Tax change threat to Connexions

The quality and delivery of the Connexions service is under threat
after a £25m cut to its budget to help fund services outlined
in the children’s green paper.

The cut has been made in the VAT compensation provided for
Connexions partnerships that use private service providers. It
could affect up to18 of the 47 partnerships.

The money was taken out of the £40m pot created by the
Department for Education and Skills in 2002 to compensate
partnerships for VAT costs they incurred by using external
providers between 2004-6. Chief executives of Connexions
partnerships were warned of the cuts earlier in the year.

The Conservative shadow minister for young people, Charles Hendry
said the cut was forcing sub-contracting partnerships to consider
shifting to direct-led (led by the partnership itself) or
council-led structures in order to avoid VAT costs.

He said two firms providing services to Connexions partnerships in
Berkshire and Hampshire had already had their contracts ended.

A letter from the chief executive of South Central Connexions, the
partnership for East Hampshire, to a colleague confirms that the
partnership had ended its contract with a private provider due to
the cut. But the DfES denied the cuts were behind Berkshire
Connexions partnership’s decision to end its contract.

Hendry said that it looked “increasingly likely” that similar
action would follow in other Connexions partnerships, with
“disastrous consequences” for the companies, many of which had a
long history of providing quality careers guidance.

A DfES spokesperson confirmed the cut but said it wasn’t expected
to have a “major impact on front line delivery”.