Charities abandon DWP's 'unsustainable' contracts

Job cuts at major charities including the RNID

Several large charities have withdrawn from key government welfare-to-work programmes because they are not proving financially viable.

The RNID has pulled out of eight New Deal for Disabled People programmes and three Pathways to Work programmes, worth £500,000, following a review of sustainability. Fourteen staff have been laid off.

The Department for Work and Pensions established the initiatives to help people on incapacity and disability benefits find work. But rising unemployment has made targets difficult, the charities said.

Michael Adamson, executive director of individual services at the RNID, which had subcontracted work from prime providers, said the problem was compounded for charities because they dealt with the most hard-to-reach groups.

"We could not sustain the contracts at the prices available," said Adamson. "We need to get a fair price for what we do and recognition of the distance from the labour market of some of our clients."

Action for Blind People shed nine staff last week after ending Pathways subcontracts with private providers A4e and Work Directions and employment charity the Shaw Trust.

Elizabeth Percy, acting head of regional services at Action for Blind People, said the contracts could have generated £121,000, but the recession and the complex needs of its beneficiaries left it with no choice.

"It's a fair blow," she said. "It's income that we rely on but it just wasn't achievable."

The RNIB, which passed on Pathways contracts in England to Action when the two charities formed an associate agreement, has abandoned one Pathways subcontract in Wales.

Last month the Shaw Trust, the largest voluntary sector provider of employment services for disabled people, blamed the DWP funding structure for its £2.8m annual loss.

Employment minister Jim Knight said prime providers were responsible for managing subcontractors.

"Providers may have underestimated challenges and set high targets but we are working to improve performance," he said. "Many of the contracts run for three years and, due to start-up costs, providers would not be expected to make a profit immediately."

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