LONDON (Reuters) - Prime Minister David Cameron's 5-billion-pound flagship scheme to get the long-term unemployed into work found jobs for fewer than three in every 100 Britons referred to it in its first year, statistics published on Tuesday showed.
The Work Programme, which is completely outsourced to a range of private, public and voluntary sector organisations, was introduced by the cash-strapped coalition government in a bid to move the unemployed into work and off benefits.
In the first 12 months of the scheme, 18,270 people held down jobs for six months, or three months in more difficult cases, out of more than 785,000 people referred, an average success rate of 2.3 percent.
Labour leader Ed Miliband called the programme a "miserable failure", adding that a better way to tackle unemployment would be if the government paid the wages to employers in exchange for training.
"What we've seen from this government today is a failure to reform welfare," Miliband said. "Welfare bills are going up not down, not because of generosity in relation to welfare from this government, but because their plans aren't working."
The Work Programme was a central part of the coalition government's 2010 agreement, designed to encourage the private sector to take up the slack as the government cut back public sector jobs in a bid to slash the deficit.
However the approach has been seized on by critics who accuse Cameron's Conservative-led government of having an ideological preference for private outsourcing work by companies whose main priority revolves around making a profit.
The Work Programme is based on a system of payments-by-results, which the government is intending to roll out to other parts of the public sector, such as prisons.
Data for the 14 months of the programme provided by the Department for Work and Pensions showed that not a single provider had reached the minimum 5.5 percent target set by civil servants when the programme launched in June 2011.
The minimum performance target rises sharply to 27.5 percent in year two and to 33 percent in year three, targets that providers believe they can reach.
One provider in the west of England, JHP Group, found sustainable jobs for just 2.4 percent of those referred. Larger companies such as G4S (GFS.L) and Serco (SRP.L) performed marginally better but still missed the targets by some way.
Employment Minister Mark Hoban said he had sent out letters to a small number of providers demanding an improvement plan, and will monitor their performance, though he declined to give further details.
"Some are reaching the standards we expect, others have some way to go," he said. "Ultimately, we can withdraw their contract."
The government, which estimates that the programme could cost up to 5 billion pounds, has said that providers could earn between 3,700 and 13,700 pounds for every person they keep in a job for six months.
Sean Williams, who runs G4S' seven-year Work Programme contract worth 255 million pounds, defended the company's performance in the north of England, adding that he is "sector-agnostic".
"I don't think it matters whether you're from the private, public or voluntary sector, what matters is your ability to provide tailored services to unemployed people," he said.
According to the latest official statistics, the unemployment rate in Britain is around 7.8 percent, a relatively low figure for an economy that only emerged from recession in the third quarter of this year, a phenomenon that has become known as the "productivity puzzle".
However the number of long-term jobless, defined as those out of work for over a year, has increased, and reached just under a million people in September.
John, a 57-year old welder who has been out of work for two years, has just been assigned to the Work Programme.
"I'll go down there to see what they can do for me, but I don't think there's a lot that they can do - most of the work I've ever had is from people I know," he said.
John, who did not want to give his full name, said he thought young people were hardest hit.
"When I was a kid, we had technical schools, we had proper apprenticeships but I learnt welding and that's a dead trade now, for someone my age anyway," he said.
(Reporting By Christine Murray; editing by Steve Addison)