Britain's fast-track visa scheme ushered in three years ago to attract foreign Information Technology workers, particularly from India, is being investigated by the National Audit Office -- the government spending watchdog -- following complaints that the scheme had cost thousands of British IT specialists their jobs.

Under the fast-track system, companies in sectors with skill-shortage can bring in foreign employees without checking whether British workers are available.

The IT sector, however, was removed from the skill-shortage list last autumn, when it became clear that thousands of British staff were being laid off.

Firms are now meant to advertise for vacancies before seeking work permits. But campaigners claim that many fail to do so or ignore the CV's of British workers who apply. Others are exploiting an in-house transfer scheme that allows a British-based company to bring in foreign employees from a subsidiary without having to advertise.

Few applications are refused and 34,000 IT workers have come to Britain under what campaigners consider to be a loophole.

The opposition Conservatives have called on the government to curb the fast-track visa system to ensure that it is not used to undercut domestic contractors. Entry barriers for skilled IT workers were lowered three years ago at the height of the dotcom boom when companies were desperate for staff.

But thousands of non-EU workers are continuing to obtain permits despite a dramatic contraction in the industry since the September 11 terrorist attacks in 2001.

According to a report, an estimated 100,000 British IT specialists were looking for work last year. At the same time the Home Office issued a record number of work permits in the sector, it claimed.

The Home Office is issuing between 1,500 and 2,000 work permits a month and there are an estimated 50,000 overseas IT workers in the country.

The work permit system has expanded rapidly from 30,000 in the early 1990s to about 130,000 in 2002. This year Home Secretary David Blunkett has set a target of 175,000 permits. But some IT specialists claim the scheme has succeeded only in putting them out of work.

British Telecom for instance is employing several hundred Indian software developers from the Indian company, Mahindra BT, in which it has a 43 per cent stake. They are brought to Britain on a sub-contracting basis to maintain BT's systems.

The company denies that Indian employees are being paid substantially less than British workers.

Gurdial Rai represents the group on a government panel that monitors the operation of the work permit scheme in the IT sector. He said, "In spite of the very bad market conditions, a record number of permits is being issued -- around 20,000 last year. The scheme is being used to bring in cheap labour and the government is not enforcing the rules. While the work permits route provides a source of cheap labour, there will be little incentive for British employers to provide the necessary investment in training. This will have serious long-term consequences for the IT industry."