February 22, 2013 12:05 am

Back-to-work scheme under fire from MPs

Iain Duncan Smith’s back-to-work scheme has been attacked by MPs who warn that the £5bn programme is failing and companies running it risk collapse.

MPs on the public accounts committee said the Work Programme, which is designed to find jobs for those who find it hardest to get into employment, was performing “well below expectations”.

Margaret Hodge, the Labour MP who chairs the committee, said: “[The programme’s] performance so far has been extremely poor ... It is particularly failing young people and the hardest to help.

“It is shocking that of the 9,500 former incapacity benefit claimants referred to providers, only 20 people have been placed in a job that has lasted three months, while the poorest performing provider did not manage to place a single person in the under-25 category into a job lasting six months.”

The work and pensions secretary’s scheme has come under fire since ministers admitted last year that far fewer people were finding sustained employment than had been expected. Just 2 per cent of claimants found work for six months, or three months for particularly difficult cases, compared with the government’s own target of 5.5 per cent.

The figures were so bad that they fell below what the department predicted would have been the success rate if there had been no such scheme – although experts said that forecast was over-optimistic.

The committee found that the programme’s failure was not caused by economic stagnation and a lack of jobs but rather the failure of companies to design effective schemes.

Ms Hodge said: “The department must hold failing providers to account, as well as ensuring that good practice is identified and shared.”

Each of the companies running back-to-work schemes on behalf of the government is paid by results, with higher payments for helping those hardest to reach. The government has boasted that it has kept payments low using a competitive tendering process but the committee found the sums were so low that companies were not doing enough to help the most difficult cases.

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The report said: “There is some emerging evidence that those who are hardest to help are being parked with minimum support and therefore little prospect of moving into work.”

Providers have long warned that the payments offered by the government were not enough to run schemes.

The problem is so acute that some companies are at risk of failing altogether. The committee warned: “The department should, in the period up to June 2013, monitor contracts to identify those most at risk of failure and produce contract specific plans for the steps it will take should failure occur.”

The report comes at a sensitive time for Mr Duncan Smith, who faces criticism over his two flagship schemes: the Work Programme and the universal credit, which bundles all working-age benefits into a single payment. The Financial Times revealed this week that David Pitchford, a Whitehall troubleshooter, had been drafted in to take over the welfare reform, which Number 10 fears could be undone by technology failures.

The department said: “This report paints a skewed picture. More than 200,000 people have moved off benefits and into a job thanks to the Work Programme.”

It defended the scheme’s payment levels, saying: “Previous schemes paid out too much upfront regardless of success. By paying providers for delivering results, the Work Programme is actually offering the taxpayer real value for money.”

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