WELFARE-TO-WORK schemes for which profiteers get payment by results (PBR) were dealt a major blow yesterday as auditors warned they might create “perverse incentives” for the providers.

The damning assessment by the National Audit Office (NAO) showed that central government did not know how many such schemes were in place across the public sector or how much taxpayers’ money was being spent on them.

Neither the Cabinet Office nor the Treasury maintains a database of these arrangements, by which private firms are paid depending on outcomes.