February 29, 2012 10:05 pm

Alarm on jobs aide ignored by No 10

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Downing Street ignored warnings that appointing Emma Harrison as the prime minister’s adviser on “troubled families” could lead to a conflict of interest with her company, A4e, which is at the centre of a fraud inquiry.

Officials at the Department for Work and Pensions (DWP) told Number 10 that giving Ms Harrison a role advising the government on finding jobs for troubled families might cause ethical problems, given her company’s role as one of the main providers of the government’s £5bn back-to-work scheme.

Number 10 appointed Ms Harrison despite these concerns, according to officials familiar with the exchanges. This led to embarrassment for the prime minister when four employees of A4e were arrested last month under suspicion of fraud while handling government contracts.

Civil servants at the DWP are irritated that they are now being blamed for the row surrounding Ms Harrison’s appointment, but admit they did not tell Number 10 after they found out about the fraud allegations in November 2010, which have led to the recent arrests.

Sir Jeremy Heywood, cabinet secretary, will carry out a review of why information was not passed from junior DWP officials further up the civil service hierarchy. One person in the department said: “The department is looking at how we can tighten up our procedures and make sure we pass on information more quickly.”

Officials also insist they were not under any obligation to tell Number 10 that they had carried out eight investigations into the company under the previous Labour government’s Flexible New Deal scheme. Four of those found there was no case to answer and department aides say the other four did not amount to evidence of “systemic” problems at the company.

David Cameron told MPs during prime minister’s questions: “I do think this issue needs to be properly dealt with. I’m concerned that subsequent to Emma Harrison’s appointment information needed to be passed up more rapidly to ministers.”

Liam Byrne, Labour’s shadow work and pensions secretary, said: “David Cameron appointed the head of one of his biggest contractors as a personal adviser, in the teeth of civil service warning that there was a conflict of interest.”

Labour also accused the government of leaving its back-to-work scheme open to further fraud allegations after it emerged providers will not face automatic checks until nearly a year after the scheme started.

The IT system for checking whether companies are getting benefits claimants into sustained jobs will not be running until April, four months after it began to pay providers for successful placements, by which time an estimated £60m will have been paid out.

DWP stressed there were measures in place to prevent fraud. “Providers are paid by results, so they must prove and have verified with an employer that they have placed someone in work for six months,” it said.

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