House of Commons Scottish Affairs Committee
Remploy Marine Fife
First Report of Session 2013–14
Volume I: Report, together with formal minutes, oral and written evidence
Ordered by the House of Commons to be printed 24 June 2013
HC 454 Incorporating HC 1051-i & -ii, Session 2012-13 Published on 26 June 2013 by authority of the House of Commons London: The Stationery Office Limited £0.00
The Scottish Affairs Committee
The Scottish Affairs Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Scotland Office (including (i) relations with the Scottish Parliament and (ii) administration and expenditure of the offices of the Advocate General for Scotland (but excluding individual cases and advice given within government by the Advocate General)).
Current membership Mr Ian Davidson MP (Labour/Co-op, Glasgow South West) (Chair) Mike Crockart MP (Liberal Democrat, Edinburgh West) Mrs Eleanor Laing MP (Conservative, Epping Forest) Jim McGovern MP (Labour, Dundee West) Graeme Morrice MP (Labour, Livingston) Pamela Nash MP (Labour, Airdrie and Shotts) Sir Jim Paice MP (Conservative, South East Cambridgeshire) Simon Reevell MP (Conservative, Dewsbury) Mr Alan Reid MP (Liberal Democrat, Argyll and Bute) Lindsay Roy MP (Labour, Glenrothes) Dr Eilidh Whiteford MP (Scottish National Party, Banff and Buchan)
The following members were also members of the committee during the Parliament: Fiona Bruce MP (Conservative, Congleton) Mike Freer MP (Conservative, Finchley and Golders Green) Cathy Jamieson MP (Labour/Co-op, Kilmarnock and Loudoun) Mark Menzies MP (Conservative, Fylde) Iain McKenzie MP (Labour, Inverclyde) David Mowat MP (Conservative, Warrington South) Fiona O’Donnell MP (Labour, East Lothian) Julian Smith MP (Conservative, Skipton and Ripon)
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The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Additional written evidence may be published on the internet only.
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Remploy Marine Fife 1
Contents
Report Page
Summary 3
1 Introduction 4 Remploy 4 The Sayce Review and changes to Remploy 5
2 Remploy Marine Fife 7 The nature of the business 7 A going concern? 8 Transitional support 9
3 Flaws in the bidding process? 11 The bidding process 11 Difficulties and confusion 11
4 Conclusion 14
Conclusions and recommendations 15
Formal Minutes 17
Witnesses 18
List of printed written evidence 18
List of Reports from the Committee during the current Parliament 19
Remploy Marine Fife 3
Summary
Following a review of disability employment support in 2011, the Government announced its intention to reduce and ultimately withdraw funding for Remploy, the company established in 1945 to provide employment opportunities for those with disabilities. The intention was to move away from very targeted support for a small number of workers in Remploy establishments to more broadly-based employment support for those with disabilities. 36 factories were sold or closed in the first phase of this process. In December 2012, it was revealed that the remaining factories would be put up for sale and the Government invited bids. This tranche included Remploy Marine Fife, which has factories in Leven and Cowdenbeath. Remploy Marine Fife manufactures lifejackets at its two factories. It is an internationally recognised business with a quality Kitemark, and currently produces 30,000 lifejackets a year. Its order books are full. However, it is currently making a loss, although the size of this loss has declined significantly over the past three years. The lifejackets are sold by the customer, Ocean Safety, at a mark-up of over £100 compared to the cost of production, and this gap seems extraordinarily large. The Government must look again at how Remploy agreed this contract on such generous terms to the customer. One of the central criteria by which bids for the Remploy sites will be judged is sustaining the workforce in employment. We believe this is vital, but also that the wider social context must be taken into consideration when assessing the bids in terms of value for money. Regrettably, the Government has shown no evidence of having taken these factors into account. We fear that the changes to Remploy will descend into simply a series of factory closures or asset-stripping. Fife Council highlighted a number of problems they and a number of other interested parties had encountered in the bidding process. The timescale was short—January to March 2013—and Remploy insisted that bidders sign confidentiality and non-disclosure agreements before proceeding to the third stage of the process. Fife Council felt this made it impossible to collaborate with social enterprises or co-operatives in order to try to keep the factories as going concerns. In addition, the Government has indicated that there will be very little in the way of transitional support for the Remploy businesses as funding is withdrawn. This lack of flexibility, a “one size fits all” approach, has been a considerable inhibitor. We reject the unyielding approach of the DWP and Remploy in terms of timescale and transitional arrangements in the light of the evidence we heard. Even at this late stage, we believe the Government can and should instruct Remploy to extend the timescale, make more appropriate transitional arrangements available and ensure that social enterprises, mutuals and co-operatives are able to participate in the bidding process. After we took evidence, there were renewed talks between Fife Council and Remploy. Given the expressions of interest in Remploy Marine Fife, we hope that there will be successful bids for both factories to maintain their workforces in employment, manufacturing a high-quality product to an international market. It is vital that the high quality manufacturing base in Fife is maintained, otherwise it is likely that it will be transferred overseas.
4 Remploy Marine Fife
1 Introduction
1. Remploy Marine Fife’s two factories at Leven and Cowdenbeath were earmarked for sale by the Government as part of its wider winding-down of Remploy by withdrawing financial support. There were concerns raised about the process by which this was going to happen, so we decided to undertake a short, focused inquiry into the future of Remploy Marine Fife. We held two oral evidence sessions, with representatives of Fife Council and Friends of Remploy, and with the Department for Work and Pensions and Remploy itself. In our Report, we highlight some of the difficulties bidders have faced in the proposed sale of Remploy Marine Fife and the measures which have been taken to try to resolve these. We are grateful to all of those who gave evidence to the inquiry.
Remploy 2. Remploy, a non-departmental public body owned by the Department for Work and Pensions (DWP) and organised as a company limited by guarantee, exists to provide sustainable employment opportunities for those with disabilities and those who have “complex barriers to work”.1 It was established in 1945 under the terms of the Disabled Persons (Employment) Act 1944, and opened its first factory in Bridgend, in 1946. Over the following decades it, at its peak, established a network of 83 factories across the UK making a wide variety of products, and in the late 20th century it moved into service businesses. 29 of these factories were closed by the previous Government. Remploy promotes work as a key element of an independent and fulfilling life, and its Employment Service operates through a network of 64 town and city centre branches and offices and a comprehensive range of tailored support services provided through them.
3. Remploy’s purpose is defined as follows:
We recognise the fundamental role that leading employers play in delivering sustainable employment. We also recognise that employing disabled people delivers real social and economic value for business. So, by helping employers to better understand and act upon the benefits of employing disabled people, in effect transforming business, we can help to transform the lives of individuals.2
In 2010/11, Remploy found 20,000 jobs for those with disabilities and complex barriers to work.
4. Remploy provides various products and services through ‘Enterprise Businesses’. If a United Kingdom public body procures these products or services from a Remploy business, it is permitted to take advantage of the 2006 Public Contracts Regulations (Regulation 7). These regulations restrict the tendering process for goods or services to supported businesses, which are defined as those where over 50% of employees are disabled. UK Government guidance is that every public body should reserve at least one contract for supported businesses. In this way, public bodies can fulfil their corporate social
1 www.remploy.co.uk 2 ibid.
Remploy Marine Fife 5
responsibility objectives by helping more disabled people into work. There is also a European directive, Article 19, which allows public bodies to reserve some contracts for businesses in which over 50% of the workforce is disabled.3 However, we regret that the take-up of these opportunities has been very low.
The Sayce Review and changes to Remploy 5. In March 2012, following consultation on the findings of Getting In, Staying In and Getting On: Disability employment support fit for the future, a review of disability employment support by Liz Sayce4, the Government announced its intention to reduce and ultimately withdraw funding for Remploy, resulting in major changes to Remploy’s factory-based Enterprise Businesses. Remploy then announced that 36 of its remaining 54 factories were at risk of closure following this decision.
6. Remploy announced on 10 July 2012 that it was in discussion with a number of bidders for nine of those 36 factories and the Cook with Care business. Another nine factories then closed or began the process of closure. On 6 December 2012, the company announced proposals for sale or closure of the remaining 18 factories and its CCTV business in Stage 2 of the Remploy change process. There was then a 90-day consultation on these proposals with trade unions and other employee representative bodies to promote viable business plans and to consider possible ways to mitigate job losses.
7. Expressions of interest were invited from individuals or organisations who wished to acquire all or part of the following businesses or sites and their associated assets:
Automotive Textiles, based in Huddersfield
Marine Textiles, based in Leven and Cowdenbeath
Frontline Textiles, based in Clydebank, Dundee and Stirling
E-Cycle, based in Heywood and Porth
Packaging, based in Burnley, Norwich, Portsmouth and Sunderland
The deadline for expressions of interest and bids was the end of March 2013.
8. The Chairman of Remploy, Mr Ian Russell, explained to us that one of the central criteria for judging bids was the continuation of employment for disabled people. As a result, they needed to be sure that the bids they had received were financially sound. “We do not want them to bid now and be struggling in six months’ time.”5 However, he stressed that the bids had to meet further criteria:
The first of the three criteria is the continued employment of disabled people. The second is that the high-level business plan is financially sound. We do not want to sell factories to people who go out of business after six months; that does not help
3 Q 38 4 Getting in, staying in and getting on: Disability employment support fit for the future, Cm 8081, June 2011 5 Q 91
6 Remploy Marine Fife
our employees. The third is that it passes a value-for-money test for the Department and for Remploy—for the public purse, if you like. At this stage, we are looking for preliminary business plans that continue with the employment of disabled people, are financially sound and meet the value-for-money test. If they do, they go through to the next stage, when more detailed information would become available. They are not competing against another bid; they are simply seeking to pass those three tests.6
He noted that consideration would also be given to the employment of able-bodied people, as Remploy has a mixed workforce.7
9. Mr Russell told us that value for money was judged by whether a bid was higher than the cost of closing a site, including redundancy costs, property wind-up costs and disposal costs.8 However, in the case of competing bids, he was confident that bidders would not want to pass that threshold by a narrow margin but by a considerable way.
6 Q 98 7 Q 99 8 Q 100
Remploy Marine Fife 7
2 Remploy Marine Fife
The nature of the business 10. Remploy Marine Fife consists of two factories, at Leven and Cowdenbeath. They were established in 1948 and manufacture lifejackets. The factories have a full order book, making over 30,000 lifejackets a year. These bear an international quality Kitemark and are widely distributed in the UK and to diverse international markets. Councillor David Ross, the Depute Leader of Fife Council, told us in his written evidence that they “have an established reputation as a world leader in this equipment”, and could expand their capacity from 30,000 to 40,000 because of the size of the market.9 Cowdenbeath employs 36 disabled people while Leven employs 28.
11. This claim was also made by the Member for Kirkcaldy and Cowdenbeath, Rt Hon Gordon Brown MP. In an adjournment debate in January of this year, he explained:
These factories in Fife have an order book and an established product that people want to buy. Indeed, the order book could be rapidly extended in the right circumstances and, as I will also show, two prospective buyers have indicated to me and to my hon. Friends the Members for Glenrothes [Lindsay Roy] and for Dunfermline and West Fife [Thomas Docherty] that they would be interested in purchasing the factories.10
Cllr Ross confirmed this to us in oral evidence.
They have a full order book. There is a very good internationally recognised product there. On top of that, they have quite a dedicated and committed work force skilled at what they are doing. Many of them have been there 20 or 30 years. They really see themselves almost as a family. That is worth something in terms of the business.11
Lyn Turner, of Friends of Remploy, concurred with this view. He told us of the factories’ products, “It is a brand that is phenomenal. It is high quality with a worldwide brand. They are everywhere.”12
12. Despite this positive interpretation, Remploy Marine Fife is currently a loss-making concern. The written evidence we received from Fife Council demonstrated that the factories had made a loss of £1,610,000 in the financial year 2010-11 and £1,232,000 in 2011-12. Estimates indicate that the deficit has been reduced to £800,000 for the most recent year. However, addressing this shortfall would clearly be a hurdle for any would-be bidder in the short term.
13. We were curious to know why, if Remploy Marine Fife was such a promising business, it was not a more commercially viable entity. The evidence we heard suggested that there
9 Ev 29 10 HC deb, 15 January 2013, col 841 11 Q 31 12 Q 32
8 Remploy Marine Fife
were two problems. The first was marketing. Mr Turner suggested that Remploy had not sold itself efficiently as a brand for many years, and that therefore the high quality of the products and their saleability were not universally recognised.13 The second problem was that Remploy Marine Fife relies on a single buyer for its lifejackets, Ocean Safety, a Southampton-based company which specialises in the worldwide supply, distribution, service and hire of marine safety equipment, including life rafts, lifejackets & distress beacons. Cllr Ross pointed out that “somebody coming in would have to question that and how long it would take to diversify and build up other markets”.14
14. Mr Russell sought to qualify that impression when he gave evidence to us. We had been told that the lifejackets made by Remploy Marine Fife were sold by Ocean Safety at a mark- up of the order of £100.15 The implication was that this was due to some kind of lack of marketing or commercial acuity on the part of Remploy. Mr Russell explained that Ocean Safety had considerable overheads which accounted for some of the difference between the price for which they bought the lifejackets from Remploy and the price for which they were sold.
I would say that part of the difference between the price that Leven and Cowdenbeath get for the product and the price the product is sold for is to pay for assistance with the product development, all the international marketing and sales offices and, very importantly, the international service centres. As you can imagine, if you deploy a life piece of equipment, you want it to be put back together so you can reuse it. Ocean Safety provides that service to us. All of that is part of the cost differential between what we sell for and what they sell for.16
Nevertheless, we felt strongly that there was an exorbitant chasm between the manufacturing and marketing price that was difficult to justify.
A going concern? 15. Friends of Remploy and Fife Council were very keen that Remploy Marine Fife should be sold as a going concern rather than closed down. Mr Turner warned that “we need to learn the lessons from stage one first of all. If you ask yourself how many existing businesses came out of phase one, I only know of one.”17 He felt that the Government had focused too much on disposal in the first phase of bidding, and that this was a danger for the second. Cllr Ross concurred:
There does not seem to be any assessment of the knock-on and indirect costs, and particularly no consideration of continued employment for that work force or people with disabilities. There is no consideration about whether a business is sustainable. It is purely on the cost basis. The concern is that that just attracts asset-stripping.18
13 Q 33 14 ibid. 15 Q 30 16 Q 146 17 Q 53 18 Q 57
Remploy Marine Fife 9
Their argument, therefore, was that preserving the factories as viable businesses which continued to employ the workforce would be value for money.
16. We were particularly concerned that Remploy Marine Fife might fall prey to a negative consideration bid; that is, that the successful bid might be the one which cost the Government least, irrespective of the future intentions of the bidder towards the sites. We put this concern to Mr Russell, who stated that asset-stripping would not be the outcome of the bidding process.
The Department, KPMG, the independent panel and the board of Remploy all look in detail at every bid and business plan that comes forward to try to make sure that we avoid the situation that you have just described.19
We are grateful for that assurance from the Chairman of Remploy and trust that this commitment will be fulfilled.
Transitional support 17. A vital aspect which was stressed in evidence to us was the need for transitional support from the Government to allow Remploy Marine Fife to be preserved as a going concern. The DWP stated its intention to provide up to £3,200 per disabled worker in the first year of transition, but Fife Council argued that this was not sufficient, and that it was simply not reasonable to expect the factories to go from receiving a subsidy of around £20,000 per worker to financial viability overnight. Mr Moist, of Friends of Remploy, pointed out that the Sayce Review had said explicitly that support should be offered over a period of time to Remploy businesses to allow them to remain viable during the transition into private ownership.20 He went on to say that the then-Minister for Disabled People, Maria Miller MP, had responded to the Sayce Review in 2011, accepting the recommendation.21
18. We are deeply concerned by suggestions that this process has not been followed. Mr Moist told us that, in the case of Remploy Marine Fife, there had been no contact with the DWP and no suggestion of transitional support. “Not a shop steward, not a trade union, not a local authority has had any contact with the DWP to implement any part of that transition process.”22
19. We put to the Minister, Esther McVey MP, a quotation from an unnamed DWP spokesperson :
If bidders come forward with a credible plan to safeguard jobs and put the marine textiles business on sustainable long-term footing, then requests for extra funding will be considered as part of the commercial process.23
19 Q 197 20 Q 11 21 Q 12 22 ibid. 23 Q 175
10 Remploy Marine Fife
The Minister responded that she did not know what the extra funding would be, and explained that there was only a tapered wage subsidy for a three-year period in place. Jeremy Moore, Director for Disability and Work Opportunities at the DWP, confirmed “There is no plan to put any additional financing into the scheme”.24
20. The Government’s argument is that spending large sums of money on a relatively few disabled workers is inefficient. The Minister argued that it was less effective to spend the budget of the Remploy factories, more than £300 million, on failing factories than on seeking to get many more disabled people into mainstream work. She pointed out that, for the stage 2 process, there were 152 disabled people employed by Remploy, against a national population of 668,000, and attention should be focused on helping all of those people find work.25
21. We are disappointed that the Government is not willing to think more creatively in terms of transitional support to help Remploy concerns remain viable as they move into private ownership. We note the Government’s argument that the firms are resource-intensive compared to the wider population of disabled people, but we are far from convinced that the long-term and wider costs of closure of Remploy factories have adequately been taken into consideration. We urge the Government to look again at possible variations in transitional support for Remploy businesses in relation to individual prospects and circumstances. We remain strongly of the view that a one-size approach does not fit all.
24 ibid. 25 Q 138
Remploy Marine Fife 11
3 Flaws in the bidding process?
The bidding process 22. The process for bidding for the Remploy factories being sold during phase 2, which began on 28 January 2013, has several stages. The first is a simple one, requiring simply the submission of name, address and contact number. The second is similarly starightforward. However, our main concern was over the third stage, for which the deadline was 28 March 2013, at which non-disclosure and confidentiality agreements had to be signed. We return to this issue below. This stage also required a business plan. Ian Russell said that this was a “high-level” stage and that “it is not that difficult an exercise”.26
23. Once bidders have expressed an interest, they have access to what Remploy call ‘the data room’. This consists of “a lot of very detailed cost, revenue and balance sheet information”, to allow bidders to put together their high-level business cases.27 Thereafter, Remploy would engage with bidders, and with the DWP, to try to help them develop their bids, but also to try to ensure that the bids were credible and viable. The purpose of the non-disclosure and confidentiality agreements is to preserve a level playing field between bidders, which Mr Russell stressed was a priority.28
24. The bids are not evaluated solely by Remploy. Mr Russell explained to us that both the DWP and KPMG have input into the decision-making process. In addition, there is a panel independent of Government and Remploy which examines prospective bids (it is intended there will be a Scottish representative on the panel). There is, therefore, a wide range of people judging the bids. We welcome the fact that Remploy is using independent expertise in evaluating bids at phase 2.
Difficulties and confusion 25. We heard criticism from Fife Council that the bidding process for Cowdenbeath and Leven had thrown up some obstacles. Not only had they experienced great difficulty in accessing and sharing information as a result of legal advice, they were also unable through their ‘business gateway service’ to support bids from possible mutual, co-operative and social enterprise interests, as well as interested commercial businesses. John Moist, of Friends of Remploy, suggested that the requirements to enter the data room were impossible for a co-operative or a social enterprise to meet.
You have to complete a conflict of interest statement and then advise them who your legal adviser is, who your financial adviser is, contact details for your property adviser and your bank. At that stage, any of the work force and certainly any of the shop stewards or full-time officials are put in a position where they cannot go beyond that. The NDA stops discussion between local authorities and other interested parties. The hoops we have to go through to get into the data room make it
26 Q 155 27 ibid. 28 Q 165
12 Remploy Marine Fife
impossible for all those things where advice would happen. Social enterprises, co- operatives and the rest are stymied at that stage.29
We put these criticisms to Remploy and the DWP. Ian Russell explained that Fife Council had received legal advice not to sign the non-disclosure agreement, and had requested an amended version. It appears that this was because it was concerned that there might be repercussions if it wished to share any information with the Scottish Government or other councils. Mr Russell said that he thought the difficulties had been resolved, but that he had not heard further from Fife Council.30
26. Fife Council argued that the confidentiality and non-disclosure agreements made it impossible to collaborate with other parties in an attempt to bid for Remploy Marine Fife as a social enterprise. Mr Moist added that effectively barring such bodies was contrary to the recommendations of the Sayce Review. “There should be action between local interest groups, local enterprise groups, Remploy, local government and the trade unions.”31
27. We took evidence from the Minister and Mr Russell in the week before the deadline for high-level bids. Given the difficulties that Fife Council had obviously had in preparing their bid, we asked whether there was any flexibility in the deadline. Mr Russell said that, for the sake of fairness, there could not be any flexibility and the deadline had to remain as it was. However, he emphasised that he was very keen to engage with Fife Council and said that if they were in contact with him that day or the next then there would still be time to put a bid together before the deadline.32
28. When we took evidence from Mr Russell, there had been 11 expressions of interest in Remploy Marine Fife. However, he could not tell us, for reasons of commercial confidentiality, how many of these had access to the data room, before the deadline for bids had passed. All he could confirm was that any interested parties which had signed the non- disclosure agreement would have access to the data room.33
29. More widely, there seemed to be a lack of clarity in the bidding process and confusion between the roles of Remploy and the DWP. The perception of the process which Fife Council and Friends of Remploy had often seemed to be at variance with the picture which the Minister and Mr Russell were painting.
30. We have grave concerns that the bidding process was a “one size fits all” process, which left no flexibility for co-operative groups or social enterprises to put together proper bids for the Remploy sites. Fife Council’s focus was, understandably, on maintaining the Leven and Cowdenbeath sites as going concerns which would continue to provide employment for disabled people. It would be wrong if that kind of bid was disadvantaged against a straightforward commercial bid which might involve the workforce being reduced or the factories being closed altogether.
29 Q 6 30 Q 169 31 Q 26 32 Q 174 33 Qq 156-7
Remploy Marine Fife 13
31. We are grateful to Ian Russell for indicating his willingness to engage with Fife Council even at a late date to try to facilitate their bid. Remploy indicated that it was acting in good faith and wanted to facilitate as many bids for the Remploy Marine Fife sites as possible. However, we remain concerned that it took so long, and our intervention, to facilitate such last-minute engagement, and the Government, and Remploy, should learn lessons from this.
14 Remploy Marine Fife
4 Conclusion
32. Following our evidence sessions, talks were held between Remploy and Fife Council to attempt to enter alternative bids which would keep the factories at Leven and Cowdenbeath in operation and attempt to make the transition from Government ownership to a successful and viable entity in the private sector. The outcome of these negotiations will only fully be known when the result of the bidding process is announced. Nonetheless, whatever the fate of Remploy Marine Fife, we believe there are some key lessons which can be learned.
33. Remploy was created as a means of finding employment for disabled people. While we understand the reasoning behind moving the factories away from public ownership, especially in times of acute economic austerity, we believe that its original mission should be preserved, and the Government ought to place at the centre of its focus the social value of maintaining jobs for disabled people, and should pay more attention to the wider financial and social costs of the potential closure of such sites.
34. Remploy Marine Fife is an internationally recognised business with a full order book, and some capacity to expand. Its products have an international quality Kitemark. We believe it therefore has considerable potential and should be supported accordingly. Otherwise it is highly likely that the lifejackets may be transferred for production elsewhere, perhaps abroad, using the design and expertise amassed within Fife, leaving these factories without jobs.
35. Bearing in mind the social value of Remploy, there should have been greater flexibility in the bidding process, and more capacity for transitional support. The “one size fits all” approach might have been appropriate if the Government was seeking to shed a purely commercial enterprise, but was not suited to a more nuanced transition and the unique circumstances of Remploy Marine Fife. We reject the unyielding approach in terms of timescale and transitional arrangements adopted by the DWP and Remploy in the light of the evidence we heard. The short timescale and lack of flexibility has proved a great obstacle to social enterprises, co-operatives and mutual groups which have sought to express interest. We expect that the outcome of the bidding process will be weighted towards maintaining Remploy sites as viable businesses, and especially to fulfilling the promise which we believe Remploy Marine Fife possesses.
Remploy Marine Fife 15
Conclusions and recommendations
Transitional support 1. We are disappointed that the Government is not willing to think more creatively in terms of transitional support to help Remploy concerns remain viable as they move into private ownership. We note the Government’s argument that the firms are resource-intensive compared to the wider population of disabled people, but we are far from convinced that the long-term and wider costs of closure of Remploy factories have adequately been taken into consideration. We urge the Government to look again at possible variations in transitional support for Remploy businesses in relation to individual prospects and circumstances. We remain strongly of the view that a one-size approach does not fit all. (Paragraph 21)
The bidding process 2. We welcome the fact that Remploy is using independent expertise in evaluating bids at phase 2. (Paragraph 24)
Difficulties and confusion 3. We have grave concerns that the bidding process was a “one size fits all” process, which left no flexibility for co-operative groups or social enterprises to put together proper bids for the Remploy sites. Fife Council’s focus was, understandably, on maintaining the Leven and Cowdenbeath sites as going concerns which would continue to provide employment for disabled people. It would be wrong if that kind of bid was disadvantaged against a straightforward commercial bid which might involve the workforce being reduced or the factories being closed altogether. (Paragraph 30)
4. We are grateful to Ian Russell for indicating his willingness to engage with Fife Council even at a late date to try to facilitate their bid. Remploy indicated that it was acting in good faith and wanted to facilitate as many bids for the Remploy Marine Fife sites as possible. However, we remain concerned that it took so long, and our intervention, to facilitate such last-minute engagement, and the Government, and Remploy, should learn lessons from this. (Paragraph 31)
Conclusion 5. Remploy was created as a means of finding employment for disabled people. While we understand the reasoning behind moving the factories away from public ownership, especially in times of acute economic austerity, we believe that its original mission should be preserved, and the Government ought to place at the centre of its focus the social value of maintaining jobs for disabled people, and should pay more attention to the wider financial and social costs of the potential closure of such sites. (Paragraph 33)
16 Remploy Marine Fife
6. Remploy Marine Fife is an internationally recognised business with a full order book, and some capacity to expand. Its products have an international quality Kitemark. We believe it therefore has considerable potential and should be supported accordingly. Otherwise it is highly likely that the lifejackets may be transferred for production elsewhere, perhaps abroad, using the design and expertise amassed within Fife, leaving these factories without jobs. (Paragraph 34)
7. Bearing in mind the social value of Remploy, there should have been greater flexibility in the bidding process, and more capacity for transitional support. The “one size fits all” approach might have been appropriate if the Government was seeking to shed a purely commercial enterprise, but was not suited to a more nuanced transition and the unique circumstances of Remploy Marine Fife. We reject the unyielding approach in terms of timescale and transitional arrangements adopted by the DWP and Remploy in the light of the evidence we heard. The short timescale and lack of flexibility has proved a great obstacle to social enterprises, co- operatives and mutual groups which have sought to express interest. We expect that the outcome of the bidding process will be weighted towards maintaining Remploy sites as viable businesses, and especially to fulfilling the promise which we believe Remploy Marine Fife possesses. (Paragraph 35)
Remploy Marine Fife 17
Formal Minutes
Tuesday 25 June 2013
Members present:
Mr Ian Davidson, in the Chair
Mr Alan Reid Lindsay Roy
Draft Report (Remploy Marine Fife), proposed by the Chair, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 35 read and agreed to.
Summary agreed to.
Resolved, That the Report be the First Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.
[Adjourned till Tuesday 25 June at 2.00 pm
18 Remploy Marine Fife
Witnesses
Wednesday 13 March 2013 Page
Councillor David Ross, Depute Leader, Fife Council, John Moist, Friends of Remploy, and Lyn Turner, Friends of Remploy and Regional Secretary of Unite Ev 1
Thursday 21 March 2013
Esther McVey MP, Minister for Disabled People, Department of Work and Pensions, Ian Russell CBE, Chairman of the Board, Remploy, and Jeremy Moore, Director for Disability and Work Opportunities, Department of Work and Pensions Ev 15
List of printed written evidence
1 Councillor David Ross Ev 29
Remploy Marine Fife 19
List of Reports from the Committee during the current Parliament
The reference number of the Government’s response to each Report is printed in brackets after the HC printing number.
Session 2010–12 First Report Postal Services in Scotland HC 669 (HC 884) Second Report Video Games Industry in Scotland HC 500 (Cm 8067) Third Report UK Border Agency and Glasgow City Council HC 733 Fourth Report The Scotland Bill HC 775 Fifth Report Student Immigration System in Scotland HC 912 (Cm 8192) Sixth Report The Referendum on Separation for Scotland: HC 1806 Unanswered Questions Seventh Report The Crown Estate in Scotland HC 1117 Eighth Report The Referendum on Separation for Scotland: Do you HC 1942 agree this is a biased question?
Session 2012–13 First Report A Robust Grid for 21st Century Scotland HC 499 Second Report The Referendum on Separation for Scotland: making HC 542 the process legal Third Report The Referendum on Separation for Scotland: a multi- HC 543 option question? Fourth Report The Referendum on Separation for Scotland: HC 676 (HC 861) Terminating Trident—Days or Decades? Fifth Report The Future of HM Coastguard in Scotland HC 583 Sixth Report The Referendum on Separation for Scotland: The HC 863 proposed section 30 Order—Can a player also be the referee? Seventh Report The Referendum on Separation for Scotland: HC 892 Separation shuts shipyards Eighth Report The Referendum on Separation for Scotland: How HC 957 (HC 257) would Separation affect jobs in the Scottish Defence Industry?
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Scottish Affairs Committee: Evidence Ev 1
Oral evidence
Taken before the Scottish Affairs Committee on Wednesday 13 March 2013
Members present: Mr Alan Reid (Chair)
Mike Crockart Pamela Nash Jim McGovern Lindsay Roy Graeme Morrice
In the absence of the Chairman, Mr Reid was called to the Chair ______
Examination of Witnesses
Witnesses: Councillor David Ross, Depute Leader, Fife Council, John Moist, Friends of Remploy, and Lyn Turner, Friends of Remploy and Regional Secretary of Unite, gave evidence.
Q1 Chair: I want to thank the three witnesses for but they seem to be under considerable restrictions as coming along to our inquiry this afternoon. My name to what they can then do with that. In fact, they have is Alan Reid. I am the Member of Parliament for not been able to engage in real discussions with Fife Argyll and Bute and I am chairing the meeting this and the other authorities on the basis of the afternoon. Would you introduce yourselves and information they have, so it is of little practical use explain your connection to Remploy? to them. Lyn Turner: My name is Lyn Turner. I am a full- I understand the Scottish Government, or Scottish time official for Unite the Union and also a Friend Enterprise, have now signed an NDA but have of Remploy. submitted a covering letter setting out their concerns David Ross: I am Councillor David Ross. I am depute about the freedom of information requirements. To leader of Fife council. We have two Remploy factories date, or up until this morning, they had not received a within Fife. reply back from Remploy. We are, all of us, rather in John Moist: I am John Moist, recently retired as a the dark. GMB official with responsibility for Remploy and Lyn Turner: I would say, Chair, that the information founding member of the Friends of Remploy with the is limited. John is the best person to speak to with Scottish Parliament. regard to this because John submitted an expression Chair: Thank you very much. of interest on behalf of Friends of Remploy.
Q2 Jim McGovern: Thank you very much for Q3 Jim McGovern: Dundee city council have done coming along; you are more than welcome. I have the same, but they cannot get the information they already declared an interest inasmuch as I am a require. member of the Friends of Remploy here in Lyn Turner: All shop stewards in the five factories in Westminster. Scotland have submitted an expression of interest. How easy or how difficult has it been for you to They see exactly what the information is, which is access information? Certainly in terms of Dundee city very limited, to say the least. council, it has been very difficult for us to access information that would allow us to put forward some Q4 Jim McGovern: Has Fife council, Unite or John sort of appropriate business plan. Is it different in written to Esther McVey, the Minister responsible for Fife? this? I have written to her and she has batted it back David Ross: Maybe I can answer first. It has probably to me and said, “You should be speaking to Remploy been even worse for us in Fife. Our experience reflects and not me.” the experience of the other local authorities and, David Ross: Lyn and I met with Iain Duncan Smith a indeed, the Scottish Government, Scottish Enterprise, couple of weeks ago at the invitation of Lindsay and in that we have submitted a note of interest and Gordon Brown. We raised that with him there. He requested access to the data. We are still in the process said, “Oh, we will sort it out.” We did get an approach of trying to negotiate a suitable form of words in the then as the council from the DWP, but that has only non-disclosure agreement. Our legal advice is led us into these discussions and has not resolved the certainly that the requirements that are being asked for issue. We have certainly raised it with the are contrary to the guidance that we have from the Government. Information Commissioner in Scotland in terms of John Moist: I would pick up on the expression of freedom of information. interest. The Scottish Government, in consultation On several occasions we have written to Remploy with the DWP and Remploy, allowed local authorities with alternative wordings. To date, they have passed in Scotland a little bit more leeway than they allowed them back each time. I am aware that Dundee city other people expressing interest in taking it over. The council bit the bullet and signed the NDA and got that, access you get is limited. The information is of a cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Ev 2 Scottish Affairs Committee: Evidence
13 March 2013 Councillor David Ross, John Moist and Lyn Turner standard with public information—i.e. it is not very Chair: I am sorry; I didn’t catch that. comprehensive and it is almost incomprehensible— John Moist: It was part of that phrase “the bonfire of but at least the councils are getting in. the quangos”. It was listed there. The problem we have had in expressing and moving on our expression of interest is, that following a Q8 Chair: But on any inquiries that you or MPs have meeting that we had with Gordon Brown and Ian made to the Secretary of State you have just been Russell— referred to the Remploy board. John Moist: Yes. Q5 Chair: Sorry; who are Owen Brown and Ian Russell? Q9 Chair: Do you know if private companies are John Moist: Gordon Brown is the Fife MP. interested or have managed to get to a further stage in the process than have social enterprises? Q6 Chair: I thought you said Owen Brown; Gordon David Ross: My understanding, although it is very Brown, sorry. much information through the grapevine, as it were, John Moist: He is probably best remembered is that there are certainly at least two private previously as the Prime Minister at some point. companies that have expressed an interest in the Fife Graeme Morrice: Yes; he used to be Prime Minister. factories. Partly because of the NDA things, we have Chair: Oh yes, I remember. I am sorry; I did not not really been able to engage with them or flush hear properly. that out. John Moist: Ian Russell is the chairman of the board. Can I add that, in regard to the social enterprise, we Chair: Ian Russell is the chairman; right. have certainly all been talking about a possibility, and John Moist: We were assured at a meeting of shop a number of interested parties have expressed that as stewards that we would get access to the data to allow a possibility? We have recognised from day one that us to prepare a business plan. At the express request you need a viable business, whatever structure it is of the shop stewards I submitted that. going to be, but we certainly felt there was a There are three stages. The first stage is quite possibility. Given some of the experience in the straightforward, Jim. It is just your name, address and previous ones of Aberdeen and Springburn, we contact number. The next stage moves up a slight thought that was worth following up. As a council, we level, but not much more than that. When you get to had contacted the other local authorities to see if they the third stage, you are expected to sign a non- were interested. They all thought it was an interesting disclosure agreement and a further expression of idea but impractical given the time scale that we were interest. You have to complete a conflict of interest working to. We really have not been able to progress statement and then advise them who your legal that very far. adviser is, who your financial adviser is, contact details for your property adviser and your bank. At Q10 Pamela Nash: Good afternoon. I want to ask that stage, any of the work force and certainly any of each of you what your experience of support and the shop stewards or full-time officials are put in a advice from DWP has been so far since the proposal position where they cannot go beyond that. The NDA for closure has been put forward. stops discussion between local authorities and other Lyn Turner: We met with Esther McVey on 20 interested parties. The hoops we have to go through October in the Scottish Parliament. The Minister was to get into the data room make it impossible for all surrounded, shall we say, with people from the DWP. those things where advice would happen. Social In my view, the DWP were hellbent on making sure enterprises, co-operatives and the rest are stymied at there were no success stories coming from this. That that stage. is me being blunt. I wrote to Remploy immediately after the meeting, which was on 4 January. The bid phase opened on 28 Q11 Pamela Nash: Prior to that meeting, what January 2013. At that point we were advised that 28 communication did you have with DWP? Was that March is the cut-off point for all bids to be in, which initiated by yourself or the Department? includes a business plan. We have people desperately Lyn Turner: The DWP had national discussions with running around trying to get information that is of regard to consultation. The rub of it is that it is not very little value, as far as we are aware, and anyone or anything. You have the DWP blaming practically impossible to get hold of. Remploy and Remploy blaming the DWP. You are not The question is: is this a Remploy responsibility or a getting a straight answer from anyone because you are DWP responsibility? I honestly don’t know. chasing your tail to find out where to get the answer. Jim McGovern: Thank you very much for that, John. I wrote to the Minister, Esther McVey, on 5 November I have to say that it gives me no great satisfaction to asking her to outline her points when we met on 20 say that Dundee is not alone in not getting October in the Scottish Parliament. She wrote to me information. subsequently back in February, so four months later, giving me the line about the Bolton factory and the Q7 Chair: Can you maybe explain to the Committee Chesterfield factory, but not really mentioning any how the ownership of Remploy is structured at the factory in particular that I was asking her about in moment? Where does it sit within the public sector? Scotland. It is one size fits all, and that cannot be John Moist: It is a quango. It is responsible to the the case. DWP. It was part of the infamous “bonfire of the John Moist: Could I go back a little bit in time to quangos”. when this began? This process was an outcome of the cobber Pack: U PL: COE1 [O] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 3
13 March 2013 Councillor David Ross, John Moist and Lyn Turner
Sayce report, which was commissioned in 2010. I am specifically have you done to provide assistance to sure you will be able to find out exactly when. Liz any third party wishing to take over the businesses in Sayce made certain recommendations, most of which terms of preparing any bids? What have the Scottish we as then full-time trade union officials rejected. Do Government done in this respect? What involvement you mind if I read one recommendation? have the Scottish Government had in this? Chair: No; please do. David Ross: Fairly limited. As the local authority, we John Moist: This is from “Disability Employment have had an economic development role since the Support Fit for the Future”. The recommendation is: wind-up of the local Scottish Enterprise companies. “The Department”—the DWP—“should ensure We took over that role, as you will be aware, so we existing employees in Remploy Enterprise businesses have business advice and support through the are offered the opportunity and expert entrepreneurial gateway. We also have issues around property that we and business support over a decent time period to could be supporting there. Perhaps we will come back develop businesses into independent enterprises, to this later, but one of the ways forward that we where viable—whether mutuals, social enterprises, thought made sense in Fife was possibly combining companies limited by guarantee Disability the two sites in an upgraded factory. We would be Employment Support Fit for the Future…The DWP willing to help with that. should actively pursue partnership working between We have really not been able to engage with anybody. Remploy, local authorities, businesses, disabled It has been on the basis of speaking to the other local people’s organisations and others to achieve this. authorities, to the employees, to the unions and others, Trade unions should be fully involved.” about, “Can we put together something that might Had that been the transition process, we would not be work here?” Because of the way the process is sitting here today. That was not the transition process. working, that really has hit too many hurdles to help. The Minister for Disabled People, Maria Miller, With regard to the Scottish Government, we have responded to that document, I think, in the following spoken to them. Fergus Ewing, the Minister, convened year; this would be 2011. She said: “I am announcing a meeting in January with the local authorities and a that the Government proposes to implement the Sayce representative from Remploy and Scottish Enterprise. Review recommendations on reforming Remploy. As That has not gone very far. There has been a a first stage, Remploy will begin collective commitment by the Scottish Government to put in the consultation on the future of Remploy factories that standard support for disabled people if anybody else the Remploy Board considers (subject to consultation takes on the employees from Remploy. That looked with their employee representatives) are unlikely to be as though it was more about accepting the case that able to achieve independent financial viability”—that the places are going to close and what we can then do is the stage one factories–“and is therefore proposing about it. That was not the direction in which we for closure…The second stage of the process will be wanted to go. for us to work with the Remploy Board to identify if it is, indeed, possible to set free the remaining Q14 Graeme Morrice: What did they mean by businesses, or parts of businesses, from government “standard support”? control and, if that should be possible how this might David Ross: I think it was £5,000 per employee to be achieved. Where this is not possible, further a business taking that on. To be fair to the Scottish closures would need to be considered.” Government, they have said that, if any particular bids That was the proposal that, having initially rejected come forward and want some kind of support, they the Sayce report, if the DWP, as it seemed at that time, would look at that. But, because of the process, was intent on going through the process, we thought nobody has really been able to come forward and would give us support. Liz Sayce actually identified express a need for any support. That is the same for the period of time of six months to allow that process us. to go through. We are now two weeks away from We and the Scottish Government have had difficulty closure and we have not had a meeting with the in originally getting in with redundancy support—the Government. PACE team. There was considerable resistance. I believe that is starting to happen now, but it is perhaps Q12 Pamela Nash: Just to be clear, the Government quite late in the day. have set out a transition process that has not been Lyn Turner: With regard to the Scottish Government, followed. obviously they have set up the Remploy task force, John Moist: Liz Sayce set out a process that she which is chaired by Fergus Ewing, the Minister. From recommended. The Government accepted that there came the employer recruitment incentive, which recommendation. We have been looking desperately is £5,000 per disabled employee over 18 months. As hard within the Government’s paper to see that far as it goes with regard to the rest of it, you have process repeated, but they definitely accepted the access to the PACE team. That is now starting to go recommendation. Not a shop steward, not a trade into the five sites. That is where we are at the moment. union, not a local authority has had any contact with John Moist: The Scottish Government also set up a the DWP to implement any part of that transition study by the Scottish Manufacturing Advisory Service process. to look at each individual site. They went through and looked at the various structures there. You are Q13 Graeme Morrice: I note the particular support constantly running after your tail here. Because the Fife council is looking at providing to anyone that is Scottish Government were not in a position to access indicating an interest to get involved in this. What the data themselves at that particular point, local cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Ev 4 Scottish Affairs Committee: Evidence
13 March 2013 Councillor David Ross, John Moist and Lyn Turner authorities who did try were prevented by the non- do we collaborate with? Is it going to be the DWP or disclosure agreement from speaking to any other local is it going to be Remploy? When it suits, each one authority and, in turn, were prevented from speaking will point at the other. The next one is, who has the— to the Scottish Government. We are in this position where, in our heart of hearts, we all know that the Q20 Lindsay Roy: Before you carry on, have you data room is of as much use as the other information had conflicting advice? Have you approached that Remploy have publicly issued. There are no Remploy and they have said, “Contact DWP,” and internal cost mechanisms at all. Things are just moved vice versa? around between factories. Though there is value, John Moist: Over the past several months we have nothing is taken into account. had issues that we have primarily raised with Nevertheless, because we could not get into the data Remploy that we would have thought Remploy would room, we could not put together or formulate any resolve, but we have had correspondence from the business plan, be it one that the Scottish Government Secretary of State advising us that issues such as the or individual local authorities could look after. We timetable—and I can only assume it is in his letter— were not even aware if they had authority to do that are his responsibility. This was in a letter to Gordon because at that time Remploy were not a delegated Brown when he stated quite specifically the time scale responsibility. There were a number of specific issues that would apply—this seemed to me to be coming that prevented the Scottish Government going beyond directly from the DWP—and whether or not Remploy that which they attempted to do. Through the would be able or willing even to assist us in reviewing stakeholders group that Lyn sits on, we are trying to those dates, because that more than anything would rectify that, but, again, these concessions have come allow us to look in a much more serious fashion at post-January 2013 and the period ends on 28 March. a transition.
Q15 Graeme Morrice: You have touched on the Q21 Lindsay Roy: So there was some kind of issue of it not being “delegated”, I think you said, but artificial demarcation. you mean devolved, and that aspect of it. John Moist: From my point of view, there is an John Moist: Devolved—sorry. It was a slip of the entirely artificial demarcation. I just wish someone tongue. would take responsibility. David Ross: Certainly in regard to discussions we Q16 Graeme Morrice: The situation in Wales is have had with some of the Remploy senior somewhat different. Is it not the case that the Welsh management or board, they have talked about, “Oh, Government have had a bigger and greater role? there might be flexibility in terms of the support that John Moist: Yes. Lyn has been directly involved in was coming.” When we spoke to Iain Duncan Smith, that. he was clear, “Oh no, there isn’t any flexibility on Lyn Turner: I met with the Welsh Assembly. It is that.” So there are mixed messages coming. £2.41 million over a two-year period. That has given Lyn Turner: There is some evidence in respect of that direct access and support to subsidy of wages to from Phil Brannan, a senior convenor from the employers who want to take on former Remploy Springburn factory before it shut, at national employees. We asked and encouraged the Scottish consultation talks. Esther McVey told Parliament that Government to do likewise because it is a Parliament the phase two 90 days would not start until the new that has stronger powers than the Welsh Assembly. year, but the company insisted that it started on 19 With all due respect, they came up with the employer December. You have the Minister telling Parliament recruitment incentive, which is £5,000 per employee. that the 90 days’ consultation will start in the new Basically, the budget is £1.63 million over an 18- year. The employer is telling the trade union month period. consortium that it started on 19 December and coming out with quotes like, “The DWP doesn’t run Remploy; Q17 Graeme Morrice: Do you think the Scottish the board runs Remploy.” Okay, we will take that as Government could be doing more? a given, but then they go and hide behind the DWP Lyn Turner: I think a lot of people could be doing when they need to answer serious questions about more, otherwise we would not be sitting around this information that is lacking. table today. Q22 Lindsay Roy: Are you aware of any approaches Q18 Graeme Morrice: Not least the UK or contacts from Remploy to those who have Government; that is a given. expressed an interest, inviting them to see the Lyn Turner: Hand on heart, with the five remaining factories? factories, which are predominantly textiles and have Lyn Turner: I am aware of two, I believe. been profitable with regard to what they have been producing over a number of years, yes, I think so. Q23 Lindsay Roy: Who made the approach? Lyn Turner: I am unaware of who made the approach. Q19 Lindsay Roy: Could you sum up and clarify I have been made aware that there have been two. what kinds of barriers you have faced in getting collaborative action on social enterprise, co-operatives Q24 Lindsay Roy: I am aware of one where the and joint ventures? company had to make contact and ask through myself John Moist: Where do we start, Lindsay? The first rather than, as you would have thought if they were problem with getting any kind of collaboration is, who serious about selling the business, DWP and Remploy cobber Pack: U PL: COE1 [O] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 5
13 March 2013 Councillor David Ross, John Moist and Lyn Turner saying, “When do you want to come and visit and see and I feel for the local managers because they have the site?” been told to get on with it. Lyn Turner: Absolutely. John Moist: There is one serious failing throughout David Ross: Prior to expressing any interest, I had Remploy. For whatever reason, they took a decision asked to go and visit the Cowdenbeath site. Prior to that they would not market. The Friends of Remploy that, Esther McVey came up to visit in Leven, and I have had a presentation in January for the last 11 had asked to go and visit Cowdenbeath prior to that years. We have basically been asking for Remploy to and was refused on the basis that this was now a bring their goods that they have for sale to a big confidential commercial process and they didn’t want corporate event. That is the first time these corporate to invite anybody down. Being the local authority we invitees see them, because they do not market. The thought there was a role for that. I am also aware— facility in Fife—the Cowdenbeath and Leven and Lindsay has shared this with the local authority— factories—produce a world-class product. Its of the correspondence and that one of the bidders had intellectual property is protected by Remploy. All of made that approach. In the first instance, as you are its marketing is to a single purchaser. That single suggesting there, they got very much a rebuff and a purchaser then takes its entire output and markets it whole lot of conditions put on it such as, “You won’t as its own. The gap in between Remploy’s do this; you won’t do the other”, whatever. That entrepreneurial view and the rest of the world is so certainly seemed to me to be over-proscriptive and far apart. putting barriers in the way of them gathering the information that they needed. Q29 Lindsay Roy: John, can you give us an Lindsay Roy: Just for the record, I have had an indication of the price that Remploy get for the apology from Remploy managers about that. There lifejackets and the selling price through Ocean Safety? has certainly been a considerable delay. I realise it is indicative. John Moist: I am pleased you said it was an Q25 Jim McGovern: A Remploy action group has indication. We cannot talk directly because of the been set up in Dundee with various councillors, MSPs confidentiality agreements with anyone within and MPs, but no one from Remploy local management Remploy. However, we are given to understand that is allowed to attend. Is that an instruction from the the product is sold from the two Fife sites at a cost of national management? approximately £25 per garment, but it could be up to Lyn Turner: Yes. £35 per garment. It is retailed by one of the current John Moist: It is. They were all asked to sign bidders with a £100 mark-up per garment. This is the confidentiality clauses at the beginning of the stage indication that I have received. If I were on oath today two process. As you have experienced, Jim, I also I would maybe not say that, but those are all the approached the senior managers when we were first indications I have had from the factory. looking at the social enterprise model and we were told, much as they would like to speak, that they had Q30 Lindsay Roy: Did you say a £100 mark-up or all signed confidentiality clauses that disallowed them £100— from speaking to anyone with any interest outside John Moist: £100 per garment mark-up. They the company. produce it at between £25 and £35, presumably depending on what finesses there are in any particular Q26 Jim McGovern: For the record, I would ask for model. It is then retailed by the current company at a response. That is hardly in the spirit of co-operation £100 per garment plus. and trying to keep factories open, is it? John Moist: I would go back to not so much the spirit Q31 Lindsay Roy: Were the employees and the but the recommendation from the Sayce report, which management at Remploy aware of the differential, to is quite the contrary. There should be action between your knowledge? local interest groups, local enterprise groups, John Moist: That would be dragging them into a Remploy, local government and the trade unions. conversation they may well not wish to have. As a previous full time official, and new full time officials, Q27 Jim McGovern: So what is happening totally we ask questions of our members and they give us the contradicts that. answers they believe to be true. John Moist: In my view, it totally contradicts that. David Ross: In terms of the strengths and weaknesses, Jim McGovern: I share your view, John. I would confirm some of that. They have a full order book. There is a very good internationally recognised Q28 Graeme Morrice: If we look at the present product there. On top of that, they have quite a businesses in Fife, in your view, what would you dedicated and committed work force skilled at what regard as the main strengths and weaknesses of both they are doing. Many of them have been there 20 or outfits? 30 years. They really see themselves almost as a Lyn Turner: Obviously the strength is the product that family. That is worth something in terms of the they are making in Fife. It has been like that for a business. number of years. They have a strong order book. The In terms of the barriers or the weaknesses, you only weaknesses are poor management. You would expect need to go and look at some of the studies that have a trade union official to say that, but there has been been done previously to see that the sales and poor management. There are central costs and marketing aspect of this is just absolutely ridiculous. overheads just to keep the ship running in Coventry, It is not fit for purpose in any business. There are cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Ev 6 Scottish Affairs Committee: Evidence
13 March 2013 Councillor David Ross, John Moist and Lyn Turner the central costs overheads as well. When you buy in Q34 Jim McGovern: We have perhaps not materials that, as we understand, cost something like concentrated enough on the work force. Obviously, 70% to 80% of the sales, that is not economically everyone is aware that Remploy was set up after the viable. second world war to employ disabled ex-service As John has also said, there is a complete lack of personnel. Since then it has been what is called a transparency in the cross-internal charging regime sheltered workplace, which means that a large amount within the company. That makes business planning a of the work force suffers some sort of disability or nightmare if you are looking at one part or the other special needs. of the business. Those are some of the other aspects David, you mentioned length of service. I was that we are struggling with. recently at an event to celebrate the retirement of Bobby Brown, who had been with Remploy for 48 Q32 Lindsay Roy: Are you aware of the export years in Dundee. For most of the work force, many of market potential? Can you tell us a bit more about whom I know on first-name terms, that is the only job where they export to, apart from companies in the they have had. To be quite frank, they are terrified at UK? the thought of the factory closing and trying to find Lyn Turner: It is worldwide, Lindsay. It is a brand work and “means to an employment”, as the that is phenomenal. It is high quality with a worldwide Government would call it. brand. They are everywhere. When I recently visited the factory in Dundee, they were manufacturing uniforms to be exported to Japan. Q33 Graeme Morrice: I do not disagree with the If there is a contract there to manufacture uniforms comments you made with regard to the quality of the to be exported to Japan, why can’t we manufacture product and the highly skilled, dedicated and very uniforms for British armed forces personnel, for the committed local work force. Why is there not more Scottish police force or for Dundee city council? interest in terms of taking over the businesses on the Would you agree with me on that point? Do you have basis of what is, potentially, a very profitable venture? a comment to make? I know you have said that part of the problem is a lack John Moist: I have a quick comment. One of the of transparency, poor management and the centralist reasons why Bobby Brown has been there for 48 approach to this. Nevertheless, you might think there years, along with all his Remploy colleagues, is would be much more interest out there to take over because there has been no recruitment into Remploy what could potentially be a very lucrative venture in any meaningful sense for the last 10 years. indeed. Remploy—and I use the word advisedly—has been Lyn Turner: You need to look at the marketing. I do managed to fail for the last 10 years. It has been a not think Remploy as a brand has sold itself over a controlled exit. There have been various attempts to number of years. It is now under the guise of the turn it into a process whereby people come in and be people who sell on the product. progressed out again. You are quite right that no one David Ross: The other aspect to it—and I can really has given a jot about the work force there. They have only talk for the Fife factories; there will be other been forced, whether they are a self-contained factors in the others—is that effectively there is one company or an adjunct of the DWP, in some way, customer at the moment. That does not promise very shape or form to reflect Government opinion at any much. Although there is a pretty full order book, particular time. They never had the opportunity, to be somebody coming in would have to question that and fair to Remploy, to develop any form of economic how long it would take to diversify and build up other industrial strategy, which is one of the issues as to markets. That is one of the issues about the timing. who the puppet is and who the puppet master is. I Being honest, on the basis of the figures last year, it certainly have my own opinions. That has been a big is still making a notional loss of over £1 million. To issue. It is because of that that the turnover in move from that position to break-even and Remploy has declined. That is one of the major profitability, with the small level of subsidy for one reasons why it is now going to be difficult, with one year basically, is asking an awful lot. I think that has or two exceptions where we have a very healthy a lot to do with the lack of interest. product, to get anybody to express an interest in John Moist: There is also the intellectual property taking over the companies. What has been going on that exists within the garment itself. Our is a really serious issue that we have to confront. understanding is that this was designed, created and is wholly owned by Remploy. However, that may not Q35 Lindsay Roy: As far as we understand from necessarily be the case. Again, at the same meeting Esther McVey, there are eight expressions of interest with Ian Russell, the chair of Remploy, he indicated for the factories in Fife. that the current sole purchaser may also have an John Moist: So we understand. interest in that. What form of interest we don’t know. We don’t even know if there is any form whatsoever, Q36 Lindsay Roy: Do you believe that quite a but the implication of the conversation that we had number of these will fall by the wayside because of was that it may not be quite as easy for whoever takes this dearth of information? over that factory. If it is not this particular company, John Moist: Mine has—absolutely. Our expression of they may have a struggle to hold on to the intellectual interest will fall. I know the shop steward in property rights for that. I personally doubt it, but that Cowdenbeath and the shop steward in Leven have is my opinion. now taken that up and have applied for the appropriate cobber Pack: U PL: COE1 [O] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 7
13 March 2013 Councillor David Ross, John Moist and Lyn Turner documentation. They are probably another two that Q39 Chair: I want to clarify something here. Am I will drop out simply because of the time scale. right that what you are saying is that the Scottish Government, the UK Government, Fife council or any Q37 Lindsay Roy: And that is all because of the other council does not have a policy on article 19 at dearth of information and the time scale. There is not the moment? enough time to co-ordinate activities within the social Lyn Turner: I can pick that up. In October last year, enterprises, with Fife council or with any other the supported business framework came into effect. council and the Scottish and UK Governments. Remploy is a partner in that. That allows them to John Moist: I do not want to repeat what I have procure more easily than other organisations. John and already said, but the idea that there is a transition is a I have had meetings and been to debates with regard nonsense. There is no transition. What we are doing to procurement over the last five years. Coming to the is transiting people on to the unemployment queue. end of Remploy as it is, there is a framework in place That is all we are doing. There are the time scales and that allows organisations such as Remploy and the dearth of information. I am convinced that, even supported businesses easy access to procured if you get into the data room, the information is going contracts. That goes exactly to your point, Jim, about to be inadequate. How could you put in any form of a single police force or a single NHS with NHS reasonable bid in those circumstances and in that uniforms in a devolved responsibility in Scotland. period of time? They should be looking to get these. What we would like to do is to go further and access the data room, see what information is available Q40 Chair: Does the Scottish Government have a where, and see if it is possible to sort out the wheat policy? from the chaff. At that point, we would be prepared John Moist: Yes, they do. to put in not just a high-level business plan but a quite specific business plan. We are not going to get that Q41 Chair: What is it? opportunity. It is very apparent from DWP that we John Moist: They have a policy—they did a recent will not be getting that opportunity. survey—that every public body in Scotland should Lyn Turner: It is like trying to buy a house without have at least one article 19 contract with a supported doing a proper survey. You would never do that, but business. The big problem is that that will take some that is how the DWP and Remploy want people to time as there are dozens of bodies. The timing of the operate. procurement contract renewal and the opportunity for David Ross: I have two points there. Remploy to bid—other EU-supported businesses can also bid, as it is not reserved in that sense; there is a Chair: If any of the three of you have anything to say bid process—is not going to allow us to get a base at any time, just jump in. load, which is what Lyn and I have long argued for, David Ross: In regard to that last point, the nature of into any of the factories. There are individual small the process, which was set up as a confidential contracts in various factories at the moment, but this commercial tendering exercise, means it is impossible is under the aegis of Remploy, and it is Remploy that for some kind of joint collaborative bid to be built up. has the framework agreement. Remploy is effectively That has really scuppered that approach. going to cease to exist come September 2013. That The point you were making, Jim, was about other whole framework structure is going to have to be opportunities for sales. There are a lot. I know that, in renegotiated on any of those businesses that are saved the past, Fife council had at least one contract with from stage two. At this moment, it looks only as if Remploy that fell by the wayside over time. The there will be bids in for the two Fife factories. This is whole idea of the article 19 contracts— a huge problem and, again, it is because there is no sensible period of transition from loss-making, to a Q38 Chair: What is article 19? business takeover, to a business being turned round to David Ross: Article 19 is the European directive that returning a profit. That is our major concern. allows public bodies to reserve an amount of contracts for businesses or enterprises that have over 50% Q42 Mike Crockart: You are absolutely right that disabled people. That has been raised again in the body that is recognised as being able to provide discussion with the Scottish Government. On the the output from supported employment is Remploy, plane coming down I met John Park, the former MSP which is going to cease to exist. Do you see that there in Fife, who reminded me that he had actually put in is a huge barrier to any successor company coming a motion to the Scottish Parliament three years ago in—to bidders being able to get on that list in the suggesting that collectively we should be reserving same way that Remploy is? 1% of public sector contracts under article 19. I think John Moist: Yes, I do. I see it in terms of scale. The that was rejected at the time, but the idea has been situation at the moment, prior to the taking out of the resurrected. Again, it will take time. marine section, is this. The Scottish estate was Certainly from Fife council’s point of view, it is effectively a textile estate. Therefore, they could bid something that we have put back on the table in our for the CB chemical defence uniforms with the MOD procurement setting. They are producing uniforms of and take on an order of maybe 50,000 uniforms. That good quality—textiles. There is a massive demand in capacity is going to disappear. If there are any public authorities. The new single police force, as well factories that come individually out of that, it will be as the fire service, will have a demand. Again, it is a based on something much smaller, like marine. I think huge missed opportunity. there are serious structural problems if the position cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Ev 8 Scottish Affairs Committee: Evidence
13 March 2013 Councillor David Ross, John Moist and Lyn Turner develops where the three textile factories— John Moist: I am not entirely sure. We have an Clydebank, Dundee and Stirling—are split up. There understanding, and again I will put it no stronger than will be no capacity to take on any of the orders. Jim that, that one of the bidders for the marine side is is talking about the new Scottish police force. There looking to expand production and expand the work is not going to be a company in Scotland that is going force. That maybe takes care of Fife. I have no to be able to take on that capacity in textiles. indication in Clydebank, Stirling or Dundee that there are other bidders interested. There could be, but I have Q43 Mike Crockart: But procurement can be broken seen no indication that any of the bidders are looking down into smaller parts. We have talked for years to do anything other than take the asset. You have the about the ability to get SMEs into public procurement. building, which you don’t have in Dundee, and you In a sense, it is just recreating that issue but on slightly have the buildings in other places that are Remploy- different turf. The experience I have had in Edinburgh owned. They have machinery installed in them, which is that we had a Remploy factory that closed down. It could be taken away. If we think about the capacity had its own particular problems. It had the for a new enterprise to take on some of the work force management costs and huge running costs, but it also in situ, with some of the terms and conditions they had a rather split number of things that it was involved currently enjoy, I would suggest it is not that great. with. The major one it was involved with was document services. That is entirely different from the Q45 Jim McGovern: I want to go back to article Remploy model for Scotland. Hopefully, there is a 19. A colleague of mine, Jenny Marra, has been very successor company that is going to go there. It did vociferous on this point about article 19. As a manage to get on to the list for sustainable supported councillor, David, is this something that is determined employers. It was a relatively straightforward process by the Scottish Government, or can councils use it for them to be able to do that. I am unsure why you themselves? If councils can use it, is Fife council feel that there is going to be such a real problem using it? getting on to that list if a successful bidder comes in David Ross: As you know, we only came into and takes over the factories. administration last May. Over that time, we have David Ross: It may not. initiated a review of our ongoing procurement John Moist: I was talking about the estate generally. policies. We do support a different supported David Ross: Certainly, one scenario that we are very employment organisation as well, quite separate from worried about is a company coming in, taking it over Remploy, but there is a whole range of things and and basically the work force being dispensed with, article 19 is one of those things. The whole taking redundancy and going away. Then you no community benefit clauses and such like are longer have a supported business there and, therefore, something that, probably, Fife has not made enough they are not eligible for that kind of thing. use of. We have made use of them, but we have not Lyn Turner: There is already evidence of that made enough use of them. happening with regard to the Springburn and Chesterfield factories. Springburn is now shut and Q46 Jim McGovern: Are you allowed to? everything is being made in the Chesterfield factory. David Ross: I believe so, yes. That is something we The new owners of that immediately paid off 40 are looking at—how we increase the use of article people. There is already evidence that that happens 19 and other measures that are for the benefit of the with regard to redundancies and the way the business local community. is run as new people come in. John Moist: One of the problems is the conditions of Q47 Jim McGovern: That is helpful. Obviously, if the sale. It is not for the continuation of the factory. It Fife council is allowed to, in your opinion, then can also be just for the assets that exist. As Jim will Dundee city council would also be allowed to. be aware, the Dundee factory, for example, has two John Moist: The previous administration trialled a cutting tables that have supplied the textile estate contract with Remploy on data storage. It sounds a lot within Scotland. Let us take the point of view where grander than it is. It is taking big boxes of paper, filing someone is interested in marine but requires the them and storing them. For whatever reason, and I cutting. They are not going to Dundee. They may buy don’t know the ins and outs, the administration the asset from Dundee and transfer it either to brought that to an end some three years ago or Southampton where that company currently cuts, or something like that. Some years ago they decided not maybe put it into one of the two Fife factories. In any to continue with that. They do have the authority to event, the asset that maintains Dundee would be sold put out a contract. There is a de minimis level, which as an asset rather than as a continuation of a business. I think was £140,000, but that may have changed, on the value of any contract that they would wish to Q44 Mike Crockart: But of course what they are process under article 19. That opportunity is there. trying to do here is to create viable companies. I know Was it West Renfrewshire that had their school it is difficult to say for certain because of all the refurbishment programme done by Remploy under a differences that you have talked about relating to similar contract? transparency of information, costs between sites, Lyn Turner: Lanarkshire. centralised costs and things like that, but, ultimately, John Moist: Sorry; Lanarkshire. that is the issue that bidders are wrestling with. How do they create a viable company from that? Q48 Jim McGovern: If Dundee has the cutting Lyn Turner: I am not sure. equipment and Leven and Cowdenbeath do the cobber Pack: U PL: COE1 [O] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 9
13 March 2013 Councillor David Ross, John Moist and Lyn Turner manufacturing, if the three plants worked together, The way it is being handled at the moment with regard there is a possible future. If the local authorities say, to the bidding process is that textiles is textiles. You “All the work we require will be produced by lump the five factories together and I think that is Remploy,” there is a possible future. wrong. There should be an individual look at John Moist: I don’t want to rain on your parade, but individual factories. From that assessment, the lead-in the cutting for the two Fife factories would probably should look at the potential. employ maybe five people. To maintain an exclusive cutting facility in Dundee, you would need to take on Q53 Lindsay Roy: Would you argue that it is not a all the other textile contract-cutting as well, which you proper business-like approach? currently do, to do that. Lyn Turner: It is a rapid response. In general, Lindsay, I would like to see a complete stop to phase Q49 Jim McGovern: I am talking about it as a two at the moment while we are looking at and starting point, John. If we then said that for the single assessing the mess that happened in phase one. I was Scottish police force the uniforms would be produced at that meeting on 13 February. Quite clearly, the by Remploy, the MOD contracts should go to Secretary of State is just going to bash on with it. Remploy— When 28 March comes, there is the deadline; then John Moist: I would be absolutely delighted if you after that the expressions of interest are in and we will could get us to the starting post. see what is left. I think we need to learn the lessons from stage one first of all. If you ask yourself how Q50 Jim McGovern: I have raised it in the House, many existing businesses came out of phase one, I believe me. The response I have had has not been only know of one. satisfactory. I am currently awaiting a written response from the procurement Minister from the Q54 Chair: Which factories were involved in phase MOD on that point. one? John Moist: I would have thought, given the necessity Lyn Turner: That was the Chesterfield factory, which to get people back in work, the DWP would support automatically paid off 40 people and started to attack that approach. the terms and conditions of the existing work force. Lyn Turner: Coming back to your point about local We need to learn lessons from phase one. Quite authorities, before the new framework came in there clearly, I talked there about the consultation period. It was a nervousness with regard to local authorities started on 19 December. The Minister made an getting involved with supported business and with announcement about phase two just before Christmas. procurement. I think the question needs to be asked: That was another Christmas present from this how many local authorities in Scotland are now Administration. Then they obviously bash on and no procuring supported businesses with regard to the new one is taking stock of the work force or their framework? How they are replying to that framework is more important to me. commitment. They just see 28 March coming. They all hang by a thread then until May to see what John Moist: Of course it is a lot easier in Scotland because there is a single procurement organisation happens next, and then obviously there is June and called Apex, which takes the major procurement July. If there is not a viable business going, they all decisions for the whole COSLA structure; it spots the get made redundant in September. primary, secondary and tertiary stuff, and breaks it down from there. Q55 Lindsay Roy: Is it your view that this is a quick approach to get Remploy off their hands? Q51 Lindsay Roy: Would I be right in thinking that Lyn Turner: Yes. John and I are of the same opinion. each of the Remploy factories is unique and therefore As soon as it was classed as the bonfire of the a one-size-fits-all approach is inappropriate? quangos, and Remploy was No. 50 on that list, we Lyn Turner: That is where I think it is going wrong, knew that there would be major changes ahead for us Lindsay, because it should not be one size fits all. with regard to Remploy and supported businesses. There are five individual factories or, let us say, three and then the two in Fife. It is just being applied as Q56 Lindsay Roy: As far as you can make out, what one size fits all. That is where the majority of it falls will be the successful criteria against which bids are down at the moment. gauged? Is it just the cheapest price or is it to do with the number of people who are sustained in Q52 Lindsay Roy: Why do you think that approach employment? Do you know that? has been taken? John Moist: We don’t know for certain, as we say, Chair: I just want to ask for clarification. What are because there are so many complex deals. What we the five factories you are talking about? know is that it has to be value for money. The problem Lyn Turner: Clydebank, Dundee, Stirling, Leven and always with the expression “value for money” is how Cowdenbeath; but obviously we class the two Fife you define that. There is nothing we can find in any factories as one because they make the same kind of of the documentation we have seen from the DWP product. If you take Clydebank, for instance, they that says that to continue to supply jobs for workers made the “quick don” suits. It has now moved into with disabilities in any area is part of that value for automotive but is still classed as a textile factory. It money. They seem to have another avenue by which relies on one of the car manufacturers—Toyota or they would choose to get disabled workers back into Honda—with regard to the seat covers that it makes. work. cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Ev 10 Scottish Affairs Committee: Evidence
13 March 2013 Councillor David Ross, John Moist and Lyn Turner
Q57 Lindsay Roy: So there would be no account sufficient time to the work force to determine, first taken of additional benefits that might have to be paid and foremost, whether they want to continue working if people were made redundant or unemployed, as far for Remploy after all the abuse they have had, and, as you are aware. beyond that, whether it would be possible to put John Moist: No. together in consultation with the work force and with David Ross: We have certainly had a discussion with local businesses some kind of sensible business plan Ian Russell, the chair of Remploy. Although he felt he that would allow the development of the factories. could not go so far as to put figures on it, there was One of the issues that we have not touched on is this. quite clearly the suggestion that, with regard to the Everybody refers to Remploy as a manufacturing criteria, apart from being the lowest bid, provided a facility. Every Remploy has a training facility on site bid comes in that will cost Remploy and the DWP that is grossly under-utilised, and yet one of the less than it would cost them just to close the factories, Government’s key platforms to get people back into they would look at accepting that. As you say, there work is to give them training and work experience. does not seem to be any assessment of the knock-on Coincidentally, the places where the Remploy and indirect costs, and particularly no consideration of factories exist are very often the places where there is continued employment for that work force or people the greatest proportion of people who could benefit with disabilities. There is no consideration about from that. But nowhere do we see that taken into any whether a business is sustainable. It is purely on the cost-benefit analysis either. cost basis. The concern is that that just attracts asset- David Ross: I would probably agree with my stripping. People may come in and feel they— colleagues here. The ideal situation is putting a stop to the current process and devising one that allows us Q58 Lindsay Roy: I can understand your concern. Is to look at the individual factories and collectively at that why people have raised this negative Remploy in Scotland, and come together with some consideration bid that Iain Duncan Smith spoke to us collaborative approach that gives them and the work about? forces there a real future. I still think that was, at one David Ross: Yes. stage, a realistic prospect. Given the messages that are coming from the Government and from Remploy Q59 Lindsay Roy: What are your concerns about itself, I have to say I am sceptical as to whether that that? will happen. David Ross: That is exactly what our concerns are; it Assuming we are going forward with the current is what we have said there. They are willing to pay process, the key issues for me are that quite clearly something, but, as long as it costs less than closing there is an employment and a sustainability aspect, the factories and making everybody redundant, they and not just value for money or the lowest bidder. I would jump at that as an opportunity rather than would certainly like more transparency in the whole considering the wider issues. process, and particularly that the local unions and John Moist: Negative consideration is a total mystery representatives of the employees are included in that to me, but from the conversations we have had, if you to check what is happening and to blow the whistle if give a minus figure—so you bid less than the value of something is going wrong. the assets—as long as that figure is justifiable and The other aspect that we mentioned earlier is getting indeed you will be paying the Remploy board less than the cost they would have to continue to pay, then longer transitional arrangements to support these you are likely to get it. If that is the case, the potential while they turn round and give them a chance of is that someone will come in with a minus bid and turning round into viable businesses. Those are the walk away with an asset. To me, the intellectual kinds of conditions I would like to see if we are going property asset relating directly to the two factories in forward on this basis. Fife is of considerable value because we already know Lyn Turner: You are asking someone to go from a 30,000 suits are produced using that intellectual £20,000-a-year employee subsidy down to £3,200 in property. the first year. That is just not viable with regard to how it is going to pan out. Q60 Lindsay Roy: As far as I recall, at the meeting with Ian Russell, he indicated that employability and Q62 Chair: Even if you got rid of the inefficient retaining jobs would be part of the value for money central management and had better sales marketing? exercise; yet we have perhaps conflicting advice from Lyn Turner: But you are asking someone to go from the DWP. there to a Government subsidy of £3,200. That is a John Moist: Absolutely. This is the fundamental point UK DWP subsidy. On top of that, of course, you will where we started. Who is the puppet and who is the get the £5,000 employer recruitment incentive. That puppet master? We don’t know. is what the DWP are putting in within the first year with regard to someone’s support. I do not think that Q61 Lindsay Roy: What would you want done transition and that money is credible with regard to about this? the support that it needs. People need to build up a John Moist: As Lyn has already said, what we would business base. wish is to see those recommendations within the Sayce report adhered to and discussions take place at Q63 Chair: I know you do not have the detailed a factory level, or even at an estate level. It would figures; that is obviously one of the issues. From the probably be at a factory level. That would give figures you have available, do you think that these cobber Pack: U PL: COE1 [O] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 11
13 March 2013 Councillor David Ross, John Moist and Lyn Turner factories could be made into a viable business if you anything. We would not wish to go down that path. were given time to turn them round? We would be looking at a very specific textile product, Lyn Turner: You have a quality product and a full as I say, for the Scottish Government hopefully, and— order book. With the right kind of backing and who knows?—maybe from Westminster, and beyond commitment, you will have a sustainable business that within that same environment of textiles. going forward for many years. That should then be Sometimes in a Remploy factory you are producing replicated with the three remaining factories. None of textiles one week. and the next week you will be us have talked about future orders with regard to producing plastic boxes with screws. I think that offshore. Fergus Ewing at the Remploy stakeholder would take a little longer than it would for the current groups says he is discussing customer bases up in two in Fife. Aberdeen with regard to potential customers there. This is nothing new. The SNP Government in Q68 Lindsay Roy: You have been unable to get Holyrood got involved in Glencraft in Aberdeen, clarity. What would you like this Committee to do to when PSN came in and took over or at least supported support you in trying to sustain Remploy and to make the Glencraft factory. That was Scottish Government sure that there are opportunities for viability? money. I think £500,000 was pumped in there. Lyn Turner: First, I would like to stop the blame game where one blames the other and vice versa. I Q64 Chair: Do potential bidders know about the would like to see some transparency coming from the £5,000 from the Scottish Government? Is that money Secretary of State or the Minister, Esther McVey. To guaranteed to potential bidders or would that be by be fair to the current Minister, Esther McVey walked negotiation? into this because there was a cabinet reshuffle and Lyn Turner: I will put on record that the Minister, Maria Miller—affectionately known as the “Remploy Esther McVey, made a statement saying, “Yes, we Killer”—was promoted to her current role. Esther have helped seven people back to work in the McVey came from the Back Benches and became the Aberdeen factory.” She named the factories. I can Minister for Disabled People. She said one thing as a assure you there was no help from Remploy with Back-Bencher compared with what she says now as a regard to the co-operative being set up in Aberdeen. Minister, having a Remploy factory in her Yes, they get the subsidy of £3,200, but on top of Birkenhead constituency. that those seven individuals, who pumped their own I would like to have the opportunity to see the redundancy money into that co-operative, also get Secretary of State, so that there is none of this blame £5,000. That is another incentive for them to set up game—“That is a DWP issue”, or “That is a Remploy their co-operative. issue.” Someone should take charge and give us the relevant information to make sure that factories have Q65 Chair: Are you able to put a time scale on how a viable future. In some cases that might not be, but many years would be needed to turn the factories we have opportunities here to look at viability. round? John Moist: We have to be careful here. There is a Q69 Lindsay Roy: So you would like this much quicker turnaround for the two Fife factories Committee to meet with a representative of the because they have, as we have said, an order book and management of Remploy and the Minister for DWP a demand for the product. The demand is probably far to clarify the situation. in excess of what they currently produce. The other Lyn Turner: I think so. That would also go down well textiles group would take longer. at national level with regard to the trade union consortium, because they are not getting answers in Q66 Chair: Again, can you remind us which ones relation to the negotiation. That finishes on 25 March. you are talking about? That is the end date for the 90 days’ consultation. John Moist: Clydebank, Stirling and Dundee. Dundee would have a part business with the two Fife factories, Q70 Lindsay Roy: Are there any other points of but there would still be a capacity there. view from other colleagues? John Moist: Five years ago, at the end of this month, Q67 Chair: What about Clydebank and Stirling? the then Government gave Remploy management John Moist: They are textiles at the moment. One £555 million to come up with a rescue plan. They does car covers and the other does MOD suits. The recruited managers hand over fist to manage framework agreement referred to previously and the redundancy on the back of that £555 million. What I actions of the Scottish Government in developing the would like to see is a fraction of that money applied article 19 instruction, for want of a better word, to to the commitments that Liz Sayce set out in the Scottish public bodies would take a couple of years to Sayce report. That was accepted by this fully supply a base load, but, once you have the base Administration as the way forward to restructuring load in the factory, it is then relatively easy to seek Remploy. The restructure plan, where the money went markets beyond that because you are not constantly directly to the management of Remploy, was a trying to fill the factory. One of the big problems with miserable failure. I would hope here we can involve Remploy—and this manifests itself with the issue of local enterprise as well as social start-ups of one sort costings—is that their dominant objective was to fill or another. That would be a huge step forward. the factory. The pricing, the purchasing and the selling [Interruption.] was secondary to keeping the people in the factory Chair: I am afraid that bell means that we have to employed doing something—in some cases doing adjourn and go off to vote. I am afraid I do not know cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Ev 12 Scottish Affairs Committee: Evidence
13 March 2013 Councillor David Ross, John Moist and Lyn Turner how long we will be, but we will be back as quickly viable”, whether they are mutuals, private or as we can. I will adjourn the meeting for the moment. whatever. That was a recommendation that the DWP Sitting suspended for a Division in the House said it would pick up and act on. On resuming— Lyn Turner: The question is, who is that person? Chair: We will start again. Lindsay, you were asking There is no one out there, as I see it at the moment. questions. Q74 Lindsay Roy: You mean to co-ordinate. Q71 Lindsay Roy: What would you like to see Lyn Turner: They said they were following the Sayce happen, particularly in the Fife case, to try and ensure report. Quite clearly, if they are following the Sayce a sustainable takeover? report—because they have not at the moment—they David Ross: I want to go back to the way you phrased talked about entrepreneurial skills coming in to the original question about the role of what this support businesses going forward. There is no person Committee can do. I would echo the views of my two named in that report who is doing that. colleagues about getting the DWP or the Ministers and Remploy here to see that they are saying the same Q75 Lindsay Roy: I take it you would also want us things, but, in particular, to question them on their to pursue the mixed messages. In the Dundee Courier expectations of the continued employment and the there was an indication from the DWP that there sustainability of a business—and preferably a would be some flexibility, whereas the Minister said supported business—to take over. I would want you that was not on the cards. to ask them again on the issue of transitional support John Moist: I think you want to pursue the hyperbole and whether they think some kind of transitional versus the hypocrisy that we have had. The hyperbole support on a case-by-case basis is better than— through the Sayce report and right through this entire exercise has been excellent. The hypocrisy, Q72 Lindsay Roy: That is really questioning the unfortunately, is the delivery. one-size-fits-all approach. Lyn Turner: If you go back to the article in the David Ross: Exactly, yes. Dundee Courier, what the Provost of Dundee was saying was probably reality, and what the Q73 Mike Crockart: Would you be looking over and spokesperson for Remploy said was a different above the £6,240 transitional package? What do you scenario from that which any of us have been think you need, or is it difficult for you to say? engaged with. Lyn Turner: That is why you cannot use a one size fits all. There needs to be a different methodology Q76 Mike Crockart: Do you have any experience of with regard to the thinking of it. Fife needs will be supported employments in these areas, but particularly different from the Clydebank situation, for instance, in Fife and Dundee, having closed in the past? I know and different from the Dundee situation. For instance, that in Edinburgh we had Blindcraft, which gave the factory in Dundee is rented and has a lease. experience of this, and of what the realistic chances Clydebank is freehold. The two Fife factories are were for finding employment. Do you have any such freehold. There is a different methodology needed experience that indicates what the likely prospects are with regard to how it is going to operate. The one- for the people at these factories if the factories don’t size-fits-all approach of, “They are textiles, so lump continue? them all together and see what comes out in the mix” Lyn Turner: It is gloomy. If you look at Edinburgh is the wrong approach. Blindcraft, or indeed at the last restructuring of David Ross: It is also a question of the relationship Remploy back in 2008 and the voluntary redundancy, with the local authorities, and in Fife’s case certainly just under 90% of those individuals who volunteered the council. We are not going to step in and take them for redundancy last time are yet to find a job. That is over; we just cannot do that. We are there to help from 2008. develop business plans and bring together prospective bidders or other interested parties that could provide Q77 Jim McGovern: I agree entirely with Lyn’s a sustainable future. We have some figures from the analysis. The Work programme is pretty dismal. past and are trying to put together some viable Something like only 3.4% of people on the Work business plan, but, without access to the detailed programme have actually found work. Dundee is the figures and being able to talk those through, it is very lowest in the UK, with 1.8% finding work. What difficult to put together a viable business plan. It is confidence would you have in the Remploy work difficult to answer the kinds of questions you are force, if the Dundee factory closes, finding asking about what transitional support would look like alternative employment? when we don’t have that. John Moist: What we said earlier, Jim, was that the John Moist: If we can, we go back to that which was Remploy factories are situated in those areas where originally promised. The Disability Employment that kind of initiative is required more than any other; Support Fit for the Future report—the Sayce report and yet there is no sign at all of any success where that I referred to earlier—says quite specifically: “The we can see Remploy closing down and there being Department should ensure existing employees in any employment coming from that in what they call Remploy Enterprise businesses are offered the mainstream industry. It just does not exist. opportunity and expert entrepreneurial and business Lyn Turner: May I also add that you have to look at support over a decent time period to develop the community spirit in each of these factories? In businesses into independent enterprises, where the Clydebank factories, an employee comes up to me cobber Pack: U PL: COE1 [O] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 13
13 March 2013 Councillor David Ross, John Moist and Lyn Turner every time I step into the factory to say, “I have been Lindsay Roy: Yes. here for 36 years. I catch the 10 past 6 bus every Lyn Turner: It is quite commonly known that they morning and I get to the factory at 7 o’clock.” His job make the product basically for peanuts and the profit is to make sure that the canteen is open. He has done is made by the person who is selling it on. That comes that. It is not right to take that and then put them into with how Remploy has marketed itself over the years. a scenario where they have to sign on or claim for benefit. These people have done nothing wrong. They Q80 Lindsay Roy: Have you challenged Remploy are the most vulnerable workers in our society. They managers on that? are being given the minimum information and it Lyn Turner: John and I have even challenged brings uncertainty to them. I just don’t know what the Remploy when they tried to get into the American future for these people will be. defence market. The American defence market is John Moist: I will pick up a point I made earlier solely Government-owned, so I don’t know why they because it is one that is often ignored. People speak sent two people out to America to begin with for a of the disabled as an entity, and they are not. We have few years looking at solely getting into the American different cultures within each disability group. One of defence market. the most profound is the non-speaking deaf. They live John Moist: To be fair, we have been pursuing and exist in a very small community in the workplace, procurement contracts for Remploy now for at least and sometimes outside. If you split that group up and 10 years. I can’t count the number of conversations say, “You are in Asda and you are in Tesco,” that that we have had with procurement officers and with whole cultural experience collapses. There is no one Remploy questioning their inability to market and the else in the workplace that shares that cultural disappointments that we have had on both counts. We experience, so they are entirely and totally isolated in have had more cups of tea and more biscuits—it used the workplace. to be chocolate biscuits before the austerity measures, but it has been cut down a lot since then—than you Q78 Jim McGovern: It has certainly been put to me, would care to count, with not a contract and not a and it is in the example John raises about sensible response from Remploy. Why do they persist supermarkets, that, if someone working in the solely on manufacturing rather than marketing an Remploy factory in Dundee who suffers from epilepsy assigned company? has a fit, their colleagues know how to deal with it. Maybe 10 or 15 minutes later everything is okay. It David Ross: In terms of the marketing certainly, what has been made clear to me that Asda, Tesco, I understand—and it may or may not be correct—is Sainsbury or Morrisons are not going to employ that, in terms of Scotland, it is the local managers that someone with that condition. are expected to do some of the marketing. There is Mike Crockart: I think you are being a little unfair one other individual who has a marketing role for the there. whole of the Scottish factories. That does not seem to Jim McGovern: Unfair to whom—to Asda or to me to be a sensible way forward when they are all Tesco? different products. Mike Crockart: To large employers. Just as an illustration, we talked about the Aberdeen Jim McGovern: I don’t believe I am, actually. I experience. Some of our officers have been speaking believe I am being pragmatic and realistic. to the people in Aberdeen more recently. Although it Chair: Order, order. It is the witnesses who are here has now taken two years, they are beginning to hit to give evidence, not the MPs. break-even point. I understand that there are seven out John Moist: I think it is perfectly true to say that there of the original 17 work force employed. The really may well be offers of employment. They will not be telling figure they have told me is that, when they public front-of-house offers of employment. They will changed from Remploy, they had 10 customers, and be behind the scenes. We have seen the example of they now have over 300 customers. That is indicative the young lady—this is not Remploy, by the way— of the scale of the marketing problem that we have who was disabled and was working in a west end seen. store. She had lost her arm above the elbow. She was Chair: Jim, remember there is another vote coming suddenly no longer front-of-house but at the back of up. the store. So there is that. Don’t tell me about the Disability Discrimination Act because we know how Q81 Jim McGovern: I will keep it brief. I want to it applies or doesn’t apply and how subjective these touch on what Lyn was saying about the community things are. There are cultural differences. spirit within Remploy. Speaking to the Remploy management in Dundee—it is a management I have Q79 Lindsay Roy: We spoke earlier on about the great respect for—they say there are employees who buying and selling price and the price at which Ocean do not want to take their holidays because they just Safety sold the product. That was in ballpark figures. love to go into work every day. The manager there They are available on the internet; you can find out actually visits them at their home during their holidays how much Ocean Safety are charging for them. Have to make sure that they are okay. Is that the sort of you discussed with the work force at Remploy the community spirit you are referring to, Lyn? cost or the price that they get from Ocean Safety? Is Lyn Turner: Absolutely. Last August or September, that something we should raise with the Minister? the fact that disabled workers had to take industrial Lyn Turner: To discuss the cost compared to the action so they could get proper consultation with selling price? regard to the way it is going was just remarkable. cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG01 Source: /MILES/PKU/INPUT/030703/030703_o001_michelle_130313 CORRECTED Final.xml
Ev 14 Scottish Affairs Committee: Evidence
13 March 2013 Councillor David Ross, John Moist and Lyn Turner
People had to vote. Why do they have to do this so be employed elsewhere. At the moment, they feel that that the Government can hear their voice? they are being productive and have self-esteem and Another thing I would like to mention is employment confidence. That would be very difficult to replace services. You will no doubt hear, if the Minister comes outwith that. here, that 35,000 people have been put back into work In terms of those two areas of Cowdenbeath—the through employment services. I would dig a bit deeper Benarty and Lochgelly surrounding area and the with regard to that number. [Interruption.] Methil/Buckhaven area around the Leven factory— they are both in some of the highest areas in terms Q82 Chair: We will have to adjourn there. You have of deprivation through the Scottish Index of Multiple certainly given us plenty of food for thought. We will Deprivation that has recently been updated. They are certainly invite the Minister and Remploy to come and in the top 15%. You will also have seen the recent give their side of the story to us. We can either stop survey of child poverty across Scotland. In these two there or adjourn for the vote and come back. Is there wards, Methil/Buckhaven comes out at something like anything else that you want to add? If there is, we will 40%, and The Lochs ward, which is near adjourn and come back. Cowdenbeath, is 33%. It is certainly the highest in John Moist: We will come back. Fife and some of the highest in Scotland. That is the Sitting suspended for a Division in the House. nature of the kind of communities that these sit in. On resuming— Q85 Lindsay Roy: Is it 38% overall? Q83 Chair: As I was saying, we will definitely be David Ross: That is right; yes. That is the nature of inviting the Minister and the Remploy board to come the communities, so you can draw your own along and give their side of the story. We will put all conclusions about what the chances are for disabled the points to them that you have raised this afternoon. people who are currently productive in good John, did you want to add something? employment here if they are chucked out and have to John Moist: I can’t recall now; I have probably make their own way. exhausted everyone, including myself. John Moist: On a point of information, the fight for the two factories in Fife has almost exclusively been Q84 Chair: Is there anything else that you want to led by Labour MPs. However, I find now that my own add? constituency MP, Sir Menzies Campbell, is now also David Ross: There are two things. I would re- supporting the fight in Fife to see if we can improve emphasise the point that you should ask them about on the lot of the two factories. potential contradictions between the NDA and the Chair: If there is nothing else, thank you all very guidance that the local authorities have had from the much for coming. The procedure now is that we will Information Commissioner. invite the Minister and the Remploy board to come The other point, just to go back to the issue about along and be questioned. We will put to them the where the factories in Fife sit in the local community various points that you have raised with us this as well as being communities themselves, is that, as afternoon. We will then draw up a report, which will you have quite rightly highlighted, people have been be published and will make recommendations to there for 20, 30 or 40 years and certainly would not Government and Remploy. Thank you very much. cobber Pack: U PL: COE1 [SO] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 15
Thursday 21 March 2013
Members present: Mr Alan Reid (Chair)
Jim McGovern Lindsay Roy Pamela Nash
In the absence of the Chairman, Mr Reid was called to the Chair ______
Examination of Witnesses
Witnesses: Esther McVey MP, Minister for Disabled People, Department of Work and Pensions, Ian Russell CBE, Chairman of the Board, Remploy, and Jeremy Moore, Director for Disability and Work Opportunities, Department of Work and Pensions, gave evidence.
Q86 Chair: Good afternoon. Thank you all very the issue was how we would get that help in as early much for coming at such short notice; we very much as possible. In stage 1, people were concerned about appreciate it. Minister, will you start by introducing the staff but may have delayed that process as they yourself and your colleagues? wanted to know what the legalities were, whereas now Esther McVey: Thank you very much indeed and we are thinking about the people first and foremost thank you for having us here today. My name is Esther and how we can make it work for them. For us, that McVey and I am the Minister for people with was really what we learned from stage 1. disabilities. To my right is Ian Russell, who is the chairman of Remploy Ltd. To my left is Jeremy Q88 Jim McGovern: As I said, I imagine that DWP, Moore, DWP director for disability and work which you have just covered, Minister, but also opportunities. I thought it might help the Committee Remploy, has probably learned something from what to direct questions at the right people if I differentiated happened in phase 1. Can I ask Mr Russell to between my role and that of Mr Russell. Questions respond? relating to Remploy sites or the commercial process Ian Russell: Certainly, Mr McGovern. One of the key should go to Mr Russell; those relating to strategy and lessons for us was earlier access to the sites. In stage policy should obviously come to me. 1 last year, we gave bidders or interested parties Chair: Thank you very much. access to the sites after the initial bids were in and before their best and final offers were to be received— Q87 Jim McGovern: Minister, I thank you and your in that very detailed period. This time round, we have colleagues very much for coming along. I imagine that enabled bidders that request it to have access to the the DWP and Remploy will have learned lessons from sites now, rather than waiting until a later stage. Our the phase 1 sell-off process. How will these be applied reason for doing that is to improve both the prospect to phase 2? of the number of bids that we receive and also to Esther McVey: Do you want to come to me first? improve prospective bidders’ understanding of exactly Chair: The simplest thing would probably be for you what they are bidding for. We think that is an to decide which of the three of you is most suitable to important lesson from last year that we have taken in answer the question. and applied this year. Esther McVey: I can, indeed. You are quite right in that regard—of course, lessons are always learned Q89 Lindsay Roy: Why would you have to wait for about what we can do and how best to go forward. a request? Why would Remploy not be more proactive One of the key lessons for us relates to the whole in encouraging bidders to come forward for a visit? process of commercial sales to help social enterprises Ian Russell: Mr Roy, I guess the difference is that we set up. In the first stage, we had the commercial are not insisting that they make a visit—we have not process viewed first, and the other process, for made that a condition of receiving a bid. We have purchasing the assets and so on, followed on. We pointed out to all interested parties that they have the found from that—particularly with what was opportunity to make a visit. We have encouraged demanded under TUPE, which made it very difficult them, to use your word, to do that, but at the end of for people to take it over entirely as a commercial the day it is up to a bidder to decide whether it wants process—that it was best to get together and view all to do that. We have not made it a condition of bids, whether they were for assets or for the business, receiving a bid. knowing all the time that first and foremost was future employment for the staff; secondly, it had to be about Q90 Lindsay Roy: That is not the experience that we viability and sustainability of the business, whether it have had on the ground in Fife. People have had to was a commercial or a social enterprise; and, finally, use their own initiative. Understandably, you would it was about value for money, so all of that could be expect that, but some of the people who planned to taken into account once we knew what everybody set up social enterprises have not had that invitation. wanted. Equally, when we were looking at support for As far as I know, they have expressed an interest, but the individual members of staff of Remploy—getting they have not had an invitation to look around the in personal case workers and the support package— factory sites. cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Ev 16 Scottish Affairs Committee: Evidence
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore
Ian Russell: I know there have been a number of steps Q93 Jim McGovern: You mentioned Dundee city in the process. This might cover the examples that you council. A Remploy action group has been set up in are referring to. Before a prospective bidder is given Dundee and the Minister addressed that group a few access to the site, we ask them to sign non-disclosure weeks ago. It has consistently said to me that it has agreements—confidentiality agreements. Clearly, signed the appropriate documentation but has not yet from a commercial perspective—and also, received the information that it requires to build up a importantly, from an employee perspective—we do business case to put in a bid. Can you confirm or not want to open the doors of the sites to everybody; otherwise whether it has that information yet? we want to encourage people who are serious about Ian Russell: It certainly has the information that we the prospect of bidding. Bidders have had to sign are making available at this stage. confidentiality documentation, which is very much in line with normal commercial process—certainly in my Q94 Jim McGovern: What does that mean? own experience of the way these things happen. It Ian Russell: Let me explain. One of the key may well be that the people you are referring to were requirements for us at the moment is to make sure not willing to sign the documentation and that then that every bidder has access to the same information; did not give them access to the site. otherwise it is not a level playing field. Because this is in part a public process, we are under an obligation Q91 Lindsay Roy: Was that due to the complexity to make sure that we do not favour one bidder over of what was being asked for? For example, I another. So we have a standard set of information, understand that they were asked at, I think, stage 3 to which is available at this stage to prospective bidders give details of their property adviser and legal adviser, such as Dundee city council. I have to say that, in my and bank details. own experience of these things in a private setting, the Ian Russell: That is not the case at this stage. The information that we have made available at this stage document that we have asked people to sign for the to prepare what is a preliminary business plan—we current stage of the process, which would allow them are not looking for detailed plans at this stage—is both to access the site and to receive much more in more than would normally be made available. the way of data from us, is a relatively straightforward We have made available three years’ worth of trial form. Most people have signed it very promptly and balance level detailed financial information. That is down to the level of things like “£54 for cleaning”; it quickly. A number of people have referred it to their is very detailed stuff. We have made available records lawyers, which has slowed things down a bit, but the of all assets and liabilities—plant and equipment that majority of people have found it very easy to complete is in the factory. We have made available details of the forms. the contracts that the factories have. We have made You referred to property, financial and other advisers. available details of staffing levels and skill sets within There is no precondition at this stage requiring bidders the employee group, so that bidders can assess what to have advisers on board, but there is a requirement sort of employees we have. There is a very long list that any bids that we receive are financially sound. of information available at this stage, and I would be One of our key criteria is to continue the employment happy to share it with you. I would have thought that of disabled people. That will happen only if somebody that information would be sufficient for any bidder makes a financially sustainable bid; we do not want interested in putting forward a business plan for us at them to bid now and be struggling in six months’ this stage. time. We have said to prospective bidders that, if they wish to use advisers to help them in that regard, they Q95 Jim McGovern: Can I pursue this point? Mr are welcome to do so, but it has not been a condition Russell, you still give the impression that you are not at this stage. giving all the information. You say you are giving the appropriate or current information that you are Q92 Lindsay Roy: Can you explain why councillors, allowed to give. What is missing? for example, felt that they needed to go to lawyers in Ian Russell: Let me give you an example of what is relation to the non-disclosure agreement? As I missing. What is missing at this stage is individual understand it, Fife council still has not signed an employee payroll details. NDA, and that has inhibited its engagement in the process. Q96 Jim McGovern: Why? Ian Russell: I am afraid that I cannot explain to you Ian Russell: Because we do not think bidders require why it felt the need for a lawyer. I would say two individual employee payroll details to prepare a things in response. One is that Dundee city council business plan at this point. We think giving them signed the documentation very promptly, so it can be departmental payroll data—this is the cost of that done. Secondly, we have had three requests from Fife department; this is the skill set of that department—is council to change the documentation. We have met sufficient. Equally, we have not given all the details those requests. It then asked for a further change; we that exist on individual contracts that the organisation have met that request. It asked for a further change; has because, frankly, it is commercially sensitive. We we have met that request. Between two and three have, I think, 11 expressions of interest for the weeks ago, we sent back to Fife council the document Cowdenbeath and Leven sites. I do not think it is amended in line with its request. I think you are commercially sensible to give all 11 people with right—I do not think it has yet signed. You would expressions of interest payroll and contract details, have to ask it why it has not done that. because they simply do not need those in order to cobber Pack: U PL: COE1 [O] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 17
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore prepare a high-level business case, which is being some cases in stage 1, and Remploy has to close a requested at this stage. I apologise if you get a sense factory, it will clearly cost us money to do that. There that we are holding back information— will be redundancy costs, property wind-up costs and Jim McGovern: We do. disposal costs. So, a starting point from a value-for- Ian Russell: You are right—we are. I think that, money perspective is to say that a bid has to be better commercially, we are entitled to. There was no test— financially than the cost of closure. Because a lot of the bids that we received last year for the stage 1 Q97 Jim McGovern: Is it not a discouragement to properties were competing bids, bidders were quite potential bidders? keen not to pass that test by a sliver; they wanted to Ian Russell: No, I do not think so. As we discovered pass it by quite a lot, because they wanted to be the in stage 1, the information that people are getting at winning bid. That is the initial test—is it better than this stage is more than enough. The next stage, where the cost of closure? people have to put in best and final offers, is the point at which they would get more information of the type Q101 Jim McGovern: Given the record of the last that you are referring to. It is important to realise at Remploy closures and how many people have this stage what the test is. I will explain this in a little managed to find alternative employment, would it be bit of detail, if I may. The test that is being applied at value for money to put 43 people on the dole? this stage is not whether bid A is better than bid B. Ian Russell: Clearly, that is not the objective. That comes later; it is the next stage. What we are trying to do at the moment is to elicit preliminary Q102 Chair: Just for clarification, when you look at business plans from prospective bidders. Providing value for money, are you looking at value for money they meet three criteria, they get through to the next purely for Remploy or for the taxpayer as a whole? stage. It is a pretty low bar that we are setting. Are you taking into account the fact that, if people do not get a job, they could well end up being in receipt Q98 Chair: Maybe you were going on to answer the of jobseeker’s allowance for a considerable period of question, but I was just going to ask you what the time? Is that taken into account? three criteria were. Ian Russell: We try to take that into account, but it is Ian Russell: The first of the three criteria is the an uncertain calculation. A lot of people have been continued employment of disabled people. The second supported into work as part of the programme last is that the high-level business plan is financially year, so you don’t know quite what the numbers will sound. We do not want to sell factories to people who be, but we do try to take that into account. It is a go out of business after six months; that does not help wider calculation. our employees. The third is that it passes a value-for- money test for the Department and for Remploy—for the public purse, if you like. At this stage, we are Q103 Chair: Do you have a formula? Do you looking for preliminary business plans that continue assume a certain length of time? with the employment of disabled people, are Ian Russell: No, because it depends very much on the financially sound and meet the value-for-money test. skill set and mix of the work force in an individual If they do, they go through to the next stage, when factory. Frankly, it also depends on the location of the more detailed information would become available. factory and what else is around. They are not competing against another bid; they are simply seeking to pass those three tests. Q104 Chair: But presumably you must have some formula that you use. You are not just going to pluck Q99 Jim McGovern: I have a couple of points. For a figure out of the air; you must have some criteria. the purposes of clarity, I want to take you back to the Ian Russell: We have a formula for the absolute first criterion—to continue to employ disabled people. calculation of whether it is better from Remploy’s The work force in Dundee is a mixed work force. perspective, and we know precisely what that is; but There are able-bodied people and disabled people. then there is a judgmental element over and above The only criterion you are referring to is to employ that, which is the wider picture. disabled people. Ian Russell: It is the principal criterion. We have 43 Q105 Chair: Do you have a written-down formula, employees in total, of whom 36 are disabled, so there or is it just left up to somebody’s judgment in each are seven non-disabled employees. Clearly, we would individual case? like them to have continued employment as well, but Ian Russell: It is judgment, but it is a pretty broad Remploy’s ethos—its reason for being—is to support church that applies that judgment. It is worth saying disabled people into work. Understandably, that is our at this stage that the evaluation of the bids is not just key focus, but of course we would pay attention to a a Remploy job. We have input from the Department bidder’s plans for the continued employment of non- and input from KPMG. We have an independent disabled people as well. panel, which is completely independent of Remploy and Government—including, I believe, prospectively Q100 Jim McGovern: The second point relates to a representative from Scotland on that committee—as the third criterion that you mentioned: value for well as the board of Remploy looking at this. I want money. How do we quantify that? to give you the impression that a wide range of people Ian Russell: One starting point is to say that, if there are looking to make that judgment. Some of it can be are no successful bids for factories, as happened in calculated and some of it is judgment. cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Ev 18 Scottish Affairs Committee: Evidence
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore
Q106 Jim McGovern: Can any of the witnesses Q111 Chair: Not under Remploy, but in some other confirm the current status of the Remploy facilities way. that were included in the phase 1 process? Esther McVey: Separately. Esther McVey: In what way? What do you mean by that question? Q112 Chair: How many are still operating? Esther McVey: I was explaining how they had come Q107 Jim McGovern: What is their status? Are they forward. Barrow and Chesterfield have come forward earmarked for closure? as commercial operations. I was going through what Esther McVey: If you are asking what has happened was happening at Birkenhead, Bolton, north London, so far at all of the 36 factories, I can tell you. Two of Oldham, Southampton and Wigan. Many of them are the factories—Barrow and Chesterfield—did complete coming forward and developing. with a commercial process. Various other factories have metamorphosed in different ways. That is why Q113 Chair: Are you able to give me a number for we looked at social enterprises—how we would do how many of the 36 are still operating? them and how we would look at mutuals. Bolton is Esther McVey: I have explained that. Two are quite interesting. Somebody has bought the site, but operating as a commercial process, and these others they were prepared to let a social enterprise be on that are now coming forward. Because they are starting at site. DWP gifted the assets to them, and there were different times and having support at different times, anticipated to be 10 to 14 jobs by the end of March. I cannot give you an exact number. There are two In north London, we have an organisation ready to further ones that could be coming to completion— employ eight ex-Remploy employees. In Oldham, we Edinburgh and Motherwell. That will happen in the have seen a new community interest company set up, next couple of months. At the moment, those deals for taking on 25 employees.1 In Wigan, we have seen a completion and support are ongoing. new social enterprise set up, with 20 job opportunities.2 This is what has happened to the Q114 Chair: I am sorry, but I am still confused. Mr factories. We really are seeing people from the local Russell said that there were none still under Remploy. community and businesses taking a hold and wanting You have said that two of the 36 were commercial. to get involved. When it comes to the jobs overall, I What is the status of the other 34? can really talk only about the 1,148 people who said Esther McVey: I have another eight that have people that they wanted to engage with us.3 We know we working and in employment, and the numbers are have got 307 of those into employment and 250 on going up. As I said, there are further ones that will to traineeships. complete going forward in the next couple of months. That will make two, eight and a further two, but there Q108 Jim McGovern: I am sorry, but can you clarify are more coming forward. what you meant by the figure of 1,100 and something that you gave who want to engage? What does that Q115 Chair: You say “coming forward”, but what is mean? their status at the moment? Mr Russell said they are Esther McVey: At the time, we said we would help not with Remploy. If they are not commercial, what people with personal case workers and put in place a is their actual status? You said there were two, eight package of £8 million, but some people decided that and two. That leaves 22 factories in some other state, they did not want that support and did not want to but I am not clear about what state those 22 are in. engage with us. In fact, when I came on board in Esther McVey: That state would be that people are September, the number of people who said they would looking at the assets. Groups such as mutuals and actively engage with us was closer to 850. Now, social enterprises are coming together to see whether perhaps because they have seen that they have that they can take them over and whether this is something support, we have put things in place and people have they can do. As I said, two factories—those in got jobs, that figure has increased to 1,148, as I Motherwell and Edinburgh—will potentially be said.4 completed in the next two months. That will mean another four5 employees at one site and, I think, about eight6 employees at the other, but it is not Q109 Chair: Could I ask you for some detailed finalised yet; they are putting all of their pieces down. figures? First, how many factories were involved in phase 1? Q116 Chair: I am sorry, but I still cannot fathom this Esther McVey: Thirty-six. out. What is happening in these factories at the moment? Are they still operating, or are they shut— Q110 Chair: Of those, how many are still operating closed—while investigations are carried out? I am in one way or another? afraid I am still not clear. Ian Russell: None. Jim McGovern: I think the question we want to ask Esther McVey: Under the Remploy board— is, how many people were employed in the 36 1 Note by witness: figure corrected to 10 employees and 20 factories, and are they still all employed? Has next year. anybody lost their job yet? 2 Note by witness: figure corrected to 25 job opportunities. Chair: Jim, we can come to that question. 3 Note by witness: figure corrected to 1,093 people who said that they wanted to engage with us. 5 Note by witness: figure corrected to six 4 ibid. 6 Note by witness: figure corrected to ten cobber Pack: U PL: COE1 [O] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 19
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore
Esther McVey: I have given you those numbers in the and support package, 307 have found jobs and 250 are 1,148 people I mentioned.7 in some form of traineeship.
Q117 Chair: We will come to that question in a Q125 Jim McGovern: I am still intrigued by the lack minute. Mr Russell, can you help? of any sort of clarification about figures. Of the 36 Jim McGovern: I never heard the Minister’s answer. factories, how many people were employed there, how Chair: Jim, please. Mr Russell, can you help me? many people remain employed and how many have Ian Russell: If we wind the clock back slightly, we gone on to find alternative employment? had 36 factories last year that were put up for sale, on Esther McVey: What we were explaining is that two the understanding that if they were not sold they factories have remained, as they were going through would be closed. Two were sold; 34 were closed by Remploy. However, a number of them, correctly, as a commercial process. Others are now opening up as the Minister has said, were bought as sites—some just social enterprises, so those were separate figures for as sites, some as sites with equipment in them—by those who were employed. The other set of figures purchasers who wanted to restart activity. Some of the that I gave you are for people we have helped get into activity that restarted in the sites was the same activity other forms of work. Some people could be working that there had been under Remploy and some of it was with Asda, some could be working with Amazon, and completely different—a different business line some are working with very small SMEs. I said that, altogether. of those, 307 are in work and 250 people have gone into other forms of training to get further work. One Q118 Chair: Two commercial operations have been of them did forklift truck work and is now working referred to. Were all of the other 34 factories sold by with Tesco; others are working at distribution centres. Remploy to somebody? Those were the figures as of Monday, but it is an Ian Russell: They were sold by Remploy to ongoing process. I get the figures on that every somebody, but what somebody then did with them Monday, and every Monday we are pleased to say varied from site to site. I think that is what the they have increased. We will continue to support them Minister was referring to. for the next 18 months.
Q119 Chair: Are you able to give me a number for Q126 Jim McGovern: How many people were those that closed completely, with all the employees employed in the 36 factories? made redundant? Esther McVey: 9 Ian Russell: We do not know that yet, because the I think there were 1,056. final closure by Remploy of some of those sites was as recently as December, because of the run-off of Q127 Jim McGovern: Over the 36 factories? work. Therefore we do not yet know which of those Esther McVey: Yes. In some of the factories there sites might reopen. The Minister referred, in were 20, while in some there were 40. The total particular, to a couple in the pipeline under social number of people working in Remploy was 2,200, at enterprise ownership. So there is still the prospect of all the Remploy sites. continued employment and continued economic activity in a number of the sites. Q128 Jim McGovern: And 300 have found alternative employment or are still employed. Q120 Chair: You have sold 34. Esther McVey: Yes. That was in stage 1 and stage 2; Ian Russell: Yes. obviously they are still working at the stage 2 sites. You are quite right—we are looking at 1,500.10 The Q121 Chair: How many of those are still employing number of those who came forward to work with us people at the moment? Do you know? was 1,148;11 that was the entirety of the numbers Ian Russell: It would be about a dozen. from stage 1. That is why we have always got to balance it up against the number of people who are Q122 Chair: At the other 22, were people just made redundant? disabled in the UK or in Scotland. There are 6.9 Ian Russell: That is my hesitation. As the Minister million of those people across the UK and 668,000 in explained correctly, some of the other 22 are still in a Scotland. That is part of what the Sayce review was process that may lead to employment in that factory. all about. We were spending a sixth of the budget, which we have protected, on 2,200 people, when Q123 Chair: But are they working at the moment? really we had to look at the entirety of people of Ian Russell: No. working age who are disabled. In fact, Peter Hain even said at the time that the Remploy deficit would Q124 Chair: They are not working. obliterate any other programmes for disabled people. Ian Russell: They are not all working at the moment. We have said it, and Liz Sayce said it in the Sayce Esther McVey: Equally, that is why I gave the other report. That is what they looked at—how can we best set of figures where we have helped to find people support all disabled people of working age to get them other employment. As I said, of the 1,1488 who have into work? engaged and been part of our personal case worker 9 Note by witness: figure corrected to 1,247 7 Note by witness: figure corrected to 1,093 10 Note by witness: figure corrected to 1,247 8 Note by witness: figure corrected to 1,093 11 Note by witness: figure corrected to 1,093 cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Ev 20 Scottish Affairs Committee: Evidence
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore
Q129 Chair: Have I got this right? In round figures, Ian Russell: Basically, it was the same work force, there were 1,000 people engaged, 300 found a job and with some change, and the same activity, but a new 200 are still in some form of— owner. Those were the two. The other 34 did not Esther McVey: It is 250. receive successful bids as a complete business. The factories were closed, the sites were put up for sale Q130 Chair: What is happening to the other and a number of social enterprise and employee bids roughly 450? were made for the sites and the equipment. As the Esther McVey: That is sort of where the complication Minister said, out of that 34, a number of new is in getting clarity on the number, because some of businesses have started using those sites, some of those are in the new social enterprises that are setting which are owned by social enterprises. up at the moment and have wanted to remain there. I can give you the numbers, where they are expected to Q136 Lindsay Roy: For clarification, after three be employed there in the next couple of months. As months with the initial bid, they were not successful. you can imagine, some, such as Wigan, started off At the end of the six months, there were some buy- with only four people, but they are now up to 20.12 outs. Is that the case? That is what has happened—you have seen those Ian Russell: Yes. In the bidding for complete, people come back on board, but gradually, because it continuing businesses, the social enterprise bids were is a brand new social enterprise. I guess they could not successful. The number of successful bids was not say straight away, “We definitely know we can relatively low—two out of 36—in part because of the take on the payroll for 20 people.” What they could TUPE requirement. As a buyer of one of the factories, say was, “We believe we can, and if we do it you have to take the work force on their existing terms incrementally, we will see that happen.” I can say that, and conditions. To answer your question, I think a because I watched Wigan do that from day 1—before number of social enterprises found that quite onerous. it set up, when it got its first two people and, as it has proceeded, as with the others. That is really the extra Q137 Lindsay Roy: Can I clarify that there are 65 support that we are trying to put in place to make sure between Cowdenbeath and Leven, not 43? As I that these are successful. understand it, there is only who is not disabled. Ian Russell: I think I was referring to Dundee, in Q131 Lindsay Roy: You said that 34 were sold and answer to Mr McGovern’s question. I think you are two are viable entities continuing under some kind of absolutely right about the numbers for Cowdenbeath Remploy umbrella. I take it that there were no bids and Leven. from social enterprises or from workers’ buy-outs in the 34. Q138 Pamela Nash: I refer to Mr Russell’s Ian Russell: I have one piece of clarification of what comments earlier about what was taken into you have just said. Thirty-four were sold, and two consideration in a value-for-money calculation. were sold but as viable businesses. None of the 36 is Clearly, there are figures for what that means for now Remploy owned. Remploy but, in terms of the Government, it was thought of but difficult to calculate. Is this something Q132 Lindsay Roy: Were any of the 34 sold to social you support? Are the Government really looking at enterprises or workers’ co-operatives? what this means for the local economies and the Ian Russell: We had bids from a number of social people concerned? I appreciate that so far you do not enterprises—from employee interest as well as other have figures for who is and is not employed, but have interest. the potential for these people being unemployed and the cost on the Government been taken fully into consideration? I would like to ask the Minister for her Q133 Lindsay Roy: Were any sold to them? opinion first; I would be happy to take more detail Ian Russell: None of them were successful. The two afterwards. out of the 36 that were sold as continuing businesses, Esther McVey: Of course all of that is taken into which were Barrow and Chesterfield, were neither consideration. That is why an independent panel was social enterprise nor employee bids. brought on board—to look at all of those aspects. Equally, we have known that for some time the Q134 Lindsay Roy: The other 34 were not social Remploy factories have had a very uncertain future. enterprises or workers’ co-operatives either? We saw what happened in 2008, when 29 factories Ian Russell: There are, indeed, some in that figure. were closed. Some of the key differentials between As the Minister highlighted, the number of them is then and now are that incentives were put in place, so increasing. This is out of the 34— people just took redundancy and retirement. All of the 1,60013 people did that; nobody monitored them, Q135 Lindsay Roy: I am trying to clarify whether a supported them or looked at what happened to the social enterprise or workers’ co-operative put in a bid local areas and environment. We did not want to do that was successful among the 34. that this time. We took on board what the Sayce Ian Russell: Yes. I am sorry to be seeking clarification review had said about how to get people into again. Start with the 36 in total. The two that were mainstream employment. Equally, we looked at how sold were sold as continuing businesses. we could support the individual and the local Lindsay Roy: I understand that. environment, because you cannot have all that money, 12 Note by witness: figure corrected to over 25 13 Note by witness: figure corrected to 1,637 cobber Pack: U PL: COE1 [O] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 21
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore in a protected budget of over £300 million, going into because these are vulnerable people who would be failing factories. That is what it was—the money was transferring out of Remploy to a new employer. Our not going to the individual person. The issue is how inquiry of the new employer would be very detailed, we really get them into work. to make sure that we were passing responsibility for If we look at stage 2 alone, you have 152 people who those employees over to the best possible responsible work in the Remploy factory and 668,000 people who new owner. are disabled. We really have to help all of those people, because there is a significant difference Q140 Jim McGovern: I have one more question, and between the numbers. I do believe we can get those then I will take a back seat; I apologise for taking up people into work, because Remploy Employment so much time. I am sure that you are aware of article Services, which is different from the actual Remploy 19, Mr Russell. Has Remploy been using article 19 to factories, has found work for 1,700 people with try to maintain the factories? similar disabilities. That is what we have to look at— Ian Russell: We have tried. In Scotland in the last five the whole of the area and, obviously, those individual years, we have succeeded in achieving one article 19 people. I went up to Scotland twice to meet the contract, worth £1.2 million. As you and others on the various stakeholders—the trade unions, the MSPs and Committee will know, there has been an enormous the factory workers—to ask whether we were doing amount of effort, both out of Holyrood and out of enough and whether we could put more support into Westminster, to try to bring forward more article 19 the local community, which we have done. We have contracts—for all of the Remploy businesses, not just set up community support funds, so there is not only the Scottish ones, but in this context, in particular, for support with job clubs but also a social gathering and the Scottish sites. Helen Eadie MSP has been support. To me, that was key, because being in work enormously instrumental over time, as have been the is not just about work—it is also about the social two representatives the Committee saw a few days element of that. ago, Mr Turner and Mr Moist, who, with Ms Eadie, Chair: Before I bring Jim in, I am conscious that we have been trying for many years to bring forward are 35 minutes in and are still on question 2. I would more article 19 contracts, both for Remploy and, more like to get on to some of the detail of the Fife broadly, for supported organisations. I have to say that factories. With that hint, Jim, we will take your in a Scottish context we have been very disappointed question. at what Holyrood has achieved. One of the reasons why, over the last five years, since the modernisation Q139 Jim McGovern: Minister, I am grateful for the plan for Remploy was launched, factories such as fact that you visited the factory in Dundee, but I am Leven, Cowdenbeath, Stirling, Clydebank and, sure you would agree that there was no sense of indeed, Springburn have been less successful than we gratitude from the work force in Dundee saying, “This would have liked has been our inability to secure is a great idea. Shut this factory and put me into article 19 contracts from the Scottish Government. mainstream employment.” I am sure you are aware The answer to your question, Mr McGovern, is that that there was a certain opposition, to say the least, to we have had one. the Government’s plans. I have a question for Mr Jim McGovern: Thank you for that. It is Russell. You mentioned TUPE—the Transfer of disappointing, though. Undertakings (Protection of Employment) Regulations. Can you confirm that, where a bid is Q141 Lindsay Roy: Can you give an assessment of successful, the new employer will recognise trade why you think that failure has occurred? unions, if there is a trade union in the factory? Will Ian Russell: I think it is principally for two reasons. they also maintain the pension scheme and the In part, we do not always make what the Scottish pension rights of the work force? Government want to buy. Leven and Cowdenbeath Ian Russell: The answer to the question is that we make life jackets, principally. There is some demand would take the employer’s intentions in those regards in the Scottish Government for life jackets. into account. Clearly, where we are transferring a Chair: They own a large ferry company, Caledonian business, as we did in stage 1, a new owner of the MacBrayne, so there should be big demand. business—whether that is a social enterprise or a commercial owner—has to abide by the TUPE Q142 Lindsay Roy: There are also the North sea regulations and other employment regulations; TUPE assets, although they are not directly owned by the is not the only requirement here. One of the things we Scottish Government. get into in the next stage of this process is a detailed Ian Russell: Correct. discussion with the prospective bidders of what their intentions are. The two points you have mentioned— Q143 Jim McGovern: It seems crazy that the trade union membership and pensions—would Dundee factory can manufacture uniforms for absolutely be up for discussion at that stage. Because Japanese armed forces personnel but cannot get we are a public body, on both of those subjects we contracts for UK armed forces personnel. would be looking to make sure that, where possible, Ian Russell: I can only say to both of you that I the employee status quo was maintained. We want to entirely agree with the points you are making, but you retain employment of the work force—that is one of both know that we have been trying pretty hard—and our key objectives in assessing bids—but we also with huge support from Ms Eadie and others—to want to make sure that the prospective owners live secure these contracts from the Scottish Government up to their responsibilities and recognise the rights, over a number of years. I have now been associated cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Ev 22 Scottish Affairs Committee: Evidence
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore with Remploy for six years. Certainly, while I have America to a shipping line. It would be misleading been here—I am sure my predecessor would say the to look simply at the retail price, as opposed to the same—we have put a huge number of man-hours into discounted price, and think that that was all of the trying to secure article 19 contracts. Others have tried margin. That is not the case. on our behalf, but it really has not been forthcoming. Q148 Lindsay Roy: I hear what you say, but Q144 Lindsay Roy: Is there a distinct lack of certainly the perception among Friends of Remploy is marketing expertise within Remploy itself? that there is this huge chasm, which they cannot Ian Russell: I do not think so. It is often said that explain—and, indeed, only one outlet. There does not the management costs are too high; that is one of the seem to have been diversification of outlet; as I misunderstandings about the Remploy accounts. understand it, Ocean Safety is the sole distributor. Actually, most of what are perceived to be Ian Russell: I think it is not quite the sole distributor, management costs are sales and marketing costs. but you would certainly be right in saying that it is the main distributor. Q145 Lindsay Roy: We heard last week that there was a perception that there was a distinct lack of Q149 Lindsay Roy: How is it, then, that with a full expertise in marketing. Indeed, as far as the Leven order book, an international Kitemark and a great and Cowdenbeath operation was concerned, we were export market, it is making a loss? told, without definitive figures, that Remploy received Ian Russell: Our costs are too high. around £30 per life jacket and the company that sold them did so with about a £100-plus profit. It seems Q150 Lindsay Roy: Which costs, in particular? rather strange that there is only a single outlet. Ian Russell: All of our costs, really. If you look at the Ian Russell: I will explain the background to that, if income statement—the profit and loss account—for I may. Leven and Cowdenbeath, the sales revenue that we get barely covers our employment costs. In addition Q146 Lindsay Roy: There has been no to that, we have to buy materials to make the life diversification at all. jackets and the other life-saving equipment. We have Ian Russell: I think that is not quite right. About 14 to pay for the rent, the rates, the heat and the light of years ago, the two factories—Leven and the factories. We have to pay for things such as payroll Cowdenbeath—had a serious problem, because the services and depreciation on the equipment. That is then distributor left us. Ocean Safety stepped in. In why the two factories together have a sales value of that 14-year period of time, two things have happened. just over £1 million and lose about £1 million. Our One is that Ocean Safety as a distributor has helped costs are roughly twice our revenue. us with a network of international sales offices. As you will know, we now sell equipment out of Leven Q151 Lindsay Roy: The raw materials are around and Cowdenbeath to America, the middle east and £800,000. Europe, which we did not do before. Secondly—this Ian Russell: I am including that in the £2 million of goes to your diversification point—in that period of costs. Even if you took out all overheads—if you time we have developed new, better product, evolving pared back the cost base with almost no overheads— the designs in co-operation with Ocean Safety. I I think you would still be looking at a loss of about would say that part of the difference between the price £800,000 a year, so it is a very difficult situation. that Leven and Cowdenbeath get for the product and the price the product is sold for is to pay for assistance Q152 Lindsay Roy: It has reduced from £1.6 million with the product development, all the international to £800,000. marketing and sales offices and, very importantly, the Ian Russell: It has got better—absolutely—because international service centres. As you can imagine, if we have been working to try to reduce costs and to you deploy a life piece of equipment, you want it to increase sales. However, I will not pretend—this is a be put back together so you can reuse it. Ocean Safety difficult situation. Frankly, that is why we are saying provides that service to us. All of that is part of the that these are businesses that would have a prospect cost differential between what we sell for and what of being better run under a different ownership, where they sell for. there might be benefits of scale and benefits of putting our product alongside other products that might lead Q147 Lindsay Roy: There does seem to be an to more sustainable employment. exorbitant chasm between the price that Remploy gets and the price at which it is sold. Q153 Lindsay Roy: We accept that. What we are Ian Russell: I would say that the number of seeking together is to get a viable business, to sustain employees in Ocean Safety who are helping to sell as many disabled jobs as we possibly can—that is the and service the equipment and helping with product core objective. Is a one-size-fits-all approach design is many times the number of employees we appropriate? Are there unique circumstances for each have in the Cowdenbeath and Leven factories. It is set of factories? also worth taking into account that a lot of the sales Ian Russell: Yes. I think it is not a one-size-fits-all are bulk sales. Shipping lines will buy not just one approach. There is a framework that, I agree with you, life jacket but perhaps 500 or so at a time, so the price is common but, within that framework, we work hard that Ocean Safety receives for the product is often to try to meet the aspirations of individual sites and quite heavily discounted to achieve a bulk sale in, say, the requirements of individual bidders. We are now cobber Pack: U PL: COE1 [O] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 23
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore running a process over 18 sites in total. The people Q157 Lindsay Roy: How many have signed the non- we are dealing with as prospective bidders are mainly disclosure agreement and the confidentiality in the commercial world—they know what this looks document? like and what they expect to see. That is why we have Ian Russell: I can tell you that next week when we KPMG alongside us giving us its expert advice. It are successful with the bids. starts off as a uniform process, but, once we engage with somebody who has expressed interest in Q158 Lindsay Roy: As I understand it, some are still acquiring or working with one of the factories, we waiting for the information. Some of them have had really do try to tailor our approach to suit that it in the last two weeks. particular bidder, where we possibly can. We have Ian Russell: I think the only thing that has held up been very interactive, not just with bidders but also providing information—this goes back to my earlier with councils and Scottish Enterprise, as well as with answer to Mr McGovern—has been the to-ing and the Minister and her Department, obviously, to try to make sure that we really do maximise— fro-ing over the signing of the non-disclosure and confidentiality agreements. As soon as those have been signed, access to the data is there. I want to leave Q154 Lindsay Roy: With all due respect, that does you with the impression that we have been working not match with Iain Duncan-Smith’s response to Gordon Brown, in which he said that there was no actively with people who have expressed an interest opportunity for flexibility. What kind of flexibility is in these sites. We have had 29 expressions of interest. there? If you are saying that there is some flexibility We have been phoning on a regular basis all of the in the dealings with each individual company, that is people who have expressed an interest to try to make very welcome. sure that, where they can, they get in a bid. Our Ian Russell: I think the Secretary of State was interest is to have, by the end of next week, as many referring to Mr Brown’s request for flexibility over credible, sustainable bids that secure employment for timetable and money. I think Mr Brown had asked disabled people as possible. whether the timetable could be extended and whether more money could be provided; I am paraphrasing the Q159 Lindsay Roy: I assure you that I have been request. I believe the Secretary of State pointed out working hard on behalf of the local area and Remploy that, in fairness to all bidders, we had set a timetable. to ensure that that is the case and that we have as Interested parties were aware about a year ago of the many potential bidders as possible. prospect that these sites might now be made available Ian Russell: I know from our earlier meeting in for sale; the data that are in the data room for the January that you have put a lot of effort into this. We expressions of interest have been there for between thank you for that. three and four months, which is longer than a normal commercial process would be. I think the Secretary of Q160 Pamela Nash: It is my understanding that there State was indicating that, in fairness to all the bidders may be people who are interested in bidding on and, indeed, the businesses themselves, we should Remploy Marine but may not be clear on what detail stick to the timetable that we had set out. My point is would be expected of them in a business plan. I know that within that timetable we will work as flexibly as the deadline is next week, but the final offer deadline we can with individual bidders. is not until the end of May. Is that correct? Ian Russell: Yes, that is correct. Q155 Lindsay Roy: That is not reflected in the timetable that we have—from January to March for Q161 Pamela Nash: Is there anything you could say the outline bids. That is a three-month period. that could help those potential bidders that may not Ian Russell: In December, we made information yet have expressed an interest or submitted a available about the future sale and the commercial business plan? process for these sites. As I said in response to a question from Mr McGovern, we have put a lot of Ian Russell: The only thing I would suggest is that very detailed cost, revenue and balance sheet on our website there is an e-mail address for getting information into the data room. We have engaged with into this process. If there is anybody you know of who everyone who has expressed an interest in making a would like to engage with us, if they e-mail us this bid to try to help them to see what is required and put afternoon, there is absolutely still time for them to get a bid together in that way, wherever we can. Really, in a bid. We will give them every support that we can 12 weeks is long enough, certainly in a commercial to do that. environment, for the high-level response we are looking for by the end of next week. It is not that Q162 Pamela Nash: Would they be advised of what difficult an exercise at this stage. would be expected of them in a business plan, in terms of the level of detail that is required? Q156 Lindsay Roy: How many of the 11 bidders Ian Russell: Absolutely. We have talked to all the have accessed the data room? people who have expressed interest to explain to them Ian Russell: There are 18 in the case of Dundee and what is required and have shown them the data that 11 in the case of Leven and Cowdenbeath. All those are available to them. They could e-mail me, if it expressions of interest have access to the data room if would be helpful; if you want to put them in touch they have all signed the non-disclosure agreement and with me, I will very happily get them involved in the the conflict of interest document. process. cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Ev 24 Scottish Affairs Committee: Evidence
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore
Q163 Chair: Could I clarify something? You said Ian Russell: Because its lawyers had advised it not to there had been 11 expressions of interest in Remploy sign the standard version. It wanted an amended Marine Fife. How many of those have actually signed version. a non-disclosure agreement? Ian Russell: We will know with certainty at the end Q169 Lindsay Roy: Was that because it felt that of next week the number of people who have signed there were problems about breach of confidentiality a non-disclosure agreement and the number of bids if it contacted the Scottish Government, Dundee city that we have received. council or any other council and shared the information? Q164 Chair: Do you know at the moment how many Ian Russell: I think that was part of it, although I am have signed the non-disclosure agreement? not sure that that was all of it. We have explained to Ian Russell: Because we are running a commercial the council what the situation is. We thought we had process, we are not giving out that information. We got it over that hurdle but, two to three weeks later, will be able to give you that information at the end of we are still waiting to hear from it. next week. Q170 Lindsay Roy: That is not my information. Q165 Lindsay Roy: It seems strange that you cannot Ian Russell: It is mine. Could we talk outside the even give us a number—not the names. Committee? I am very keen to get Fife council Ian Russell: Let me illustrate why. If you are bidding involved. for one of our sites and, because of something I say, you know that you are the only bidder, suddenly we Q171 Lindsay Roy: I have checked with David have put you in a very advantageous position. I am Ross; I spoke with him this morning. As far as he was very keen to keep a level playing field. We have had aware, it had still not been finalised. That is a brake 11 expressions of interest, and 18 for the textile on the council’s possible opportunity to engage and, businesses. I hope you will appreciate that one of our indeed, through business gateway, to try to support responsibilities is to keep a level playing field. We any other people who are interested in putting together really must do that. If we give you information in a bid—for instance, by finding a vacant factory that advance of putting it in the public domain, it puts us might suit a bidder. in a very difficult position. Ian Russell: I think it is factually correct to say that the ball has been in its court, so to speak, for two to Q166 Chair: I accept that. The reason for asking the three weeks. It may think it has put it back to us, but question was that the evidence we heard last week as of 10 o’clock this morning, certainly, we had not suggested that Fife council, in particular, was having received anything. Perhaps you and I could speak after difficulties with the non-disclosure agreement. Has the Committee meeting. I am very keen to get it in. Fife council discussed its difficulties with you? Ian Russell: Yes, it has. Q172 Chair: Are the issues that Fife council is raising issues that have been raised by other Q167 Chair: Clearly, as of last week, it still had organisations? difficulties. Do you accept that these are genuine Ian Russell: No. difficulties? Do you think there is a way round this? Ian Russell: I hope that there is a way round it, Q173 Chair: Are they unique to Fife council? because we would like it to have access to the data Ian Russell: They seem to be unique to Fife. I am room and to submit a bid. Very briefly, the background sure it feels they are legitimate. It is just frustrating to this is that it expressed an interest. We engaged for us, and probably for the council, that four or five with it as described and explained to it what the non- weeks have passed and it has not managed to get into disclosure agreement and the conflict of interest the process. document would involve. It took that away to its lawyers. Its lawyers wanted to make changes to the Q174 Lindsay Roy: Given these circumstances, is standard documentation and sent it back to us. We there any flexibility in terms of the deadline date for tried to accommodate that and sent it another version Fife council beyond 28 March? to sign. It showed that to its lawyers, who wanted Ian Russell: In fairness to all bidders, the deadline is further changes that were not in the first round and the end of next week. As I mentioned in answer to an sent it back to us. We tried to accommodate that and earlier question, if people will contact us today, there sent it a third version; I lost count there. It has had is still time to put in a bid. We would be very happy three versions from us, in which we have tried to take to help them get their outline business plan into us by account of its comments. We sent it the last version— the end of next week. the third version—between two and three weeks ago, Lindsay Roy: I will certainly do that in the second and we have heard nothing from it since. Other half of this week. councils have been able to sign this documentation Ian Russell: Thank you very much. and get access to the data room. I am a bit perplexed as to why it is such a struggle for Fife, to be honest. Q175 Pamela Nash: Minister, there is a quote in the press from a DWP spokesperson talking about Marine Q168 Lindsay Roy: Can you understand why Fife Textiles Fife. It says, “If bidders come forward with a council came to you with these queries about the non- credible plan to safeguard jobs and put the marine disclosure agreement? textiles business on sustainable long-term footing, cobber Pack: U PL: COE1 [O] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 25
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore then requests for extra funding will be considered as Esther McVey: I am saying that we do not know part of the commercial process.” Can you confirm that where that is and the question is thrown back— that is the case? absolutely. Esther McVey: I am not really sure what the extra funding would be. I know what funding and support Q183 Chair: Minister, at the end of the Adjournment we have put in place, whether that is tapered wages debate on 15 January, you agreed to meet local over a three-year period or support with the business Members and all the relevant parties in Scotland. plan. I know in a very separate way that Scotland has Could you tell the Committee whom you met and how offered a sort of recruitment incentive for ex-Remploy the meetings went? staff who want to work elsewhere. I do not know what Esther McVey: I have had various meetings up in that quote is. Jeremy, am I right there? Scotland. I had one in October, when I went to Jeremy Moore: I can only assume that, as the Edinburgh and met a selection of 20 MSPs at Minister said, it is a reference to either protection of Holyrood. I went back on 4 February, when I went to the employee subsidy or the Scottish Government’s Dundee and Leven. Again, I met various stakeholders. offer. There is no plan to put any additional financing I went to the various factories and met trade unions. into the scheme. The aim was really to have as open and frank a conversation as we could on both sides, whether it Q176 Pamela Nash: The subsidy is a standard three- was the employees or myself; Jim and Lindsay Roy year figure—is that correct? can witness to that. Key to that visit was not only an Jeremy Moore: Yes. engagement and an explanation of how people could Esther McVey: It is exactly £400, tapering over three tender, enter the process and put forward expressions years.14 of interest—clearly, we went through all of that Jeremy Moore: Yes, over three years. route—but equally, through the media, to see whether people were interested. It was really to ask whether Q177 Pamela Nash: It is £400. anyone else had expressions of interest, although that Jeremy Moore: That is right—in the first year. had been done quite rigorously beforehand through KPMG and Remploy. The visits hit upon many Q178 Pamela Nash: And in the second year? subjects and areas. Ian Russell: I think it is 4.8 in the first year, 1.0 in the second and 0.6 in the third, so 6.4 in total. Q184 Chair: Did you have discussions with the Scottish Government about how they could help to Q179 Lindsay Roy: It seems that there are things on encourage a co-ordinated approach to the phase 2 which we get mixed messages from the DWP and sell-off? from Remploy business inquiries. It does say here that Esther McVey: I did indeed. I went there with “extra funding will be considered as part of the representatives from Remploy and from DWP who commercial process”. were part of the commercial process, because I Esther McVey: I do not believe that any mixed thought I might not be able to answer the questions messages have gone out on that, because we check but other people there could. It went from things as and double-check what goes out. Maybe you have a simple as gathering together people who are interested quote from the media and there was a to quite in-depth discussions about people perhaps not misinterpretation somewhere along the line, but what putting in just a single bid because they might want goes out, what is on the Remploy website and what to put in a bid for the business, which in this instance comes out from us would be one and the same. would be across Leven, Cowdenbeath and Dundee. All those issues, as well as the time plan—the timing Q180 Lindsay Roy: This is a quote from the Dundee of how this was to proceed—were discussed. Courier on Monday 4 March. Esther McVey: Possibly the Dundee Courier was not Q185 Chair: Did the local authorities that you met as rigorous as we are when we put out our have any concerns to raise about the process? information. Esther McVey: The one that seems to have come Jim McGovern: You are probably right. through is Fife. As has been said, Dundee was happy to proceed and felt it had all the information that was required, but obviously this issue for Fife seems to Q181 Lindsay Roy: This is not a trite point. It was have rumbled on. quoted from a DWP spokesperson. Esther McVey: Have we a name for the DWP spokesperson? As a generic person like that, people Q186 Chair: You can appreciate our difficulties, can give quotes that are not necessarily correct. because we had Fife here last week saying that it was Lindsay Roy: I understand that, but I can also unable to sign the non-disclosure agreement and we understand the confusion that that has caused within have Mr Russell here today saying he thought he had the community. answered all the issues that it had raised. Is there anything that you as the Minister can do to bang heads together, shall we say, to try to get this resolved? Q182 Pamela Nash: Just to be clear, are you saying Esther McVey: I tried again, because everybody was that this quote that has been attributed to the DWP is up for a meeting with the Secretary of State, to get not an official quote? people round a table to say what we could do. From 14 Note by witness: figure corrected to £6,400 that, straight away the lawyers from Remploy and Fife cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Ev 26 Scottish Affairs Committee: Evidence
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore had the first contract. As has been said, it seems to Q191 Lindsay Roy: I understand that. What they have gone through three different redrafts. Again, Fife were looking for was some models to work from. has to figure out why it has difficulties with that when Esther McVey: I think they need to look to themselves we have seen that nobody else has. I did put it together for that. with Dundee to see why Dundee found it acceptable and not Fife. Obviously, I cannot answer on its behalf. Q192 Lindsay Roy: I do not disagree that they have Chair: Right. to look to themselves, but in any scenario there are procedures where people can be helped, aided and Q187 Lindsay Roy: Just for the record, Fife supported through a process if they are not very councillors believe that Dundee may be open to legal clear themselves. challenge. There is an issue I want to raise. Does the Ian Russell: One of the offers of assistance, certainly non-disclosure agreement not inhibit collaborative for employee collaborative bids, has been—as was the approaches, simply by the very nature of non- case last year—the offer to provide £10,000-worth of disclosing? support. This may be what you have in mind, as it Ian Russell: Provided that both parties are happy to would allow somebody who has a keen interest, as the collaborate— Minister said, but maybe not all of the expertise Lindsay Roy: It may be more than two. required at this stage to use the £10,000 allowance to Ian Russell: Provided that all parties are happy to bring in that expertise. Last year, that was certainly collaborate—I am sorry; I did not mean to limit it to taken advantage of, in the sense that people took up two—and sign a non-disclosure agreement between that offer. If that would work this time round, it might them to that effect, there is no problem. All we are be the solution. Again, if you would like to put the people you have in mind in touch with me or one of trying to do, as I am sure you will appreciate and my colleagues, we would be very happy to try to help would want us to do, is to protect the information them to get that done. from a commercial and confidential perspective, to confine its knowledge to those people whom we know. Q193 Lindsay Roy: If two, three or more parties want to get together in I can contact them to see whether that is how they wish to proceed. the sort of collaboration the Minister just referred to, Ian Russell: Okay. the documentation we are asking people to sign Chair: I think we have covered questions 1 to 14. Do absolutely does not prohibit that. What we are asking members of the Committee have anything else to add? them to do is to be up front about it—to tell us that they are doing it. Q194 Lindsay Roy: I want to clarify the position on value for money. Can you confirm that a key Q188 Lindsay Roy: When we met the Minister component of this is sustaining employment of before, we asked for some examples of case studies. I disabled workers and that the criteria will not be that am afraid the recipient found them less than helpful. you go to the cheapest bidder? In fact, he described them as tokenistic, because they Ian Russell: That is absolutely correct. The criteria are really just four lines of paper. are continuing the employment of our disabled people, Esther McVey: I think they wanted to understand financial sustainability—that is to say, it is not a what other factories in other areas had done. As a business plan that will fail in the first sixth months— simple example of the various types of businesses, and, only thirdly, the value-for-money test. social enterprises and mutuals that had sprung forth, we were saying, “This is what has happened in Q195 Lindsay Roy: And the value-for-money test various parts of the country.” Again, I would not have is? business plans or anything like that. Maybe they are Ian Russell: It has to be better for Remploy than the not sure what information they seek. cost of closure—with, as we discussed earlier, the more subjective overlay, because it depends on the Q189 Lindsay Roy: What they were looking for mix of staff and the location, the alternative costs for were examples of how various groups have those employees. collaborated in putting forward a bid, to a non- disclosure agreement. Q196 Lindsay Roy: Can you understand why, when Esther McVey: It has shown both the uniqueness and there was discussion of a negative consideration bid, the difference across the country, with different people people felt that that was an opportunity for asset who really wanted this to happen and how they were stripping? making it happen. Maybe there is the difference. Ian Russell: I can understand it.
Q190 Lindsay Roy: There is nothing here to indicate Q197 Lindsay Roy: Can you give us an assurance that. The expectation was that there would be more that that is not the case? detail of how this had been arrived at in the various Ian Russell: I can absolutely give you the assurance. examples you have given. Going back to my earlier answer, one of the reasons Esther McVey: But it has to be from themselves as why we have an independent panel, including well—what it is they want to happen and how they someone put forward by the Scottish Government, think it is going to work. These are very different overseeing the whole process of receiving bids and businesses, so how could they explain that on behalf which ones get taken forward, is to make sure that we of somebody else? It has to be their motivation. do everything possible to make sure that the cobber Pack: U PL: COE1 [O] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Scottish Affairs Committee: Evidence Ev 27
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore successful bidders are only people who have the earlier. The data room is electronic, so as soon as you welfare of our disabled employees and other have signed the non-disclosure agreement and the employees at heart and have a sustainable business conflict of interest agreement you can go online and plan to keep their employment going forward, as well look at the information. There is no delay through as meeting the financial test. The Department, KPMG, documents arriving in the post or something of that the independent panel and the board of Remploy all sort—it is just there. look in detail at every bid and business plan that comes forward to try to make sure that we avoid the Q203 Chair: Has any organisation other than Fife situation that you have just described. council expressed problems with signing the non- Lindsay Roy: Those are all the questions I have at disclosure agreement? the moment. Ian Russell: I am aware that Scottish Enterprise had some difficulties, but we resolved those with it very Q198 Jim McGovern: I have a point for quickly. clarification. Mr Russell, I think you said there were 11 plus 18 expressions of interest. What is the Q204 Jim McGovern: Dundee city council also difference there? expressed concerns. I wrote to the Minister and, I Ian Russell: I am sorry for not being clear. We had believe, the Minister passed the correspondence to 11 expressions of interest for Leven and Remploy. I assume that Dundee now has the Cowdenbeath. We had 18 expressions of interest information. covering the other textile factories—Dundee, Ian Russell: It has had it for some time. I thought the Clydebank, Stirling and Birkenhead. question was about problems that have been lengthy and ongoing. You are right that Dundee also had Q199 Jim McGovern: I see. So there has been an issues, but those were resolved very quickly. Dundee expression of interest in Dundee, although you are not is in the data room. able to divulge just what it is. Ian Russell: Correct. We had 18 covering the other Q205 Chair: So, as far as you are aware, Fife council textile factories, including Dundee. is the only organisation whose problems with the non- disclosure agreement have not been resolved? Q200 Lindsay Roy: Are you in a position to tell us Ian Russell: Correct. about the intellectual property rights? Ian Russell: For Leven and Cowdenbeath, in Q206 Pamela Nash: Can I ask a follow-up question? particular? Mr McGovern mentioned the problems with Dundee, Lindsay Roy: Yes. and you said that they had been resolved quickly. Are Ian Russell: Absolutely. As you may know—it is in there any situations where this has occurred, they have the data room—a lot, though not all, of the intellectual not been resolved and the other person has walked property rights were jointly developed over the last away from the table? 14 years by Ocean Safety and Remploy. This is the Ian Russell: None that I am aware of. The only one collaborative work I referred to earlier. We have been that comes close to what you have asked about is the very grateful to Ocean Safety for that. We have situation with Fife council. benefited from the introduction of new product, which has helped with sales and the internationalisation of Q207 Lindsay Roy: Just to clarify the position again, the business to America, Argentina, Denmark and the you are saying that it is not a one-size-fits-all UAE. The consequence of that is that, in some cases, approach—there is a degree of flexibility. the property rights are jointly held. Any bidding Ian Russell: Correct, but there are— process or new bidder would need to take that into Lindsay Roy: Within parameters. account. Ian Russell: Yes. There is flexibility over some things. There is not flexibility over timetable and Q201 Lindsay Roy: Finally, do you accept that there money. have been some shortcomings in terms of the transfer of information when people have expressed an Q208 Lindsay Roy: Can you give us an idea of what interest? things there is flexibility about and what there is not Ian Russell: I am not sure I understand the question. flexibility about? Could you clarify it, please? Ian Russell: There is the example we talked about earlier of the assistance given to a bidder to try to help Q202 Lindsay Roy: We have been told that there them put together a business plan. There is the have been delays in getting information from example of our phoning people who have expressed Remploy business inquiries and that has inhibited interest on a regular basis to make sure that we are their approach. doing everything we can to support them in preparing Ian Russell: I am certainly not aware of that, other and making a business plan proposal next week. There than the point we discussed earlier about not giving is flexibility in terms of access to the site. Where that information to people unless they sign the non- has been requested, we have tried to be as flexible as disclosure agreement and the conflict of interest we can over dates and access in that way. I know that agreement. As far as I am aware, as soon as people money and timetable are two big issues, and there is have done that, they have had access to the data room no flexibility there, but, on everything else on which and have had all the information that we discussed we can be flexible, we have done our best. cobber Pack: U PL: COE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG02 Source: /MILES/PKU/INPUT/030703/030703_o002_michelle_130321 CORRECTED Final.xml
Ev 28 Scottish Affairs Committee: Evidence
21 March 2013 Esther McVey MP, Ian Russell CBE and Jeremy Moore
Chair: Do members of the Committee have any whole of Dundee is not vital for the continuation of other questions? Cowdenbeath.
Q209 Jim McGovern: I have one point for Mr Q211 Jim McGovern: But presumably it would Russell. It is a business question, so your answer may make good business sense for the three of them to be a matter of opinion rather than a matter of fact. In work in conjunction. the Adjournment debate that took place in January and Ian Russell: I think that the business sense for the to which the Minister responded, the former Prime cutting in Dundee is there—absolutely. In terms of the Minister, Gordon Brown, the right honourable rest of the Dundee plant and whether it makes sense Member for Kirkcaldy and Cowdenbeath, said that, in to see the three together, as opposed to two factories order for the Fife factories to survive, they would need plus the cutting, I think that is a struggle, to be honest. the Dundee factory, because the Dundee factory has The cutting in Dundee is an absolutely crucial part of the cutting machinery. Would you concur with that? the Leven and Cowdenbeath product line, but that can Ian Russell: I think the cutting that is done at Dundee be done other than in Dundee. could be done in two other ways. One is that the Jim McGovern: I appreciate your honesty. equipment that is in Dundee could be transferred with Ian Russell: Sorry. the Leven and Cowdenbeath factories, so I do not think it requires all of Dundee. Q212 Chair: Before we finish, is there anything you want to add that you feel would be useful for the Q210 Jim McGovern: That is not the answer I was Committee to know? looking for. Esther McVey: I am fine. Ian Russell: You asked for my opinion, and I am Lindsay Roy: Can I say a personal thank you to you trying to give it. for coming to Fife, discussing these things with us and Jim McGovern: I appreciate that. showing an interest in the particular factories and the Ian Russell: The other possibility is that it could be situation they find themselves in? We are trying to done elsewhere, as there is a lot of capacity for cutting work together to get the best possible outcome. within the UK. I know it is not the answer you are Chair: Thank you very much for coming, particularly looking for, but I do not think the success of a bid for since we did not give you much notice. We have found Leven and Cowdenbeath depends also on a continuing it very useful this afternoon. business in Dundee. The cutting is important, but the cobber Pack: U PL: CWE1 [SO] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG03
Scottish Affairs Committee: Evidence Ev 29
Written evidence
Written evidence submitted by Cllr David Ross, Depute Leader, Fife Council The Issues The DWP announced the sale or closure of the Fife Leven and Cowdenbeath factories, the Remploy Marine Division, and have set the terms of the privatisation including a Stage 1 process for indications of interest (calling for business plans) and Stage 2 final bids. The Government have also set the limits on what help can be made available, so that the maximum subsidy per disabled employee is £6,400 over three years: starting at £3,200 and then decreasing in year two and three, to nothing in the fourth year. After Stage 1, the expression of interest, the Government will make a decision on bids by what they call the practice of a “negative consideration bid”. It is not clear whether the criteria that decides which bid will succeed is simply the lowest bid, or whether it is numbers of employees kept on, or sustainability that would include investment plans and commitment to the long term.
The Assets The two Fife factories have a full order book making around 30,000 life jackets every year. They have an established reputation as a world leader in this equipment. The design is a Remploy design although it has been in association with just one seller. The sales of the garments extend to every continent. There is a view that orders could increase by 25% to nearly 40,000 because of the size of the market. The workforce have been regarded as efficient as well as dedicated and widely praised for the quality of their product. There is no doubt that the viability of the product makes it possible to envisage continued employment in manufacturing—securing British manufacturing export to the rest of the world. It is a measure of the product’s success that it is understood there have been eight expressions of interest for the factories including at least two private bidders and further interest from possible social enterprises. But our fear is that even with this high level of interest, the terms of the privatisation are so onerous that either one or both of the two factories will close or there will be a complete loss of the existing workforce under the new arrangements.
The Problems The enclosed figures are a summary of sales and costs for the past two years. It is understood that net profit for the current financial year will show a further improvement but will still be a loss of around £1 million. The figures show that the two factories lost £1.6 million in 2010–11 and while the losses were reduced in 2011–12 (for which the definitive final figures do not seem to be available) the factories are being asked to move overnight from around £20,000 losses per employee to viability—with only a UK subsidy of at most £3,200 per employee in the first year. While there is some help from the Scottish Government the terms of privatisation envisage a turnaround that is virtually impossible without shutting the plants or decimating their workforce. The problem is emphasised by an examination of the overheads: costs of materials run to £800,000 so even without paying one salary most of the £1.1 million revenues are taken up by insourcing materials. Once we add rates and rent, administrative overheads shared across the group, and lighting costs and electricity, the costs of running the factory in 2010–11 exceed the revenues earned, even before a penny is paid in salaries. Our view is that by better deals on the pricing of in-sourced materials and by cutting overheads, including the contribution to Remploy’s central administration, costs can be cut but the deficit cannot be eliminated overnight and this is the nub of the problem—a one size fits all solution is being applied to factories with good products that cannot cut their overheads instantly but can do so only over a period of time. The fact is that the product is good enough that it will be made somewhere—that means that if Cowdenbeath and Leven do not get the work someone else will—and if the product is sellable, but it is the overheads that are too high, a solution can be found but needs transitional arrangements
The Government’s Response These concerns have been put to the Minister, butthe Government’s reply is inflexible. It seems that they are not prepared to entertain even the most basic additional transitional support that is obviously necessary to ensure a sustainable but relatively quick transition to viability for the Leven and Cowdenbeath factories. cobber Pack: U PL: CWE1 [E] Processed: [21-06-2013 15:19] Job: 030703 Unit: PG03
Ev 30 Scottish Affairs Committee: Evidence
We are concerned that the Government’s position will dissuade those among the eight potential bidders who have long-term plans for guaranteeing the factories futures from making bids that would allow them to succeed. We are concerned that the arrangements favour asset strippers. We disagree with the view of Work and Pensions Secretary Iain Duncan Smith who states in his letter that “funding currently used by Remploy to support its factories can be better used”. Given the poor record of reemployment for redundant Remploy workers, the best solution is to continue to employ the current workforce as long as we have good transitional arrangements which offer good use of resources. The Government also says that extra transitional help “will dilute the focus on people building sustainable businesses, at least in the short term”. This suggests that Ministers have already decided that the current businesses are not sustainable. But our worries focus on what the Minister calls the “negative consideration bid”. For without further information that allays our fears, it looks as if the criterion used to decide the successful bidder may be the lowest bid irrespective of what are his or her commitments to employment or to the sustainability of the factories, and because of its inflexibility, this favours someone who wishes to close the business or at least cut back on most of its employees and shut one or both of the factories. Those who wish to keep the factories going will be disadvantaged because while their bid has to take into account the costs of new investment and keeping on a higher number of the workforce, their bid may be seen to be more expensive than an asset stripping bid which as a result may be successful. We stress this because we know of at least one bidder who will potentially retain both factories, expand the output and increase the workforce. We are therefore asking the Committee: First of all to consider whether the successful bidder from the eight expressions of interest should in fact be the company that first and foremost meets employment and sustainability criteria—keeping one or both factories open and deploying the largest number of the existing workforce—and that this is central to the value for money test. Thus in addition to value for money, employment and sustainability are the criteria for evaluating the bids and it should take into account the indirect costs that come from local Remploy employees being made redundant and the effect on the local economies of factory sites. Secondly, to ensure proper transparency of the exercise, the Government should submit the process of evaluating bids to a more transparent form of external validation that will allow local people and the local representatives, as well as the workforce itself, to be confident that this process operates fairly—and thus in the interests of those who wish to retain the most jobs, both factories and the continuation of the work in Fife. So we ask that an investigation takes place into the fairness of the procedures of sale. And we ask that the Committee consider whether the limited transitional support on offer and the final bid process is not in fact, threatening the continuation of the two factories and threatening the maintenance of employment of the workforce.
FINANCIAL APPENDIX REMPLOY FIFE—MARINE TEXTILES DIVISION Financial Projections—Summary P&L (£’000) (£’000) FY 10/11 FY 11/12 Sales £1,072 £1,112 Material Cost £843 £810 78.6% 72.8% Direct Staff Cost £763 £1,142 71.2% 102.7% Gross Margin -£534 -£840 49.8% 75.5%
BIS/Central Costs £1,023 £294 Other Overheads £53 £92 Net Profit -£1,610 -£1,232
March 2013