CONNEXIONS: Partnership chiefs told to claw back annual budgets by 25m

Weinstock's letter, which says partnerships must reduce their VAT liability to become more tax efficient, follows an emergency meeting of chief executives at Connexions' Sheffield headquarters on 13 February.

The Department for Education and Skills (DfES) said the cuts were likely to mean "no frontline staff jobs will go" but that they "may lead to a reduction in administration or managerial staff". This could mean that personal advisers will be required to take on extra administrative work.

Connexions' total budget for 2003-04 is 455m. The DfES said the 25m is not a reduction in the Connexions grant, which is supposed to rise to 515m by the financial year 2005-06. It claims the cuts would be made from a "pot of money set aside as a short-term measure to support transitional arrangements following a change in Connexions' VAT status".

Partnerships will not be able to reclaim all their VAT from 1 April because the 40m dispensation fund set up by the DfES to assist Connexions' start-up phase is being reduced by about 70 per cent. Partnerships that use a subcontracting model are to bear the brunt of the cuts, because they pay more VAT.

The Connexions announcement coincided with the DfES' U-turn on the Children's Fund crisis earlier in the month, when it put plans to reduce the fund by 20m on hold for 2004-05 (YPN, 18-24 February, p2).

In her letter to Connexions chief executives, Weinstock said: "We have no option about finding the 25m - we want to find the best way of avoiding frontline delivery becoming disrupted."

She went on to say: "This will be a very difficult period for us but one also of opportunity. If we can move quickly to a point whereby we can deliver high-quality services for all young people in the most cost-effective and tax-efficient way, we shall be in a very strong position to help deliver the vision of the green paper."

See Leader, p13.