INTRODUCTION
AND SUMMARY
OF CONCLUSIONS
RECOMMENDATIONS
1. Remploy Limited (Remploy) are a company set up
by the Government in 1945 to provide employment for people with
severe disabilities who would otherwise be unlikely to obtain
employment or undertake self-employment. Remploy are funded from
the Government's supported employment programme which in 1996-97
provided 11,339 factory and workshop places, of which 6,958 were
in Remploy factories, and 10,895 placements with host firms, of
which 2,704 were in Remploy's placement scheme, Interwork[1].
2. The Department for Education and Employment (the
Department) determine the policy for the supported employment
programme which is operated and monitored by the Employment Service,
an executive agency of the Department. Government funding of
the supported employment programme amounted to £154.3 million
in 1996-97, of which £94.2 million was paid to Remploy[2].
3. On the basis of a report and supplementary memorandum
by the Comptroller and Auditor General[3],
we took evidence from the Department, the Employment Service and
Remploy on Remploy in the context of the supported employment
programme and on how the Department and the Employment Service
monitor Remploy's performance as a supported employment provider
and ensure the fairness of Remploy's pricing and subsidy.
4. We believe that supported employment is a very
important source of work for the severely disabled. Overall,
we acknowledge the good work done and the commitment shown by
the Department, the Employment Service and Remploy in providing
employment from within the supported employment programme for
severely disabled people. Nevertheless in our view there is real
scope for further significant value for money improvements which
would, amongst other things, help to provide a wider range of
job opportunities for severely disabled people from the Government's
funding of the supported employment programme, including grants
paid to Remploy.
5. In our view, savings might be made in the following
areas:
- Each supported job in a Remploy factory and in
a local authority or voluntary body workshop costs more than £10,000
a year. More could be done to reinforce the trend towards placing
people with host firms at half this cost, and to encourage those
people who are able to move from supported to open employment.
- There is surplus capacity at workshops and at
Remploy factories in some parts of the country; and there is relative
under-provision of supported employment in other parts. In order
to provide a better and more cost-effective service to the citizen,
it is important that the Department and Remploy do all they can
to secure a more balanced provision, working as necessary with
businesses, local authorities, and the voluntary sector.
6. We urge the Department to set a firm timetable
for implementing the recommendations in this report, and to report
the timetable to us.
7. In more detail, our conclusions and recommendations
are as follows:
On Remploy in the Context of the Supported Employment
Programme
(i) We note that, in terms of the value
for money with which they provide supported employment places,
Remploy compare reasonably with local authorities and voluntary
bodies. However, places in local authority and voluntary body
workshops and Remploy factories, which offer a more supportive
environment, cost more than twice as much as supported placements
with host firms (paragraph 20).
(ii) We, therefore, welcome the fact that
over the past ten years there has been a 29 per cent shift
in supported employment provision from local authority and voluntary
body workshop and Remploy factory places to the more cost-effective
supported placements with host firms. We recognise that further
rebalancing of the programme will take time and will need to be
handled sensitively (paragraph 21).
(iii) We are concerned that no long term
target has been set for the rebalancing of the programme towards
supported placements with host firms. We note that the Department
are reluctant to set targets at a national level because they
do not wish to be seen as forcing disabled people from the more
sheltered environment of workshops and factories to placements
for which they might not be suitable. Instead, the Department
expect that discussion on rebalancing should take place at a local
level (paragraph 21).
(iv) Without attempting to prejudice the
outcome, we recommend that the Department review their existing
provision of workshop and factory places in order to assess by
31 December 1999 future requirements for that more sheltered environment
with a view to establishing the appropriate balance of provision
between workshop/factory places and placements with firms for
the year 2000 onwards. The results of this assessment would then
inform any discussion on rebalancing taking place at a local level
with individual providers (paragraph 21).
(v) We note the interim results of the research
which the Department recently commissioned into local demand for
and supply of supported employment and into the added value of
workshop and factory places compared with placements. We look
forward to hearing the final results when they are published in
1998 and trust that these results will make a substantial contribution
to our suggested review of the future requirement for workshop
and factory places (paragraph 22).
(vi) We note that, despite some improvements
over the past ten years, the geographical distribution of supported
employment provision remains uneven and still largely determined
by the providers. We are concerned that, particularly in areas
of relative under-provision, severely disabled people are consequently
being denied the opportunity to work (paragraph 23).
(vii) We are concerned that the decrease
in the number of people in workshops and Remploy factories has
resulted in surplus production capacity at some locations. We
urge the Department, when determining their future strategy, to
consider how optimum use can be made of any surplus production
capacity while securing a more even geographical distribution
of provision corresponding to the spread of the demand (paragraph
23).
(viii) We note that the Disability Discrimination
Act 1995 allowed the Secretary of State for Education and Employment
to contract directly with profit-making bodies as well as local
authorities and voluntary bodies for the provision of supported
employment but that, before using this power, the Department will
have wide consultation with relevant organisations (paragraph
24).
(ix) We are concerned that no such consultation
has yet taken place. We encourage the Department to proceed with
the consultation process as a matter of urgency with a view to
providing a wider range of job opportunities for severely disabled
people and reducing the geographical unevenness of the current
provision (paragraph 24).
(x) We note that one of the objectives of
the supported employment programme is to encourage provision of
an effective means of progression for people with severe disabilities
from a supportive to a more open working environment. Against
that background, we are concerned that only limited numbers of
disabled people leave the supported employment programme for open
employment (paragraph 25).
(xi) We note that the Employment Service
are piloting new ways to encourage and manage progressions from
supported to open employment. Once these pilot schemes have been
evaluated, we look to the Department and the Employment Service
to introduce measures to stimulate an increase in the number of
people who progress to open employment. We would like to see
these measures in place by 1999-2000 so that by the end of that
year a significantly increased number of people will have moved
into open employment (paragraph 25).
(xii) We note that the Employment Service
have set targets for Remploy as regards the number of progressions
into a more open working environment. We recommend that the Employment
Service should set similar targets for local authority and voluntary
body providers when they contract with them in future (paragraph
25).
On Monitoring Remploy's Performance as a Supported
Employment Provider
(xiii) We note that Remploy have achieved
all but two of the targets which the Department have set for them
since 1992-93 in their Annual Performance Agreements (paragraph
38).
(xiv) We also note that, despite substantially
meeting their targets, Remploy's operating deficit for each disabled
employee increased in real terms by 16 per cent between 1987-88
and 1994-95 although it has since decreased by 7 per cent.
Also, since 1990-91 the Departmental contribution to Remploy
has exceeded the direct wage costs of the disabled workforce (paragraph
39).
(xv) We look to the Department and the Employment
Service to ensure that the targets set for Remploy in future years
are sufficiently challenging and that pressure on Remploy to improve
their financial performance continues to be maintained (paragraph
39).
(xvi) We observe that there are wide variations
in the operating deficit per disabled person between Remploy's
business groups and between individual factories within the same
group, with relatively cost-effective activities supporting the
less cost-effective. We are concerned that this cross-subsidisation
between Remploy's groups and factories is not a cost-effective
use of the taxpayers' money. We stress the need for Remploy to
reduce these variations by continuing to merge factories, to reduce
overheads and to change their commercial activities where significant
operating deficits are being incurred (paragraph 40).
(xvii) We note the Department's view that
it is necessary to pay performance bonuses to Remploy's executive
directors to attract and retain the right calibre of staff. We
look to the Department to monitor the arrangements for setting
bonus levels to ensure that the amounts paid continue to be commensurate
with the performance of the Company against their objectives (paragraph
41).
(xviii) We are concerned that Remploy currently
have no directors who are registered as disabled to act as role
models for disabled staff. We recommend that Remploy should seek
to increase the severely disabled people represented in their
directorate and senior management when vacancies arise and people
of the right calibre are available (paragraph 42).
(xix) We endorse Remploy's intention to
move progressively into areas of work where the pay and quality
of work for severely disabled people can be improved (paragraph
42).
(xx) We are concerned that Silhouette Ltd,
which Remploy purchased for £2.4 million in 1989 as part
of Spencer (Banbury) Ltd, was sold at a loss in August 1997 because
the long learning curves, intricate manufacture and short term
nature of the lingerie business proved to be too difficult to
integrate into Remploy factories. We recommend that Remploy ensure
that any future businesses that they consider acquiring are of
a nature suitable for their severely disabled workforce (paragraph 43).
On Ensuring the Fairness of Remploy's Pricing
and Subsidy
(xxi) We note that the majority of Remploy's
business has attracted no complaints from competitors about unfair
pricing and that the few complaints made have not been borne out
following detailed examination. We look to the Employment Service
and Remploy to ensure that Remploy's costing and pricing policy
continues to be the subject of regular, rigorous review to provide
assurance that Remploy are pricing fairly (paragraph 48).
(xxii) We note that the Department have
introduced arrangements, based on a methodology agreed by the
European Commission, to estimate the additional costs to Remploy
of employing disabled people. We also note that Remploy's calculations
under these arrangements showed that the grant paid to them in
the five years 1992-93 to 1996-97 fell short of the estimated
additional costs of employing disabled people, indicating that
the grant was not an unfair subsidy (paragraph 49).
(xxiii) We welcome the Department's assurance
that this calculation will be subjected to continued, regular,
external challenge and scrutiny by Remploy's external auditors
and that this scrutiny will cover not only the results but also
any changes to key assumptions (paragraph 49).
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