Queen of the jobless industry

The first time Emma Harrison visited Thornbridge Hall, an immense faux-Jacobean pile in the Peak District, she was a feckless teenager on an Outward Bound course with her social worker. But then she turned her life around, made a fortune getting unemployed people back to work and … bought the place. She built a new wing, restored the Victorian fittings and put a herd of wild boar in the woods.

The night before I meet her, Harrison has had a number of performers from West End shows staging an event for charity. Several are still padding around in the kitchen, putting me in mind of the Great Gatsby, whose party guests hung about for ever, eating his food and playing his piano.

It would be easy to point out the contrast between Harrison's glamorous existence – The Sunday Times Rich List estimates her fortune as £35m – and the bleaker lives of her company's clients.

Harrison, 46, is one of the biggest shots in Britain's rapidly growing unemployment industry, one of the few sectors flourishing in these straitened times.

Figures released last week show that 2.5m people are jobless, the highest number for 14 years. Almost 1m of them are young people, a lost generation who may never wean themselves off the state. On the other side of the fence, about 30,000 people are employed in Britain's high street jobcentres, which are themselves affiliated to a myriad of state-supported bodies and private companies, including Harrison's training company, Action for Employment (A4e).

Harrison and A4e should represent the government's best hope at cracking unemployment. Since 1991 she and her thousands of trainers and tutors have taught more than 1m single mothers, redundant steelworkers and former offenders to write a CV, smarten themselves up for interviews and look their potential boss straight in the eye.

In 2008, A4e claims to have helped 20,000 people into “meaningful work”. It's not clear how many thousands still have the jobs they were helped into, but several found work at A4e, jobs that are probably more secure than most: the company turnover was £128.5m last year and it has grown quickly, covering whole regions in the UK and extending itself into Australia, France, Germany, India, Israel, Poland and South Africa.

To television viewers, Harrison will be familiar for her appearance on the Channel 4 reality television show The Secret Millionaire, in which she left her palatial home to go undercover as a cleaner in Dagenham and was reduced to tears by it. She can be seen again this week in a new Channel 4 documentary, Benefit Busters, in which the cameras follow A4e staff as they place the long-term unemployed in work.

A group of single mothers in Doncaster overcome problems with drink, childcare and self-esteem to find jobs at Poundland. (“Did you see the transformation?” Harrison asks. “They're better off mentally and financially.”) Less happily, a former offender from Hull finds his dream job as a landscape gardener, only to be laid off again a few weeks later.

To keep somebody on benefits costs £30,000 a year, says Harrison, who reaches this shocking figure by dividing the total cost of out-of-work benefits plus associated allowances and dividing them by the number of out-of-work claimants. “That's a bare minimum,” she adds, “because there are all the other social costs associated with unemployment: ill health, vandalism and so on.” The average salary is much lower: about £24,000. In other words, absurdly, the taxpayer spends more money to keep somebody idle than an employer would pay to get them working.

In this recession, professionals and young graduates are as likely as anybody to be trapped by the system's perverse horrors. If it hasn't happened to someone in your family, it will have happened to someone you know.

I tell Harrison that a close friend has just been made redundant and I've advised him to avoid the welfare state. Reinvent yourself as a freelance contractor, I said.

Harrison disagrees: “He should take jobseeker's allowance, because he'll have his National Insurance paid and he can still do a shift and declare that. But he must not become reliant. He must get up every day at a normal time and go to meet people and make contacts, especially for the first six months.”

Not surprisingly, many people resist the disempowering, infantilising effect of “the system” for as long as they can, as the case studies below show. One of the surprising things about the unemployment figures released last week is that while unemployment has increased sharply, the number of people claiming benefits has not risen as much. Some 750,000 people are “missing”, much to the consternation of the bureaucrats.

The government suspects that some non-claimants are worried about the stigma or don't know their rights, but it's just as likely that people fear being depressed by the sheer complexity of the system, in which each new state initiative is patched onto the last and nothing can be achieved without endless form-filling.

A4e has been one of the biggest contractors since the introduction of the government's so-called new deal in 1998. The idea behind this was to reduce unemployment by providing support and training, with the threat that benefits would be stopped if “reasonable” employment was refused. However, new deal results have been disappointing: in 2006, a report for the Department for Work and Pensions described the new deal for young people as ineffective, expensive and in some cases even “potentially negative”, as clients were referred back repeatedly to the programme for new courses without completing the ones on which they were originally enrolled.

It would be easy to imagine that for Harrison and A4e, high unemployment is good news: more clients. But she argues that her mission statement, “improving people's lives”, is not just a slogan: “It's incredibly important to hold onto your vision with complete belief. When I started A4e, people would say, ‘That's a nice strapline you've got'. But that missed the point. If it's just a slogan, it can be hard to see it as the core of everything we do.”

She has not previously spoken publicly about how she came up with A4e's vision, but she hopes that by telling me about it she will prove that it's sincere.

She was brought up in Sheffield by her father, with an older and a younger brother. Her mother kept leaving home to have affairs, then returned for brief periods. “My dad was absolutely gutted,” she recalls, and so was Harrison. In her mid-teens, her mother came home with bone cancer and Harrison looked after her until she recovered and left again. Harrison started to play truant and was assigned a social worker, who helped her to get back on track. She went to university to study engineering (even though a careers adviser told her engineering was for men and if she studied it, nobody would marry her).

After university she worked for her father's training business helping unemployed steelworkers in Sheffield find new work. She came up with the then revolutionary idea of starting courses every week, instead of leaving people waiting for months at a time. “It seems obvious now,” she says, “but back then it was genius.”

The business grew ever more successful but she hated to be rewarded for getting “bums on seats” – being paid to train people regardless of whether they got jobs. This was not improving lives. Training is fine, but work provides real purpose, she believed. She became demoralised and argued with her father. Distraught, she gave him six months' notice and walked away from a half-share in the business, which was then turning over £3m a year.

“We fell out for two years and I walked away from my entitlement. That's why it annoys me when people say it's just a slogan,” she says.

Despite A4e's huge growth, she still holds regular events at home with staff invited at random, including small informal gatherings called “tea with Emma”. Each year A4e rewards an employee for making the most inspiring intervention in people's lives. “One winner came to work every day in a new coat. It turned out he was giving his coats to homeless people and buying new ones at Oxfam.”

The sincerity of her zeal for doing good is hard to dispute but A4e, along with other training contractors, has had its share of complaints. There aren't enough computers for everybody to search the internet for jobs or write CVs. Sometimes there aren't even enough chairs. And for hours on end there's little to do, clients say. “When I asked what we were doing this morning,” says Mark Pilkington from Hull, “I got, ‘Well, read the Yellow Pages or look at that newspaper'. The classroom is full of zombies. I might as well have not been there.”

The reason, Harrison explains, is that the government requires clients to attend new deal courses for 30 hours a week for 13 weeks or they lose their benefits. Thus tutors waste huge amounts of time chasing and checking timesheets, and clients, coerced into attendance, become demoralised. As for the chairs and computers? Contractors haven't dared to invest because until now their contracts have been too short and insecure to make it worth it.

This October the system will change significantly. Under the “flexible new deal”, companies like A4e will be paid for getting people into work. They will receive 40% of their fee per head up front, the remaining 60% to be paid only once a client is in a job. (When the economy picks up, the share will rise to 80%.) Even including the successful placement fee, the amount paid will be less than before, at about £1,500 for each client.

Perhaps significantly, the exact contractual terms have not been agreed yet, weeks before kick-off, suggesting intense behind-the-scenes wrangling between the work and pensions department and the private companies which depend on it for work. In return for accepting this riskier financial arrangement, contractors will be given the security of longer tenure.

Harrison says she has always invested a lot of money in A4e: “I laugh when people say how rich I am. We only make 4% profit because we invest millions.” As for her fancy home: “My husband's got a very successful business [a microbrewery] and he sold an engineering business recently. Plus, there's a big mortgage.”

The government is pulling back from its tendency to micro-manage and plans to allow contractors such as A4e to determine what each client needs, then customise a service using more than 200 types of “intervention”. These include tackling drink problems and managing debt. “We can even buy a bicycle,” says Harrison, “if someone can't get to work on public transport.”

This doesn't mean it's going to be easy for claimants. If somebody is deemed ready for employment, they will be given much less time to find a job and will have benefits taken away much sooner. “The government is getting tougher,” Harrison says. “It will soon be very hard after six months of unemployment to do nothing.”

Not everyone is impressed by the government's tinkering. David Willetts, the shadow skills secretary, says: “Instead of paying training companies to churn out paper qualifications to meet government targets, we should make it easier for firms to take on apprentices and give colleges the freedom to respond to the needs of local employers.”

Think tanks and the relevant Commons select committee argue that the flexible new deal can't work because it's underfunded. They believe agencies such as A4e will cream off the best candidates, take the cash and neglect less promising cases.

The government says there are checks in place to prevent this. But arguably the biggest problem is that the tailored services offered under the flexible new deal are available to most people only after they've been unemployed for a year, by which time they will have become demoralised.

“Are some problems insurmountable in the time we are given? Of course,” says Harrison. “I met a man once who carried a letter in his pocket from his dead wife. Every time we tried to help, he got it out and read it again. Expecting him to find a job would be like asking someone with broken legs to run a marathon. You wouldn't dream of it.”

Dole queue? Not for us

Angela Osborn, 35, designer
“I was made redundant in August 2008 and signed on. I got a part-time job in a shop, which was very different from what I was used to doing, because I had been a clothing designer.

I spent all my time toing and froing from the jobcentre. They'd told me I could work 16 hours and still claim. But they hadn't explained properly that there was a limit on how much I could earn. The rule was to work under 16 hours, so I thought as long as I worked 15 hours and 59 minutes per week, that should have been okay. But even when I worked 12 hours, on the minimum wage, they said I was earning too much money. I couldn't fathom it. It didn't make sense.

In the end I got completely fed up with it: so much messing around meant no time to set up my own business, which is what I'd told them I was planning to do. I still had to go down to the office, sign on and look for jobs I had no intention of taking. Every time I asked for help to set up my business, and every time I was just given really random jobs. They just assume you're there for benefits. So in the end I forgot about it and just did a few more hours in the shop. The jobcentre just wasn't getting me anywhere. My own business is so much more rewarding.”

Paul Reed, 41, engineering contractor
“I was laid off at Christmas. What puts me off claiming benefits? It's pretty degrading having to go into a jobcentre; they're depressing places. I went into Ashford jobcentre once. It was not a pleasant experience: before they would do anything for me they wanted me to fill out hundreds of forms on claiming benefits, which I wasn't desperately interested in doing – my focus was on getting another job.

The other part of it is pride: I've never claimed a penny in my life. I've paid my taxes all these years. For me it would be like giving up, the ultimate admission of defeat. The amount of money you get on benefits is about £65 per week, which is so low as to mean you'd still have to do some work to survive.

The part of the system that definitely puts you off looking for other work is that as soon as you do some work, the benefits start being taken away. So if I were to do one day's work a week I could make enough money to mean that I wouldn't get benefits that week anyway, so why jump through all the hoops, the ridiculous amount of bureaucracy and paperwork to get a small amount of money?”

Robin Campbell, 28, banker turned cake-maker, below
“When I lost my job at an Icelandic bank last year, I did think about going on the dole, but I couldn't be bothered to fill out all those forms. I knew that if I signed on I'd have to report to the jobcentre every two weeks, talking to people who had no clue about my line of work yet who were still trying to fix me up with jobs I didn't want to do.

The problem is the people at the jobcentre have never met an architect or a banker and so have no idea who they are dealing with. Thus they are still trying to match up out-of-work professionals with lower-echelon jobs. It just doesn't work – they need people who understand a wider range of jobs. Having said that, in retrospect I probably should have done it as you get your National Insurance contributions, and so it would have been quite beneficial, especially in the first few months, when I was slightly at sea.

In the end, however, I decided to use my redundancy payment to help start up my own cake company. It just seemed a much more positive approach than resigning myself to the dole, plus it left me freer to organise and plan my new business without having to worry about attending jobcentre meetings every other week.

Part of the reason I didn't join up was also, I suppose, moral grounds. Although I was totally unemployed for a number of months, I felt that if I'd signed up while I was planning on being self-employed, it would have been slightly cheating the system somehow.”