The Access to Work scheme this year provided Pounds 19 million to support disabled employees. But from April it is to be cut to Pounds 12 million. The Government has yet to make an official announcement, but it is likely employers will be asked to make up the shortfall.
The change has been described as "disastrous" by critics who say it will dissuade potential employers and undermine the new Disability Discrimination Act, which aims to promote fairness in the workplace.
Such is the demand on this year's budget that the Government has already restricted the scheme. Since Christmas, only employees taken straight from the dole queue have been eligible for help.
"It's totally undermining to the work we have been doing to promote equality of opportunity for disabled students," said Paul Ennals, director of education and leisure at the Royal National Institute for the Blind. The RNIB runs two further education colleges and supports 2,000 pupils in secondary education.
"After years of hard and painstaking work, they will find the carpet completely taken from under them," he said. "In effect the Government is subsidising failure. It is transferring expenditure from this sort of forward-looking scheme to the dole queue.
"They are talking about massive cuts; the situation would be disastrous. We will be going absolutely nuclear on this one."
The chief executive of the Association for Colleges, Ruth Gee, said: "This Government seems to have a problem with disabled people. It is surely in everyone's interest to get as many disabled people back to work as possible. Any suggestion that employers should be charged for taking on disabled people should be scuttled at once."
Scope (formerly the Spastics Society), which acts for people with cerebral palsy and runs eight schools and colleges, said that an employer subsidy would "destroy" Access to Work.
"Ten thousand people have benefited from the scheme so far," said a spokeswoman. "This number is likely to rise to 13,000 next year. We want the budget to be doubled, not held to Pounds 12 million."
It would also undermine the Disability Discrimination Act which, she said, had been supported by business partly because of the help offered by the scheme.
"This is very much tied up with education. You support people throughout the process and then they're up against a brick wall. We're extremely concerned about the prospect of cuts."
Reports by the RNIB and the Employment Service suggest that, without specialist help, employers are very reluctant to take on people with disabilities.
The Royal London Society for the Blind, which runs Dorton College in Sevenoaks, Kent, said that more than 80 per cent of visually-impaired people are unemployed.
Brian Cooney, the Dorton principal, said: "All of our graduates use Access to Work monies. It is fundamental to their efforts to secure a position.
"The fact that the cost of aids and adaptations is met by Access to Work is a key factor, and often the decisive one, in persuading an employer to take on a visually-impaired person.
"Asking employers to make a contribution to the cost of this will have a devastating effect on our graduates' work prospects."