Make learning less taxing

The long-term aim is to improve productivity by developing a more highly skilled workforce. The means chosen to achieve this is individual learning accounts, or ILAs, which will promote lifelong learning and education.

ILAs will be the main route for adults to receive help in acquiring qualifications so that they can boost their income and make themselves more employable. Their philosophy is based on the changing economy where the traditional ''job for life'' has been replaced by shorter-term employment and temporary contracts.

This has led to a need for a more flexible, multi-skilled workforce. The ILA will allow employees to gather a fund which they can use to buy training in new or more advanced skills which will help them in their existing or in future jobs.

''It is clear that we are in a fast-changing global economy,'' said Chancellor of the Exchequer Gordon Brown MP, when he attended the launch of the pilot in Fife. ''Indeed, research shows that nowadays people will have on average 10 jobs throughout their career and no-one can be guaranteed a job for life.

''The ILAs are an important way of making sure that people have the chance to upgrade and develop their skills.''

A government statement released with the Budget announced incentives to encourage employers to invest in employee training, although existing tax incentives are to be abolished.

The idea is that public money should be better targeted and in future more help will go to those who have the greatest need to improve their skills and qualifications. At present, tax relief is available to individuals who pay for certain costs of their own vocational training. Most trainees get relief at source by deducting an amount equal to income tax at the basic rate from the fees they pay to UK training providers.

Training providers then reclaim that amount directly from the Inland Revenue. Trainees can claim any higher rate tax relief from their local tax offices or in their tax returns.

Vocational training tax relief is available if the course taken can lead to a Scottish or National Vocational Qualification (SVQ or NVQ) and the trainee is 19 or older, or if aged 16 to 18 and not in full-time education.

The relief is also due for other training if the course offers skills or knowledge relevant to paid employment or self-employment and is intended to be used in the employment. The trainee must be 30 or older and the course must be full-time, lasting for at least four weeks but no more than a year.

All teaching and practice must take place within the UK and trainees must be resident in the UK, not receiving any other tax relief for the fees and not entitled to public financial assistance for the course. They must pay for the training themselves and not be undertaking it for recreation or leisure.

The first step to achieving the Chancellor's redistribution of support is to abolish higher rate tax relief on vocational training from April 6.

So higher rate relief should not be claimed for payments made to training providers on or after a week on Tuesday. This will affect around 5000 trainees and the extra revenue for the Government will be less than #3m in the next financial year.

Basic rate relief will continue until the following financial year, 2000-01, when vocational training relief will be abolished completely. The final date for payments that attract relief will be announced nearer the time.

At the same time the extra-statutory concession (ESC), which in very limited circumstances gives tax relief for spending on job-related training courses that employees pay for themselves, will also be abolished.

By then, though, the national framework for ILAs will have been launched. Contributions by employers into ILAs held by their employees will qualify for a deduction from taxable profits. They will be free from tax and National Insurance contributions as long as the employer contributes to the ILAs of the lowest-paid workers on similar terms.

The new legislation on employers' contributions will be introduced next year once the finer details of how ILAs will operate have been finalised.

The first starter Individual Learning Accounts will be opened in the financial year starting on April 6. For every one of the first #1m accounts, the Government will give #150 to spend on education and training when the account holder commits at least #25 of his own money.

In the following year, the national framework will be in place making ILAs available to everyone. These ILAs will provide a 20% discount on spending of up to #500 for eligible courses, saving them up to #100 a year. Some key courses, such as those on computer literacy, will attract higher discounts.

The Chancellor has also changed the tax rules to encourage increased computer access throughout the community, particularly much wider computer use and computer skills among employees.

From a week on Tuesday, employees will be able to have a computer on loan from their employer without facing a benefits charge. The new exemption applies to computer equipment worth up to #2000.

''We hope this new measure will encourage businesses to loan computers to their employees,'' said Brown, ''and that it will be as successful as a similar scheme developed in Sweden, where household computer use increased dramatically as a result.

''There are real benefits to businesses, employees and the wider community from the increasing access to computers.''

Francis Shennan