Conned into paying for failure

For the past decade the government has driven welfare policy in a new direction.

Warning lights started flashing on the dashboard. The engine began making a funny noise years ago. Every now and then that worrying hot-plastic smell fills the cabin.

But Labour and Tory ministers responded by pressing down extra hard on the accelerator.

It's obvious the whole machine is going to break down, but the politicians in the driving seat are just revving away and crossing their fingers.

Around 2000, the Labour government started throwing cash at the unemployment problem. But the people who take the cash keep wasting it. They don't live up to their promises. Sometimes they resort to fraud and misbehaviour.

So far, so Daily Express. But the benefit claimants aren't the unemployed. They are the "benefit-busting" companies who take cash to get people back into work - then don't.

The scandal of A4E's poor performance, profiteering and fraud is well known.

Readers of this column knew about it a couple of years before the Daily Mail noticed.

But A4E is not alone. It is just one of the worst examples of a systematic problem.

Just pick one of the other "benefit-busting" companies and you will find exactly the same problems.

Take Working Links. It was founded in 2000 as a "public-private partnership."

David Blunkett and Tessa Jowell pushed the Employment Service into a joint venture with temp agency Manpower and consultants Cap Gemini to form the firm.

The government still owns a share of Working Links, but they have taken a back seat as the company grabbed government contracts.

Working Links, like all the "benefit-busting" firms, runs a variety of "job-club" type coaching of the unemployed. Working Links doesn't really bring any "free market" magic to the business because the only market it competes in is the market for government grants.

Its current annual report says its "principal activity" is being "a provider of services under a range of government contracts to help Britain's most disadvantaged communities."

This "activity" has had dramatic effects on the firm - Working Links had a £27 million turnover in 2001.

According to its latest report, it took in £123m in 2010. The report says this "turnover is the amount of revenue receivable under a variety of government contracts."

In the same period, profits zoomed from £865,000 to £5.7m.

Working Links is very good at transferring cash to its shareholders. In 2010 the firm paid £3m in "fees" to one shareholder, Manpower, and a £1.6m dividend to their shareholders.

Unfortunately, Working Links isn't very good at getting people into work. One of the firm's first contracts was "Action Team for Jobs," an outreach scheme where advisers tried to search out hard-to-reach unemployed people and help them back into work.

The Department for Work and Pensions's own research report into the scheme found the "private sector-led" teams - run by Working Links and another firm - "only met 78 per cent of their job entry targets."

By comparison, the civil servants in the Jobcentre Plus teams "achieved 140 per cent of their job entry targets." This was particularly striking as the "private-sector" teams focused on unemployed people who had fewer problems.

The Jobcentre Plus teams worked with clients from more traditionally "hard-to-reach" groups than private teams, who had a greater proportion of clients who had been unemployed for less than six months.

The "private-sector" teams "were also proportionately more likely to work with clients with just one of the target disadvantages than Jobcentre Plus teams."

Seeing Working Links's failure, the government gave it more contracts. These included millions of pounds to run the government's next scheme, Pathways to Work, aimed at disabled unemployed people.

Predictably, the National Audit Office found privatising Pathways to Work was "poor value for money" as contractors "universally failed by considerable margins to meet their contractual targets."

In particular "Jobcentre Plus pathways have performed better than provider-led pathways in supporting claimants" from more disadvantaged groups.

The evidence shows Working Links were yet again "creaming" the most active unemployed folk and "parking" those with more problems.

One Ofsted report on a Working Links Pathways contract showed "the number of participants who move into jobs is too low." Another found "Job outcome rates" were "poor."

Working Links was supposed to get 29 per cent of "mandatory participants" in the scheme into jobs.

Instead they only found work for 11 per cent.

Working Links's infamous competitor A4E got away with poor performance and high profits for years.

But it finally hit a crisis over accusations of fraud and fiddling. Working Links has also been found guilty of false claims for cash.

My day job is working for Private Eye magazine.

Last year we were leaked a report of a 2011 Department of Work and Pensions "compliance visit" to the firm's Liverpool office.

The government inspection checked claims for 85 unemployed people. It said: "Based on the information above, none of these customers should have been considered as starts on the Working Links contract."

The company should not have claimed government cash because "They had all been referred to jobs by Jobcentre Plus and been successful in securing those jobs prior to any intervention by Working Links."

The firm also claimed cash for training them even though this training "was not provided by Working Links." The firm was merely asked to repay the wrongly claimed cash.

Most of Working Links business was built up under new Labour. The Tories have looked at this mess and taken decisive action.

First, they are keeping all reports into financial misbehaviour by firms like Working Links secret.

Second, they have banned Ofsted from inspecting the providers.

And third, Chris Grayling has given it contracts to run his Work Programme in Scotland, Wales, and south-west England worth £307 million.