Employment Minister Chris Grayling described the Work Programme as revolutionary The government’s new work scheme has begun, with ministers hoping to get a million people off benefits and into employment over the next two 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 will focus on investing in places where they are more likely to get people into work.
BBC home affairs editor Mark Easton said the Work Programme has been described as the centrepiece of the most sweeping welfare reform for 60 years.
“The government is investing billions in a programme they claim won’t cost the taxpayer a penny,” he said.
“The money is effectively being borrowed from the Treasury’s benefits budget in the belief that getting people off welfare and into work will save money in the long run.”
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.
Seven-year contracts have been agreed to largely private sector companies, including outsourcing giants Serco and G4S. The total value over the contracts is likely to be between £3bn and £5bn.
Voluntary sector groups are also involved in delivering the programme, including Mencap, the Citizens Advice Bureau, the Prince’s Trust and Action for Blind People.
Ministers said that under the Work Programme, providers would be free to design support, based on the needs of jobseekers and local labour markets.
Employment Minister Chris Grayling said: “The Work Programme will tackle the endemic worklessness that has blighted so many of the country’s communities for decades.
“It is revolutionary in the way it tailors support to jobseekers’ individual needs and pays organisations primarily for getting people into sustained employment.”
Mr Grayling said providers will be paid for supporting people into employment and helping them stay there for longer than ever before, with higher payments for supporting the hardest to help.
The scheme replaces employment support currently on offer including the New Deals, Employment Zones and Pathways to Work.
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.”
Shadow work and pensions secretary Liam Byrne said Labour supported the principles of the Work Programme but it was vital the government revealed how many people the scheme would help.
According to the latest statistics, UK unemployment fell by 36,000 in the three months to the end of March to 2.46 million.
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