The Government has faced calls to scrap its flagship employment scheme after new figures showed only 3.5% of those taking part had found sustainable jobs.
Figures published by the Department for Work and Pensions showed that 800,000 people had started the Work Programme since it was launched last year, but only 31,000 stayed in a job for six months.
Ministers defended the scheme, set up to tackle long-term unemployment, and were embroiled in a row with Labour after the Opposition said the programme had "failed". Unions and campaign groups attacked the scheme and said it "beggared belief" that the coalition was trying to spin the figures as good news.
The 3.5% figure is short of a target of 5.5% set for finding sustainable jobs. Employment minister Mark Hoban said the programme was showing "promising signs" against a tougher economic backdrop than was expected when the scheme was launched in June last year.
Providers were having to find more than one job for some long-term unemployed, but the minister said the performance of some firms varied. Mr Hoban said improvement notices had been sent to a number of organisations involved in the programme, asking them to come up with plans to improve their performance.
He said that 56% of people who joined the scheme have come off benefits, with one in five of the earliest participants spending at least six months off benefits.
Labour leader Ed Miliband said the Work Programme was turning out to be a "miserable failure", adding: "It is just not working. What we've seen from the Government is a failure to reform welfare."
Shadow work and pensions secretary Liam Byrne said the figures "reveal the Work Programme is comprehensively failing. We were promised a welfare revolution and what we've got has been exposed as worse than doing nothing". He added: "On the DWP's own benchmarks, just 2.3% have found a 'job outcome'. That is under half the rate the DWP said could be achieved by doing nothing. Meanwhile long-term unemployment has soared by over 200,000."
Mr Hoban responded: "It's clearly ridiculous to suggest the Work Programme isn't helping people into work. Already nearly 10% of the first starters on the Work Programme have got into work and stayed there for six months. The figures also show that 40% of the 31,000 outcomes published today came in June and July - the last two months for which data is available - clearly showing that performance is already improving."
Disabled charity Scope said the figures also showed that out of 79,000 employment and support allowance claimants, only 1,000 have been in work for six months. Chief executive Richard Hawkes said: "We have known for some time that the Government's fitness to work test is deeply flawed and is wrongly pushing many disabled people on to the Work Programme. Today we learn that only 1.3% of disabled people claiming employment and support allowance have actually found a job through the Work Programme. These shocking figures indicate a system that is not working for disabled people."