Remploy plans factory closures with 1,700 job losses
Remploy - which provides work for people with disabilities - is planning to close 36 of its 54 factories, putting more than 1,700 jobs at risk.
Minister for Disabled People Maria Miller saidthe sites could be closed by the end of the yearas they were not financially viable.
Labour called the decision "the wrong plan at the wrong time".
Remploy factories were established 66 years ago as part of the creation of the welfare state.
Remploy workers are employed in enterprises that vary from furniture and packaging manufacturing to recycling electrical appliances and operating CCTV systems and control rooms.
The government says "non-viable" Remploy factories should close, with the money, part of a £320m annual budget for disability employment, re-invested into other schemes to help disabled people find work.
It follows an independent review conducted by Liz Sayce, chief executive of Disability Rights UK, into the way in which the government spends its disability employment budget.
Her report recommended that government funding should focus on support for individuals, rather than subsidising factory businesses.
She recommended the cash should be diverted into the Access to Work fund, which provides technology and other help to firms for the disabled, whose average spend per person is £2,900.
The Department for Work and Pensions said about a fifth of that budget was currently spent on Remploy factories, but added that almost all of the factories were loss-making and last year lost £68.3m.
Speaking to the BBC, Ms Sayce said she hoped that some of the loss-making factories could be returned to profitability.
"I think it is really important that those factories should be given a chance to show if they can be viable," she said.
"I really think there should be good business support, and if somebody has got a good idea for how to turn something around and make a success of it, really go for it, good luck, and I really hope that works.
"Because the more that any compulsory redundancies can be avoided the better."
Remploy factories in Wales will be among those hardest hit, with proposals to close seven of its nine factories, affecting up to 272 staff.
In a Commons statement, Ms Miller said the government would reduce its current subsidy to Remploy from the beginning of the new financial year.
She described the announcement as "difficult but important".
"The current system is not using the money we have available most effectively, the current situation is simply not sustainable," Ms Miller added.
She went on to say that every Remploy place currently costs £25,000 a year, compared with £3,000 per person under the Access to Work scheme.
An £8m fund is being set up to help those affected find alternative employment.
In response, the shadow minister for the disabled Anne McGuire said making such a decision on the basis of a "report by an individual is frankly not acceptable".
She added: "There are tens of people, in each of the constituencies where these factory redundancies are going to be made, chasing every job."
Earlier, Liam Byrne MP, Labour's shadow work and pensions secretary, said: "It is frankly outrageous that the government has tried to smuggle out the news on the day of the Parliament's celebration of Her Majesty's Diamond Jubilee.
"Quite simply this is the wrong plan at the wrong time. Unemployment is going through the roof. Back to work schemes are sinking under the weight of spiralling unemployment.
"In 2007, Chris Grayling said in Parliament: 'Let me assure Remploy and its employees that the next Conservative Government will continue the process of identifying additional potential procurement opportunities for them and the public sector workforce'.
"Now we know the truth. People with disabilities will never trust a word they say again."
Phil Davies, national secretary of the GMB union, said the government's announcement was "an attack on the most vulnerable members of our society".
He added: "I never thought that I would live to see the day that an organisation set up to provide sustainable employment for disabled people being shut down."
The 36 Remploy factories due to close are: Aberdare, Aberdeen, Abertillery, Acton, Ashington, Barking, Barrow, Birkenhead, Bolton, Bridgend, Bristol, Chesterfield, Cleator Moor, Croespenmaen, Edinburgh, Gateshead, Leeds, Leicester, Manchester, Merthyr Tydfil, Motherwell, Newcastle, north London, North Staffs, Oldham, Penzance, Pontefract, Poole, Preston, Southampton, Spennymoor, Springburn, Swansea, Wigan, Worksop and Wrexham.