Work scheme 'needs more funding'

The effects of the downturn will make the scheme more expensive, MPs say

The government has to increase the budget for its job creation scheme to cope with the recession or face a "significant risk" of failure, MPs say.

The work and pensions committee said the Flexible New Deal - which replaces the New Deal later this year - had to have more money "as soon as possible".

It predicted the number of claimants joining the scheme would be 300% higher than originally estimated.

The government said it was working to ensure its plans were "robust enough".

The Flexible New Deal, aimed at bringing 200,000 more long-term unemployed back into work each year, is scheduled to replace the New Deal in October.

After a year of unemployment, claimants will be referred to contractors, who will be paid by the government to find them work

Viable

The committee endorsed the principles of the scheme but warned that the number of claimants joining the programme would be three times higher than predicted.

Its chairman, Labour MP Terry Rooney, said: "As the labour market contracts it becomes even more important to ensure that those who have been unemployed for a long time receive the support they need to return to work.

"The Flexible New Deal has the potential to offer this, but the financial principles on which it is based must be viable.

"Unless the budget for FND is increased, there is a real danger that providers will not be able to cope with the numbers of customers coming through their doors.

"The potential consequences of this for those customers who are most in need of expert support and their prospects of rejoining the labour market should give the Department for Work and Pensions real cause for concern."

A Department for Work and Pensions spokesman said: "We know that times are tough and that those who become long-term unemployed face a particularly difficult time.

"That is why we are working with the bidders for flexible new deal to ensure that their proposals are robust enough to meet the demands of changing economic conditions, and to bring in the new FND contracts just as quickly as we can.

"We welcome the select committee's report and we will be considering all of their recommendations. Our formal response will be published in due course."

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