The company in charge of Newcastle College is to share in a £31m bonus for a controversial Government back-to-work scheme - even though its performance was so poor that Ministers have stripped it of one of its contracts.
The payout has been revealed by the National Audit Office, the official spending watchdog, and provoked a furious response from the head of a Commons committee which scrutinises public spending.
Margaret Hodge, chair of the Committee of Public Accounts, said: “It beggars belief that the Department expects to pay at least £31m in bonuses to all of its contractors despite their poor performance - even NCG whose contract has been terminated will receive a bonus.”
The revelation follows an announcement in March that the college’s parent group NCG was to lose its contract to provide services helping long-term unemployed people find work in North East Yorkshire and the Humber.
The contract was part of the Government’s Work Programme, which involves paying private sector organisations to provide training, work experience and careers advice for unemployed people.
Figures published by the Department for Work and Pensions (DWP) showed that just 1,070 people found work out of the 14,540 people that received help from Newcastle College in North East Yorkshire and the Humber over 12 months.
This is a success rate of 7.4% - the lowest result of the 40 such schemes across the country.
But it has now emerged that it will receive a bonus anyway - because of what the National Audit Office (NAO) report called “flawed contractual performance measures”.
An NAO report said: “Flawed contractual performance measures mean the Department will have to make incentive payments to even the worst performing contractors.
“The Department established incentive payments to reward high performance. But it uses a measure of performance that is highly sensitive to changes in referral volumes over time.
“In 2014-15 all 40 contracts are likely to be entitled to £31m in incentive payments. The Department estimates that only £6m would be paid using an accurate measure of performance.”
Mrs Hodge said: “The Work Programme is absolutely critical to getting people, especially some of the most vulnerable in society, into work and helping to keep them there in the longer term.”
She added: “It is very clear to me that it still has a mountain to climb if it is to help those most in need.”
Her committee will raise the concerns with Department for Work and Pensions officials who are due to give evidence to it later this month.
A DWP spokesman said: “The Work Programme is helping more people than any previous employment programme and has already helped half a million people start a job and 300,000 into lasting work.
“The National Audit Office says that we’ve already saved more than £40m over and above any previous employment programme, and that we’ll save £450m on benefits compared with any scheme that has gone before. Even starting in the recession, the Work Programme performed as well as previous schemes, and with performance improving rapidly it’s on track to deliver significantly more jobs than previous schemes.”
An NCG spokesperson said: “This is the DWP’s system, which we could not influence and which we implemented correctly. As such it would be inappropriate for us to comment further.”