Government's welfare to work scheme launched

Employment Minister Chris Grayling described the Work Programme as revolutionary

The government's new work scheme has begun, with ministers promising it will give 2.4 million unemployed people help to find jobs over the next five years.

Under the scheme, approved providers, mostly private companies, will try to find work for claimants in the UK.

Seven-year contracts have been agreed and are on a payment-by-results basis.

The Work Foundation said there was a danger private contractors would cherry-pick parts of the country where they were more likely to get results.

The scheme replaces existing employment support schemes - the New Deal, Employment Zones and Pathways to Work.

BBC home affairs editor Mark Easton said the government was investing billions in the Work Programme, but arguing that ultimately it would save the taxpayer money by getting people off benefits.

But he added that the payment-by-results aspect had led some to speculate that suppliers might pressurise vulnerable people into unsuitable jobs or ignore those who need the most support.

'Dating agency'

Outsourcing giants Serco and G4S are two of the private firms involved, while the voluntary sector groups signed up include Mencap, the Citizens Advice Bureau, the Prince's Trust and Action for Blind People.

The total value of the contracts awarded is likely to be between £3bn and £5bn.

Employment Minister Chris Grayling said the programme was "probably the biggest payment-by-results scheme in the world" and would offer "specialised, personalised support" for the unemployed.

Over 25-year-olds will become eligible when they have been out of work for 12 months and under 25s after nine months. Some younger people in certain circumstances, like young offenders, will be eligible after a shorter period of time.

"They're with the providers for up to two years," Mr Grayling told the BBC.

"The best way of describing it is almost like a giant employment dating agency, trying to motivate the long-term unemployed and match them to a job in which they have a good chance of staying.

"It's no longer Whitehall that decides how you do it. We say to the providers, 'You decide how best to help people and we'll pay you for doing it.'"

Mr Grayling said providers would be paid in instalments over a period of up to 27 months, which would give them an incentive not just to get people into work, but also to keep them there.

Andrew Dutton, chief executive of A4E, one of the companies involved, said it would look at removing the barriers that had been keeping people out of work.

"They may be debt issues or housing issues or problems within the family, legal issues around housing, but often very much around supporting them to really gain confidence," he told the BBC.

'Not big enough'

The Work Foundation research group has warned the programme would do little to improve job prospects for people living in economically weaker areas of the UK.

Neil Lee, the group's senior economist, said: "As the Work Programme is based on payment by results, contractors carry the initial risk.

"There is therefore the danger that private contractors will focus on investing in places where they are more likely to get people into work to secure a return on investment."

Mr Grayling, however, said the government had seen "intense competition" for the contracts right across the country, not just in economically better-off areas.

Shadow work and pensions secretary Liam Byrne said Labour supported the principles of the Work Programme but was concerned it was not big enough to help all those struggling to find jobs.

He also said an extra tax should be levied on bankers' bonuses to raise money for the scheme.

According to the latest statistics, UK unemployment fell by 36,000 in the three months to the end of March to 2.46 million.