The Work Programme only managed to get 3.6% of the people on the scheme off benefits and into secure employment in its first 14 months, the Public Accounts Committee said.
This was less than a third of the 11.9% target the Department for Work and Pensions (DWP) expected to achieve, and well below the official estimate of what would have happened if the programme had not been launched, said the MPs.
Margaret Hodge (pictured), who chairs the committee of cross-party MPs, said the Work Programme was particularly failing young people and those hardest to help.
Hodge said: "The performance was so poor that it was actually worse than the Department's own expectations of the number of people who would have found work if the programme didn't exist."
The Work Programme was set up in June 2011 to help the long-term unemployed move off benefits and into sustained employment. It is expected to cost between £3 billion and £5 billion over five years.
Work Programme providers - largely private companies - are paid on performance. They receive a small fee initially, but most of their fee depends on workers staying in their jobs for three or six months.
Not one of the 18 providers in the programme has met its contractual targets and their performance ''varies wildly'', the committee said.
"The best-performing provider only moved 5% of people off benefit and into work, while the worst managed just 2%," said Hodge.
"It is shocking that of the 9,500 former incapacity benefit claimants referred to providers, only 20 people have been placed in a job that has lasted three months, while the poorest performing provider did not manage to place a single person in the under-25 category in a job lasting six months."
She added: "The Department must hold failing providers to account, as well as ensuring that good practice is identified and shared."
However, the DWP said the claim that only 3.6% of people referred to the Work Programme moved off benefit and into work is "simply wrong". It said: "More than 200,000 participants have already got into work. These comments are very disappointing and are misleading the public about the Work Programme."
Peter Cheese, chief executive of the Chartered Institute of Personnel and Development (CIPD), said: "The Work Programme has attracted a lot of harsh criticism, and this report is no exception.
"However, it is sad and telling that the report makes no mention of employers, one of the most important stakeholders involved in the scheme.
"Those employers who are engaging with the Work Programme and similar initiatives of their own to assist the long-term unemployed do so because they recognise that they have a responsibility for ensuring the labour market is accessible to people who may not have been engaged in it for some time."
Shadow work and pensions secretary Liam Byrne said: "This report underscores the Work Programme's comprehensive failure to bring down long-term unemployment.
"Figures released by the DWP decisively showed that the Work Programme was worse than doing nothing."
