Agency in line for £126m deal to help jobless

The company headed by Emma Harrison, the Government's "back to work" expert, will be allowed to pitch for contracts to help the young jobless.

A4e could be in line for a share of £126m of payment-by-results contracts to help more than 50,000 16 and 17-year-olds to "earn or learn". The company ran into controversy when it emerged that Mrs Harrison was paid £8.6m.

After police launched a fraud inquiry last week, Margaret Hodge, chairman of the Public Accounts Committee, called on the Government to consider suspending its contracts with the firm.

But the Cabinet Office said last night that A4e would be among the private-sector companies and charities able to bid for the new scheme to be announced by Nick Clegg today. "Any organisation with a proven track record in the field will be able to apply in an open tender – the usual process," a spokesman said.

The Deputy Prime Minister will promise to tackle the problem of so-called Neets – young people not in education, employment or training – by targeting 16 and 17-year-olds with no GCSEs at grades A* to C. He will say: "Sitting at home with nothing to do when you're so young can knock the stuffing out of you for years. It is a tragedy for the young people involved – a ticking time bomb for the economy and our society as a whole."

The contracts will be worth up to £2,200 for every young person helped.