The Work and Pensions committee has warned that unless government acts now, communities and charities could face the "disastrous" loss of hundreds of millions of pounds of funding each year.
Between 2007 and 2013 the UK benefited from €8.6 billion (approximately £7.7bn) in funding from the European Social Fund, which goes towards charities and others working in disadvantaged communities. A further €3.5bn has been allocated to the UK for 2014-2020.
About £500m a year of this goes towards employment and skills support.
Government has promised a UK Shared Prosperity Fund to replace the ESF, but the committee warned that unless there is prompt action this will not be ready in time, and that existing suppliers could be "bankrupted" while they wait for a replacement.
The committee called on the government to:
- ensure funds are available so there is no gap between existing and new provision
- establish a new arm’s length body to hold the fund’s budget, dovetailing existing funding streams so programmes can meet effectively all of their participants’ needs
- retain a separate fund within the UK Shared Prosperity Fund for employment support
- ensure flexibility of local funding mechanisms for both longer-term and short-term programmes
- reduce overall bureaucracy for providers, enabling them to focus on value for money, building understanding of what works in employment support, and fostering new entrants
Labour MP Frank Field MP, chair of the committee, said: “We now have an historic opportunity to create a truly fit-for-purpose successor to the ESF.
“The government must act quickly so that those excellent existing suppliers are not bankrupted. Effective reform here offers the government an important new chance to begin to fill our skills gap from the community upwards, instead of having a top-down approach.”
Elizabeth Chamberlain, head of policy at NCVO said: “The committee is right to highlight the need for urgency.
“There is a great opportunity to build on the work of the European Social Fund by continuing to invest in training and employment support to vulnerable groups who often fall through the gaps of mainstream public services.
“This includes people with disabilities and health conditions, people facing multiple or complex barriers to employment, and ex-offenders. With less than a year to go before Brexit the government needs to explain its plans for continuing and improving this support as soon as possible.”
In December, NCVO and the Employment Related Services Association published a report that warned the withdrawal of the ESF without a replacement programme “would have a serious impact on the vital support some of the most disadvantaged communities receive”.