Remploy - Work and Pensions Committee Contents


Examination of Witnesses (Questions 1-30)

Chair: May I begin by welcoming you all here this morning? Before we get started, I have a declaration to make: I am a GMB member and I have received money from the GMB towards my election campaign. Kate?

Kate Green: Similarly, I am a member of the GMB and I am a member of Unite, and I have received money from the union as well.

Chair: We have to make that clear. The other thing, obviously, is that the union and Remploy have been and continue to be in an industrial dispute, perhaps not quite in any kind of formal way, and we are very conscious of that. That is not the role of this Committee this morning, because we are not here to adjudicate on any industrial dispute. That is a matter between management and the unions. But what we are concerned about is the future of Remploy as an organisation, and particularly the future of the factory arm of Remploy. Our questions will reflect that this morning. Oliver Heald has the first question.

Q1 Mr Heald: Good morning. Do you agree that history is working against the traditional model for Remploy, in that there is not enough work for the factories, and far more people with disabilities want to work in mainstream employment?

Phil Davies: If I can answer that, the situation in the UK economy is changing considerably. We recognise that as trade unions but, having said that, if you take for example a British furniture­manufacturing industry employing over 100,000 people, it is more difficult now to go out and get work. The whole situation has changed because of the imports that are coming into the country; it is more competitive.

One of the reasons why we have asked Kathleen to come along from our Brussels office is to talk about public procurement. I think that question hinges on where the work comes from, and whether Remploy has the organisation to go out and get that work. There was an absolute commitment in 2008 that public procurement would be one of the major planks of the new Remploy. If I could just ask Kathleen to briefly tell you about where we see the sales coming from to fill the factories.

Kathleen Walker Shaw: Thank you. Just to be clear—

Chair: I was just going to say that we have got quite a lot of questions on the whole procurement basis so, unless you want to make a very brief opening remark, we will explore that in more detail, because obviously it is a key issue.

Q2 Mr Heald: Really I am supposed to be dealing with a slightly different set of issues, which are about what disabled people can get out of the workplace these days, and whether Remploy is providing a full day of fulfilling work for the people who go there.

Phil Davies: The answer to that is very clear. We have surveyed, and I think we have provided the evidence of that, the disabled workers who lost their jobs in 2008. Quite clearly, lots of those people, a very high percentage, have said to us they made a mistake; they would rather be in Remploy. There is an argument in the disability movement about disabled people working together. There is nothing wrong, in our view, with disabled people working together, as long as that work is meaningful and as long as it is in the community and it becomes part of the community. There is still a need for some disabled people to need full support; people with severe learning difficulties and mental health problems maybe need more support than other people with disabilities.

Q3 Mr Heald: Do you think it would be fair to say that the unions are acting as a bit of a brake on change, because if you look at what is said by the disability organisations, what was said in 2007 was that far more people wanted to go into mainstream employment and that, even with these very strong targets that were put forward for more work, Remploy would be a smaller business focusing on employment services, getting people into work and then some factories, of course, continuing as promised. The union attitude just seems to be to attack the employment service the whole time, as though it is uneconomic and does not work—when for many people that is seen as the future—and then at the same time to try to keep the numbers up in factories that are just completely without work. Only half of the week is covered with work in some of these factories. Is that right?

Phil Davies: I think that might be the perception of some people, but the fact of the matter is that the trade unions recognise a need for change; we recognise a need that some people can go straight into open employment with very little support, but others cannot. On employment services, we recognise that the job that they do is very difficult. We are not saying it should be the factories or employment services; we are saying it should be both. One of the disappointing aspects of Remploy has been that they have not used the factories to their full capacities. We have factories now where there are 10, 15 or 20 people in them. They used to have 100 people. Now, what do you do with the rest of the factory?

Q4 Mr Heald: And there is not enough work for those in many cases. Do you agree? There is not enough work even for the 15 who remain, in many cases.

Phil Davies: There could be.

Mr Heald: There is not at the moment.

Phil Davies: That is another issue. It is what sorts of targets you set your salespeople and what type of salespeople you have.

Kevin Hepworth: Remploy's sales are suffering, like everybody in the country. At the moment it is an abnormal situation. However, Remploy management, even as late as yesterday, told us they have salespeople who are totally underperforming; if they had had a free hand, they would have allowed them to go on the [Voluntary Redundancy] VR exercise. They are trying to recruit sales staff, and have been now for a significant period, and they are being blocked by the DWP in recruiting salespeople. Now, you cannot run a manufacturing business unless you have salespeople bringing the orders in—and good salespeople, at that. It does start to make you wonder whether there are not people in the background who want to see Remploy fail.

Q5 Mr Heald: You are saying that the quality of the sales force is just not there.

Kevin Hepworth: In some areas, and that is what the management told us, yesterday even. Some sales staff are achieving 25%, 30% targets, which is woefully inadequate but, as they cannot recruit and if they let them go they are not allowed to replace them, they are better off having a salesperson bringing in a very poor amount of work than somebody not bringing in anything. The DWP has also capped the sales staff's legitimate bonuses on achieving sales targets, which has again disenfranchised those salespeople, because you have taken away the incentive to actually get out there and sell. Salespeople rely on hitting targets to achieve bonuses.

Q6 Mr Heald: This is to do with my colleagues' areas of questioning. The point that I am really working on is whether a lot of the disabled people are getting a good day's work in the factories that is fulfilling for them. My other point is: would a lot of the people who work there prefer to be in mainstream employment? In November 2007, Peter Hain did say that an increasing number of disabled people want to be supported to work for mainstream employers.

Les Woodward: Can I come in on that? My name is Les Woodward, and I am the national convenor and also a shop steward in a Swansea factory. Like every other factory, we see trainees coming in. A lot of the trainees that we have got in the Swansea factory would quite honestly give their right arms to have a job in the factory, and they are disabled people. Coming back to your point about whether the factories are relevant for the 21st century, that tells me that they are. What they get from coming into our factories is they learn skills; they see at the end of the day a product that they are rightly proud of, and a product that in many respects is a world beater. To me that ticks all the boxes of whether or not disabled people want to work in a Remploy factory.

Q7 Mr Heald: You can say definitely your resistance to disabled people moving into mainstream employment is not about maintaining union numbers or anything like that.

Les Woodward: We have not got any resistance to people wanting to move into mainstream employment.

Phil Davies: None at all.

Les Woodward: There is no resistance there. What we want is for Remploy factories to be there in the future to give future disabled people the chances that we have had to learn skills and to be economically active within the community.

Kathleen Walker Shaw: Could I just add to that very briefly to give you, in a sentence, what the whole GMB and joint union campaign has been about, in terms of the strong future that we wanted to see for Remploy? It is the whole principle of the right of disabled people to choose what form of employment. Everybody in this room has had the choice of what career path they take. People with disabilities are several rungs down the ladder of being able to make those choices of their own volition—follow their own aspirations and dreams.

The aspiration of some people is to work in open employment. For some of those people who want to do that, Remploy has often been a very valuable period of work experience, development and skills. We have to remember where Remploy came from. Remploy is not a commercial enterprise; it is fulfilling a social objective. We see Remploy and other supported employment factories as very vital—increasingly vital—because without supported employment you will not be able to offer the freedom of choice to disabled people. That is discriminatory.

Q8 Mr Heald: Just to put a slightly different point to you, if I may, just to see how you would respond, at one time it was Remploy or nothing. Now a lot of us glory in the fact that people with disabilities can go out and work in the open employment market. It would be a pity if we were holding them back.

Kathleen Walker Shaw: The two, as Phil says, are not mutually exclusive; they are part of a package of options. We have to accept the reality that, even with the workers that we have in Remploy and the workers that we have in open employment with disabilities, they are just the surface numbers. The amount of people with disabilities who are still not in the world of work is absolutely unacceptable, to be honest.

For those who are currently outside of the world of work, working in open employment, regrettably—because the culture has not changed with the modernisation of political policy development on disability down at the grassroots level—a lot of people with more severe disabilities are not going to walk into open employment jobs anyway, even if we have a more buoyant economy. In the current crisis, we are looking at 20.8% youth unemployment at the moment.

Q9 Stephen Lloyd: The Remploy issue has been going on for many, many years. Looking at it from a social model, would you accept that the majority of people in the disability lobby, although they appreciate and accept that Remploy, because of its historical reasons, should be supported and there is a need for it, actually are not very keen on Remploy and the factory model? What they are really keen on—which, to be fair to the previous Government, they invested a lot in with Access to Work—is to get more and more disabled people out into the mainstream workplace. That is the driver.

Are you suggesting that Remploy, as almost like a protective home aspect for disabled people, should still be around in 100 years? Are you hopeful that, as time goes on, more and more disabled people with the right support are able to get into mainstream work so that mainstream society can benefit? Do you think that is a good thing or are you hoping to see Remploy still employing loads of people in factories in 100 years' time?

Kathleen Walker Shaw: The reality is that we have to accept that we cannot talk about people with disabilities as a group that we can identify. The range of disabilities, and the peaks and troughs of the severity of those disabilities, is an ongoing thing. You cannot, at any one day, categorise that. That is why the importance of choice is such a key feature of this argument. In our view, the reality is that a lot of people are going to need support in their employment to be actively involved in the world of work. The sad reality is that commercially open jobs do not allow for the mentoring, support and possibly the lack of productivity that sometimes comes when a person with disabilities is suffering.

Q10 Stephen Lloyd: Would you accept that that has changed a lot in the last 10 years? I paid tribute to the previous Government, and I mean it; I am not being sarky. I think they have made a lot of effort and a lot of progress with people with disabilities in supporting people with disabilities into work. My view is, personally—I am sure you guys disagree, but I know what I am talking about here—that the Coalition Government is actually following that train of thought even more with the Work Programme, and investing potentially thousands of pounds into the training group providers to get off their backsides and help support disabled people into work. In my view, and I would be interested in whether or not you agree, all of you, is that the direction of travel is for more and more disabled people, with their tremendous range of skills—as all people have a tremendous range of skills—getting the right level of support so that they can get into mainstream employment.

The older model, which was necessary x number of years ago, of Remploy and factories and bundling them all together, is inescapably going to be going in a downward trend, because progress is getting people with disabilities into mainstream employment. Would you say, "No, that is not true. We want to stick with the Remploy model and expand the factories for ever and ever"?

Phil Davies: It is halfway true. In 100 years' time, we may still have disabled people who cannot get jobs because employers will not take them on. That is a fact of life.

Q11 Stephen Lloyd: You cannot guarantee that. That is a subjective statement. In 100 years' time, there will be some employers who, because they are idiots, will not employ women. There will be some employers who, because they are fools, will not employ Welsh people. That is a ludicrously subjective statement, if you do not mind my saying so. Believe you me, I have worked closely in that area and I know it well. There is still a long way to go, and I will fight ferociously for the rights of disabled people as long as I am an MP. But the difference today, compared with 15 years ago—mostly under the legislation brought in by John Major and then powered firmly by the previous Labour Government, legislation that I support—in the number of disabled people finally getting into work, because employers' doors were then being battered down, is in a completely different league from what it was 15 years ago. To say in 100 years' time that there are still going to be some employers not employing disabled people—

Phil Davies: I had not finished what I was going to say. In 100 years' time, it may well be a lot better, but there will still be employers who will not take on disabled people.

Stephen Lloyd: I agree. Do you take my point then—

Chair: Allow Mr Davies to answer the question that you have put, and then you can come back.

Phil Davies: I will be very brief, if I can just finish. The proof and the only survey, as far as we know, of disabled people leaving supported employment, was done by the GMB and Unite. That survey showed that the biggest part of those disabled people is still unemployed—not because they have not tried, I have to say, but because they have tried and been turned down. Now, you are completely right; it is changing, and it is far easier than it was 20 years ago, but there are a million­plus disabled people still not in employment. We are not going to wave a magic wand without giving the support mechanisms to those people to find work.

Now, why take away a place of excellence, which people can use as a halfway house? That is why I said there would be changes. It may well be that you come into a Remploy factory and you stay for a limited period, because some disabled people have never worked, and they are 40 or 30 years of age. They do not know what it is to have to get out of bed in the morning and have to turn up at a certain time. What we are saying quite clearly is of course there will be change. We hope that employers will employ more disabled people and there will be opportunities in the open market for disabled people.

The fact of life is that, while we sit here, there are tens of thousands of disabled people who are unemployed. Only 26% of those who lost a job last time, in 2008, are the ones who got jobs, and 5% of them said that their jobs were better paid. Some people have gone into employment and it has been worse employment. We do not believe that disabled people should be at the bottom of the employment structure and should get the worst jobs in the UK economy, because there is a hell of a lot of talent out there.

Q12 Stephen Lloyd: Who does? Are you proposing that, say, me, the Coalition Government or what have you, or the previous Labour Government, believe that the only jobs that should be available for disabled people are scraps? That is ludicrous. Yes, there will be people in 100 years, and I know this, who will not employ disabled people because they discriminate against disabled people. There will be people in 100 years who will not employ black people, women, men or whatever. The difference from where we are now compared with 20 years ago, the direction of travel, is profound. Without going into the whole detail of the Work Programme, I should say that the whole point behind it, which actually was beginning to be proposed by the previous Government x number of years ago, is that to get to help more and more disabled people into work—not from a patronising perspective, because a lot of them have exactly the same skills as everyone else—they are going to need more support to get them into work and to hold them there. If you are running a very small business, quite often you do not have the resources that a large public sector or a corporate has.

We know and I passionately believe that, if the right support is there for a lot of people with disabilities, those smaller businesses will see that they benefit. We are not saying, "Do away with Remploy"; we are not saying, "Close all the factories." I wholly understand that, for historical reasons, they need nurturing, taking care of and managing, but broadly managing down. If in 70 or 80 years' time there is a factory where 30% of the people have a disability, but they are hired as they should be because they are tremendous workers and have a little bit of support to ensure that, if they are blind, they can actually manage in the same way as someone who is not blind, and they are there for the skills, then I know we will have made real progress. If in x number of years' time, you have a factory that is still 100% disabled people, and it is the only way they will be employed, that would be a real backward step.

Chair: Do you have a question?

Stephen Lloyd: No.

Chair: I do not know whether anybody wants to respond to that.

Phil Davies: Well, we have gone from 9,000 to under 2,000 disabled people in the factories. That loss has been the loss not of union membership; that does not matter to the big unions in terms of numbers. That is not why we are here; we are here because we passionately believe that Remploy factories should play a role. No one can guarantee, and we have seen no figures from Government, any Government, how long the jobs are lasting that Employment Services and other providers find. There has been very, very little data. I can remember six years ago us meeting with the DWP and asking them to monitor a disabled person, right through their life in terms of job, and see if they met the supported employment requirements. That has never been done. I do not think anyone can put their hand on their heart and say that the jobs that some disabled people are finding are sustainable.

Q13 Harriett Baldwin: I have this GMB-Unite leaflet, which went out to all the workforce in the factory, which I imagine you recall. It is about the voluntary redundancy scheme, and it gives reasons to say no to the redundancy package. It says things like, "You will lose your dignity. You may lose your health. You may suffer from depression. You will lose your friends at work. If you take voluntary redundancy, you lose your integrity and humanity." I just wondered if you thought that that language is appropriate when communicating with a workforce that has some learning difficulties and mental health issues.

Phil Davies: We have strayed into the current situation now. The current situation was brought about because of a lack of consultation. There were decisions made, we still do not know when, about the voluntary redundancy. There was no plan by the company whatsoever, and there is still not.

Q14 Harriett Baldwin: Could you answer my question?

Phil Davies: Yes, I am going to come to that with reasons for it. There is no plan after the redundancy for what is going to happen, which is a very unusual situation. In fact, I have been a national officer for 23 years and never known a company not to have a plan after a redundancy. The facts of whether we like it or not, and in the pack that we provided—I take it that everybody has had the pack of evidence—were just two. We could have put 22 or 102 letters from people who have contacted us.

Q15 Harriett Baldwin: You are talking about the process that you are going through. I asked a very specific question about a leaflet that your union has given to a workforce, which you said earlier has issues around mental health and learning difficulties. I just wondered if you thought that that language was appropriate.

Phil Davies: We gave them what we believed would happen, and what has proved to have happened in 2008 when people left a factory and got no support. Now yesterday the company went a long way to saying what support the 800 people were going to get, but the fact of the matter was that 2,500 people disappeared out of Remploy with no support. What our people are saying is they have lost their friends; they have lost their communities; they have lost their jobs; their health has deteriorated. These are facts, whether we like it or not. Out of the 500 disabled people who are going to leave at the end of May, that is going to happen to some of them.

Q16 Harriett Baldwin: You think it is appropriate to say to someone with learning difficulties who is taking a voluntary redundancy package that, if you take this voluntary redundancy package, you lose your humanity. You think that is appropriate. You stand by that. That is all I wanted to ask.

Phil Davies: Well, let me answer you. I think it was appropriate for us to do what we did in all the circumstances. I think it was appropriate to tell people that, in Mansfield, two people with mental health problems, because they did not get any help from the company, lost their homes, and it was the trade unions that had to go in and go to social services. It was the trade unions that had to give them legal aid to right that. Yes, they did lose their houses; they did lose their humanity—absolutely people being on their own, left on their own, with no friends. The only hot meals that they used to get were at Remploy. There was no support whatsoever, other than shop stewards, like these guys sat behind me, running around because they knew that that person was on their own.

Yes, we had every right to say to people, "Think very carefully about accepting voluntary redundancy." One person rang me up 12 weeks after he got his £30,000­odd and said, "I don't know what I've done with it. It's gone and now I am in debt. Can you do anything?" It was the trade unions that had to go to the social services, the trade unions that had to get a financial person to reschedule the debt. The problems that we have with some people when they leave the community inside the factory are tremendous, and we have done everything possible to say to people, "Think very carefully. If you are at an age where you are going to work for the next 10 or 15 years, think very carefully about giving that job up."

Q17 Brandon Lewis: Let me just ask Mr Davies something specifically on what he just said. Bearing in mind what that advert says, there seems to me—and correct me if I am wrong—that surely there is a difference between saying to somebody who is vulnerable, "This is what can happen; here is the information," exactly as you are saying—"This has happened to other people; think carefully"—and the language used in that kind of advert, which is effectively insulting somebody or telling them, "This is what you are making yourself," before they have even made a decision. That seems very much more like being scaremongering than informative.

Phil Davies: We tried, and we will not deny it, to persuade people to stay in Remploy, because we had seen the problems. We tried everything in our means to persuade them. Do not forget that we were faced with a situation when, the day they announced to the trade unions under the 90­day consultation, they were writing to every single employee telling them about voluntary redundancy. If you want to look at the tactics of being called in one at a time in some factories, being persuaded that it was best for them to take voluntary redundancy, all sorts of promises being made to them last time, not adhered to and not kept, I think our tactics were fairly mild.

Kevin Hepworth: I think as well it is very fine and dandy saying, "You sent this leaflet to every member," etc. Our reps in the workplace are very experienced at supporting their fellow members. Although those circulars went out, there were factory meetings and people were spoken to. Those people who have got learning difficulties, those people who obviously have impairments of sight, etc, are all supported by the reps at the workplace. It is not just send a leaflet out and that was it; there was proper support; there were proper briefings given to those members to expand on the bullet points in the leaflet. Please, do not just think we just send it out and that is it. It was part of a proper supported campaign.

Les Woodward: Can I come in there? As shop stewards, we are at the sharp end of everything. I can remember back in 2008 when the factory closure programme was announced. There were colleagues of mine having to deal with people locking themselves in the toilet threatening to commit suicide because they thought their days of being a valued member of the community and being economically active were over. Coming back to that notice that went out, to be honest with you that was very mild compared with what we have had to deal with in the past with the way the company has acted and the repercussions of the way that notices have been brought out.

Chair: I need to move on. We have some questions on the relative costs of supported employment.

Q18 Karen Bradley: The National Audit Office review concluded that the average cost of providing employment by Remploy in a Remploy factory was between £18,000 and £20,000 per year. I understand that you dispute this figure, and I wonder if you could tell the Committee what you think the correct figure is and how you account for the difference.

Phil Davies: The figure was not so much disputed, but the reasons for the figure were disputed. I think it is higher now; I think it is around £26,000 per disabled worker. The reasons we disputed how they got to that figure were that you would expect that in that particular factory the people in it were costing £26,000 a year to employ, but they do not carry the costs of just the factory, of course. This is where we disputed it. There is central services, which is an entity outside the factory network. There are massive costs from consultants, £5 million or £6 million I believe. The company will give you the exact figure, no doubt, from 2008. All that goes in to alter the costs. It is not somebody walking into a factory making furniture and losing heaps of money; they have to sustain that outside body of management.

We have said that there were massive amounts of cost savings to be made. We are talking millions of pounds here—the use of consultants, the numbers of management. All these get tagged on in a formula on top of that factory's actual sales and what it costs to produce it. If there is any mis­management or too much management in the whole of Remploy, that gets passed on, so that is why that figure is so high. We dispute that, because a commercial company would never have the 30 or so people in HR that there are now. There will still be after this redundancy 11 HR people in the businesses, who have to be paid for. That cost comes on top, whether they do any work or whether they are busy working overtime because they have loads of work; that cost is still allocated to that factory. The bigger the management structures are, the more spending worries in non­productive places, then the higher that cost is that is passed on. That is our argument.

Q19 Karen Bradley: What do you think the correct figure is?

Phil Davies: We think that the factories should be more autonomous. We are getting into a debate of where Remploy should go. There has been a trial with five factories where these costs are not being allocated, or most of the costs, to the factories. Yesterday we were told that, without those costs and without some of the other costs, the cost has come down to about £5,000 to £6,000. Straight away you can see they have done this exercise in five of the small factories. They are calling it social enterprise in the factories, where they actually go out into the community and get work from the community.

It is a similar basis to the GMB and Unite Workers' Cooperative that was set up in York when the York factory was closed. Last May, we set up a workers' cooperative, owned by disabled people for disabled people, on very, very few funds. This May we are starting to go forward. There are six people there; that is all. Some of these factories are going to be down to five or six people, Worksop for one. When I said earlier there needs to be a change, it is that sort of change. We need to get rid of the costs in Remploy, because it has become a place where there are some very high­paid jobs, and you can see the difference in the redundancy packages from the management structures, where a manager with a short notice will go out with £90,000­odd and someone with 25 years' service will go out with £30,000 on average. We have done the figures; we have put the figures into this pack for you to look at. These costs are what are drawing Remploy down. We want to see more autonomy in the factories.

Q20 Stephen Lloyd: Is not one of the challenges with the costs, which my colleague was talking about, that you have the capital infrastructure of Remploy that has built up over a number of years? I agree with you; I think it is clunky. I certainly agree with you that I much preferred the smaller focused social enterprise companies employing disabled people and going out to the community. I think that is a fantastic idea and I am very supportive of that. The problem we have with Remploy though goes back to my colleague's quote of whatever it is—£20,000—and you saying there were lots of on-costs that bring it to that point. We do not dispute that.

The challenge is that, when you have a clunky, capital­intensive infrastructure that has built up over many years, whether you like it or not, and I am inclined to agree with you on some of the salaries that some of the senior management are paid—and believe you me I am going to be quizzing them about it later—the reality is it probably is about £18,000 to £22,000 per disabled person, because of the infrastructure that has built up over a number of years. You cannot dispute that, surely.

Kevin Hepworth: If you look at this round of redundancies, the pyramid, if you like, is becoming less of a pyramid and more of a straight cylinder, because there are significant numbers, over 700 disabled people, going out of Remploy on this round of redundancies; 99% of shop floor workers who applied have been allowed to go. Fewer than 50% of the management and staff who applied have been allowed to go, and the company has admitted that they are using upwards of £15 million of taxpayers' money to fund this redundancy exercise. What it is doing is actually increasing the cost per supported employee by over £1,000. Where is the logic? Why are we using taxpayers' money in this way? They are going backwards instead of forwards.

Q21 Karen Bradley: The only point I wanted to make, which was following on from Stephen's point, was that, if you are looking at an organisation with between 4,000 and 5,000 employees, 11 HR staff in my experience of the private sector does not sound that much. That is just a fact of life nowadays. You need that big back office to manage that number of employees. If you had a private sector organisation with 4,000 employees and only 11 HR staff, they would be doing very, very well. I think the issue here is, yes, we want to quiz the management and we want to look at the backrooms and the back office costs but, when you are looking at a big organisation like this, there inevitably are going to be those costs.

Phil Davies: The cost of the back office—Saint Gobain, Solaglas, which I deal with, employs over 2,600 people, three HR.

Q22 Chair: Can I just ask about the issue of the viability of the factories? We know now the numbers involved in the voluntary redundancy. Although it is not in my own constituency, I know the Aberdeen factory well; there are 25 employees and 11 will be allowed to have voluntary redundancy, which leaves a factory of 14 in a building. This comes back to the back office costs as well. It is a building that used to employ 100. They have sub-let part of it, but not very much of it. My question is: now that we know what the final figures are going to be with the number of people left in the factories, what is your assessment of the viability of some of those factories? We know that management has said the factories will close, but what is your assessment of that?

Kevin Hepworth: We have got grave concerns for their long-term future. We either have to seriously find alternative premises for some of those smaller factories to house them in a more economic environment, or look at significant dividing­off of some of the larger buildings and finding alternative tenants then to take over part of those buildings. At the moment, the problem with that is there are, as we all know, because of the closures and redundancies that took place, lots and lots of empty spaces all over, with lots of landlords desperate to get tenants, who therefore will offer very small rents.

You either own the property, so at least you only have the rates to pay on it and you have the maintenance, or we feel that a lot of these factories are just being set up so, in two years' time, they close. There is no doubt about it; our suspicions are and we understand that the board has made a decision to close Remploy. It would be interesting to find out from them whether that is true, because we are being told they have made that decision to close the factories completely.

Certainly my colleague Lyn Turner in Aberdeen rang me last night, and he is absolutely distraught about the future for the Aberdeen site in particular. He said they were starting to take it forward and this is just sending it backwards, and that is the biggest worry we have got. Worksop, which is a GMB site, is another prime case. It was doing well; they were actually talking about, we are told, asking one of the tenants who they sub-let part of the building to when they did not need the space, to leave. Not many weeks ago they were telling us that, and the next minute they announced redundancies and they are going to let five out of 12, is it, go. You will end up with a factory with about seven people in it. We are just concerned that some of this is just a recipe to encourage closures in a few years' time.

Q23 Brandon Lewis: I would like to start to turn towards the modernisation plan itself, because part of Remploy's plan—a huge part—is the expansion of the Employment Services business. Looking at the figures there, that does seem to be more cost-effective and, touching on what Stephen was saying earlier, is more likely to bring people into the more open workplace. Do you agree that that is more cost­effective and that, if that was able to expand, that could be a better solution in the long term?

Phil Davies: We welcome any expansion of any part of Remploy, including Employment Services, that will lead to sustainable employment for disabled people. We welcome that. Employment Services has its problems. It has just recently not won a single contract in the Government's Work Programme, not a single contract. They are having to TUPE over 200 of their workers, some of the best people that they have got, because the contracts have been won by other providers, and they are having to become a subcontractor and TUPE over in another direction about 50% of what employees are going to lose. So it is not all plain sailing there but, in answer to your question, of course we would encourage it. Why would we not encourage it? I said earlier that it does not need to be Employment Services only; it should be a combination, but I would like to see Employment Services using the factories more, because there is a need for this initial training of people.

Now, we are seeing a lot of trainees coming in and being heartbroken—we had an argument in Les's factory—when they are going out after eight, nine, 12 weeks, because they are going nowhere and they have no job to go to. They have got that taste of employment in Remploy, working with other disabled people and learning skills, and then somebody says, "I'm really sorry. Your funding is up. On your way." These are young people, and they were not on their way to other jobs; they were on their way back to benefits. It does need to change. We want to see Employment Services playing an active role, of course we do, but we want to see core workforces in these factories that can be places of excellence. We do not accept it is impossible to bring the work in.

Coming back to the salespeople, we were told quite clearly on three occasions, "We would have loved to have accepted some of the salespeople as redundant who had volunteered, because they are not up to the job, but we cannot do that because we cannot replace them." These are non­disabled people. If they are only acting or performing at 30%, that is 30% better than nothing at all, because we cannot replace that man or woman. No commercial company would have to run the organisation under those sorts of circumstances, with the DWP saying you cannot replace people in key positions.

Les Woodward: The way we have seen it on the shop floor comes back to what Kevin said earlier. We see now, and we have seen it over the last 10 to 15 years, mushrooming of management. You have managers managing managers, who have managers to manage who manage other managers. The whole system needs a revamp. Coming back to your point, we said back before the last round of factory closures and voluntary redundancies that Remploy factories should be an integral part of any supported employment programme in the UK. They work hand in glove with Employment Services to provide the training, as Phil said, and also to provide support.

Coming back again, we are seeing a lot of young people—in their mid­20s—coming in who have never done a day's work in their lives. It is not their fault; it is because they have not got a chance. They have not had the chances in life. Coming into a Remploy factory where they are working with other disabled people gives them the support—not only the support of training, but the peer support as well of people saying, "Welcome to the world of work. Here we are."

Chair: I am going to have to move on, because we only have 10 minutes left and we still have all the questions on sales and procurement.

Q24 Stephen Lloyd: You mentioned about the last 10 to 15 years. I would like to bring you to the modernisation plan. I will just flag up that one of the things I do agree with you about is that one of the challenges of the last 10 years is that suddenly managers mushroomed in the public sector, but that is by the by. The DWP say that the sales and cost reduction targets set in 2008 proved unrealistic and unattainable from the outset. Was the GMB consulted over the setting of these targets and did you think they were achievable at the time?

Phil Davies: Yes, we were consulted about the targets. We did feel they were difficult targets, but we felt that they could be achievable. There are billions of pounds' worth of public procurement spend in the UK, and one of the reasons why we asked Kathleen along today was just to briefly tell you what the changes in the Directive were—which have never been exploited, we do not believe, by Remploy, to the full extent that they should have been. Those changes gave a very, very good opportunity for Remploy to do a lot better than what they have done. It has been very disappointing. Now when we talk about public procurement with the senior people in the management, we are not getting any response; we are not getting any enthusiasm from them. The first six to nine months, they were enthusiastic about it, but that seems to have disappeared completely within the company.

Kathleen Walker Shaw: If I could maybe just highlight that by example to give you the background to the legal change in the European Procurement Directives. They gave us a contract status, which allowed public authorities, to use an American term, to set aside, to reduce the pool in terms of a contract to only supported employment workplaces—but within that, any enterprise in Europe where at least 50% of the people working were disabled people. We started this debate with the European Commission when the priority suppliers scheme was taken away in 1994. The effect that had on the level of contracts going into Remploy and other supported employment workplaces, within 18 months of its withdrawal, was quite phenomenal. In the MOD, in terms of public contracts there, from 17 million down to 10 million; in textiles, it was even more dramatic, which was a fairly labour­intensive part of Remploy factories at the time—18 million down to 3 million.

We worked from 1994 until 2004, when these Directives were agreed. Those of you who know European law know that anything to do with the internal market is an extremely difficult area in which to change law, because it is very commercially driven. We managed to get this reserved contract status in the body of European law in 2004, after a 10­year struggle. I was the leading party at European level in terms of that lobbying, and I can tell you that anybody in this room would be forgiven for thinking that was actually the role of Remploy management, as the people, as the employers and senior managers. However, it was a union that had one officer in Brussels and one national secretary at national level, and our colleagues in the other unions who did not have a European facilitator, managed, with the co-operation of our supporters—and they were cross­party and cross­Member State at European level—to change that legislation. We had no support or virtually no support or encouragement from Remploy, apart from one member of staff in Remploy, who has since left the company, who actually actively supported this.

I am not involved in the negotiating or the organising of Remploy, but as somebody who was a policy adviser on that issue and somebody who influenced that, I could only interpret that as a conspiracy to fail. If the public procurement reserved contract status was being allowed to be used, and Remploy had actively sought to use that legislation and maximise the scope of that to show their own commitment to it, we might be looking at a very different thing. Mr Lewis was talking about expansion in Employment Services; the factory capacities would have also been increasing their productivity. It has been left to the trade union side to do that. Serious questions have to be asked. Surely the purpose of management of a business is to get contracts. If they are leaving to the trade unions the very huge mountain to climb to change European law to facilitate contracts going into supported employment, I think that gives us a very fundamental basis for wondering why we are where we are with Remploy.

We experienced the same problems when we were going through the UK implementation stages. Again, it was the GMB and our fellow unions that were driving trying to get positive guidance with the Government. We actually managed to encourage them to include the wording that each public authority should have at least one contract with supported employment at any one time. Sadly, that has not been achieved, and it is currently still in Government guidance that that should be the thing.

If we had every public authority just putting one contract into supported employment, our factory capacities and the business capacities would have been up, but we have seen no will from Remploy management to actually do that. In your packs, in appendix 17 and 18, you see two letters written back to Members of this House where Remploy showed no interest in going for a contract. We are not sure whether Remploy went in, but they certainly did not get on the shortlist of another contract in Stirling.

Stephen Lloyd: On those specific things, on the procurement side we will be putting those questions to the managers when they come afterwards. In fact, it is one of the things I have got flagged up, so I have taken some of your lines and I think they are important. I will challenge them on that.

Q25 Glenda Jackson: Following on from what you have said, there has been no attempt by the Remploy company to pursue contracts. You said that you believe that they had a commitment to fail. What is the benefit to them if the company does fail? Can you hazard a guess? Have you any idea? What is in it for them if it fails?

Kathleen Walker Shaw: In my assessment, and as I say I am not involved in negotiating the organisational aspects with Remploy—and I think in some ways that allows you to take a step back and just ask some of these very fundamental questions—there was an agenda within Remploy to try and undermine and, if not, get rid of the factory­based employment within Remploy, and concentrate on the Employment Services-related thing.

I think that was a mistake. It then restricts the ability to offer a variety of employment opportunities for people in diverse areas of skills development. That is my considered view: that they did not want manufacturing­related and productivity­related contracts; we saw a very half­hearted approach to that. It was the GMB and Unite that actually encouraged the Office of Government Commerce Buying Solutions, after several meetings, to actually open a national framework contract in 2010. Again, it was our input and political influencing that managed to get that contract, and similarly with the contract for the Welsh Assembly framework. Again, we were pushing water uphill to try to encourage Remploy to go for all of these things.

Q26 Glenda Jackson: Now you have got that water up the hill and the bucket in that sense is full, you are saying that they are still failing to pursue the potential of that. Is it your perception that it is because they simply, either then or now, want to be rid of the kind of manufacturing aspects of the company?

Phil Davies: I do not think there is any doubt whatsoever that the board of directors of Remploy want to get rid of the factory network. I have been round Remploy for 22 years and I am absolutely convinced—and I was more convinced yesterday than ever. Why is it that the DWP has put £47 million into the pension fund, right away in one month, and that the company has set out to complete the deficit by 2014? The rumour is that the board strategy will be to close more of the factories in 2014.

Q27 Glenda Jackson: What is the benefit to them of that? That is what I am trying to pursue here. Is it just that they do not like factories, or is there some economic reason why they perceive that the company would be better, would be stronger, would be more capable in employing disabled people if the factories went?

Phil Davies: It would concentrate on its Employment Services arm. There is no doubt it is more difficult to run factories. The economic climate and the very fact that you have to go out and win these contracts—they are not going to be given to you; you have to win them—is more difficult. The people in the factories are there for long periods. It is just more difficult to do it. It will be cheaper, economically to the UK Government, if they did not have any factories. There is no doubt about that; whichever Government was in, it would be cheaper. All the signs are that in 2014 we will be either back here again or we will be in a campaign to stop the final closures. Who would have thought in 2008, after years of discussions with Government at the highest level, right up to Prime Minister level, that we would be sat here again with 700 redundancies, 500 of which are disabled people? What is the message coming from this redundancy that is clear? Some 507 or whatever it was applied for voluntary redundancy, and 99%, 501, were accepted. Non­disabled people were not accepted.

Q28 Glenda Jackson: Is the board of Remploy being driven by Government, regardless of the political nature of that Government? Is that what you are essentially saying—that this is coming from Government, whichever party happens to be in?

Phil Davies: It is coming from DWP; whether it is coming directly from Government, we are not sure, but certainly the officials in DWP are complicit in what is happening. You have to ask yourselves why. Every final pension scheme, every one, including the GMB's and Unite's, is in deficit because of the stockmarket and what is happening. There is not a final­salary scheme that we know about that is not. Even the Pilkington one, which was the jewel in the crown, is in deficit. Everybody is planning a 15­year recovery. Part of the agreement with Government is that, if Remploy is ever closed down, the pension scheme will be guaranteed. The recent move tells me for sure that there is a plan ahead, and the rumours on the shop floor, as Les is probably going to come in and tell you, is that they have already set the date.

Chair: If we are going to put these points to management, we need to wrap up this session. Kate still has some questions.

Kate Green: I do not need to ask any questions.

Chair: Obviously, things are going on.

Les Woodward: Can I just make one quick point? When we had the negotiations on the consultations on the modernisation programme the last time around, in 2007 before the 29 factories closed, there was a very, very senior DWP civil servant who sat with us. Subsequently, we found out after the employment tribunal that this particular person was advocating the closure of all the Remploy factories at that particular time. To come back to your question of who is driving it, my personal opinion is it seems to me that the senior civil servants or the advisers of the DWP are the drivers behind it.

Q29 Glenda Jackson: They only advise; they do not make the decisions. What I was trying to actually pull out was whether the board of Remploy is as much a victim of Government decisions in this area as the workforce. They cannot make the decisions perhaps that they would like to make, because the Government—and I stress again the Government of whichever political persuasion, because this did not start last May—are actually pushing for the removal of the factories.

Les Woodward: The then board of directors vociferously argued against that particular course of action that was advocated by this senior civil servant. The board of directors very much make their own decisions.

Kathleen Walker Shaw: If I could maybe just clarify that in terms of just following on from the points I was making earlier, some of the political decisions or the thoughts and the views of Government officials and civil servants within the Department of Work and Pensions were partly probably because of a frustration about some of the figures that we have discussed here today, which are not impressive, in terms of the lack of productivity. I think where there might have been a pressure coming from Government or civil service, in terms of the direction of Remploy, it is a result of what they are seeing on paper about the lack of achievement. The problem there is out of a frustration with the failure to step up to the task by Remploy management.

When I was going through the work to try to get the public contracts law through, part of my work within that at the early stages was confecting the legal argument. I thought it would be very helpful to speak to a range of procurement officers across the country—firstly, who are familiar with working and contracting to supported employment, and secondly, for them to legally advise me on how this scheme would work if we did actually implement it. I am not going to publicly mention the various names, because it was said to me in confidence, but I have to say these were not isolated comments that came to us. Systematically, we had unanimous support from public procurement officers at various levels—governmental, regional government and local authority contractors—for what we were trying to do.

If I had £5 for every time I heard them say, "We support completely what you unions are trying to do, but we have to say that a lot of us in the procurement officer circles are sick to the back teeth of the complacency that we have to face from salespeople and management of Remploy, who seem to think that they have got a God-given right that they are going to get a contract. Their apathy and laziness that everything is just going to fall in their laps is so frustrating to us as procurement officers that often, although we completely support wanting to promote job opportunities for people with disabilities, we are tempted not to give that contract because of their complacency." We are in a self­fulfilling prophecy there; whatever DWP has now decided for the future of Remploy lies very squarely, in my view, through management failures. How different could that have all been if we had the reserved contract status a lot earlier, and management had the will and vision to see that they could create jobs for the future of disabled people in this country?

Q30 Chair: Sorry, I will have to stop you, because we are now 15 minutes over time, so I am going to have to end the session there. I am really sorry, because you have lots more that you could have said, but we do have your written evidence and the pack that you have talked about. Can I just thank you very much for coming along this morning? Obviously, we are now about to put some of these points to the management. If you think there is anything that you did not get to say this morning, then please provide it to us in writing. Anything in writing has equal weight to anything you said in person. Thanks very much.

Phil Davies: Thank you for listening.



 
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Prepared 28 June 2011