Voluntary sector organisations have reacted with surprise to the news that the Department for Work and Pensions' flagship Flexible New Deal programme has been put on hold.
The DWP was due to announce the preferred bidders for multi-million-pound contracts to run the scheme this week.
But The Observer reported on Sunday that the decision had been postponed and the programme, which was created to help get jobseekers back into work, was "in chaos". It said there were now too many people out of work and too few vacancies to make the payment-by-results scheme viable and that bidders wanted more cash up front before entering into contracts.
Voluntary organisations were expected to be heavily involved in bids to run the scheme, either as prime contractors or sub-contractors to private companies.
Catherine A'Bear, chief officer for corporate affairs at the Shaw Trust, urged the DWP to press ahead and make any amendments to contracts at a later date.
"We believe that the DWP should continue with the process of identifying prime contractors for Flexible New Deal using the tenders it has received," she said.
"The Shaw Trust is concerned that whilst key programmes like this are ‘paused', real people will be waiting longer for the right type of support they need."
Wendy Mitchell, spokesperson on employment at drug rehabilitation charity Turning Point, said the Government should re-evaluate the impact of Flexible New Deal and realise "the commissioning process must be more sophisticated".
Tony Hawkhead, who chaired the Third Sector Taskforce, a partnership between chief executives body Acevo and the DWP to promote effective third sector involvement in welfare-to-work programmes, said the delay might be good news if it meant the amount of money that contractors received up front – 20 per cent under current proposals – was increased.
"Even if they got 50 per cent up front it might not be enough to make it feasible for organisations to recover the costs they would incur," he added.
A DWP spokesperson said: "We are continuing to consult providers to ensure that we have a system that gives real help for the long-term unemployed through the global economic downturn. However, the Government remains committed to bringing forward the Flexible New Deal."