Pair set up Sovereign Capital, which owned company that profited from £73m in government contracts

This article is more than 8 years old

This article is more than 8 years old

A City firm set up by two Conservative party donors with close ties to ministers has profited from multimillion-pound employment schemesset up by the coalition government, the Guardian has established.

Sovereign Capital, formed in 2001 by John Nash and Ryan Robson and three others, has for eight years owned the Employment and Skills Group (ESG), a training company with £73m worth of government contracts. Last Monday, ESG was sold to an investment bank for an undisclosed sum.

ESG has been awarded two lucrative contracts from Iain Duncan Smith's Department for Work and Pensions. It won a £69m contract in May 2011 for the work programme, the government's scheme for unemployed people, in Warwickshire and Staffordshire, which runs until 2016.

The company was also chosen to run a £4m mandatory work programme contract across the West Midlands – paid to find work-for-benefit placements for at least 5,000 unemployed people over four years. The firm will receive an £800 bonus for every unemployed claimant it places in mandatory work.

Nash and his wife, Caroline, have donated £182,500 to the Tories since 2006 and are said to have financed David Davis's 2005 leadership bid. Nash was appointed to the Department for Education board in 2010 by the secretary of state, Michael Gove.

As well as being a non-executive director of Sovereign Capital, Nash is a key member of the Independent Challenge Group, which advises George Osborne on "thinking the unthinkable" on government spending. The group has pushed for efficiency savings across social care and the national health service.

Robson left Sovereign in March 2011, according to the company, although he is still listed as a member of the Sovereign Capital Partners LLP at Companies House. He was a director of ESG between October 2008 and December 2011, when the company was awarded the government contracts.

Robson, 41, is also a director of the Centre for Social Justice, the thinktank established by Duncan Smith which helped the employment secretary develop his plans for tackling unemployment. In February this year, Duncan Smith visited ESG's offices in Tamworth.

A former Wandsworth councillor and defeated Tory parliamentary candidate, Robson has given the Conservative party £267,866 since 2003. He made his most recent donation, of £15,437, in January.

ESG confirmed that the company had been sold last Monday to Ares Capital, a bank that had previously refinanced the group.

"I understand that Ares was interested in investing in the UK market and we were an attractive proposition. Ryan [Robson] was part of the board when we belonged to Sovereign, but isn't any longer," an ESG spokeswoman said.

Asked if the company had been sold for a profit, she said: "I can't imagine that anyone would sell something without."

Andrew Lansley when in opposition was criticised for accepting a £21,000 donation from Nash, when the businessman was chairman of the private healthcare firm Care UK. Sovereign still maintains a large healthcare portfolio.

In 2011, the work programme replaced virtually all welfare-to-work programmes run by the government. It claimed to offer support and advice to unemployed people on jobseeker's allowance or employment support allowance to help them get, and keep, jobs.

Using 18 contractors with 40 separate contracts, the government's objectives are to increase employment compared with previous schemes, decrease time spent on benefits and increase the time employed for those coming off benefits.

However, it faced stinging criticism from the National Audit Office in January for overestimating the number of people who might find work.

The mandatory work scheme has been criticised for forcing people into dead-end jobs with little chance of improving employment chances. In June, the government announced that it would toughen the sanctions regime, making it even harder to temporarily sign off benefits to avoid being forced into unpaid work for up to four weeks .

Last week, Nash declined to comment on Sovereign's relationship with ESG. Robson did not return calls. A spokeswoman for Sovereign said that Nash's and Ryan's donations or contacts with senior politicians had not helped ESG while seeking government contracts. "Sovereign had five founders, of which John and Ryan were two. John is now a non-executive partner and Ryan left Sovereign in March 2011.

"Sovereign has a strong track record in the education and training sector – based on market opportunities, investment expertise and operational performance – not political affiliation," she said. Ares declined to comment.

Liam Byrne, the shadow secretary of state for work and pensions, said that the cosy relationship between ministers, donors and companies which benefit from government contracts showed that the coalition should allow public scrutiny of employment deals. "Trust in this government's ability to get anyone back to work is now hanging by a thread so ministers better provide some pretty rapid reassurance that these deals are all above aboard, and crucially ministers need to publish the secret data showing how well different firms are performing.

"If ministers want to avoid accusations of dodgy behaviour its about time they opened the books," he said.

A DWP spokesman said: "Our contracts are awarded after fair and open competition."