Work advisers 'pushing jobless into self-employment'

By Hannah Barnes
5 live Investigates

image captionThe Work Programme pays companies for every person they help into sustained employment

Some people on the government's welfare-to-work scheme are being inappropriately pushed towards self-employment, the BBC has learned.

It found they were being encouraged off unemployment benefit, so they can claim more money from working tax credits.

The work programme pays companies for helping people into sustained employment - including self-employment.

The body which represents providers said there is "no incentive" to push people into unsuitable work.

"It is only right that work programme advisers help jobseekers explore all possible avenues for work and for some self-employment is a really good option," said the Employment Related Services Association's chief executive Kirsty McHugh said.

But BBC's 5 live Investigates has spoken to clients of six different providers across Britain, who said that they were encouraged to either pretend to be working for themselves or to set up businesses they did not consider viable.

Among them was Joanna, who has been out of work for several years and was encouraged to set up her own gardening business.

As a single parent she would need to do 16 hours per week in order to be eligible for the credits, but her adviser hinted that the rules can be stretched.

"It was suggested to me that in the winter - when I have a down season and I would probably have no hours work a week - that I could invent the whole 16 hours a week, which I think is totally unacceptable.

"I think that they are probably quite desperate to get people into work and off jobseeker's allowance in order that they get paid."

Paid by results

Work programme providers - which are largely private companies - are paid by results.

For every person sent to them by Jobcentre Plus, they receive a small attachment fee, but they can receive another, much larger, payment if someone finds a job and stays in it for six months.

Under the scheme, self-employment is treated in the same way as a regular nine-to-five position.

But Sue Royston of the Citizens Advice Bureau (CAB) said that people should not be pushed into working for themselves.

She said: "If the provider has not investigated whether or not there is a realistic prospect of self-employment working out for a client, this is wrong."

In December, Prof Roy Sainsbury of York University told MPs on the Work and Pensions Select Committee that self-employment was a potential weakness in the work programme structure.

"You could stay there [in self-employment] for a while - even six months or a year - before anyone really takes much interest in you from the tax credit perspective. I am beginning to feel that there is an easy route here for work programme providers to channel people into self-employment."

Some work programme clients have been told incorrectly by advisers that they could claim more in benefits by transferring to tax credits.

Household chores

But for some people that is the case.

One such work programme client, Anne, who is 34 and has been out of work since 2005, told 5 live Investigates that she has been pressurised to declare herself self-employed, even though she did not have any viable business ideas.

She would be better off, it was claimed, because although she would have to sign off employment and support allowance, she could claim working tax credits instead.

Anne's adviser said that her weekly benefit take-home pay would increase from £264 to £284 as a result of going on working tax credits, and to £304 if she managed to work a few hours each week.

He told her she could try selling items on eBay or Gumtree, working for Avon, or setting up a business doing household chores like ironing.

"He told me I could earn say £20 a week, so obviously that wouldn't be a lot of hours, but I'd be able to claim 30 hours a week working tax credit - which to me seems quite fraudulent," Anne says.

None of the clients the BBC spoke to was told of the risks of pretending to be self-employed.

But CAB's Sue Royston warned: "Someone could have been receiving working tax credits for a year and at the end of the year the tax credit office could turn round and say that they were not realistically working in the expectation of earning - you owe us thousands of pounds."

The Employment Related Services Association does not agree that it has been putting people under undue pressure.

Chief executive Kirsty McHugh told the BBC: "Welfare to work providers only get paid if they help someone into employment and keep them there."

A Department for Work and Pensions spokesperson said: "Self-employment is a great way for many jobseekers to move off benefits and into work, and it's right that Work Programme participants should be encouraged to consider whether it is appropriate for them.

"We have tough controls in place to make sure taxpayers' money is protected and all job outcome payments, including self-employment, are subject to our payment checks process.

"There is a clear complaints process for participants who are unhappy with their treatment. If we were presented with evidence of fraud or impropriety we would not hesitate to take appropriate action."

You can listen to the full report on 5 live Investigates on Sunday, 3 February, at 11:00 GMT on BBC 5 live.

Listen again via the 5 live website or by downloading the 5 live Investigates podcast.

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