A flagship Department of Work and Pensions (DWP) programme aimed at improving employment numbers is at risk of failure if it does not receive more money, a committee announced today.

The Flexible New Deal (FND), which starts in October, is expected to attract up to three times as many applicants than was originally predicted.

The committee warned if the budget is not amended to reflect the anticipated rise in applicants then there is significant risk of market failure.

“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,” said committee chair, Terry Rooney.

“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 DWP real cause for concern.”

The FND looks to help find employment for the long-term unemployed by providing longer contracts with both private and voluntary sector employers.

“The government must put adequate funding behind their welfare reforms or they will simply fall flat as unemployment spikes,” said Liberal Democrat employment spokesman Steve Webb.

“It is bad enough that people have to wait a year for specialist support after losing their jobs. That support must not be further compromised by a funding shortfall.

“There is no point handing over back-to-work services to private contractors if they cannot afford the specialist services that jobseekers need now more than ever.”

Shadow work and pensions secretary Theresa May said: “It is essential that the flexible new deal is not delayed, potentially leaving thousands of jobseekers without proper support back into work at a time when they need it the most.”

The committee said longer contracts and outcome-based pay should provide an environment which allows employers to employ as many people as possible.

The report, ‘DWP’s Commissioning Strategy and the Flexible New Deal’, urged the government to announce changes in the budget as soon as possible. It also warned the Jobseekers’ Allowance budget was not enough to cover the expected rise in applicants.

“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,” said Mr Rooney

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

The report also recommended the appointment of an independent ombudsman to address concerns of the voluntary sector and to ensure that the public’s voice was heard throughout the process.