Labour has signalled that it will cut back the role of the big outsourcing companies in delivering the Government's back-to-work programme if it wins the next general election.

Shadow work and pensions secretary Rachel Reeves has said she wants to scrap the current system of big, centrally commissioned contracts for the Work Programme and open up the process to smaller providers.

In an interview with the Financial Times, she suggested that services could be bought at a more local level by local councils or local enterprise partnerships.

Asked if big corporate providers should be worried by the changes, she said: "Well, yes. I think we are going to challenge the status quo."

She added: "I would expect smaller charities and businesses to be able to get these contracts."

Ms Reeves said Labour was also considering whether to require all suppliers to guarantee they would pay the "living wage" to their employees - rather than just the lower minimum wage - in order to qualify for the award of government contracts.

She acknowledged that it was a "radical" proposal, adding: "That's why we're looking at it and looking at the cost implications."

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