Only 3.5% of people referred to Work Programme find long-term jobs

Only one in 28 unemployed people referred to the government's welfare-to-work programme has been found a job for six months – failing to meet the government's target, official figures show.

An analysis by the Guardian reveals that none of the 18 Work Programme contractors – 15 of which are private companies – managed to get 5.5% of unemployed people referred to the scheme a job for half a year in the 14 months until July 2012, despite the government having spent £435m on the scheme so far. Providers are paid for taking on a jobless person, finding them a job and then ensuring they keep it.

Ingeus, part of a multinational founded by the wife of the former Australian prime minister Kevin Rudd, is the biggest private contractor, winning seven franchises of the programme worth £727m over five years. In the north-east of England, Ingeus was referred almost 28,000 jobless people and got 920 into sustained employment, a success rate of 3.3% until July 2012. A4e, which is the second biggest contractor to the programme, with £438m of deals, found 490 jobs for 17,650 unemployed people in the south of England – a performance rate of 2.8%.

Mark Hoban, the employment minister, told a press conference he would be writing to companies to warn them they were falling short of the government's targets, and reminding them if they had not improved by next April he could begin to divert the jobless from poor performers to the best companies.

Describing this as a "snapshot", he said: "We clearly have measures in place to deal with underperformance and we will be writing to providers to ask them to set out their plans to improve their performance. They will have to put plans in place and deliver against them. We will take action thereafter if they are not delivering."

Hoban said the figures had to be considered "against the backdrop of much weaker than expected growth. We had been expecting growth of 2 or 2.5% a year by now."

The Department for Work and Pensions (DWP) had threatened to remove contracts from providers who failed to meet minimum performance levels, which look at the first 12 months of the Work Programme. If this measure is used then just 2.3% of jobseekers found sustained work compared with the 5.5% minimum expected by the DWP.

The Guardian analysis also indentified an alarming trend: that the work programme performed best in richer areas where there was lower levels of unemployment. The work programme in Middlesbrough, where 8% are unemployed, found 100 jobs for 4,500 people referred. Fewer than one in a hundred unemployed people on sickness payment, employment and support allowance, were found jobs by the scheme.

The Labour leader, Ed Miliband, pointed out that long-term unemployment had soared by more than 200,000 since the scheme began. He said the work programme was a "miserable failure. It's just not working because over the first year of the Work Programme just over two in every hundred people have been getting a job. And estimates are that if the Work Programme didn't exist five in every hundred would be getting a job."

The Centre for Economic and Social Inclusion, a welfare thinktank, said its calculations showed that the scheme also appeared to be below the performance of previous programmes at the same point in time – mostly because of the recession. "Focusing specifically on jobseeker's allowance claimants aged 25 or over, the Work Programme has achieved job outcomes for 4.5% of referrals in its first 14 months, compared with 5.0% for the Flexible New Deal and 5.6% for the predecessor New Deal programme."

Chris Blackwell, an industry expert who will next year take up a position as managing director of Maximus, which holds £180m worth of Work Programme contracts, told the Guardian the suggested figures were "just wrong. It's a complete misrepresentation of the data. The figures are looking at just the first few months of the scheme and do not give an accurate picture of what's happening with the Work Programme."

The trade body ERSA, which represents all the providers, estimates that if the government were to take figures up to September 2012 then the picture would improve considerably – with 20% of the unemployed referred getting into long-term employment.

Others backed the industry. Alan Downey, the UK and Europe head of public sector at KPMG Management Consulting, said: "Today's data may be taken by some as an indication that the government's efforts to help the long-term unemployed back into work are not working. Such a short-term perspective fails to acknowledge that the Work Programme is an initiative which has made some progress but, like any new programme, needs time to create the impact we all hope and expect to see."

Ian Mulheirn of the Social Market Foundation said the failure of providers to meet standards "raises serious questions about the DWP's expectations for the scheme … Unless a better-funded service is provided many jobseekers will slip into permanent worklessness."

The DWP said the figures showed at least 56% of the scheme's earliest participants had come off benefits, with 19% spending at least six consecutive months off benefits.