WELFARE-TO-WORK schemes for which profiteers get payment by results (PBR) were dealt a major blow yesterday as auditors warned they might create “perverse incentives” for the providers.

The damning assessment by the National Audit Office (NAO) showed that central government did not know how many such schemes were in place across the public sector or how much taxpayers’ money was being spent on them.

Neither the Cabinet Office nor the Treasury maintains a database of these arrangements, by which private firms are paid depending on outcomes.

“They were unable to tell us how many PBR schemes are in operation or how much money departments have allocated to such schemes,” the report states.

The auditors also said they were concerned that an absence of evidence about suitability and effectiveness could mean commissioners using PBR in circumstances to which it was ill-suited.

“A poorly designed scheme may create perverse incentives for providers, such as welfare-to-work providers prioritising people who are easier to help and ‘parking’ those who are harder to help,” the NAO said.

It went on to note its previous finding that performance expectations for the Department of Work and Pensions’s wholly privatised work programme had to be lowered, particularly for harder-to-help claimants.

“This report echoes many of our warnings about payment by results and privatisation in general — that all too often private companies are being rewarded for failure without proper scrutiny,” said public-sector union PCS general secretary Mark Serwotka.