Up to 8,000 people including young lone parents should be excluded from Community Employment schemes, according to a report presented to Cabinet by the Tanaiste.
The report, a copy of which has been seen by The Irish Times, also proposes taking some people categorised as disabled out of the CE programme.
It expresses concerns about people who have "somewhat opportunistically" had themselves classified as "being disabled" to access schemes.
Savings to the Exchequer of up between £44 million and £58 million could be achieved by taking between 6,000 and 8,000 people out of the scheme which currently involves 41,000 unemployed people, according to the report by Deloite and Touche commissioned by Ms Harney.
Ms Harney could not be contacted last night for comment.
Those removed from the scheme would revert to the dole or other payment programmes.
The report suggests that a lone parent with two children is almost £60 a week better off on a CE scheme than a married participant with two children.
It also emphasises that its recommendations were "not to cut overall spending on Active Labour Market Policies but rather to better focus that spending with a view to maximum value for money".
The report will now be referred to the secretaries general of the six Government departments that are affected by the proposed changes, the state training agency FAS, and the social partners.
The latter are already considering the transfer of 5,000 CE places into a new "social economy programme" under Partnership 2000.
The report says that funds currently spent on some CE schemes would be better spent on courses in specific skills training. The report also recommends that the age at which people can enter CE schemes should be raised from 21 to 25 "for participants in receipt of Unemployment Benefit, Unemployment Assistance and Lone Parents Allowance".