Ann Widdecombe, Under-Secretary of State for Employment, announced a pilot scheme for contractors to run the careers service for schools and colleges, while Frank Dobson, Labour's employment spokesman, accused the company that took over the Skills Training Agency of a 'scandalous' use of state funds.
Civil servants who bought 45 skill centres in a management buy-out were accused of either breaking the rules governing the dispensation of public money or taking advantage of 'sloppy' regulations.
Mr Dobson alleged that Astra, the company formed by Whitehall officials, had accepted between pounds 600 and pounds 1,000 of government money for placing each of its trainees in employment that only lasted for a short period.
He said: 'If Astra has not broken the rules, then the ministers who set the rules should resign. Nobody in their right mind would say that the company should receive pounds 1,000 for placing someone in employment for a week.' He said that the National Audit Office had qualified Astra's accounts for three years running.
Government critics want an independent inquiry into the way pounds 2.5bn is spent on training and other help for the unemployed. The 102 employer- led Training and Enterprise Councils and Local Enterprise Companies are partly on 'output-related funding' and may be tempted to resort to unacceptable activities to increase their budgets, the Opposition believes.
Mr Dobson said Labour had evidence that at least one TEC had offered the unemployed financial incentives to say they had secured jobs.
Managers at Astra yesterday referred all inquires to Arthur Anderson, the receivers, who said that the allegations would be investigated.
Ms Widdecombe said tenders were being sought to begin running 13 local careers services by next April. The aim over the next four years would be to offer all 108 services for tendering.