The confederation model means government funding for Connexions will be routed through the six local authorities in west London that are exempt from VAT. The local authorities will now manage funding for Connexions.
This means partnerships for Connexions, careers companies and the voluntary sector will not be affected.
The London West partnership, which has three subcontracted careers services - Life-time Careers, CfBT and Capital Careers - will work on the model until September.
Liam Duffy, chief executive of Lifetime Careers for West London, said: "We will lose 1.5m of Connexions London West's budget in irrecoverable VAT if we don't move to the confederation model. It will involve significant structural change. In terms of children's trusts, this model is also more effective than direct delivery because it is by local authority area."
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