no available data on the number of individuals holding and usingITAs (Greenberg and Patel, 2006).

Summary

As it is apparent from the several models and the variety of activities that can be char-acterized as Lifelong Learning, there is no ‘ideal’ financing system that would coverall learning abilities and benefit potential lifelong learners who would requiresupport to engage in organized learning beyond school. Rather, a number of differ-ent criteria have been identified that can be used to assess the various financingsystems with respect to the multiple objectives a lifelong learning system is expectedto realize (see e.g. Timmermann 1996). It is fairly obvious that the objective of provid-ing incentives for further learning for high school drop-outs and illiterate adults willneed to emphasize different principles and mechanisms than the objective of incit-ing highly educated professionals to engage in continuing professional education.

Learner-based financing systems emphasize the importance of individual respon-sibility for both investing in their further learning and in the freedom of choice inwhat, when and how they learn. This emphasis on freedom of choice is closely linkedto a more general move towards a ‘privatization’ or ‘marketization’ of education andtraining, and to ‘consumer’ choice among different ‘education service providers’.

In the course of this shift which reflects the progressive move from a welfare statemodel to a market model governments which in the past have provided andfinanced a large array of formal education and training activities have more recentlyadvocated and actively promoted private investments and individual choice ineducation by setting up a variety of ‘learner-centred ‘ financing schemes.

Like some of the other financing models mentioned, ILAs are designed to stim-ulate investments by individuals in their own education and training. Financialincentives, particularly public grants or subsidies from the individual’s employer,that can be put into these accounts thereby increasing their cash balance, arethought to motivate individuals to participate in education and training activitiesin which they would otherwise not participate. This would be of particular impor-tance for groups who are under-represented. Like vouchers, ILAs are instrumentsof demand-oriented financing, designed to empower the learner who can makechoices as to what to learn, and with what provider. As such, ILAs could be aninnovative response to some of the thorny problems concerning participation byunder-educated adults in post-secondary education or training and could, if and to

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FINANCING LIFELONG LEARNING 21

the extent that the scheme works as intended, lead to increased participation inorganized learning activities by such groups. The experience of the three coun-tries that have been briefly reviewed here has shown how difficult it is to designILAs that realize this potential.

In principle, the idea of ILAs has the potential of addressing and closing a majorgap in current financing systems. In reality, however, as the experience of the threecountries shows, ILAs were poorly coordinated, if at all, with existing systems offinancing learning activities by adults and of other financial transfers. This was, Isuggest, their main flaw and the reason they failed in the UK, or never took off inCanada and Sweden. The challenge remains to integrate ILAs or other new financialmechanisms into the existing system in order to avoid the one-way streets and cul-de-sacs that are still characteristic of the wide variety of existing education and learn-ing programmes. That does not necessarily mean the necessity to design a masterplan that replaces all or most of the other existing financial mechanisms for educa-tion and organized learning (as suggested by the Drawing Rights model, mentionedabove). Like a system of Lifelong Learning that has to grow out of the present patchwork of learning opportunities, a system of financing Lifelong Learning must alsobe developed on the basis of existing mechanisms and be coordinated with these.

Acknowledgement

An earlier version of this article was published in SWEET, R. and ANISEF, P. (eds.)(2005) Preparing for Post-secondary education: New roles for governments and families(Montreal: McGill-Queen’s University Press).

Notes

1.1. ‘Formal’ settings comprise the education system, i.e. schools, colleges, universities whereas ‘non-formal’ settings are other places outside the formal sector where organized learning takes place (e.g.the workplace, museums, community centres, trade unions, sports clubs). By contrast, ‘informal’learning is learning that takes place anywhere, yet in an unplanned, unorganized and mostly inciden-tal manner. This informal ‘everyday learning’ is not included in the discussion of the organizationand financing of lifelong learning.

2.2. An exception are wages or allowances for apprentices which are lower than those for a qualified worker.3.3. However, in view of massive opposition from the tertiary sector, the Australian government decided

recently not to adopt a far more radical proposal for financing post-secondary education whichwould have combined a voucher system with an extended outcome-contingent loan scheme (seeCommonwealth of Australia (Department of Employment, Education, Training and Youth Affairs)1998 and Harman 1999).

4.4. The Act is based on the following principles: • Training and employment programmes must be designed and managed at the local level – where

the needs of businesses and individuals are best understood.• Customers must be able to conveniently access the employment, education, training and informa-

tion services they need at a single location in their neighbourhoods.• Customers should have choices in deciding the training programme that best fits their needs and

the organizations that will provide that service. They should have control over their own careerdevelopment.

Under the new Workforce Investment System, state workforce investment boards were establishedand states developed five-year strategic plans. Individuals are referred to a ‘One-Stop’ delivery system,with career centres in their neighbourhoods where they can access core employment services and bereferred directly to job training, education or other services. ITA’s are to promote individual respon-sibility and personal decision-making or they allow adult customers to ‘purchase’ the training theydetermine best for them.

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ded

by [

Nor

thea

ster

n U

nive

rsity

] at

20:

49 1

6 D

ecem

ber

2014