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A programme run by the private sector to get people on incapacity benefit to work has met devastating criticism from parliament’s spending watchdog.

The coalition government seeks a big cut in the £12.6bn incapacity benefits bill as part of next month’s spending review. It is also planning to hand over to private providers the job of getting 2.6m people on incapacity into work – funding the programme through a payment-by-results system.

But, to date, contractors on the Pathways to Work programme have “universally failed by considerable margins to meet their contractual targets”, says the public accounts committee.

Private providers, who deliver the Pathways programme in 60 per cent of the country, performed worse than the Jobcentre Plus areas. They tended to “cherry pick” the easiest clients, but they still achieved only a third of their targets for getting into work people who were required to go through the programme.

The report comes amid confusion about planned cuts to sickness benefit. Leaked documents suggested the Treasury had agreed to £2.5bn savings; officials insisted the figure was no longer valid and that talks were ongoing.

George Osborne, the chancellor, revealed that the bill for all out-of-work benefits would fall by £4bn in the spending review – an announcement that took the Department for Work and Pensions by surprise.

Including piloting from 2005, some £760m has been spent on Pathways. But up to 2009 there had been only a 125,000 reduction of incapacity benefit (IB) claimants. “No one knew by how much Pathways contributed to this reduction,” said Margaret Hodge, who chairs the committee. The programme has not saved more than it cost.

In 2008-9, almost £100m was spent on employment support “that did not deliver additional jobs”, the committee says. There are too few controls in place to prevent erroneous or fraudulent claims by providers, and important lessons must be learnt before the programme is subsumed under the vastly more ambitious new programme.

The committee recognises that problems in handing claimants over to the private providers hampered the programme. Over-ambitious goals were set for it since pilot programmes were not properly evaluated.

The main contractors have referred only 12 per cent of their customers to sub-contractors, who include voluntary specialists in assisting people back to work. That, the committee says, does not appear consistent with “maintaining a healthy welfare-to-work supplier market”.

Chris Grayling, employment minister, blamed the problems on Labour: “This report is hugely disappointing and just underlines how misplaced many of the previous government’s labour policies were. They just never got to grips with the challenges of getting people back to work.”

The committee also notes huge numbers of existing IB claimants may transfer to jobseekers’ allowance as they start to be put through a new medical assessment to transfer them from incapacity benefit to the new employment and support allowance.

Copyright The Financial Times Limited 2017. All rights reserved.
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