2.10 Learning accounts will be built on two key principles: first, that individuals are best placed to choose what and how they want to learn; and second, that responsibility for investing in learning is shared.

2.11 A national system of individual learning accounts will turn these principles into reality, acting as a catalyst for the learning revolution. They will allow individuals to save and borrow for investment in their own learning. Learning accounts will be available to everyone, including the self-employed. They will be used, at the learner's choice, to pay for learning - whether an evening class, or a learning programme bought through the UfI, or meeting the cost of childcare so as to give time to study.

2.12 The Government will construct the framework for these accounts so as to encourage as many people as possible to save using them. In the medium term, this could be done through tax incentives or by matching the individual's contributions with public support. We will be consulting widely with the financial services sector to achieve this. Having created the framework, we expect that learning accounts will be offered through a range of financial institutions. We are currently working with these institutions on development plans. It is important that people should have a choice about where they want to hold their account.

2.13 We will also explore the best way of helping people to make informed decisions about their learning using their learning account. The UfI will play an important role. For the first time, individuals and companies will have one place to get advice on the courses they need, what their account could buy them and which providers are right for them. We will explore how the University for Industry and learning accounts can best dovetail, and how smart card technology can help people to manage their financial transactions and plan and record their learning in relation both to their learning account and their ‘membership’ of the UfI.

2.14 We will test different approaches to learning accounts in preparing for a national system. For this work to provide useful answers, we need to test real reactions to different forms of learning accounts. As part of this work, and to provide impetus to learning accounts, we propose to support up to one million learning accounts, funded by £150 million from TECs' resources. These will be based on two main approaches to learning accounts: the universal and the targeted.

• the universal approach will offer accounts to anyone at work wanting to learn. Everyone will have to invest a minimum amount of their own money in their account, either as a lump sum or in the form of a commitment to regular saving. The Government will then support that initial investment, up to a maximum public contribution of £150 for each account. It will be open to others - for example, employers - to contribute to a person's account in cash or in kind;

• the targeted approach will use a proportion of these one million accounts to support particular learning or skill needs; for example, people without qualifications and in low-skill jobs, areas of skills shortage, employees in small firms and those seeking to return to work.

2.15 We also want to encourage more people to study at sub-degree level as Graduate Apprentices and, in particular, people in employment who might not otherwise have taken up higher education. We intend to pilot, in a few sectors, approaches that - using learning accounts to provide incentive and support - will encourage people to study while they are employed.

2.16 Learning accounts have the potential to play a very significant role in developing a new partnership between public funding for learning and the investment made by individuals and employers. It may be sensible to channel some of the funding which currently goes to providers - for example, TECs or further education colleges - through learning accounts. This might increase both choice for individuals and total funding by providing a greater incentive to individuals and businesses to match the Government's investment. We propose to discuss with the relevant partners possible projects to explore this.

2.17 Individual learning accounts could have a profound effect on the way individuals take responsibility for their learning and on the incentive for institutions to respond to individuals' needs. To do so, learning accounts will need to be part of a coherent approach to welfare reform, in which relieving poverty is not just a question of financial support but also of enabling people to get the skills which allow them to earn their own living. They therefore raise some fundamental questions:

• how effective would fiscal incentives be in encouraging greater investment in learning?

• should these incentives be targeted or universally available?

• what public funds should be channelled through learning accounts?

• how should the learning accounts relate to other incentives to save, including individual savings accounts (ISAs)?

• what incentives should there be for employers to contribute to learning accounts, given the existing tax relief on their expenditure on training employees?

• how can we ensure that individuals have the information they need to use their learning accounts effectively?

2.18 Working with our partners, and especially TECs and the financial services sector, we will pilot a range of different approaches across the country to ensure that the learning account framework we develop is flexible and cost effective.