Ministers' anger over A4e welfare-to-work whistleblower

Unemployed people undertake four-week placements under welfare-to-work

Ministers have hit back in a row over claims there was "systemic fraud" at welfare-to-work company A4e.

Evidence to a government committee from the company's former head of audit was leaked to a national newspaper.

Eddie Hutchinson claims little was done by senior A4e managers to deal with abuse of taxpayers' money.

But ministers said there were "questions" about Mr Hutchinson and that the allegations relate to Labour's time in office. A4e denies wrongdoing.

On Thursday, Work and Pensions Secretary Iain Duncan Smith wrote to former Labour ministers - including his shadow, Liam Byrne, and former culture minister Margaret Hodge - pressing them to reveal what advice they received about A4e.

On Friday, Mrs Hodge wrote back saying "the suggestion in your letter that I have deliberately withheld information from you or your officials is outrageous and untrue".

'Unethical behaviour'

A4e is paid by the government to place unemployed people in a job. It handles millions of pounds of government contracts and is majority-owned by Emma Harrison, an adviser to the prime minister until February 2012.

The firm is currently the subject of a police investigation into allegations of fraud relating to its welfare-to-work schemes.

Labour has accused work and pensions minister Iain Duncan Smith of being "asleep at the wheel" after evidence from former A4e auditor Mr Hutchinson to the Public Accounts Select Committee claimed that:

• There was a "complete absence" of oversight at the company

• "Huge barriers" prevented him carrying out his audit role

• Fraud was systemic and involved staff creating fictitious jobs - driven by bonus payments that encouraged some to "engage in malpractice for personal gain"

• A4e staff did not raise concerns because they feared for their jobs

Mr Hutchinson, who worked for A4e and another work programme company Working Links, wrote: "I encountered unethical behaviour or wrongdoing that fell way below standards that should be expected of organisations funded by significant sums from the public purse."

The committee had wanted to hear his evidence in secret but the documents were subsequently <link> <caption>leaked to the Daily Telegraph</caption> <url href="http://www.telegraph.co.uk/news/politics/9287740/Welfare-to-work-fraud-scandal-IDS-is-asleep-at-the-wheel-Labour-claim.html" platform="highweb"/> </link> . Chairwoman Mrs Hodge said she was launching an inquiry into the disclosure.

'Significant weaknesses'

Employment minister Chris Grayling told the BBC's Newsnight he had "significant doubts" about the allegations, adding: "There are questions about the individual who gave that evidence."

Sources close to Mr Duncan Smith, meanwhile, say he is angry at claims from Liam Byrne that the minister was "asleep at the wheel".

In his letter to Mr Byrne, Mr Duncan Smith said the committee had only received a "limited amount of information" and that to "ensure complete openness" advice provided to previous ministers should be passed to his department.

"It is also important to highlight the fact that none of the evidence we have seen so far or any of the allegations from alleged whistleblowers relate to the current government contracts, only to contracts procured by the previous government, of which you were a leading member," he wrote to Mr Byrne.

"It is for this reason, and in the interests of transparency, it is crucial for all advice received by previous Labour ministers in this area to be released."

In her letter on Friday, meanwhile, Margaret Hodge hit back, saying she had provided Mr Duncan Smith's officials "via the National Audit Office, with a dossier of emails containing allegations of fraud, malpractice and poor practice within A4e".

She added: "I must ask you to retract your allegation that I withheld information from you.

"Indeed the real question is did you properly investigate the allegations I sent you?"

She said she had always acknowledged that many allegations related to previous government programmes.

And she said she was "astounded" to see Mr Grayling "trying to undermine the character of one of our witnesses".

"It is my view that they were a credible set of witnesses whose evidence cannot be dismissed because it is politically inconvenient," she added.

The government's Mandatory Work Activity programme was launched by the coalition in May 2010. More than 24,000 people have been through the scheme, which involves a four-week placement including maintenance work on houses, renovating furniture or supporting charities.

The government recently cancelled one work programme contract with A4e after an audit found "significant weaknesses" in their management systems.

A Department of Work and Pensions spokeswoman said there were now "strong controls" in place and described the latest allegations as "unproven", adding: "These allegations all relate to programmes run by the previous government. We have audited current contracts with A4e and found no evidence of fraud.

"We have changed the way we run new welfare-to-work programmes to safeguard taxpayers' money. We only pay by results and under the Work Programme, claims are verified against benefit and employment records to make sure fraudulent claims are not processed."